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EXHIBIT 1 TO FORM 13D
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ARRIS INTERACTIVE L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
AUGUST 3, 2001
THE INTERESTS IN ARRIS INTERACTIVE L.L.C. (THE "INTERESTS") ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH IN ARTICLE
VIII OF THIS AGREEMENT. THE INTERESTS HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND HAVE NOT BEEN REGISTERED UNDER (I) ANY STATE SECURITIES LAWS, OR (II)
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
NEITHER THE INTERESTS, NOR ANY PART THEREOF, MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF ARTICLE VIII OF THIS AGREEMENT AND (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER SUCH LAWS OR WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH LAWS.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................1
1.01. Definitions...........................................................1
1.02. Exