EXECUTION COPY
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
NET2PHONE HOLDINGS, L.L.C.
Dated as of October 19, 2001
TABLE OF CONTENTS
Page No.
--------
ARTICLE I.
DEFINITIONS
1.1. Definitions..........................................................2
1.2. Terms Generally.....................................................10
ARTICLE II.
THE COMPANY AND ITS BUSINESS
2.1. Formation of the Company; Effectiveness.............................11
2.2. Company Name........................................................11
2.3. Term................................................................11
2.4. Business; Scope of Members' Authority...............................11
2.5. Principal Office; Registered Agent..................................12
2.6. Names and Addresses of Members......................................12
2.7. Certain Representations by Members..................................12
2.8. Withholding Tax.....................................................13
ARTICLE III.
MANAGEMENT OF COMPANY BUSINESS
3.1. Management and Control..............................................13
3.2. Appointment of Managers; Removal of Managers; Meetings of
Managers and Members..............................................14
3.3. Significant Decisions...............................................16
3.4. Compensation of Managers............................................18
3.5. Actions by the Members..............................................18
ARTICLE IV.
RIGHTS AND DUTIES OF MEMBERS
4.1. Other Activities of the Members.....................................18
4.2. Liability of Members, Managers and Officers.........................19
4.3. Investment Representations..........................................20
4.4. Legend..............................................................20
-i-
4.5. Limited Liability of Members........................................21
4.6. Dealing with Members................................................22
4.7. Designation of Tax Matters Member...................................22
4.8. Tax Matters.........................................................22
ARTICLE V.
BOOKS, RECORDS, BUDGETS AND REPORTS
5.1. Books of Account....................................................25
5.2. Availability of Books of Account....................................25
5.3. Annual and Periodic Reports and Statements..........................25
5.4. Accounting Expenses.................................................26
ARTICLE VI.
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, PROFITS AND LOSSES
AND ALLOCATIONS
6.1. Capital Contributions of the Members................................26
6.2. Capital of the Company..............................................27
6.3. Return of Capital Contribution......................................27
6.4. Capital Accounts....................................................27
6.5. Profits and Losses..................................................28
6.6. Special Allocations.................................................28
6.7. Other Allocation Rules..............................................29
6.8. Tax Allocations: Code Section 704(c)...............................30
ARTICLE VII.
DISTRIBUTIONS
7.1. Distribution Policy.................................................30
7.2. Liquidation.........................................................32
ARTICLE VIII.
RECIPROCAL PUT/CALL RIGHTS
8.1. Put Rights..........................................................32
8.2. Call Rights.........................................................34
-ii-
ARTICLE IX.
TERMINATION OF A MEMBER; TRANSFER OF MEMBERSHIP INTERESTS
9.1. Termination of a Member.............................................35
9.2. Transfer of Membership Interests....................................35
ARTICLE X.
TERMINATION OF THE COMPANY;
LIQUIDATION AND DISTRIBUTION OF ASSETS
10.1. Dissolution and Termination.........................................36
10.2. Distribution Upon Liquidation.......................................37
10.3. Sale of Company Assets..............................................38
10.4. Deficit Capital Accounts............................................38
ARTICLE XI.
REDEMPTION OF CLASS A MEMBERSHIP INTERESTS
11.1. Redemption of the Class A Membership Interests
held by AT&T Sub....................................................39
ARTICLE XII.
AMENDMENTS
12.1. Amendments..........................................................40
ARTICLE XIII.
MISCELLANEOUS
13.1. Further Assurances..................................................40
13.2. Notices.............................................................40
13.3. Headings and Captions...............................................41
13.4. Variance of Pronouns................................................41
13.5. Counterparts........................................................41
13.6. Governing Law.......................................................41
13.7. Partition...........................................................41
13.8. Invalidity..........................................................41
13.9. Assignment; Successors and Assigns..................................41
13.10. Entire Agreement....................................................43
-iii-
13.11. No Brokers..........................................................43
13.12. Maintenance as a Separate Entity....................................43
13.13. Expenses............................................................43
13.14. Publicity...........................................................43
-iv-
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
NET2PHONE HOLDINGS, L.L.C.
This Second Amended and Restated Limited Liability Company Agreement of
Net2Phone Holdings, L.L.C. (the "Company") is made, entered into and effective
as of October 19, 2001, by and among AT&T Corp., a New York corporation
("AT&T"), ITelTech, LLC, a Delaware limited liability company ("AT&T Sub"), IDT
Corporation, a Delaware corporation ("IDT Corporation"), IDT Domestic-Union,
LLC, a Delaware limited liability company ("IDT Sub"), IDT Investments Inc., a
Nevada corporation ("IDT Investments"), Liberty Media Corporation, a Delaware
corporation ("LMC"), and LMC Animal Planet, Inc., a Colorado corporation
("Liberty Sub"), and each other Person who, in accordance with the terms hereof,
shall become a party to or be bound by the terms of this Agreement after the
date hereof.
R E C I T A L S
WHEREAS, the Company was formed under the Act pursuant to the
Certificate of Formation filed with the Secretary of State of the State of
Delaware on October 17, 2001;
WHEREAS, IDT Sub entered into a Limited Liability Company Agreement,
dated as of October 19, 2001 (the "Limited Liability Company Agreement"), in
respect of the Company, which was amended and restated on October 19, 2001, by
the Amended and Restated Limited Liability Company Agreement, dated as of
October 19, 2001 (the "Amended and Restated Limited Liability Company
Agreement"), entered into by IDT Sub, AT&T Sub and AT&T;
WHEREAS, IDT Sub and AT&T Sub hereby agree to admit IDT Investments and
Liberty Sub as members to the Company, on the terms and conditions contained in
this Agreement;
WHEREAS, AT&T, AT&T Sub, IDT Corporation, IDT Sub, IDT Investments, LMC
and Liberty Sub are entering into this Agreement to jointly own 28,896,750
shares of Class A Common Stock, par value $.01 per share (together with any
shares of such common stock or other property distributed in respect thereof,
the "Common Stock"), of Net2Phone, Inc., a Delaware corporation ("Net2Phone"),
and to actively manage the Common Stock through the Company to increase the
value of the Common Stock for the benefit of the parties;
WHEREAS, IDT Sub contributed to the Company the 9,996,750 shares of
Common Stock owned by IDT Sub immediately prior to the execution and delivery of
the Limited Liability Company Agreement (the "IDT Sub Shares") in exchange for
Class A-1 and Class B Membership Interests of the Company, on the terms and
conditions contained in the Limited Liability Company Agreement, the Amended and
Restated Limited Liability Company Agreement and this Agreement;
WHEREAS, AT&T Sub contributed to the Company the 18,900,000 shares of
Common Stock beneficially owned by AT&T Sub immediately prior to the execution
and delivery of the Amended and Restated Limited Liability Company Agreement
(the "AT&T Sub Shares") in exchange for Class A and Class B Membership Interests
of the Company, on the terms and conditions contained in the Amended and
Restated Limited Liability Company Agreement and this Agreement; and
WHEREAS, AT&T Sub wishes to transfer certain of its Class A Membership
Interests and Class B Membership Interests in exchange for cash and stock of
Liberty Sub and IDT Investments in accordance with the Exchange Agreements (as
defined herein).
NOW, THEREFORE, in order to carry out their intent as expressed above
and in consideration of the mutual agreements contained herein, the parties
hereby agree to amend and restate the Amended and Restated Limited Liability
Company Agreement in its entirety as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Act" shall mean the Delaware Limited Liability Company Act, Sections
18-101 et seq. of Title 6 of the Delaware Code, as amended from time to time.
"Additional Member" shall mean any Person admitted to the Company as a
Member pursuant to the terms of this Agreement.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant period, after giving effect to the following adjustments:
(i) credit to such Capital Account of any amounts which such
Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentence of Treasury
-2-
Regulations Section 1.704-2(g)(1) or pursuant to the penultimate
sentence of Treasury Regulations Section 1.704-2(i)(5); and
(ii) debit to such Capital Account the items described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
This definition of Adjusted Capital Account Deficit and the limitations and
allocations set forth in Section 6.6(a), (b) and (c) hereof are together
intended to comply with Treasury Regulations Section 1.704-1(b)(2)(ii)(d), and
shall be so interpreted.
"Affiliate" shall mean with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries Controls, is
Controlled by or is under common Control with such Person.
"Affiliate Transaction" shall have the meaning set forth in Section
4.6.
"Agreement" shall mean this Second Amended and Restated Limited
Liability Company Agreement of Net2Phone Holdings, L.L.C., including any
Schedules hereto, as it may hereafter be amended, modified or supplemented from
time to time.
"Amended and Restated Limited Liability Company Agreement" has the
meaning given in the Recitals.
"AT&T" has the meaning given in the Preamble.
"AT&T Restructuring Entity" has the meaning given in Section 13.9.
"AT&T Sub Shares" has the meaning given in the Recitals.
"AT&T Sub" has the meaning given in the Preamble.
"Bankruptcy" shall mean, with respect to the affected party, (i) the
entry of an Order for Relief under Title 11 of the United States Code, (ii) the
admission by such party of its inability to pay its debts as they mature, (iii)
the making by it of an assignment for the benefit of creditors, (iv) the filing
by it of a petition in bankruptcy or a petition for relief under Title 11 of the
United States Code or any other applicable federal or state bankruptcy or
insolvency law, (v) the expiration of sixty (60) days after the filing of an
involuntary petition under Title 11 of the United States Code, an application
for the appointment of a receiver for the assets of such party, or an
involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other federal or state insolvency law,
provided that the same shall not have been vacated, set aside or stayed within
such sixty (60)-day period or (vi) the imposition of a judicial or statutory
lien on all or a substantial part of its assets unless such lien is discharged
or vacated or the enforcement thereof stayed within sixty (60) days after its
effective date.
-3-
With respect to a Member, the foregoing definition of "Bankruptcy" is intended
to replace and shall supersede and replace the definition of "bankruptcy" set
forth in Sections 18-101(1) and 18-304 of the Act.
"Board of Managers" shall mean the governing board of the Company,
constituted in accordance with the provisions of Article III hereof. Each member
of the Board of Managers shall constitute a "manager" within the meaning of the
Act.
"Book Value" with respect to any Company Asset shall mean its adjusted
basis for federal income tax purposes, except that the initial Book Value of any
asset contributed by a Member to the Company shall be an amount equal to the
fair market value of such asset as determined by the Board of Managers, and such
Book Value shall thereafter be adjusted in a manner consistent with Treasury
Regulations Section 1.704-l(b)(2)(iv)(g), including as a result of any
revaluations pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) in
the sole discretion of the Board of Managers.
"Breaching Member" shall have the meaning set forth in Section 2.7.
"Capital Account" when used in respect of any Member shall mean the
Capital Account maintained for such Member in accordance with Section 6.4, as
said Capital Account may be increased or decreased from time to time pursuant to
the terms of Section 6.4.
"Capital Contribution" when used with respect to (x) any Member shall
mean the amount of capital, if any, contributed by such Member in accordance
with Section 6.1(a) and (y) each of the Class A Membership Interests, Class A-1
Membership Interests and Class B Membership Interests held by a Member, the
amount of capital contributed by the Member with respect to each such class of
Membership Interests.
"Certificate of Formation" shall mean the certificate of formation of
the Company filed with the Secretary of State of the State of Delaware on
October 17, 2001, as the same may be amended and/or restated from time to time.
"Class A Capital Account" shall have the meaning set forth in Section
6.4(a).
"Class A Fair Market Value" shall mean, at any time with respect to a
Class A Membership Interest, the value of the distributions that the holder of
such Class A Membership Interest would receive pursuant to Section 10.2(iii)
upon the hypothetical liquidation of the Company at such time. For purposes of
determining the Class A Fair Market Value, the Common Stock shall be valued as
set forth in Section 10.2 hereof.
"Class A Member" shall mean (i) each of AT&T Sub and Liberty Sub for so
long as each holds any Class A Membership Interests, (ii) any transferee of any
Class
-4-
A Membership Interest who has been admitted to the Company as an Additional
Member in accordance with the terms of this Agreement or (iii) any other Person
who has been admitted to the Company as a Class A Member in accordance with the
terms of this Agreement.
"Class A Membership Interest" shall mean one unit of the authorized
Class A Membership Interests of the Company issued and outstanding in accordance
with this Agreement.
"Class A Percentage Interest" shall equal, with respect to any Class A
Member, the number of Class A Membership Interests then held by such Class A
Member divided by the aggregate number of Class A Membership Interests then
issued and outstanding, expressed as a percentage.
"Class A-1 Capital Account" shall have the meaning set forth in Section
6.4(a).
"Class A-1 Member" shall mean (i) IDT Sub for so long as it holds any
Class A-1 Membership Interests, (ii) any transferee of any Class A-1 Membership
Interest who has been admitted to the Company as an Additional Member in
accordance with the terms of this Agreement or (iii) any other Person who has
been admitted to the Company as a Class A-1 Member in accordance with the terms
of this Agreement.
"Class A-1 Membership Interest" shall mean one unit of the authorized
Class A-1 Membership Interests of the Company issued and outstanding in
accordance with this Agreement.
"Class A-1 Percentage Interest" shall equal, with respect to any Class
A-1 Member, the number of Class A-1 Membership Interests then held by such Class
A-1 Member divided by the aggregate number of Class A-1 Membership Interests
then issued and outstanding, expressed as a percentage.
"Class B Capital Account" shall have the meaning set forth in Section
6.4(a).
"Class B Member" shall mean (i) each of IDT Sub, IDT Investments and
Liberty Sub for so long as each holds any Class B Membership Interests, (ii) any
transferee of any Class B Membership Interest who has been admitted to the
Company as an Additional Member in accordance with the terms of this Agreement
or (iii) any other Person who has been admitted to the Company as a Class B
Member in accordance with the terms of this Agreement.
-5-
"Class B Membership Interest" shall mean one unit of the authorized
Class B Membership Interests of the Company issued and outstanding in accordance
with this Agreement.
"Class B Percentage Interest" shall equal, with respect to any Class B
Member, the number of the Class B Membership Interests then held by such Class B
Member divided by the aggregate number of Class B Membership Interests then
issued and outstanding, expressed as a percentage.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
corresponding provision(s) of succeeding law.
"Company Assets" shall mean all right, title and interest of the
Company in and to all or any portion of the assets of the Company, including,
without limitation, securities of, and ownership interests in, Subsidiaries of
the Company, and any property (real, personal, tangible or intangible) acquired
in exchange therefor or in connection therewith.
"Common Stock" shall have the meaning set forth in the recitals.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of another
Person, whether through the ownership of voting securities or other ownership
interests by contract or otherwise.
"Damages" shall have the meaning set forth in Section 2.7.
"Distributable Funds" shall mean all cash receipts of the Company (or
released from reserves) during any period, as reduced by the setting aside
during such period of such reserves as the Board of Managers may deem reasonably
necessary for the discharge of liabilities or obligations of the Company and as
increased by the release of any such reserves as determined by the Board of
Managers.
"electronic transmission" has the meaning given in Section 3.2(i).
"Exchange Agreements" shall mean, (i) the exchange agreement, dated as
of the date hereof, among AT&T, AT&T Sub, IDT Corporation, IDT Domestic Telecom,
Inc., IDT Nevada Holdings, Inc. and IDT Investments, and (ii) the exchange
agreement, dated as of the date hereof, among AT&T, AT&T Sub, LMC and Liberty
Sub, pursuant to which the Exchange Transactions will occur.
"Exchange Transactions" shall mean the separate transactions, entered
into as of the date hereof, pursuant to which AT&T Sub (x) is transferring
certain Class A Membership Interests, Class B Membership Interests and shares of
IDTC Class B
-6-
Common Stock to Liberty Sub in exchange for cash and shares of preferred stock
and common stock of Liberty Sub and (y) is transferring certain Class B
Membership Interests to IDT Investments in exchange for cash and shares of IDT
Investments Preferred Stock.
"Fiscal Year" shall mean the fiscal year of the Company, which shall be
each twelve-month period ending December 31 of each year; provided, however,
that upon termination of the Company, "Fiscal Year" shall mean the period from
the end of the last preceding Fiscal Year to the date of such termination.
"IDT Corporation" has the meaning given in the Preamble.
"IDT Investments" has the meaning given in the Preamble.
"IDT Investments Call" has the meaning given in Section 8.2(a).
"IDT Investments Preferred Stock" has the meaning given in Section
8.1(b).
"IDT Investments Put" has the meaning given in Section 8.1(a).
"IDT Sub" has the meaning given in the Preamble.
"IDT Sub Shares" has the meaning given in the Recitals.
"IDTC Class B Common Stock" has the meaning given in Section 8.1(b).
"Indebtedness" shall mean (i) all indebtedness for borrowed money or
for the deferred purchase price of property, goods and services, including
reimbursement, and all other obligations, absolute or contingent, with respect
to surety bonds, letters of credit and bankers' acceptances whether or not
matured, and xxxxxx, swaps and other derivative contracts and financial
instruments, (ii) all obligations evidenced by notes, bonds, debentures, or
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to acquired
property (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (iv) all capital lease obligations, (v) all indebtedness referred to
in clause (i), (ii), (iii) or (iv) above secured by (or for which the holder of
such indebtedness has an existing right, contingent or otherwise, to be secured
by) any lien upon or on property owned by the Company or any wholly-owned
Subsidiary (including accounts or contract rights), even though the Company or
such wholly-owned Subsidiary has not assumed or become liable for such
indebtedness, and (vi) all guaranteed indebtedness of others.
"Independent Accountants" has the meaning given in Section 4.8(a).
-7-
"Initial Class B Return" has the meaning given in Section 7.1(a)(iii).
"IRR" shall mean the internal rate of return since the date hereof
earned by the Class B Members on the Capital Contributions made with respect to
the Class B Membership Interests taking into account the timing and amounts of
any distributions made with respect to the Class B Membership Interests pursuant
to Sections 7.1(a) and 10.2.
"IRS" shall mean the Internal Revenue Service and any successor agency
or entity thereto.
"Liberty Sub" has the meaning given in the Preamble.
"Liberty Sub Call" has the meaning given in Section 8.2(a).
"Liberty Sub Preferred Stock" has the meaning given in Section 8.1(c).
"Liberty Sub Put" has the meaning given in Section 8.1(a).
"Limited Liability Company Agreement" has the meaning given in the
Recitals.
"LMC" has the meaning given in the Preamble.
"LMC Manager" has the meaning given in Section 3.2(b).
"Managers" has the meaning given in Section 3.2(a).
"Member" shall mean a Class A Member, a Class A-1 Member or a Class B
Member, as the context may require, in its capacity as a member of the Company.
For purposes of the Act, there are no separate classes or groups of members
other than the Class A Members, the Class A-1 Members and the Class B Members.
"Membership Interests" means the Class A Membership Interests, the
Class A-1 Membership Interests and the Class B Membership Interests.
"Net2Phone" has the meaning given in the Recitals.
"Organizational Documents" shall mean (if applicable) (i) with respect
to a corporation, such Person's certificate or articles of incorporation and
by-laws (including any constitution or rules constituting such by-laws), and any
shareholder agreement, voting agreement, voting trust or similar arrangement
applicable to any of such Person's authorized shares of capital stock, (ii) with
respect to a partnership, such Person's certificate of limited partnership, if
any, partnership agreement, voting trusts, voting agreements or similar
arrangements applicable to any of its partnership interests or
-8-
(iii) with respect to a limited liability company, such Person's certificate of
formation, limited liability company or operating agreement, voting trusts,
voting agreements or similar arrangements applicable to any of its limited
liability company interests.
"Parent" shall mean (i) LMC with respect to Liberty Sub or any
Permitted Transferee of Liberty Sub, (ii) AT&T (or if the Agreement is assigned
by AT&T to an AT&T Restructuring Entity, the AT&T Restructuring Entity) with
respect to AT&T Sub or any Permitted Transferee of AT&T Sub, (iii) IDT
Corporation with respect to IDT Sub or any Permitted Transferee of IDT Sub and
IDT Investments or any Permitted Transferee of IDT Investments, and (iv) with
respect to each of the foregoing, any assignee pursuant to Section 13.9(a)(ii).
"Permitted Transferee" has the meaning given in Section 9.2.
"Person" shall mean an individual, corporation (including any
non-profit corporation), association, general or limited partnership,
organization, business, firm, limited liability company, joint venture, trust,
estate or other entity, association or organization, whether constituting a
separate legal entity or not.
"Profits" and "Losses" for any period shall mean the taxable income or
loss, as the case may be, of the Company for such period determined in
accordance with Code Section 703(a) and Treasury Regulation Section 1.703-1
computed with the following adjustments:
(i) Items of gain, loss, and deduction shall be computed based
upon the Book Values of the Company's assets (in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g) and/or 1.704-3(d))
rather than upon the assets' adjusted bases for federal income tax
purposes;
(ii) Any tax exempt income received by the Company shall be
included as an item of gross income;
(iii) The amount of any adjustments to the Book Values of any
assets of the Company pursuant to Code Section 743 shall not be taken
into account; and
(iv) Any expenditure of the Company described in Code Section
705(a)(2)(B) (including any expenditure treated as being described in
Code Section 705(a)(2)(B) pursuant to Treasury Regulation under Code
Section 704(b)) shall be treated as a deductible expense.
"Regulatory Allocations" has the meaning given in Section 6.6(d).
"Significant Decision" has the meaning given in Section 3.3.
-9-
"Sub-Capital Account" when used in respect of the Membership Interests
held by any Member shall mean the Sub-Capital Account maintained for such Member
in accordance with Section 6.4 with respect to each class of Membership
Interests held by such Member, as said Sub-Capital Accounts may be increased or
decreased from time to time pursuant to the terms of Section 6.4.
"Subsidiary" shall mean, with respect to any Person, (x) any other
Person which such Person Controls and (y) in which such Person owns a majority
of the outstanding capital stock or other ownership interests.
"Tax Matters Member" shall initially be IDT Sub who shall serve as Tax
Matters Member until such time as a successor Tax Matters Member is appointed by
the Board of Managers.
"Terminating Event" has the meaning given in Section 9.1.
"Total Class B Return" has the meaning given in Section 7.1(a)(iv).
"Transaction Documents" shall mean the Exchange Agreements and this
Agreement.
"Transfer" shall have the meaning set forth in Section 9.2.
"Treasury Regulations" shall mean the regulations promulgated under the
Code, as amended.
"Voting Agreement" shall mean the Voting Agreement, dated as of August
11, 2000, by and between AT&T Sub and IDT Investments.
1.2. Terms Generally. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined herein have the meanings assigned to them herein
and include both the plural and the singular, as the context may require;
(b) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
(c) the words "including" and "include" and other words of similar
import shall be deemed to be followed by the phrase "without limitation."
-10-
ARTICLE II.
THE COMPANY AND ITS BUSINESS
2.1. Formation of the Company; Effectiveness. Prior to the date hereof,
the Certificate of Formation was filed with the Secretary of State of the State
of Delaware. The Members hereby agree to execute and file any required
amendments to the Certificate of Formation and shall do all other acts required
for the constitution of the Company as a limited liability company under the
laws of the State of Delaware. The Members and the Board of Managers hereby
ratify and approve the execution, delivery and filing of the original
Certificate of Formation with the Secretary of State of the State of Delaware by
Xxxxxx Xxxxxx, and all other certificates executed, delivered and filed as of
the date hereof with the Secretary of State of the State of Delaware by any
officer of the Company, as an authorized person within the meaning of the Act.
Thereafter, Xxxxxx Xxxxxx'x powers as an authorized person ceased, and any
Person authorized by the Board of Managers as an authorized person within the
meaning of the Act shall execute, deliver and file, or cause the execution,
delivery and filing of, all certificates (and any amendments and/or restatements
thereof) required or permitted by the Act to be filed with the Secretary of
State of the State of Delaware.
2.2. Company Name. The business of the Company shall be conducted under
the name of "Net2Phone Holdings, L.L.C." in the State of Delaware and under such
name or such assumed or trade names as the Board of Managers deem necessary or
appropriate to comply with the requirements of any other jurisdiction in which
the Company may be required to qualify.
2.3. Term. The term of the Company commenced on the date the Secretary
of State of the State of Delaware accepted for filing the Certificate of
Formation for the Company and shall continue until the Company is dissolved
pursuant to Article X of this Agreement.
2.4. Business; Scope of Members' Authority.
(a) The Company is organized for the object and purpose of, and the
nature of the business to be conducted and promoted by the Company is, engaging
in any lawful act or activity for which limited liability companies may be
formed under the Act and engaging in any and all activities necessary,
convenient, desirable or incidental to the foregoing, including, without
limitation, acquiring, holding, managing, operating and disposing of real and
personal property.
(b) Except as otherwise expressly and specifically provided in this
Agreement, no Member shall have any authority to bind or act for, or assume any
obligations or responsibility on behalf of, any other Member or the Company.
Neither the Company nor any Member shall, by virtue of executing this Agreement,
be
-11-
responsible or liable for any Indebtedness or obligation of the other Members
incurred or arising either before or after the execution of this Agreement,
except that the Company shall be responsible for the responsibilities,
liabilities, Indebtedness and obligations of the Company incurred after the date
hereof pursuant to and as limited by the terms of this Agreement.
2.5. Principal Office; Registered Agent. The principal office of the
Company shall be at 000 Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxx
00000. The Company may change its place of business to such location or
locations as may at any time or from time to time be determined by the Board of
Managers. The mailing address of the Company shall be at 000 Xxxxx Xxxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxx 00000, or such other address as may be
selected from time to time by the Board of Managers. The registered office and
registered agent in the State of Delaware of the Company shall be c/o The
Corporation Trust Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
2.6. Names and Addresses of Members. The names and addresses of the
Members are set forth on Schedule I hereto, as such schedule shall be amended
from time to time to reflect changes in the Members or their addresses. Upon
execution and delivery of this Agreement IDT Investments and Liberty Sub shall
be admitted to the Company as Members and IDT Sub and AT&T Sub shall continue as
Members.
2.7. Certain Representations by Members. Each Member represents,
warrants, agrees and acknowledges that, as of the date hereof, (i) it has been
duly authorized to purchase and hold its Membership Interests and to execute and
deliver this Agreement and all other instruments executed and delivered on
behalf of it in connection with the acquisition of its Membership Interests,
(ii) the execution and delivery of this Agreement and the performance of its
obligations hereunder will not result in a breach or violation of, a default
under, or conflict with (A) its Organizational Documents or (B) any existing
agreement to which it or any of its properties or assets is subject, other than
in the case of clause (ii) (B) above, such breaches, violations, defaults and
conflicts that will not materially adversely affect the ability of the Company
and the Members to consummate the transactions and acts contemplated by this
Agreement and, to the best of its knowledge, will not subject the Company, any
wholly-owned Subsidiary of the Company or the Members to any material liability
or materially and adversely affect the ability of the Company or any
wholly-owned Subsidiary of the Company to conduct its business as currently
conducted or as proposed to be conducted, (iii) this Agreement has been duly
authorized, executed and delivered by, and is a binding agreement on the part
of, such Member enforceable against such Member in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and (iv) all authorizations,
consents, approvals, orders, notices, filings, registrations, qualifications and
exemptions of, with or from any court, administrative
-12-
agency or commission or other federal, state or local governmental authority and
agencies, departments or subdivisions thereof or any self-regulatory authority
required to be obtained or made by or on behalf of such Member in connection
with the execution of this Agreement or the performance of its obligations
hereunder, to its knowledge, have been duly obtained or made by such Member and
are in full force and effect, other than authorizations, consents, approvals,
orders, notices, filings, registrations, qualifications and exemptions the
absence of which would not have individually or in the aggregate a material
adverse effect on the transactions contemplated by this Agreement. Each Member
agrees to indemnify the Company, any wholly-owned Subsidiary of the Company and
each other Member against any and all claims, demands, losses, damages,
liabilities, lawsuits and other proceedings, judgments and awards, and costs and
expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Damages") incurred by the Company or any such other Member or
any Affiliate of any Member arising from any breach by such Member of any of the
foregoing representations and warranties or the representations and warranties
contained in Section 6.1(b) of this Agreement (the "Breaching Member");
provided, however, that (A) if the Breaching Member is AT&T Sub, AT&T shall also
covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the
Company and each other Member against any and all Damages arising from AT&T
Sub's breach of any of the foregoing representations and warranties, (B) if the
Breaching Member is IDT Sub or IDT Investments, IDT Corporation shall also
covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the
Company and each other Member against any and all Damages arising from IDT Sub's
or IDT Investments' breach of any of the foregoing representations and
warranties, and (C) if the Breaching Member is Liberty Sub, LMC shall also
covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the
Company and each other Member against any and all Damages arising from Liberty
Sub's breach of any of the foregoing representations and warranties.
2.8. Withholding Tax. Each Member represents and warrants that it is
not a foreign partner under Section 1446(e) of the Code.
ARTICLE III.
MANAGEMENT OF COMPANY BUSINESS
3.1. Management and Control.
(a) Except as otherwise specifically set forth in this Agreement, the
Board of Managers of the Company, acting in accordance with the terms of this
Agreement, including, but not limited to, Section 3.2, shall have the right,
power and authority to oversee the business and affairs of the Company and to do
all things necessary to manage the business of the Company, and the Board of
Managers is hereby
-13-
authorized to take any action of any kind and to do anything and everything the
Board of Managers deems necessary or appropriate in accordance with the
provisions of this Agreement and applicable law. Any action taken by the Board
of Managers in accordance with the terms of this Agreement that is not otherwise
in violation of applicable law shall constitute the act of, and shall serve to
bind, the Company.
(b) No Member shall take any action on behalf of or in the name of the
Company, or enter into any commitment or obligation binding upon the Company,
except for actions authorized by the Board of Managers in the manner set forth
herein.
3.2. Appointment of Managers; Removal of Managers; Meetings of Managers
and Members.
(a) The Board of Managers shall be comprised of five (5) Managers of
the Company (the "Managers"), who shall be appointed by Members owning a
majority of the Class A-1 Membership Interests, subject to the consent of the
other Members, which shall not be unreasonably withheld. For so long as Liberty
Sub owns a majority of the Membership Interests owned by it on the date hereof,
the Class A-1 Member or Members agree to cause one nominee selected by Liberty
Sub to be appointed as a Manager of the Company (the "LMC Manager"). A Manager
need not be a Member. The initial Managers shall be those individuals designated
on Schedule II hereto.
(b) Each Manager shall hold office until his death, resignation or
removal as set forth in this Section 3.2(b). Any Manager may resign at any time
upon written notice to the Board of Managers. Such resignation shall take effect
at the time specified therein, and unless specified therein, no acceptance of
such resignation shall be necessary to make it effective. Any Manager may be
removed with or without cause by Members owning a majority of the Class A-1
Membership Interests, and any Person designated to replace such Manager shall be
appointed in accordance with Section 3.2(a); provided, however, that so long as
Liberty Sub owns a majority of the Membership Interests owned by it on the date
hereof, the Class A-1 Member or Members, shall not, without Liberty Sub's
consent, remove or cause the removal without cause of the LMC Manager.
(c) As soon as practicable after the date hereof, each of AT&T Sub and
IDT Investments shall (i) assign its rights under the Voting Agreement to the
Company and (ii) use reasonable best efforts to fully cooperate with each other
and with the Company in removing and replacing the directors of Net2Phone
currently designated by AT&T Sub and in ensuring that the directors of Net2Phone
designated by IDT Investments are elected to the Net2Phone board of directors.
(d) The Board of Managers shall make all decisions relating to the
casting of votes in respect of the Common Stock on all matters submitted to a
vote of, or seeking the written consent of, the stockholders of Net2Phone,
including the election and
-14-
removal of directors to the board of directors of Net2Phone.
(e) The Board of Managers may hold meetings, both regular and special,
either within or without the State of Delaware.
(f) Regular meetings of the Board of Managers may be called by any
Manager on one (1) day's prior notice to each member of the Board of Managers,
either personally or by mail or by facsimile, at such time and such place as
from time to time shall be determined by the Board of Managers, but in any event
shall be held at least once every quarter.
(g) Special meetings of the Board of Managers may be called by any
Manager on one (1) day's prior notice to each member of the Board of Managers,
either personally or by mail or by facsimile. Such notice shall state the
purpose or purposes for which the special meeting is called.
(h) At all meetings of the Board of Managers, three (3) Managers,
present in person or represented by proxy, shall constitute a quorum for the
transaction of business and, provided proper notice has been given to the
Managers, the act of a majority of the Managers, present in person or
represented by proxy, at any meeting at which there is a quorum shall be the act
of the Board of Managers and, subject to Section 3.3, shall conduct, oversee and
manage the business and affairs of the Company.
(i) Any action required or permitted to be taken at any meeting of the
Board of Managers may be taken without a meeting if the Managers having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all Managers were present, consent thereto in
writing or by electronic transmission and the writing or writings or electronic
transmission or transmissions are filed with the minutes of the Company. Such
filing shall be in paper form if the minutes are maintained in paper form and
shall be in electronic form if the minutes are maintained in electronic form. As
used in this Agreement, "electronic transmission" means any form of
communication, not directly involving the physical transmission of paper, that
creates a record that may be retained, retrieved and reviewed by a recipient
thereof, and that may be directly reproduced in paper form by such a recipient
through an automated process.
(j) Managers may participate in a meeting of the Board of Managers by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
(k) Each Manager shall have the right to receive all printed
information distributed to any member of the Board of Managers in his or her
capacity as a Manager.
-15-
(l) Each Manager may authorize another person or persons to act for
such Manager by proxy at any meeting of the Board of Managers.
3.3. Significant Decisions. The Company shall not, and no Manager of
the Company shall have the power or authority to cause the Company to, without
the prior unanimous consent of all of the Members, take any action in respect of
a Significant Decision; provided, however, that if a Member receives notice from
the Company, either personally or by mail or by facsimile, describing in
reasonable detail an action with respect to a Significant Decision that the
Company intends to adopt, and such Member does not notify the Company in writing
within seven (7) days or such longer period as may be stated in the notice that
it does not consent to the taking of such action, such Member shall be deemed to
have consented to the taking of such action with respect to the Significant
Decision. For purposes of this Agreement, each of the following matters shall
constitute a "Significant Decision":
(a) the adoption, amendment, alteration or repeal of any provision or
term of any Organizational Document of the Company;
(b) any merger or consolidation involving, or any reorganization,
dissolution (other than as expressly provided in Article X or Article XI
hereof), liquidation or the issuance of equity securities or securities
convertible into or exchangeable for equity securities (other than in any of the
foregoing instances any merger or consolidation of a wholly owned Subsidiary of
the Company, if any, with or into the Company or another wholly owned Subsidiary
of the Company which would not have a material adverse tax effect on any Member)
or other winding-up or termination of, the Company (or the adoption of a plan to
do any of the foregoing);
(c) the purchase or other acquisition (by merger, consolidation or
otherwise) by the Company of any stock or equity interests in or of any other
Person, or any assets of any other Person, or any business (or a substantial
part of a business), other than the purchase or other acquisition of (i)
securities issued by governmental agencies backed by the full faith and credit
of the United States government, (ii) deposits with, certificates of deposit
issued by and securities repurchase contracts with commercial banks or primary
financial institutions, (iii) commercial paper, or (iv) shares of money market
mutual or similar funds which invest exclusively in assets satisfying the
requirements of clauses (i), (ii) or (iii) hereof;
(d) except as otherwise provided in this Agreement, the redemption,
purchase, repurchase or other acquisition for value of any Membership Interests
(other than as expressly provided in Article VIII and Article XI hereof) or any
debt securities of the Company or any wholly-owned Subsidiary of the Company
(except to the extent such debt security is required to be so redeemed,
purchased, repurchased or otherwise acquired in accordance with the terms of
this Agreement);
-16-
(e) the sale, transfer, pledge or hypothecation of any shares of Common
Stock other than to a wholly-owned Subsidiary of the Company;
(f) subject to subsection (i) below, the entering into of any contract
or transaction with or for the direct or indirect benefit of, or payment or
provision of any money or other form of consideration, directly or indirectly,
to or for the benefit of, or assumption, guarantee or becoming otherwise liable
for any indebtedness or other obligation of, or sale, lease (as lessor or
lessee), transfer, giving or other assignment or acquisition of any properties
or assets, tangible or intangible, or services to or from, any Member or any of
their respective Affiliates; provided, that subject to subsection (i) below, the
unanimous consent of the Members shall not be required for the advancement of
any working capital to the Company by IDT Corporation and LMC as contemplated in
Section 4.1(e);
(g) taking any action or failing to take any action that could
reasonably be expected to result in (i) the Company failing to be treated as a
partnership for U.S. federal income tax purposes or (ii) the termination of the
Company under Section 708(b) of the Code;
(h) accepting contributions of capital from any Member after the date
hereof;
(i) enter into any contract or arrangement which requires payment to or
by the Company or any of its Subsidiaries in an amount, whether payable at one
time or in a series of payments, in excess of U.S. $500,000 over the life of the
contract or arrangement, except for any contract or arrangement which require
payment of reasonable fees relating to administrative or professional services
provided to the Company or any of its Subsidiaries;
(j) cause any settlement of any litigation or other governmental
proceeding or which provides for the release of a Manager from any liability for
damages to the Company caused by fraud or willful misconduct of such Manager;
provided, however, that the consent of the Members to take action with respect
to this Section 3.3(j) shall not be unreasonably withheld;
(k) entering into, assuming or becoming bound by any contract to do any
of the foregoing, or otherwise attempting to do any of the foregoing, either
directly or indirectly.
Notwithstanding anything to the contrary contained herein, any action required
to be taken by the Company pursuant to Article VII shall not be deemed a
Significant Decision.
-17-
3.4. Compensation of Managers. The Managers shall not be entitled to
any compensation in connection with management services rendered to the Company.
All expenses incurred by the Managers in connection with travel to and from
meetings of the Board of Managers shall be borne by the Class A-1 Member, other
than the expenses of the LMC Manager, which shall be borne by Liberty Sub.
3.5. Actions by the Members. All actions required or permitted to be
taken by the Members may be taken without a meeting. The Members having not less
than the minimum number of votes that would be necessary to authorize or take an
action may consent in writing or by electronic transmission to the authorization
or taking of an action and the written consent or electronic transmission or
transmissions shall be filed with the minutes of the Company. The filing shall
be in paper form if the minutes are maintained in paper form and shall be in
electronic form if the minutes are maintained in electronic form.
ARTICLE IV.
RIGHTS AND DUTIES OF MEMBERS
4.1. Other Activities of the Members. (a) Subject to Sections 4.1(b)
and 4.1(c), this Agreement shall not be construed to create any duty or
obligation on the part of any of the Members, the Company or any other person
employed by, related to or in any way affiliated with any Member or the Company
to disclose or offer to the Company or the Members, or obtain for the benefit of
the Company or the Members, any other activity or venture or interest therein,
or to create on the part of the Company, any of the Members, any creditors of
the Company or any other Person having any interest in the Company (i) any
claim, right or cause of action against any of the Members or any other Person
employed by, related to or in any way affiliated with, any of the Members by
reason of any direct or indirect investment or other participation, whether
active or passive, in any other activity or venture or interest therein or (ii)
any right to any such activity or venture or interest therein or the income or
profits derived therefrom.
(b) AT&T hereby undertakes to use its reasonable best efforts to make
valuable and meaningful introductions for the Company to appropriate executives
at AT&T (or its Broadband division or Business division if separate entities)
and certain PTTs and equipment manufacturers where AT&T would face no conflict
of interest. AT&T further will endeavor to provide, when appropriate, intangible
value to the Company through its contacts and relationships and, as appropriate
and in its sole discretion, to purchase products and services from Net2Phone for
its own use.
(c) IDT Corporation hereby undertakes that, to the extent that as
owner, directly or indirectly, of (i) the IDT Sub Shares, (ii) any Membership
Interests or (iii) any shares of Common Stock, it is entitled to the proceeds of
any judgment or award resulting from any lawsuit or other legal proceeding
brought by Net2Phone or the
-18-
stockholders of Net2Phone against AT&T Sub or its Affiliates relating to any
matter pertaining to AT&T Sub's ownership of Common Stock prior to the date
hereof or its obligations under the agreements relating to the AT&T Sub Shares,
IDT Corporation shall, and cause it Affiliates to, as soon as practicable after
the receipt by IDT Corporation or any of its Affiliates of such proceeds,
transfer such proceeds (net of any taxes payable with respect to such proceeds)
to AT&T Sub for its sole benefit; provided, however, that for purposes of this
Section 4.1(c), Net2Phone shall not be deemed an Affiliate of IDT Corporation.
(d) The provisions of Sections 4.1(b) and (c) hereof were negotiated in
good faith by the parties hereto, and the parties hereto agree that such
provisions are reasonable and are not more restrictive than necessary to protect
the legitimate interests of the parties hereto. If any provision of Section
4.1(b) or (c) hereof shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of such Section 4.1(b) or (c). It is the
intention of the parties hereto that if any of the covenants contained in
Section 4.1(b) or (c) is in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, such Section 4.1(b) or (c) shall be construed, interpreted or
reformed to provide for a covenant having the maximum enforceable provisions as
shall be valid and enforceable under applicable law.
(e) From time to time, IDT Corporation and/or LMC may advance or cause
any of their Affiliates to advance working capital to the Company in the form of
loans in such amounts as the Board of Managers deems appropriate in order to
fund administrative and professional services required by the Company, subject
to terms and conditions on arm's-length basis (including interest payments,
sufficient collateral to secure the obligations and other commercial terms)
satisfactory to IDT Corporation and LMC.
4.2. Liability of Members, Managers and Officers.
(a) Except as otherwise expressly provided herein, no Member (including
any Member acting in its capacity as the Tax Matters Member), Manager or officer
of the Company shall be liable, responsible or accountable in damages or
otherwise, with respect to matters or actions relating to the Company, under
this Agreement to the Company or to any other Member or Manager for (i) any act
performed or omission made in good faith except for fraud or the willful
misconduct of such Member, Manager or officer, (ii) such Member's, Manager's or
officer's performance of, or failure to perform, any act on the reasonable
reliance on advice of legal counsel to the Company or (iii) the negligence,
malfeasance or bad faith of any agent, consultant or broker of the Company
selected, engaged or retained in good faith. In any threatened, pending or
completed action, suit or proceeding, each Member (including any Member
-19-
acting in its capacity as the Tax Matters Member), Manager and officer shall be
fully protected and indemnified and held harmless by the Company to the fullest
extent permitted by applicable law against all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable attorneys' fees, costs of investigation, fines, judgments and amounts
paid in settlement, actually incurred by such Member, Manager or officer in
connection with such action, suit or proceeding) by virtue of its status as a
Member (including by virtue of any Member's status as the Tax Matters Member),
Manager or officer, as the case may be, or with respect to any action or
omission taken or suffered in good faith, other than liabilities and losses
resulting from fraud or the willful misconduct of such Member, Manager or
officer. The indemnification provided by this Section 4.2(a) shall be
recoverable only out of the assets of the Company, and no Member or Manager
shall have any personal liability on account thereof.
(b) To the extent that, at law or in equity, a Member, Manager or
officer of the Company has duties (including fiduciary duties) and liabilities
relating thereto to the Company or to another Member or Manager, such Member,
Manager or officer of the Company acting in connection with the Company's
business or affairs, shall not be liable to the Company or to any Member or
Manager for its good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict the duties and
liabilities of a Member, Manager or officer of the Company otherwise existing at
law or in equity, are agreed by the Members to replace such other duties and
liabilities of such Member, Manager or officer of the Company in the context of
this Agreement.
4.3. Investment Representations. Each Member agrees that it will not
Transfer all or any portion of, or offer to Transfer all or any portion of, such
Membership Interests, or solicit offers to buy from or otherwise approach or
negotiate in respect thereof with any Person or Persons whomsoever, all or any
portion of such Membership Interests (i) in any manner which would violate or
cause the Company or any Member to violate applicable federal or state
securities laws and (ii) other than in accordance with the provisions of this
Agreement.
4.4. Legend. The Company may issue certificates representing Membership
Interests and in the event that the Company issues such certificates, such
certificates shall bear substantially the following legend:
"THE MEMBERSHIP INTERESTS REPRESENTED HEREBY WERE ORIGINALLY
ISSUED AS OF OCTOBER 19, 2001, HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE
-20-
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER OR IN
VIOLATION OF ANY SUCH STATE SECURITIES LAWS. THE SECURITIES
REPRESENTED HEREBY ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN THE SECOND AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT OF THE COMPANY AND THE COMPANY RESERVES THE
RIGHT TO REFUSE THE TRANSFER OF THE SHARES REPRESENTED HEREBY
UNTIL THE CONDITIONS THEREIN HAVE BEEN FULFILLED WITH RESPECT
TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY OF THE SECOND
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
WITHOUT CHARGE."
4.5. Limited Liability of Members.
(a) Except as otherwise expressly provided herein or in the Act, no
Member (and no director, officer, employee or controlling Person (if any) of
such Member) shall be bound by, or be personally liable for, any expense,
liability, indebtedness or obligations of the Company or any Subsidiary of the
Company or of any other Member. Moreover, except as otherwise expressly provided
herein or in the Act or for breach of this Agreement, no Member (and no
director, officer, employee or controlling Person (if any) of such Member) shall
have any liability under this Agreement to the Company or any other Member other
than, with respect to such Member only, its Capital Contributions. The Members
shall not be required to contribute any amounts in excess of the amounts set
forth in Section 6.1 hereof.
(b) To the fullest extent permitted by applicable law, recourse for any
monetary liability or obligation of a Member to the Company or any other Member
under this Agreement shall be had only against the Membership Interests held by
such Member or the value thereof, and not against other assets of such Member.
(c) Notwithstanding Sections 4.5(a) and (b) hereof, each Member shall
be fully liable to contribute its Capital Contribution in accordance with
Section 6.1 hereof.
-21-
4.6. Dealing with Members. The fact that a Member, an Affiliate of a
Member or any officer, director, employee, partner, consultant or agent of a
Member, is directly or indirectly interested in or connected with any person,
firm or corporation employed by the Company to render or perform a service, or
from or to whom the Company may buy or sell any property or have other business
dealings, shall not prohibit the Company from employing such person, firm or
corporation or from dealing with him or it (each, an "Affiliate Transaction") on
arm's-length terms, and neither the Company nor any of the Members shall have
any rights in or to any income or profits derived therefrom by the party to any
such Affiliate Transaction.
4.7. Designation of Tax Matters Member.
(a) The Tax Matters Member shall act as the "tax matters partner" of
the Company, as provided in the regulations pursuant to Section 6231 of the
Code. The Tax Matters Member shall initially be IDT Sub, which shall serve as
Tax Matters Member until such time as a successor Tax Matters Member is
appointed by the Board of Managers. Any Person serving as the Tax Matters Member
may be removed and a new Tax Matters Member may be appointed by the Board of
Managers. Any Tax Matters Member who is to be replaced by a successor Tax
Matters Member in accordance with this Section 4.7(a) shall certify that another
Member has been selected as the Tax Matters Member of the Company by filing a
statement to that effect with the IRS in the form and manner prescribed by
Section 301.6231(a)(7)-1(d) of the Treasury Regulation. Each Member hereby
approves of such designation and agrees to execute, certify, acknowledge,
deliver, swear to, file and record at the appropriate public offices such
documents as may be deemed necessary or appropriate to evidence such approval.
To the extent and in the manner provided by applicable Code sections and
Treasury Regulations thereunder, the Tax Matters Member (a) shall furnish the
name, address, profits interest and taxpayer identification number of each
Member to the IRS and (b) shall inform each Member of administrative or judicial
proceedings for the adjustment of Company items required to be taken into
account by a Member for income tax purposes. The Tax Matters Member shall act
reasonably at all times and keep the other Members reasonably informed about its
actions.
(b) All reasonable out-of-pocket expenses and costs incurred by any Tax
Matters Member in its capacity as Tax Matters Member shall be paid by the
Company as an ordinary expense of its business.
4.8. Tax Matters.
(a) The Board of Managers shall prepare all tax returns of the Company;
provided, however, that the Board of Managers shall not file any such tax return
without the approval of all Members, which approval shall not be unreasonably
withheld. The Board of Managers shall cause the Company to circulate to each
Member for its review and approval a draft of any income tax return no later
than ninety (90) days
-22-
after the end of the Company's Fiscal Year. If any Member shall object to any
items on the return within thirty (30) days, then the Members and the Board of
Managers shall attempt to agree on a mutually acceptable resolution of any
disputed tax items. If the Member and the Board of Managers cannot resolve their
disagreement within 10 days, either the Member or the Board of Managers may
request, in writing with a copy sent to the other party, that the disagreement
be resolved by a mutually agreed upon "big five" independent accounting firm
(Xxxxxx Xxxxxxxx LLP, Xxxxx & Xxxxx LLP, PricewaterhouseCoopers LLP, KPMG LLP or
Deloitte & Touche LLP) (the "Independent Accountants") and the Independent
Accountants shall be instructed to resolve the dispute by, first determining if
both positions have merit, and if not, shall adopt the position that has merit.
If the Independent Accountants determines that both positions have merit, the
Independent Accountants shall adopt the position that will maximize, in the
aggregate, the U.S. Federal, state and local income tax advantages and will
minimize, in the aggregate, the U.S. Federal, state, and local income tax
detriments, available to the Company's Members. The Independent Accountants
shall provide their written resolution of the disagreement to both the Member
and the Board of Managers within 15 days from the date that the Independent
Accountants were requested to resolve such disagreement. If the Independent
Accountants are incapable of resolving such disagreement based on the
above-stated criteria, the position of the Board of Managers shall prevail.
(b) The Board of Managers shall furnish a copy of all filed tax returns
of the Company to each of the Members. In addition, upon reasonable written
notice provided to the Company by a Member (and as otherwise required by law),
the Company shall furnish such Members, on a timely basis, with all information
relating to the Company required to be reported in any U.S. Federal, state and
local tax returns of such Members, including a report indicating such Member's
allocable share for U.S. Federal income tax purposes of the Company's income,
gain, credits, losses and deductions.
(c) The Members shall report their tax items with respect to, and
arising from, their Membership Interests in a manner that is consistent with the
Company's tax returns.
(d) The Board of Managers shall provide prompt notice to the Members of
advice that the IRS or any applicable state or local taxing authority intends to
examine any tax returns or records or books of the Company and of any notice
from the IRS in any administrative or judicial proceeding at the Company level
relating to the determination of any item of income, gain, loss, deduction or
credit of the Company, in each case together with a copy of such IRS or state or
local taxing authority notice and any written materials submitted by the Board
of Managers in response to such notice. In the event of any tax audit or any
contest, dispute or litigation with respect to the treatment of, or liability of
the Company for, any U.S. Federal, state or local income tax for any taxable
period (or portion of a taxable period) of the Company beginning after the date
-23-
hereof, the Board of Managers shall control, defend and otherwise represent the
Company in such audit, contest, dispute or litigation; provided, however, that
any Member that constitutes a "notice partner" (as defined in Code Section
6231(a)(8)) of the Company shall have the right, directly or through its
designated representatives, to review in advance and timely comment upon all
significant written submissions made in the course of such audit, contest,
dispute or litigation and to participate in, directly or through its designated
representatives, all conferences, meetings or proceedings with any taxing
authority, and all appearances before any court or judicial body, the subject
matter of which is or includes an item for which such Member's U.S. Federal
income tax liability or U.S. Federal income tax benefits could be increased or
decreased, respectively, by more than $1,000,000 with respect to the Fiscal Year
at issue. The Board of Managers shall advise any Member that constitutes a
"notice partner" of the Company (as described above) of any written proposed
adjustment by the IRS that would increase (directly or through such Member's
interest in any intermediate entities) such Member's U.S. Federal income tax
liability (or decrease (directly or through such Member's interest in any
intermediate entities) such Member's U.S. Federal tax benefits) by more than
$1,000,000 with respect to the Fiscal Year at issue. If the Board of Managers
proposes that such adjustment be approved, the Company shall not concede such
adjustment without such "notice partner" Member's prior written approval, which
approval shall not be unreasonably withheld. In the event of a disagreement
between the Board of Managers and a "notice partner" Member with respect to such
adjustment, the procedures for resolving disagreements set forth in Section
4.8(a) hereof shall apply.
(e) The Board of Managers shall take any steps necessary pursuant to
Code Section 6223(a) to designate any Member who so requests, as a "notice
partner" (as defined in Code Section 6231(a)(8)) if such Member so requests. In
addition, nothing in this Agreement is intended to waive any rights, including
rights to participate in administrative and judicial proceedings, that a Member
may have under Code Sections 6221 through 6233, inclusive.
(f) Notwithstanding any other provisions of this Agreement, the
provisions of this Section 4.8 shall survive the dissolution of the Company or
the termination of any Member's interest in the Company and shall remain binding
on all Members for a period of time necessary to resolve with the IRS or any
applicable state or local taxing authority all matters (including litigation)
regarding the U.S. Federal, state and local income taxation, as the case may be,
of the Company or any Member with respect to the Company.
(g) The parties hereby agree that the Company will file all of its tax
returns in a manner that is consistent with the tax positions set forth in
Sections 4.08 and 7.01 of the Exchange Agreement documenting the transfer by
AT&T Sub of certain Class B Membership Interests to IDT Investments and on the
basis that the contributions by the Members of the Common Stock to the Company
are tax-free transactions under Code
-24-
Section 721.
ARTICLE V.
BOOKS, RECORDS, BUDGETS AND REPORTS
5.1. Books of Account. At all times during the continuance of the
Company, the Board of Managers shall keep or cause to be kept true and complete
books of account in accordance with United States generally accepted accounting
principles (except as noted in the last sentence of Section 5.3) and in which
shall be entered fully and accurately the transactions of the Company. Such
books of account shall be kept on the basis of the Fiscal Year in accordance
with the accrual method of accounting, and shall reflect all transactions of the
Company in accordance with United States generally accepted accounting
principles (except as noted in the last sentence of Section 5.3).
5.2. Availability of Books of Account. All of the books of account
referred to in Section 5.1, together with an executed copy of this Agreement,
the Certificate of Formation and any amendments thereto shall at all times be
maintained at the principal office of the Company or such other place in the
State of Nevada or in such other state as the Board of Managers may designate in
writing to the Members, and upon reasonable notice to the Board of Managers,
shall be open to the inspection and examination of the Members or their
representatives during reasonable business hours for purposes reasonably related
to their Membership Interests.
5.3. Annual and Periodic Reports and Statements. For each Fiscal Year,
the Board of Managers shall send or shall cause to be sent to each Person who
was a Member at any time during such Fiscal Year, within one hundred and twenty
(120) days after the end of such Fiscal Year, the consolidated annual financial
statements of the Company including an annual balance sheet, profit and loss
statement and a statement of changes in financial position, and a statement
showing distributions to the Members, all as prepared in accordance with United
States generally accepted accounting principles consistently applied (except as
noted in the last sentence of this Section 5.3) and audited by the Company's
independent public accountants, which shall be a firm of Independent Accountants
and, within one hundred and twenty (120) days after the end of the Fiscal Year,
a statement showing allocations to the Members of taxable income, gains, losses,
deductions and credits, as prepared by such accountants. In addition, the Board
of Managers shall send or cause to be sent to each Member (i) within forty-five
(45) days after the end of the first three fiscal quarters of each year, a
quarterly report, as applicable, setting forth such financial and operating
information as the Board of Managers shall reasonably determine but which shall
include a consolidated balance sheet and income statement (except as noted in
the last sentence of this Section 5.3), (ii) such monthly and quarterly
financial reporting information as the Board of Managers
-25-
shall reasonably determine and (iii) such financial and other information
concerning the Company as is reasonably requested by any Member that is
necessary for the preparation of (A) such Member's federal, state and local
income or other tax returns or (B) any filing, notice or application made by or
on behalf of such Member to or with any regulatory body having jurisdiction over
such Member, subject to the right of the Company to withhold any confidential
information that it reasonably determines will not remain confidential and that
the public disclosure of which could adversely affect the Company. In addition
to the rights under this Agreement and under the Act, the Company may provide
such information to such Members and such other Persons as it deems appropriate.
Notwithstanding the foregoing, in no event shall the results of Net2Phone be
consolidated within such financial statements.
5.4. Accounting Expenses. All out-of-pocket expenses payable to Persons
in connection with the keeping of the books and records of the Company and the
preparation of audited or unaudited financial statements and federal and local
tax and information returns required to implement the provisions of this
Agreement or required by any governmental authority with jurisdiction over the
Company shall be borne by the Company as an ordinary expense of its business.
ARTICLE VI.
CAPITAL CONTRIBUTIONS, CAPITAL
ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS
6.1. Capital Contributions of the Members.
(a) IDT Sub has made a Capital Contribution to the Company in the form
of the IDT Sub Shares, as of the date of the Limited Liability Company
Agreement, with 1,300,000 shares of Common Stock exchanged for Class B
Membership Interests and 8,696,750 shares of Common Stock exchanged for Class
A-1 Membership Interests. AT&T Sub has made a Capital Contribution to the
Company in the form of the AT&T Sub Shares, as of the date of the Amended and
Restated Limited Liability Company Agreement, with 6,200,000 shares of Common
Stock exchanged for Class A Membership Interests and 12,700,000 shares of Common
Stock exchanged for Class B Membership Interests. No other Member is making a
Capital Contribution. The Exchange Transactions are hereby approved in all
respects.
(b) Each of AT&T Sub and IDT Sub represents, warrants and acknowledges
that immediately prior to its Capital Contribution, it owned the AT&T Sub Shares
or the IDT Sub Shares, as applicable, beneficially and of record, free and clear
of any mortgage, pledge, lien, security interest, claim, restriction, charge or
encumbrance of any kind. Each of AT&T Sub and IDT Sub represents, warrants and
acknowledges that it owns its Membership Interests, subject, in the case of AT&T
Sub, to the Exchange Agreements, beneficially and of record, free and clear of
any mortgage, pledge, lien,
-26-
security interest, claim, restriction, charge or encumbrance of any kind, other
than as provided in the Transaction Agreements.
(c) The Membership Interests held by each Member and the Capital
Contributions attributable to each class of Membership Interests held by each
Member, before and after giving effect to the Exchange Transactions, are set
forth on Schedule III hereto, as such schedule may be hereafter amended from
time to time.
6.2. Capital of the Company. The capital of the Company shall be the
aggregate capital in all of the Members' Capital Accounts. Except as otherwise
provided herein, no Member shall be entitled to (i) withdraw or receive any
interest or other return on its Capital Contribution or (ii) voluntarily
contribute capital to the Company.
6.3. Return of Capital Contribution. Except as otherwise provided in
this Agreement, no Member shall have the right to demand the return of all or
any part of its Capital Contribution until the Company has been dissolved, or,
in the event it has such right, to demand or receive any property other than
cash in return for its Capital Contribution.
6.4. Capital Accounts.
(a) The Company shall maintain separate Capital Accounts for each
Member in accordance with Section 704(b) of the Code and the Treasury
Regulations thereunder. In addition, the Company shall maintain separate
Sub-Capital Accounts for each Member (i) with respect to the Class A Membership
Interests held by such Member (the "Class A Capital Account"), (ii) with respect
to the Class A-1 Membership Interests held by such Member (the "Class A-1
Capital Account") and (iii) with respect to the Class B Membership Interests
held by such Member (the "Class B Capital Account"), each in the same manner as
the Capital Accounts except that only items allocable or attributable to each
individual class of Membership Interests shall be taken into account. The
Capital Accounts and the Sub-Capital Accounts of each Member as of the date
hereof, after giving effect to the Exchange Transactions, are deemed to equal
the dollar amounts set forth opposite such Member's name on Schedule IV hereto
as of the date hereof.
(b) The Capital Account of each Member shall be increased by the amount
of any Profits allocated to such Member. The Capital Account of each Member
shall be decreased by (i) the amount of any Losses allocated to such Member and
(ii) the amount of distributions to such Member. In all respects, the Members'
Capital Accounts shall be determined in accordance with the detailed capital
accounting rules set forth in Treasury Regulations Section 1.704-1(b)(2)(iv) as
currently in effect and may be adjusted in the sole discretion of the Board of
Managers as provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(f) as
currently in effect.
-27-
(c) A transferee of all (or a portion) of the Membership Interests held
by a Member shall succeed to the Capital Account, Sub-Capital Account and
Capital Contributions attributable to the transferred Membership Interests.
6.5. Profits and Losses. Except as otherwise set forth in Section 6.6
hereof, Profits, Losses and items of income, gain, deduction and loss of the
Company for each Fiscal Year shall be allocated among all Persons who were
Members during such Fiscal Year at the direction of the Board of Managers in a
manner that will, as nearly as possible, cause the Capital Account balance of
each Member (as computed for purposes of section 704(b) of the Code), as of the
date the Board of Managers determine the allocations, to be equal to the sum of
the amounts of cash or the Book Value of other property that would be
distributable to such Member pursuant to Article X hereof at such time upon a
hypothetical liquidation of the Company assuming that all the remaining assets
of the Company were sold for their Book Values, all debts of the Company were
paid according to their terms (with any nonrecourse debt for U.S. Federal income
tax purposes deemed paid in amounts not in excess of the Book Value of the
property securing such nonrecourse debt) and the cash or other property received
therefrom was distributed to the Members in accordance with the priorities set
forth in Article X hereof.
6.6. Special Allocations.
The following special allocations shall be made in the following order:
(a) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of the Member as quickly as possible; provided that an allocation
pursuant to this Section 6.6(a) shall be made only if and to the extent that the
Member would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Article VI have been tentatively made as if
this Section 6.6(a) were not in the Agreement.
(b) Gross Income Allocations. In the event any Member has an Adjusted
Capital Account Deficit at the end of any Fiscal Year, each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible; provided that an allocation pursuant to this
Section 6.6(b) shall be made only if and to the extent that such Member would
have an Adjusted Capital Account Deficit in excess of such sum after all other
allocations provided for in this Article VI have been made as if Section 6.6(a)
and this Section 6.6(b) were not in the Agreement.
(c) Loss Limitation. Losses allocated pursuant to Section 6.5 hereof
-28-
shall, to the extent possible, not exceed the maximum amount of Losses that can
be allocated without causing any Member to have an Adjusted Capital Account
Deficit at the end of any Fiscal Year. In the event some but not all of the
Members would have Adjusted Capital Account Deficits as a consequence of an
allocation of Losses pursuant to Section 6.5 hereof, the limitation set forth in
this Section 6.6(c) shall be applied on a Member by Member basis and Losses not
allocable to any Member as a result of such limitation shall be allocated to the
other Members in accordance with the positive balances in such Member's Capital
Accounts so as to allocate the maximum permissible Losses to each Member under
Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. Any remaining Losses
shall be allocated to the Members in the proportion and to the extent to which
such Members bear the economic risk with respect to such Losses.
(d) Curative Allocations. The allocations set forth in Section 6.6
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Members that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 6.6(d).
Therefore, notwithstanding any other provision of this Article VI (other than
the Regulatory Allocations), to the extent permitted under the Treasury
Regulations, the Board of Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 6.5.
6.7. Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Board of
Managers using any permissible method under Code Section 706 and the Treasury
Regulations thereunder.
(b) The Members are aware of the income tax consequences of the
allocations made by this Article VI and hereby agree to be bound by the
provisions of this Article VI in reporting their shares of Company income and
loss for income tax purposes.
(c) Notwithstanding anything to the contrary in this Article VI, the
Board of Managers shall be permitted to allocate Profits and Losses and gross
items of income, gain, loss and deduction and to adjust the Members' Capital
Accounts in the manner the Board of Managers, in its reasonable discretion,
deems required to cause the Capital Account balances of the Members to be
consistent with the distribution provisions of Article VII.
-29-
6.8. Tax Allocations: Code Section 704(c).
(a) For tax purposes, all items of income, gain, loss, deduction,
expense and credit, shall be allocated in the same manner as are Profits and
Losses and items of income, gain, loss and deduction pursuant to Sections 6.5,
6.6 and 6.7; provided, however, that in accordance with Code Section 704(c) and
the Treasury Regulations thereunder, income, gain, loss and deductions with
respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its initial Book Value (computed in accordance with the
definition of Book Value) using any permissible method as provided in the
Treasury Regulations.
(b) In the event the Book Value of any Company asset is adjusted
pursuant to subparagraph (ii) of the definition of Book Value, subsequent
allocations of income, gain, loss and deductions with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Book Value in the same manner as under Code
Section 704(c) and the Treasury Regulations thereunder using any permissible
method as provided in the Treasury Regulations.
(c) Any elections or other decisions relating to such allocations shall
be made by the Board of Managers in its sole discretion. Allocations pursuant to
this Section 6.8 are solely for purposes of federal, state and local taxes and
shall not affect, or in any way be taken into account in computing any Member's
Capital Account or share of Profits, Losses, other items or distributions
pursuant to any provisions of this Agreement.
(d) No election shall be made under Section 754 of the Code for the
Company unless otherwise determined by the Board of Managers in its sole
discretion.
ARTICLE VII.
DISTRIBUTIONS
7.1. Distribution Policy.
(a) Subject to Paragraph (b) below, the Company shall distribute
Distributable Funds only when, as and if determined by the Board of Managers.
Distributable Funds on any distribution date shall be distributed to the Members
in the following order of priority:
(i) First, 100% to the Class B Membership Interests in accordance
with the Class B Percentage Interests until the cumulative
-30-
amounts distributed pursuant to this Section 7.1(a)(i) equal the
Capital Contributions made with respect to the Class B Membership
Interests;
(ii) Second, 58.4% to the Class A-1 Membership Interests in
accordance with the Class A-1 Percentage Interests and 41.6% to the
Class A Membership Interests in accordance with the Class A Percentage
Interests until the cumulative amounts distributed pursuant to this
Section 7.1(a)(ii) equal the aggregate of the Capital Contributions
made with respect to the Class A-1 Membership Interests and the Class A
Membership Interests;
(iii) Third, 100% to the Class B Membership Interests in
accordance with the Class B Percentage Interests until the sum of the
cumulative distributions to the Class B Membership Interests pursuant
to Section 7.1(a)(i) and this Section 7.1(a)(iii) represents an annual
IRR of 8.5% compounded quarterly with respect to the Class B Membership
Interests (the "Initial Class B Return") as of such distribution date;
(iv) Fourth, 58.4% to the Class B Membership Interests in
accordance with the Class B Percentage Interests and 41.6% to the Class
A Membership Interest in accordance with the Class A Percentage
Interests until the sum of the cumulative distributions to the Class B
Membership Interests pursuant to Section 7.1(a)(i), Section 7.1(a)(iii)
and this Section 7.1(a)(iv) represents an annual IRR of 13% compounded
quarterly with respect to the Class B Membership Interests (the "Total
Class B Return") as of such distribution date; and
(v) Fifth, 58.4% to the Class A-1 Membership Interests in
accordance with the Class A-1 Percentage Interests and 41.6% to the
Class A Membership Interests in accordance with the Class A Percentage
Interests.
(b) All amounts withheld pursuant to any provision of any U.S. federal,
state, local or foreign tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to Section 7.1(a) for all purposes of this Agreement.
The Board of Managers is authorized to withhold from distributions, or with
respect to allocations, to the Members and to pay over to any U.S. federal,
state, local or foreign government any amounts required to be so withheld
pursuant to the Code or any provision of any other U.S. federal, state or local
law and shall allocate such amounts to those Members with respect to which such
amounts were withheld. To the extent that withholding taxes and other related
expenses paid to any U.S. federal, state, local or foreign government on behalf
of a Member exceed the amount of any distribution the Member would otherwise
receive from the Company, the Board of Managers may, in its discretion, require
such
-31-
Member to contribute cash to the Company up to the amount paid on such Member's
behalf.
7.2. Liquidation. In the event of any sale or other disposition of all
or substantially all of the assets of the Company in accordance with the terms
of this Agreement, the Company shall be dissolved and the proceeds of such sale
or other disposition shall be distributed to the Members in liquidation as
provided in Article X.
ARTICLE VIII.
RECIPROCAL PUT/CALL RIGHTS
8.1. Put Rights.
(a) AT&T Sub may, at its sole option, by written notice to the relevant
party (or parties) delivered not more than fifteen (15) days prior to, or within
fifteen (15) after, the first anniversary of the date hereof, transfer, within
30 days of providing such written notice, (x) six (6) of its Class A Membership
Interests in exchange for cash and stock of IDT Investments (the "IDT
Investments Put") and/or (y) twenty-three (23) of its Class A Membership
Interests in exchange for cash and stock of Liberty Sub (the "Liberty Sub Put"),
in either case valued at the Class A Fair Market Value of such Membership
Interests, calculated as of such first anniversary.
(b) If the Class A Fair Market Value required to be paid with respect
to the IDT Investments Put is $7.4 million or less at the time the IDT
Investments Put is exercised, then at least 90% of such Class A Fair Market
Value shall be paid by IDT Investments to AT&T Sub in cash and the remaining
portion (with the exact combination to be determined in the sole discretion of
IDT Investments) of such Class A Fair Market Value shall be paid by IDT
Investments to AT&T Sub in the form of preferred stock of IDT Investments having
terms and conditions substantially similar to the terms and conditions contained
on Schedule V-A hereto ("IDT Investments Preferred Stock"). If the Class A Fair
Market Value required to be paid with respect to the IDT Investments Put is
greater than $7.4 million at the time the IDT Investments Put is exercised, then
IDT Investments may elect, at its sole option, to pay the portion of such Class
A Fair Market Value that exceeds $7.4 million in the form of a combination of
cash and shares of Class B Common Stock, par value $0.01 per share, of IDT
Corporation ("IDTC Class B Common Stock") up to 90% of such excess (with the
exact combination to be determined in the sole discretion of IDT Investments)
and 10% to be paid in the form of IDT Investments Preferred Stock. For purposes
of this Section 8.1(b), the value of a share of Class B Common Stock shall be
determined to be the average (rounded to the nearest 1/10,000) of the closing
prices of the IDTC Class B Common Stock during regular trading hours on the
principal market on which shares of IDTC Class B Common Stock are then listed or
quoted (whether the NASDAQ National Market, The New York Stock
-32-
Exchange or another national securities exchange or association) for the twenty
(20) consecutive trading day period ending on the first anniversary of the date
hereof. Such satisfaction of the IDT Investments Put shall, at the option of IDT
Investments, be structured in the most tax efficient manner as determined by IDT
Investments; provided, that such structuring shall not change the payment terms
of the IDT Investments Put described above.
(c) The Class A Fair Market Value required to be paid with respect to
the Liberty Sub Put shall be paid at the time the Liberty Sub Put is exercised,
with at least 90% to be paid by Liberty Sub to AT&T Sub in the form of cash and
the remaining portion (with the exact combination to be determined in the sole
discretion of Liberty Sub) to be paid by Liberty Sub to AT&T Sub in the form of
preferred stock of Liberty Sub having terms and conditions substantially similar
to the terms and conditions contained on Schedule V-B hereto ("Liberty Sub
Preferred Stock"). Such satisfaction of the Liberty Sub Put shall, at the option
of Liberty Sub, be structured in the most tax efficient manner as determined by
Liberty Sub; provided, that such structuring shall not change the payment terms
of the Liberty Sub Put described above.
(d) Subject to the immediately succeeding sentence, IDT Investments or
Liberty Sub, as the case may be, shall pay to AT&T Sub the Class A Fair Market
Value as provided in Section 8.1(b) or 8.1(c), as the case may be, within thirty
(30) days of the date the IDT Investments Put or the Liberty Sub Put, as the
case may be, is exercised. In the event that the payment of any portion of the
Class A Fair Market Value required to be paid with respect to the IDT
Investments Put or the Class A Fair Market Value required to be paid with
respect to the Liberty Sub Put requires any statutory or regulatory approval,
the making of any statutory or regulatory filing or notification or the passage
of any waiting period required under applicable statute or regulation, the
payment of any such portion requiring such approval, filing, notification or
passage of such waiting period shall be postponed until after all such approvals
have been obtained, all such filings and notifications have been made and all
such waiting periods have passed; provided, however, that in no event shall the
payment date be extended beyond 180 days of the date the IDT Investments Put or
the Liberty Sub Put, as the case may be, was exercised. The parties agree to
cooperate in good faith and use all commercially reasonable efforts to obtain
any such approvals, make any such filings and notifications and secure the
termination of any such waiting periods.
(e) The IDT Investments Put may be assigned by IDT Investments to
Liberty Sub or any of its Affiliates at any time without the consent of AT&T or
AT&T Sub; provided, however, that if the IDT Investments Put is assigned to
Liberty Sub or any of its Affiliates, Liberty Sub or its Affiliate, as the case
may be, shall be permitted to satisfy the IDT Investments Put in part by
delivering to AT&T Sub shares of Liberty Sub Preferred Stock to the extent IDT
Investments would have been permitted to satisfy the IDT Investments Put in part
by delivering to AT&T Sub shares of IDT Investments
-33-
Preferred Stock;
(f) The Liberty Sub Put may be assigned by Liberty Sub to IDT
Investments or any of its Affiliates at any time without the consent of AT&T or
AT&T Sub; provided, however, that if the Liberty Sub Put is assigned to IDT
Investments or any of its Affiliates, IDT Investments or its Affiliate, as the
case may be, shall be permitted to satisfy the Liberty Sub Put in part by
delivering to AT&T Sub shares of IDT Investments Preferred Stock to the extent
Liberty Sub would have been permitted to satisfy the Liberty Sub Put in part by
delivering to AT&T Sub shares of Liberty Sub Preferred Stock.
8.2. Call Rights.
(a) IDT Investments may, at its sole option, by written notice to the
relevant party (or parties) delivered not more than thirty (30) days prior to,
or within thirty (30) days after, the second anniversary of the date hereof,
require AT&T Sub to transfer, within ten (10) days of providing such written
notice (but in no event prior to the second anniversary of the date hereof), six
(6) of the Class A Membership Interests held by AT&T Sub in exchange for cash
and stock of IDT Investments (the "IDT Investments Call"), and Liberty Sub may,
at its sole option, require AT&T Sub to transfer on such second anniversary
twenty three (23) of the Class A Membership Interests held by AT&T Sub in
exchange for cash and stock of Liberty Sub (the "Liberty Sub Call"), in either
case valued at the Class A Fair Market Value of such Membership Interests,
calculated as of such second anniversary.
(b) The Class A Fair Market Value required to be paid with respect to
the IDT Investments Call shall be paid within ten (10) days after the IDT
Investments Call is exercised (but in no event prior to the second anniversary
of the date hereof), with at least 90% to be paid in cash and the remaining
portion to be paid in IDT Investments Preferred Stock, with the exact
combination to be determined in the sole discretion of IDT Investments. Such
satisfaction of the IDT Investments Call shall, at the option of IDT
Investments, be structured in the most tax efficient manner as determined by IDT
Investments; provided, that such structuring shall not change the payment terms
of the IDT Investments Call described above
(c) The Class A Fair Market Value required to be paid with respect to
the Liberty Sub Call shall be paid within ten (10) days after the Liberty Sub
Call is exercised (but in no event prior to the second anniversary of the date
hereof), with at least 90% to be paid in cash and the remaining portion to be
paid in Liberty Sub Preferred Stock, with the exact combination to be determined
in the sole discretion of Liberty Sub. Such satisfaction of the Liberty Sub Call
shall, at the option of Liberty Sub, be structured in the most tax efficient
manner as determined by Liberty Sub; provided, that such structuring shall not
change the payment terms of the Liberty Sub Call described above.
-34-
(d) The IDT Investments Call may be assigned by IDT Investments or any
of its Affiliates to Liberty Sub at any time without the consent of AT&T or AT&T
Sub; provided, however, that if the IDT Investments Call is assigned to Liberty
Sub or any of its Affiliates, Liberty Sub or its Affiliate, as the case may be,
shall be permitted to satisfy the IDT Investments Call in part by delivering to
AT&T Sub shares of Liberty Sub Preferred Stock to the extent IDT Investments
would have been permitted to satisfy the IDT Investments Put in part by
delivering to AT&T Sub shares of IDT Investments Preferred Stock.
(e) The Liberty Sub Call may be assigned by Liberty Sub to IDT
Investments or any of its Affiliates at any time without the consent of AT&T or
AT&T Sub; provided, however, that if the Liberty Sub Call is assigned to IDT
Investments or any of its Affiliates, IDT Investments or its Affiliate, as the
case may be, shall be permitted to satisfy the Liberty Sub Put in part by
delivering to AT&T Sub shares of IDT Investments Preferred Stock to the extent
Liberty Sub would have been permitted to satisfy the Liberty Sub Put in part by
delivering to AT&T Sub shares of Liberty Sub Preferred Stock.
ARTICLE IX.
TERMINATION OF A MEMBER; TRANSFER OF MEMBERSHIP INTERESTS
9.1. Termination of a Member. The expulsion, dissolution or Bankruptcy
of a Member or any other event that terminates the continued membership of any
Member (each a "Terminating Event") shall not in and of itself cause the Company
to be dissolved, wound up or terminated unless, no later than ninety (90) days
following a Terminating Event with respect to a Member, Members owning all of
the remaining Membership Interests unanimously determine not to continue the
business of the Company, in which case the Company shall dissolve and liquidate
pursuant to Article X hereof and the remaining Members shall select the
liquidator pursuant to such Article. No Member shall have the right to withdraw
or resign as a Member or, except as provided in Section 10.1(a)(i), dissolve the
Company voluntarily.
9.2. Transfer of Membership Interests. No Member may transfer, sell,
pledge, hypothecate, encumber, assign or otherwise dispose of (whether
voluntarily, involuntarily, by operation of law or otherwise) (each, a
"Transfer") any Membership Interest, or agree or contract to Transfer any
Membership Interests held by such Member, without the unanimous consent of the
other Members to (x) such Transfer and (y) the admission of the proposed
transferee as a Member of the Company. Notwithstanding the foregoing, a Member
may Transfer any or all of its Membership Interests to (i) the Parent of such
Member and/or (ii) one or more Subsidiaries of the Parent of such Member;
provided that any such transferee agrees to be bound by the terms of this
Agreement
-35-
applicable to the Membership Interests so transferred and either (1) the other
Members are reasonably satisfied that such transferee has the ability to meet
the obligations it would have hereunder or (2) the transferring Member or the
Parent of such Member guarantees the performance of such obligations (each, a
"Permitted Transferee"). Any attempted or purported Transfer in violation of
this Section 9.2 shall be void and of no force or effect. For purposes of this
Agreement, any Transfer by a Parent or any Subsidiary of a Parent of any direct
or indirect interest in a Member which results in such Member ceasing to be a
Subsidiary of such Parent shall be deemed a Transfer by such Member of all of
its Membership Interests.
ARTICLE X.
TERMINATION OF THE COMPANY;
LIQUIDATION AND DISTRIBUTION OF ASSETS
10.1. Dissolution and Termination.
(a) The Company shall be dissolved only upon the occurrence of any of
the following:
(i) the delivery of a written notice by any Member on or after
January 1, 2004 to the other Members electing to unwind and dissolve
the Company; provided, however, that such election to unwind the
Company shall not be effective if at any time prior to or within 30
days after the date of any such notice, the Class A-1 Members and Class
B Members have elected to acquire or cause the Company to redeem the
Class A Membership Interests held by AT&T Sub pursuant to Section 11.1;
(ii) the sale or other disposition of all or substantially all of
the Common Stock held directly or indirectly by the Company and receipt
of the final payment of any installment obligation received as a result
of any such sale or disposition;
(iii) the unanimous written consent of all Members;
(iv) any event which makes it unlawful for the Company's business
to be continued unless, no later than thirty (30) days following such
event, the Members unanimously determine not to dissolve the Company;
(v) the issuance of a decree by any court of competent
jurisdiction that the Company be dissolved and liquidated; or
-36-
(vi) at any time that there are no Members of the Company, unless
the Company is continued in accordance with the Act.
Upon dissolution, the Company shall wind-up its affairs and shall be liquidated
and a certificate of cancellation of the Company's Certificate of Formation, as
required by law, shall be filed.
(b) In the event of the dissolution of the Company, its business
activities shall be wound up, any amounts due from the Members shall be
collected, its debts and liabilities shall be satisfied and its remaining
assets, if any, shall be distributed as set forth in Section 10.2 below.
Dissolution shall be effective on the date of the occurrence of an event set
forth in Section 10.1(a) but the Company shall not terminate until all of the
Company Assets have been liquidated and the proceeds distributed in accordance
with the provisions of this Article X. Notwithstanding the dissolution of the
Company, prior to the termination of the Company as aforesaid, the business of
the Company and the affairs of the Members as such, shall continue to be
governed by this Agreement.
10.2. Distribution Upon Liquidation. Upon dissolution of the Company,
the Board of Managers, as provided in this Agreement, or if there shall be none,
a trustee or liquidator appointed by unanimous consent of the Members shall
proceed to the liquidation of the Company and the proceeds of such liquidation
shall, notwithstanding any other provision of this Agreement to the contrary, be
applied and distributed in the following order of priority:
(i) to creditors other than Members (whether by payment or the
making of reasonable provision for payment thereof, including the
setting up of any reserves that the Managers or trustee or liquidator,
as the case may be, shall determine are reasonably necessary for any
liabilities or obligations of the Company) in satisfaction of all
Indebtedness and liabilities of the Company (including the expenses of
the liquidation);
(ii) to Members who are creditors (whether by payment or the
making of reasonable provision for payment thereof, including the
setting up of any reserves that the Managers or trustee or liquidator,
as the case may be, shall determine are reasonably necessary for any
liabilities or obligations of the Company) in satisfaction of other
debts and liabilities of the Company owed to Members; and
(iii) to the Members in accordance with Section 7.1(a) hereof.
Any Member may elect to receive distributions in kind of Common Stock held
directly or indirectly by the Company to be distributed prior to any sale of
shares of Common Stock or any Company Assets. In such case, the Company shall
xxxx-to-market the shares of
-37-
Common Stock based on the average (rounded to the nearest 1/10,000) of the
closing prices of the Common Stock of Net2Phone during regular trading hours on
the principal market on which shares of Common Stock of Net2Phone are then
listed or quoted (whether the NASDAQ National Market, The New York Stock
Exchange or another national securities exchange or association) for the twenty
(20) trading days up to and including such date and distribute Common Stock to
such electing Member in lieu of cash in the amount that such Member would have
received pursuant to clause (iii) above if all shares of Common Stock were
distributed to all the Members in a final liquidation of the Company after all
obligations under clauses (i) and (ii) above are satisfied and the number of
shares of Common Stock to be distributed to such electing Member are adjusted
accordingly to satisfy such electing Member's pro rata share of such
obligations.
10.3. Sale of Company Assets.
(a) As expeditiously as possible after dissolution, the Board of
Managers, or any trustee or liquidator, shall satisfy all Company Indebtedness
and liabilities, and make the distributions provided for in Section 10.2. Except
as agreed by the Board of Managers and subject to paragraph (b) below, the
priorities set forth in Section 10.2 and each Member's right to elect to receive
distributions in kind of Common Stock held directly or indirectly by the Company
as set forth in Section 10.2, no Member shall have the right to demand or
receive property other than cash upon liquidation, and the Board of Managers, or
any such trustee or liquidator, shall, in any event, have the power to sell
Company Assets for cash.
(b) In connection with the sale by the Company and reduction to cash of
its assets, although the Company has no obligation to offer to sell any property
to the Members, any Member or any Affiliate of any Member may bid on and
purchase any Company Assets. If the Board of Managers, or any such trustee or
liquidator, determines that an immediate sale of part or all of the Company's
assets would cause undue loss to the Members, the Members, or any trustee or
liquidator, may, with the approval of the Board of Managers, defer liquidation
of and withhold from distribution for a reasonable time any Company Assets
(except those necessary to satisfy the Company's current obligations).
10.4. Deficit Capital Accounts. Notwithstanding anything to the
contrary contained in this Agreement, and notwithstanding any custom or law to
the contrary, upon dissolution of the Company, any deficit in a Member's Capital
Account shall not be an asset of the Company and such Member shall not be
obligated to contribute such amount to the Company to bring the balance of such
Member's Capital Account to zero.
-38-
ARTICLE XI.
REDEMPTION OF
CLASS A MEMBERSHIP INTERESTS
11.1. Redemption of the Class A Membership Interests held by AT&T Sub.
On or after January 1, 2004, the Class A-1 Members and the Class B Members may
agree to elect to either (i) acquire or (ii) cause the Company to redeem the
Class A Membership Interests held by AT&T Sub. If such Members so elect, with
notice of such election to be delivered to the Class A Members in accordance
with Section 13.2, then (x) such Members may cause the Company to redeem the
Class A Membership Interests held by AT&T Sub with Common Stock at the Class A
Fair Market Value (with shares of Common Stock to be marked-to-market in
accordance with Section 10.2) or (y) either or both of IDT Investments and
Liberty Sub may acquire the Class A Membership Interests held by AT&T Sub at the
Class A Fair Market Value (with shares of Common Stock to be marked-to-market in
accordance with Section 10.2), for at least 90% cash and up to 10% IDT
Investments Preferred Stock or Liberty Sub Preferred Stock, as the case may be.
Such transaction shall, at the option of IDT Investments or Liberty Sub, as the
case may be, be structured in the most tax efficient manner as determined by IDT
Investments or Liberty Sub, as the case may be; provided, that such structuring
shall not change the payment terms described above. Subject to the immediately
succeeding sentence, IDT Investments, Liberty Sub or the Company, as the case
may be, shall pay to AT&T Sub the Class A Fair Market Value as provided in this
Section 11.1 within thirty (30) days of the date such Member or Members or the
Company elected to acquire the Class A Membership Interests held by AT&T Sub. In
the event that the payment of any portion of the Class A Fair Market Value
required to be paid with respect to such redemption requires any statutory or
regulatory approval, the making of any statutory or regulatory filing or
notification or the passage of any waiting period required under applicable
statute or regulation, the payment of any such portion requiring such approval,
filing, notification or passage of such waiting period shall be postponed until
after all such approvals have been obtained, all such filings and notifications
have been made and all such waiting periods have passed; provided, however, that
in no event shall the payment date be extended beyond 180 days of such election
date. The parties agree to cooperate in good faith and use all commercially
reasonable efforts to obtain any such approvals, make any such filings and
notifications and secure the termination of any such waiting periods.
-39-
ARTICLE XII.
AMENDMENTS
12.1. Amendments. (a) Amendments may be made to this Agreement from
time to time by the unanimous consent of the Members. In making any amendments,
there shall be prepared and filed by the Board of Managers such documents and
certificates as shall be required to be prepared and filed. All amendments to
this Agreement shall be in writing.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Board of Managers shall amend Schedules I through IV hereof to
reflect the admission of Additional Members, the Transfer of Membership
Interests, changes in the Capital Accounts of Members and any other changes in
the information set forth therein accomplished in accordance with this
Agreement, and the amendment of such Schedules shall not constitute an amendment
of this Agreement and shall not require the consent of any Member or other
Person.
ARTICLE XIII.
MISCELLANEOUS
13.1. Further Assurances. Each party to this Agreement agrees to
execute, acknowledge, deliver, file and record such further certificates,
amendments, instruments and documents, and to do all such other acts and things,
as may be required by law or as, in the reasonable judgment of both the Board of
Managers and such party, are necessary to carry out the intent and purpose of
this Agreement.
13.2. Notices. Unless otherwise specified in this Agreement, all
notices, demands, elections, requests or other communications that any party to
this Agreement may desire or be required to give hereunder shall be in writing
and shall be given by hand, by facsimile, or by a recognized overnight courier
service providing confirmation of delivery, addressed as follows:
(a) to the Company, at the address set forth in Section 2.5; and
(b) to the Members at their respective addresses set forth in Schedule
I hereto. Each Member shall have the right to designate another address or
change an address by written notice to the Company and the other Members in the
manner prescribed herein.
All notices given pursuant to this Section 13.2 shall be deemed to have been
given (i) if delivered by hand on the date of delivery or on the date delivery
was refused by the
-40-
addressee, (ii) if delivered by facsimile transmission, when transmitted to the
applicable number so specified in (or pursuant to) this Section 13.2 and an
appropriate answer back is received or (iii) if delivered by overnight courier,
on the date of delivery as established by the return receipt or courier service
confirmation (or the date on which the courier service confirms that acceptance
of delivery was refused by the addressee).
13.3. Headings and Captions. All headings and captions contained in
this Agreement and the table of contents hereto are inserted for convenience
only and shall not be deemed a part of this Agreement.
13.4. Variance of Pronouns. All pronouns and all variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or entity may require.
13.5. Counterparts. This Agreement may be executed in two or more
separate counterparts, each of which shall constitute an original and all of
which, when taken together, shall constitute one Agreement.
13.6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
13.7. Partition. The Members hereby agree that no Member nor any
successor-in-interest to any Member shall have the right, while this Agreement
remains in effect, to have the property of the Company partitioned, or to file a
complaint or institute any proceeding at law or in equity to have the property
of the Company partitioned, and each Member, on behalf of himself, his
successors, representatives, heirs and assigns, hereby waives any such right.
13.8. Invalidity. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement. If a provision of this Agreement is held to be invalid and
the rest of this Agreement is not invalidated, each party shall use all
reasonable efforts to effect as far as practicable and valid under applicable
law a new provision to achieve the purpose of such invalidated provision.
13.9. Assignment; Successors and Assigns. (a) This Agreement may be
assigned, in whole or part, (i) by any Member, to any Permitted Transferee as it
pertains to the Membership Interests transferred to such Permitted Transferee,
(ii) by any Parent, to any successor to or assignee of all or substantially all
of the assets or business of such Parent, (iii) by IDT Investments, as provided
in Sections 8.1(d) and 8.2(d), (iv) by Liberty Sub, as provided in Sections
8.1(e) and 8.2(e), and (v) by AT&T, to any entity
-41-
that controls and operates substantially all of the businesses operated by
AT&T's Broadband division, AT&T's Business division or AT&T's Consumer division
(each an "AT&T Restructuring Entity") and to which all Membership Interests held
directly or indirectly by AT&T are assigned following completion of the
restructuring plan announced by AT&T in October 2000, or any successor to or
assignee of all or substantially all of the assets or business of any AT&T
Restructuring Entity; provided that (x) in any such case, the assignee agrees to
be bound by the applicable terms of this Agreement and either (1) the other
Members are reasonably satisfied that such transferee has the ability to meet
the obligations it would have hereunder or (2) the assigning party or the Parent
of such assigning party guarantees the performance of such obligations and (y)
in the case of AT&T, the right to assign the Agreement to an AT&T Restructuring
Entity shall not be utilized more than once. Any other assignment of this
Agreement requires the unanimous written consent of the other parties hereto.
Any attempted or purported assignment in violation of this Section 13.9 shall be
void and of no force or effect.
(b) This Agreement shall be binding upon the parties hereto and their
respective successors, executors, administrators, legal representatives, heirs
and legal assigns and shall inure to the benefit of the parties hereto and,
except as otherwise provided herein, their respective successors, executors,
administrators, legal representatives, heirs and legal assigns. No Person other
than the parties hereto and their respective successors, executors,
administrators, legal representatives, heirs and legal assigns, shall have any
rights or claims under this Agreement.
(c) AT&T agrees, and in the event it assigns its rights under this
Agreement pursuant to Section 13.9(a) hereof, its assignee shall agree, to
retain beneficial ownership, either directly or indirectly, of 50% or more of
the outstanding voting securities of, or other ownership interests in, AT&T Sub,
or any Permitted Transferee of AT&T Sub to which any of AT&T Sub's Membership
Interests are transferred.
(d) LMC agrees, and in the event it assigns its rights under this
Agreement pursuant to Section 13.9(a) hereof, its assignee shall agree, to
retain beneficial ownership, either directly or indirectly, of 50% or more of
the outstanding voting securities of, or other ownership interests in, Liberty
Sub, or any Permitted Transferee of Liberty Sub to which any of Liberty Sub's
Membership Interests are transferred.
(e) IDT Corporation agrees, and in the event it assigns its rights
under this Agreement pursuant to Section 13.9(a) hereof, its assignee shall
agree, to retain beneficial ownership, either directly or indirectly, of 50% or
more of the outstanding voting securities of, or other ownership interests in,
IDT Investments or IDT Sub, as the case may be, or any Permitted Transferee of
IDT Investments or IDT Sub to which any of IDT Investments' or IDT Sub's
Membership Interests are transferred.
-42-
13.10. Entire Agreement. This Agreement and the Exchange Agreements
supersede all prior agreements among the parties with respect to the subject
matter hereof and thereof and contain the entire agreement among the parties
with respect to such subject matter. No waiver of any provision hereof by any
party hereto shall be deemed a waiver by any other party nor shall any such
waiver by any party be deemed a continuing waiver of any matter by such party.
No amendment, modification, supplement, discharge or waiver hereof or hereunder
shall require the consent of any Person not a party to this Agreement.
13.11. No Brokers. Each of the parties hereto warrants to each other
that there are no brokerage commissions or finders' fees (or any basis therefor)
resulting from any action taken by such party or any Person acting or purporting
to act on its behalf upon entering into this Agreement. Each Member agrees to
indemnify and hold harmless each other Member for all costs, damages or other
expenses arising out of any misrepresentation made in this Section 13.11.
13.12. Maintenance as a Separate Entity. The Company shall maintain
books and records and bank accounts separate from those of its Affiliates; shall
at all times hold itself out to the public as a legal entity separate and
distinct from any of its Affiliates (including in its leasing activities, in
entering into any contract, in preparing its financial statements, and in its
stationery and on any signs it posts), and shall cause its controlled Affiliates
to do the same and to conduct business with it on an arm's-length basis; shall
not commingle its assets with assets of any of its Affiliates; shall not
guarantee any obligation of any of its Affiliates; shall cause its business to
be carried on by the Board of Managers and shall keep minutes of all meetings
of, or written consent executed by, the Members.
13.13. Expenses. Without prejudice to its ability to recover for any
losses, damages or liabilities relating to any dispute, controversy or claim
arising out of or relating to this Agreement, each of the parties to this
Agreement shall pay its own expenses in connection with this Agreement and any
amendments, consents or waivers (whether or not the same become effective) under
or in respect of this Agreement.
13.14. Publicity. None of the parties hereto shall, or permit any of
their Affiliates to, issue any press release or make any other public
statements, filings or disclosure with respect to the matters contemplated by
this Agreement, the Exchange Agreements or any other matter related hereto or
thereto, except (a) as may be required by applicable law, court process or
obligations pursuant to the requirement of any applicable self-regulatory
authority or (b) with the consent of the other parties to this Agreement.
-43-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AT&T CORP.
By:/s/ XXXXXXX X. XXXXXXX
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Mergers & Acquisitions
Vice President, Assistant
Treasurer
ITELTECH, LLC
By:/s/ XXXXXXX X. XXXXXXX
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Mergers & Acquisitions
Vice President, Assistant
Treasurer
IDT DOMESTIC-UNION, LLC
By: IDT Domestic Telecom, Inc., its
Managing Member
By:/s/ XXXXX XXXXXXXXXXXX
------------------------------
Name: Xxxxx Xxxxxxxxxxxx
Title: CEO
IDT CORPORATION
By:/s/ XXXXX XXXXXXXXXXXX
------------------------------
Name: Xxxxx Xxxxxxxxxxxx
Title: EVP
-44-
IDT INVESTMENTS INC.
By:/s/ XXXXXXX X. XXXXXXXX
------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President and CFO
LMC ANIMAL PLANET, INC.
By:/s/ XXXXXXX X. XXXXXX
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
LIBERTY MEDIA CORPORATION
By:/s/ XXXXXXX X. XXXXXX
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
-45-
SCHEDULE I
NAMES AND ADDRESSES OF MEMBERS
IDT DOMESTIC-UNION, LLC
000 Xxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
ITELTECH, LLC
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxx Xxxxxx 00000
IDT INVESTMENTS INC.
000 Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
LMC ANIMAL PLANET, INC.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
SCHEDULE II
INITIAL MANAGERS
Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Xxxxxxx Xxxxxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxx (LMC Manager)
SCHEDULE III
MEMBERS' MEMBERSHIP INTERESTS
PRIOR TO THE EXCHANGE TRANSACTIONS CLASS A CLASS A-1 CLASS B
IDT Domestic-Union, LLC 87 13
ITelTech, LLC 62 127
AFTER THE EXCHANGE TRANSACTIONS CLASS A CLASS A-1 CLASS B
IDT Domestic-Union, LLC 87 13
ITelTech, LLC 29
IDT Investments Inc. 30
LMC Animal Planet, Inc. 33 97
SCHEDULE IV
CAPITAL ACCOUNTS AND SUB-CAPITAL ACCOUNTS
PRIOR TO THE EXCHANGE TRANSACTIONS CAPITAL ACCOUNT
IDT Domestic-Union, LLC $55,300,000
ITelTech, LLC $104,517,000
CLASS A CLASS A-1 CLASS B
IDT Domestic-Union, LLC $48,111,000 $7,189,000
ITelTech, LLC $34,286,000 $70,231,000
AFTER THE EXCHANGE TRANSACTIONS CAPITAL ACCOUNT
IDT Domestic-Union, LLC $55,300,000
ITelTech, LLC $16,037,000
IDT Investments Inc. $16,590,000
LMC Animal Planet, Inc. $71,890,000
CLASS A CLASS A-1 CLASS B
IDT Domestic-Union, LLC $48,111,000 $7,189,000
ITelTech, LLC $16,037,000
IDT Investments Inc. $16,590,000
LMC Animal Planet, Inc. $18,249,000 $53,641,000
SCHEDULE V-A
TERMS AND CONDITIONS OF IDT INVESTMENTS PREFERRED STOCK
CERTIFICATE OF DESIGNATION
OF SERIES ___ PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS OF
IDT INVESTMENTS INC.
Pursuant to Section 78.1955 of the Nevada Revised Statutes
------------------------
SERIES [ ] PREFERRED STOCK
Xxxxxxx Xxxxxxxx, being the Vice President and Chief Financial Officer
of IDT Investments Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the Revised Statutes of the State of Nevada, in
accordance with the provisions of Section 78.1955 of the Nevada Revised
Statutes, DOES CERTIFY that pursuant to authority conferred upon the Board of
Directors by the Articles of Incorporation of the Corporation, as amended (the
"Articles of Incorporation") adopted the following resolution.
RESOLVED that, pursuant to Section 2.3 of Article II of the Articles of
Incorporation, there be and hereby is authorized and created a series of
Preferred Stock consisting of _____ shares having a par value of $0.01 per
share, which series shall be titled "Series [ ] Preferred Stock." Capitalized
terms not defined herein shall have the definitions ascribed to such terms in
the Articles of Incorporation.
The designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions of
the Series [ ] Preferred Stock shall be as follows:
1. Designation and Amount. This series of Preferred Stock shall be
designated and known as "Series [ ] Preferred Stock" (the "Series [ ] Preferred
Stock") and shall consist of _____ shares. The Series [ ] Preferred Stock shall
have a par value of $0.01 per share.
(A) Rank. The Series [ ] Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
prior to all classes of Common Stock of the Corporation and such other series of
preferred stock as the Board of Directors of the Corporation may hereinafter
expressly designate as junior to the Series [ ] Preferred Stock. All equity
securities of the Corporation to which the Series [ ] Preferred Stock ranks
prior (whether with respect to dividends or upon liquidation, dissolution,
winding-up or otherwise), including the Common Stock, are collectively referred
to herein, where relevant with respect to dividends, upon liquidation,
dissolution, winding up or otherwise, as the "Junior Securities." All equity
securities of the Corporation with which the Series [ ] Preferred Stock ranks on
a parity (whether with respect to dividends or upon liquidation, dissolution,
winding-up or otherwise) are collectively referred to herein, where relevant
with respect to dividends, upon liquidation, dissolution, winding up or
otherwise, as the "Parity Securities." All equity securities of the Corporation
to which the Series [ ] Preferred Stock ranks junior (whether with respect to
dividends or upon liquidation, dissolution, winding-up or otherwise) are
collectively referred to herein, where relevant with respect to dividends, upon
liquidation, dissolution, winding up or otherwise, as the "Senior Securities."
The Series [ ] Preferred Stock shall, with respect to dividend rights and rights
on liquidation, winding up and dissolution, rank junior to such other series of
preferred stock as the Board of Directors may hereinafter expressly designate as
senior to the Series [ ] Preferred Stock. The Series [ ] Preferred Stock shall
be subject to the creation of Junior Securities, Parity Securities and Senior
Securities. The Corporation's Series A Preferred Stock, par value $0.01 per
share, and Series B Preferred Stock, par value $0.01 per share, shall be deemed
to be Parity Securities with the Series [ ] Preferred Stock.
(B) Dividends. (i) Each holder of a share of Series [ ] Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of Directors
of the Corporation, out of funds legally available for the payment of dividends,
cumulative dividends at a rate of _____% per annum compounded quarterly on the
Liquidation Preference thereof. Such dividends shall be payable in annual
payments commencing on [date], and then on each [date] thereafter while the
Series [ ] Preferred Stock remains outstanding; provided, however, that if such
date is not a business day, the payment date shall be the next business day
(each of such dates being a "Dividend Payment Date"), in preference to dividends
payable with respect to any Junior Securities and on a parity with any dividends
payable with respect to Parity Securities. Such dividends shall be paid to the
holders of record of Series [ ] Preferred Stock at the close of business 10 days
prior to the respective Dividend Payment Date. The dividends shall be fully
cumulative and shall accrue (whether or not declared), without interest
beginning on [Date] (the "Original Issue Date"). In addition to the foregoing,
each holder of a share of Series [ ] Preferred Stock shall be entitled to
receive the amount by which the aggregate amount of dividends receivable in any
fiscal year on [ ] shares of the Corporation's Class B Common Stock (assuming
for these purposes that each share of Series [ ] Preferred Stock had been
converted into one share of Class B Common Stock of the Corporation) exceeds the
aggregate dividend amount otherwise accrued pursuant to this paragraph (B)(i)
with respect to all [ ] shares of the Series [ ] Preferred Stock. All dividend
payments made with respect to Series [ ] Preferred Stock shall be made in cash.
(ii) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series [ ] Preferred Stock shall be declared by the Board
of Directors or paid or set apart for payment by the Corporation at such time as
the terms and provisions of any financing, working capital or other agreement of
the Corporation specifically prohibit such declaration, payment or setting apart
for payment or if such declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder or if such declaration,
payment or setting apart for payment would, upon the giving of notice or passage
of time or both, constitute such a breach or default; provided that nothing
herein contained shall in any way or under any circumstances be construed or
deemed to require the Board of Directors to declare or the Corporation to
2
pay or set apart for payment any cash dividends on shares of the Series [ ]
Preferred Stock at any time, whether permitted by any of such agreements or not.
(iii) No full dividends shall be declared by the Board of Directors or
paid or set apart for payment by the Corporation on any Parity Securities for
any period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum set apart sufficient for such payment on
the Series [ ] Preferred Stock for all dividend payment periods terminating on
or prior to the date of payment of such full dividends on such Parity
Securities. If any dividends are not paid in full, as aforesaid, upon the shares
of the Series [ ] Preferred Stock and any other Parity Securities, all dividends
declared upon shares of the Series [ ] Preferred Stock and any other Parity
Securities shall be declared pro rata so that the amount of dividends declared
per share of the Series [ ] Preferred Stock and such Parity Securities shall in
all cases bear to each other the same ratio that accumulated accrued dividends
per share on the Series [ ] Preferred Stock and such Parity Securities bear to
each other. The Corporation may elect not to declare dividend payments on any
Dividend Payment Date; provided, however, that dividends on shares of the Series
[ ] Preferred Stock will accrue whether or not the Corporation has earnings or
profits, whether or not there are funds legally available for the payment of
such dividends and whether or not dividends are declared. Dividends, whether
declared or undeclared, will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate. Arrearages of unpaid
dividends, whether declared or undeclared, will not themselves bear interest but
will be added to the Liquidation Preference (set forth in paragraph (C)(i) of
this Certificate of Designation for the Series [ ] Preferred Stock) in
accordance with the following sentence, and dividends will accrue thereafter on
the full amount of the Liquidation Preference as so increased. If any dividend
payable on any Dividend Payment Date is not declared and paid in full on such
Dividend Payment Date, the amount so payable, to the extent not paid, shall be
added to the then effective Liquidation Preference on such Dividend Payment
Date.
(iv) (a) Holders of shares of the Series [ ] Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (B)(i) in preference
to and in priority over any dividends upon any Junior Securities.
(b) Subject to the terms of paragraph (B)(iii), the Corporation shall
not declare, pay or set apart for payment any dividend or other distribution on
any Junior Securities or Parity Securities or make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any Junior Securities or Parity
Securities or any warrants, rights, calls or options exercisable for or
convertible into any Junior Securities or Parity Securities, or make any
distribution in respect thereof, either directly or indirectly, and whether in
cash, obligations or shares of the Corporation or other property (other than
distributions or dividends in Junior Securities to the holders of Junior
Securities), and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any Junior
Securities or Parity Securities or any warrants, rights, calls
3
or options exercisable for or convertible into any Junior Securities or Parity
Securities, so long as any shares of the Series [ ] Preferred Stock are
outstanding, unless prior to or concurrently with such declaration, payment,
setting apart for payment, purchase, redemption or distribution, as the case may
be, all accrued and unpaid dividends on shares of the Series [ ] Preferred Stock
not paid on the dates provided for in paragraph (B)(i) (including accrued
dividends not paid by reason of the terms and conditions of paragraph (B)(ii) or
paragraph (B)(iii) of this Certificate of Designation for the Series [ ]
Preferred Stock) shall have been paid in full.
(v) Subject to the foregoing provisions of this paragraph (B), the
Board of Directors may declare and the Corporation may pay or set apart for
payment dividends and other distributions on any Junior Securities or Parity
Securities, and may purchase or otherwise redeem any Junior Securities or Parity
Securities or any warrants, rights or options exercisable for or convertible
into any Junior Securities or Parity Securities, and the holders of the shares
of the Series [ ] Preferred Stock shall not be entitled to share therein.
(C) Liquidation Preference; Participation Right. (i) In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, each holder of a share of Series [ ] Preferred Stock
then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its Stockholders an amount in cash
equal to the greater of (x) the Liquidation Preference of each such share, plus
an amount in cash equal to all accrued but unpaid dividends thereon, to the
extent not included within the Liquidation Preference of such share pursuant to
paragraph (B)(iii), from the issuance date of such share, or if later, the most
recent Dividend Payment Date to the date fixed for liquidation, dissolution or
winding up before any payment shall be made or any assets distributed to the
holders of any Junior Securities (the "Liquidation Preference" of a share of
Series [ ] Preferred Stock shall be equal to the sum of $_____ plus any accrued
but unpaid dividends added to the Liquidation Preference pursuant to (B)(iii))
and (y) the amount of liquidation proceeds (excluding any accrued but unpaid
dividends or other amounts) payable to holders of the Corporation's Class B
Common Stock, assuming for these purposes that each such share of Series [ ]
Preferred Stock had been converted into one share of Class B Common Stock of the
Corporation on the Original Issue Date (the "Class B Common Stock Participation
Right"). The Liquidation Preference and Class B Common Stock Common Stock
Participation Right shall be subject to appropriate adjustment to reflect the
effect of any stock split, reverse stock split, stock dividend, reclassification
or other similar event affecting the Series [ ] Preferred Stock after the
Original Issue Date. If the assets of the Corporation are not sufficient to pay
in full the amounts payable to the holders of outstanding shares of the Series
[ ] Preferred Stock and any Parity Securities in the event of any such voluntary
liquidation, dissolution or winding up of the affairs of the Corporation, then
the holders of all such shares shall share ratably in such distribution of
assets in accordance with the amount that would be payable on such distribution
if the amounts to which the holders of outstanding shares of Series [ ]
Preferred Stock and the holders of outstanding shares of such Parity Securities
are entitled were paid in full.
4
(ii) For the purposes of this paragraph (C), neither the voluntary
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more other corporations shall be deemed to be a liquidation, dissolution or
winding up of the Corporation, voluntary or involuntary, provided, that the
Series [ ] Preferred Stock remains outstanding following such voluntary sale
conveyance, exchange or transfer, or the holders of the Series [ ] Preferred
Stock outstanding receive from the surviving or succeeding corporation, as the
case may be, of such voluntary sale, conveyance, exchange or transfer, a
security with substantially similar voting powers, preference, and relative,
participating optional and other special rights as the Series [ ] Preferred
Stock.
(D) Voting Rights. (i) In addition to any voting rights provided by
these terms of the Series [ ] Preferred Stock or by law, the holders of the
Series [ ] Preferred Stock shall be entitled to vote on any matter on which
holders of the Class B Common Stock of the Corporation shall be entitled to
vote. The holders of the Series [ ] Preferred Stock shall be entitled to notice
of any stockholders' meeting in accordance with the bylaws of the corporation.
Each share of the Series [ ] Preferred Stock shall have a number of votes equal
to the vote held by one share of the Corporation's Class B Common Stock,
assuming for these purposes that each such share of Series [ ] Preferred Stock
had been converted into one share of Class B Common Stock of the Corporation on
the Original Issue Date.
(ii) So long as any shares of the Series [ ] Preferred Stock are
outstanding, the Corporation will not, without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series [ ] Preferred
Stock, voting separately as a class, (A) authorize any additional shares of
Series [ ] Preferred Stock, or (B) change, by amendment to the Articles of
Incorporation of the Corporation (including any such amendment effected by
merger consolidation, statutory share exchange or otherwise) the terms and
provisions of the Series [ ] Preferred Stock set out in this Certificate of
Designation so as to affect adversely the rights and preferences of the holders
of the Series [ ] Preferred Stock. For the avoidance of doubt, any merger,
consolidation, or other transaction involving the Corporation shall not be
considered to involve an amendment to the Articles of Incorporation, if the
holders of the Series [ ] Preferred Stock shall be entitled to receive pursuant
to such merger, consolidation or other transaction (x) an amount in cash no less
than the amount that would be payable to such holders upon a liquidation,
dissolution or winding up of the Corporation or (y) securities of the surviving
or succeeding corporation of such merger consolidation or other transacting
having substantially similar voting powers, preferences, and relative,
participating optional and other special rights as the Series [ ] Preferred
Stock . For the further avoidance of doubt neither the authorization nor the
issuance by the Corporation of additional shares of any shares of its capital
stock other than Series [ ] Preferred Stock shall be considered to involve an
amendment to the Articles of Incorporation.
5
(E) Redemption. (i) The Corporation shall redeem (unless prohibited by
law) all of the outstanding shares of Series [ ] Preferred Stock on [ ] for cash
equal to greater of (x) the then applicable Liquidation Preference or (y) the
then applicable Class B Common Stock Participation Right.
(ii) The Corporation shall give written notice of any redemption of
Series [ ] Preferred Stock pursuant to this paragraph (E) at least 60 days prior
to the date of such redemption (a) by certified or registered mail, return
receipt requested, postage prepaid, (b) by a nationally known overnight delivery
service or (c) by hand delivery, addressed to each holder of any shares of
Series [ ] Preferred Stock to be redeemed, at the address of such holder as
shown on the books of the Corporation (the "Redemption Notice"). Each such
notice shall specify the date fixed for the redemption and the place or places
for surrender of shares of Series [ ] Preferred Stock. Any notice which is sent
as herein provided shall be conclusively presumed to have been duly given by the
Corporation on the date the notice is transmitted and receipt acknowledged or,
if mailed, on the date deposited in the mail, whether or not the holder of the
Series B Preferred Stock receives such notice. On or after the date fixed for
redemption (the "Redemption Date") as stated in such notice, each holder of
shares called to be redeemed shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice for redemption.
After the Redemption Date, each holder of a certificate representing any shares
of Series [ ] Preferred Stock shall cease to have any rights with respect
thereto, except the right to receive, upon surrender of such certificate, cash
equal to the amount contemplated by paragraph (E). After receipt by the holders
of the Series [ ] Preferred Stock of cash issuable upon redemption thereof, all
rights whatsoever with respect to the shares so called for redemption shall
terminate.
(F) Waiver. Any provision of this Certificate of Designation which, for
the benefit of the holders of Series [ ] Preferred Stock, prohibits, limits or
restricts actions by the Corporation, or imposes obligations on the Corporation,
including but not limited to provisions relating to the obligation of the
Corporation to redeem the Series [ ] Preferred Stock, may be waived in whole or
in part, or the application of all or any part of such provision in any
particular circumstance or generally may be waived, in each case by the
affirmative vote or with the consent of the holders of record of at least two
thirds of the number of Series [ ] Preferred Stock then outstanding (or such
greater percentage thereof as may be required by applicable law or any
applicable rules of any national securities exchange or national interdealer
quotation system), either in writing or by vote at an annual meeting or a
special meeting called for such purpose at which the holders of Series [ ]
Preferred Stock shall vote as a separate class.
(G) Preemptive Rights. The holders of the Series [ ] Preferred Stock
will not have any preemptive right to subscribe for or purchase any shares of
stock or any other securities which may be issued by this Corporation.
(H) Exclusion of Other Rights. Except as may otherwise be required by
law and for the equitable rights and remedies that may otherwise be available to
6
holders of Series [ ] Preferred Stock, the shares of Series [ ] Preferred Stock
shall not have any designations, preferences, limitations or relative rights,
other than those specifically set forth in these resolutions (as such
resolutions may, subject to paragraph (D)(ii), be amended from time to time) and
in the Articles of Incorporation of this Corporation.
(I) Headings. The headings of the various paragraphs and subparagraphs
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
7
IN WITNESS WHEREOF, said IDT Investments Inc. has caused this
certificate to be signed by its [Officer], this _____th day of _________, ____.
By:
---------------------------
Name:
Title:
8
SCHEDULE V-B
TERMS AND CONDITIONS OF LIBERTY SUB PREFERRED STOCK
SERIES ___ VOTING PREFERRED STOCK
____ of the authorized shares of preferred stock are hereby designated
"Series ___ Voting Preferred Stock."
The designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions of
the Series ___ Voting Preferred Stock are as follows:
1. Designation and Amount. This series of preferred stock shall be
designated and known as "Series [A] Voting Preferred Stock" (the "Series [A]
Preferred Stock") and shall consist of ______ shares. The Series [A] Preferred
Stock shall have a par value of $0.01 per share.
(A) Rank. The Series [A] Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
prior to the common stock of the corporation and such other series of preferred
stock as the Board of Directors of the corporation may hereinafter expressly
designate as junior to the Series [A] Preferred Stock. All equity securities of
the corporation to which the Series [A] Preferred Stock ranks prior (whether
with respect to dividends or upon liquidation, dissolution, winding-up or
otherwise), including the common stock, are collectively referred to herein,
where relevant with respect to dividends, upon liquidation, dissolution, winding
up or otherwise, as "Junior Securities." All equity securities of the
corporation with which the Series [A] Preferred Stock ranks at parity (whether
with respect to dividends or upon liquidation, dissolution, winding-up or
otherwise) are collectively referred to herein, where relevant with respect to
dividends, upon liquidation, dissolution, winding up or otherwise, as "Parity
Securities." All equity securities of the corporation to which the Series [A]
Preferred Stock ranks junior (whether with respect to dividends or upon
liquidation, dissolution, winding-up or otherwise) are collectively referred to
herein, where relevant with respect to dividends, upon liquidation, dissolution,
winding up or otherwise, as "Senior Securities." The Series [A] Preferred Stock
shall be subject to the creation of Junior Securities, Parity Securities and
Senior Securities.
(B) Dividends. (i) Subject to the rights and preferences of any
outstanding Senior Securities, each holder of a share of Series [A] Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors of the corporation, out of funds legally available for the payment of
dividends, for each share of Series [A] Preferred Stock outstanding, cash
dividends at a rate of __% per annum on the Liquidation Preference (as defined
in paragraph (C)(i) below). Such dividends, if declared, shall be payable in
[semi-annual] payments commencing on [date], and then on each [June 30] and
[December 31] thereafter while the Series [A] Preferred Stock remains
outstanding; provided, however, that if such date is not a business day, the
payment date shall be the next business day (each of such dates being a
"Dividend Payment Date"). If declared, such dividends shall be paid to the
persons who were holders of record of Series [A] Preferred Stock at the close of
business 10 days prior to the respective Dividend Payment Date. The dividends
shall be fully cumulative and shall accrue (whether or not declared) without
interest beginning on [Date] (the "Original Issue Date").
(ii) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series [A] Preferred Stock shall be declared by the Board
of Directors or paid or set apart for payment by the corporation at such time as
the terms and provisions of any financing, working capital or other agreement of
the corporation specifically prohibit such declaration, payment or setting apart
for payment or if such declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder or if such declaration,
payment or setting apart for payment would, upon the giving of notice or passage
of time or both, constitute such a breach or default; provided that nothing
herein contained shall in any way or under any circumstances be construed or
deemed to require the Board of Directors to declare or the corporation to pay or
set apart for payment any cash dividends on shares of the Series [A] Preferred
Stock at any time, whether permitted by any of such agreements or not.
(iii) No dividends shall be declared by the Board of Directors or paid
or set apart for payment by the corporation on any Parity Securities for any
period unless all accrued dividends have been or contemporaneously are declared
and paid or declared and a sum set apart sufficient for such payment on the
Series [A] Preferred Stock for all Dividend Payment Dates on or prior to the
date of payment of such dividends on such Parity Securities; provided that if
all dividends accrued and payable upon the shares of the Series [A] Preferred
Stock and any Parity Securities cannot be paid in full as aforesaid, then all
dividends declared upon shares of the Series [A] Preferred Stock and any other
Parity Securities shall be declared and paid pro rata so that the amount of
dividends declared and paid per share of the Series [A] Preferred Stock and such
Parity Securities shall in all cases bear to each other the same ratio that
accumulated accrued dividends per share on the Series [A] Preferred Stock and
such Parity Securities bear to each other. The corporation may elect not to
declare dividend payments on any Dividend Payment Date; provided, however, that
dividends on shares of the Series [A] Preferred Stock will accrue whether or not
the corporation has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends, whether declared or undeclared, will accumulate to the
extent they are not paid on the Dividend Payment Date for the period to which
they relate. Arrearages of unpaid dividends, whether declared or undeclared,
will not themselves bear interest but will be added to the Liquidation
Preference (set forth in paragraph (C)(i) below) in accordance with the
following sentence, and dividends will accrue thereafter on the full amount of
the Liquidation Preference as so increased. If the dividend provided for in
paragraph (B)(i) is not declared and paid in full on any Dividend Payment Date,
then the amount of the dividend accrued, to the extent not paid, shall be added
to the then effective Liquidation Preference on such Dividend Payment Date.
(iv) (a) Holders of shares of the Series [A] Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (B)(i) in preference
to and in priority over any dividends upon any Junior Securities.
(b) Subject to the first sentence of paragraph (B)(iii), the
corporation shall not declare, pay or set apart for payment any dividend or
other distribution on any Junior Securities or Parity Securities or make any
payment on account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any Junior
Securities or Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any Junior Securities or Parity Securities,
or make any distribution in respect thereof, either directly or indirectly, and
whether in cash, obligations or shares of the corporation or other property
(other than distributions or dividends in Junior Securities to the holders of
-2-
Junior Securities), and shall not permit any corporation or other entity
directly or indirectly controlled by the corporation to purchase or redeem any
Junior Securities or Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any Junior Securities or Parity Securities,
so long as any shares of the Series [A] Preferred Stock are outstanding, unless
prior to or concurrently with such declaration, payment, setting apart for
payment, purchase, redemption or distribution, as the case may be, all accrued
and unpaid dividends on shares of the Series [A] Preferred Stock not paid on the
dates provided for in paragraph (B)(i) (including accrued dividends not paid by
reason of the terms and conditions of paragraph (B)(ii) or paragraph (B)(iii) of
this Section C of this Article V) shall have been paid in full.
(v) Subject to the foregoing provisions of this paragraph (B), the
Board of Directors may declare and the corporation may pay or set apart for
payment dividends and other distributions on any Junior Securities or Parity
Securities, and may purchase or otherwise redeem any Junior Securities or Parity
Securities or any warrants, rights or options exercisable for or convertible
into any Junior Securities or Parity Securities, and the holders of the shares
of the Series [A] Preferred Stock shall not be entitled to share therein.
(C) Liquidation Preference. (i) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
corporation, each holder of any shares of Series [A] Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the corporation
available for distribution to its Stockholders an amount in cash equal to the
Liquidation Preference of each such share, plus an amount in cash equal to all
accrued but unpaid dividends thereon, to the extent not included within the
Liquidation Preference of such share pursuant to the last sentence of paragraph
(B)(iii), from the issuance date of such share, or if later, the most recent
Dividend Payment Date to the date fixed for liquidation, dissolution or winding
up before any payment shall be made or any assets distributed to the holders of
any Junior Securities (the "Liquidation Preference" of a share of Series [A]
Preferred Stock shall be equal to the sum of $_______ plus any accrued but
unpaid dividends added to the Liquidation Preference pursuant to the last
sentence of paragraph (B)(iii)). If the assets of the corporation are not
sufficient to pay in full the amounts payable to the holders of outstanding
shares of the Series [A] Preferred Stock and any Parity Securities in the event
of any such voluntary liquidation, dissolution or winding up of the affairs of
the corporation, then the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amount that would be payable on
such distribution if the amounts to which the holders of outstanding shares of
Series [A] Preferred Stock and the holders of outstanding shares of such Parity
Securities are entitled were paid in full.
(ii) For the purposes of this part (C), neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
corporation nor the consolidation or merger of the corporation with or into one
or more other corporations shall be deemed to be a liquidation, dissolution or
winding up of the corporation, voluntary or involuntary, provided, that the
Series [A] Preferred Stock remains outstanding following such voluntary sale
conveyance, exchange or transfer, or the holders of the Series [A] Preferred
Stock outstanding receive from the surviving or succeeding corporation, as the
case may be, of such voluntary sale, conveyance, exchange or transfer, a
security with substantially similar voting powers, preference, and relative,
participating optional and other special rights as the Series [A] Preferred
Stock.
-3-
(D) Voting Rights. (i) In addition to any voting rights provided by
these terms of the Series [A] Preferred Stock or by law, the holders of the
Series [A] Preferred Stock shall be entitled to one vote per share on any matter
on which holders of the common stock of the corporation shall be entitled to
vote, and, except as provided by law, the holders of common stock and Series [A]
Preferred Stock shall vote together as a single class on all such matters. The
holders of the Series [A] Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the bylaws of the corporation.
(ii) So long as any shares of the Series [A] Preferred Stock are
outstanding, the corporation will not, without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series [A] Preferred
Stock, voting separately as a class, (A) authorize any additional shares of
Series [A] Preferred Stock, or (B) change, by amendment to the articles of
incorporation of the corporation (including any such amendment effected by
merger consolidation, statutory share exchange or otherwise) the terms and
provisions of the Series [A] Preferred Stock set out in this Section C of this
Article V so as to affect adversely the rights and preferences of the holders of
the Series [A] Preferred Stock. For the avoidance of doubt, any merger,
consolidation, or other transaction involving the corporation pursuant to which
the Series [A] Preferred Stock is to be converted into or exchanged solely for
cash shall not be considered to involve an amendment to the articles of
incorporation, provided that in any such event, the holders of the Series [A]
Preferred Stock shall be entitled to receive in such merger, consolidation or
other transaction an amount in cash no less than the amount that would be
payable to such holders upon a liquidation, dissolution or winding up of the
corporation. For the further avoidance of doubt, neither the authorization nor
the issuance by the corporation of any shares of its capital stock other than
Series [A] Preferred Stock shall be considered to involve an amendment to the
articles of incorporation that requires the consent of the Series [A] Preferred
Stock voting separately as a class.
(E) Redemption. (i) The corporation shall redeem (unless prohibited by
law) all of the outstanding shares of Series [A] Preferred Stock on [insert date
that is the 21st anniversary of the Original Issue Date], for cash equal to the
then applicable Liquidation Preference.
(ii) The corporation shall give written notice of any redemption of
Series [A] Preferred Stock pursuant to this part (E) at least 60 days prior to
the date of such redemption (a) by certified or registered mail, return receipt
requested, postage prepaid, (b) by a nationally known overnight delivery service
or (c) by hand delivery, addressed to each record holder of any shares of Series
[A] Preferred Stock to be redeemed, at the address of such holder as shown on
the books of the corporation (the "Redemption Notice"). Each such notice shall
specify the date fixed for the redemption and the place or places for surrender
of shares of Series [A] Preferred Stock. Any notice which is sent as herein
provided shall be conclusively presumed to have been duly given by the
corporation on the date the notice is transmitted and receipt acknowledged or,
if mailed, on the date deposited in the mail, whether or not the holder of the
Series [A] Preferred Stock receives such notice. On or after the date fixed for
redemption (the "Redemption Date") as stated in such notice, each holder of
shares called to be redeemed shall surrender the certificate evidencing such
shares to the corporation at the place designated in such notice for redemption.
After the Redemption Date, each holder of a certificate representing any shares
of Series [A] Preferred Stock shall cease to have any rights with respect
thereto, except the right to receive, upon surrender of such certificate, cash
equal to the amount contemplated by this part
-4-
(E). After receipt by the holders of the Series [A] Preferred Stock of cash
issuable upon redemption thereof, all rights whatsoever with respect to the
shares so called for redemption shall terminate.
(F) Waiver. Any provision of this Section C of this Article V which,
for the benefit of the holders of Series [A] Preferred Stock, prohibits, limits
or restricts actions by the corporation, or imposes obligations on the
corporation, including but not limited to provisions relating to the obligation
of the corporation to redeem the Series [A] Preferred Stock, may be waived in
whole or in part, or the application of all or any part of such provision in any
particular circumstance or generally may be waived, in each case by the
affirmative vote or with the consent of the holders of record of at least
66-2/3% of the number of Shares then outstanding (or such greater percentage
thereof as may be required by applicable law or any applicable rules of any
national securities exchange or national interdealer quotation system), either
in writing or by vote at an annual meeting or a special meeting called for such
purpose at which the holders of Series [A] Preferred Stock shall vote as a
separate class.
(G) Preemptive Rights. The holders of the Series [A] Preferred Stock
will not have any preemptive right to subscribe for or purchase any shares of
stock or any other securities which may be issued by this corporation.
(H) Exclusion of Other Rights. Except as may otherwise be required by
law and for the equitable rights and remedies that may otherwise be available to
holders of Series [A] Preferred Stock, the shares of Series [A] Preferred Stock
shall not have any designations, preferences, limitations or relative rights,
other than those specifically set forth in this Section C of this Article V (as
it may, subject to paragraph (D)(ii), be amended from time to time) or otherwise
in the articles of incorporation of this corporation.
(I) Headings. The headings of the various parts, paragraphs and
subparagraphs hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
-5-
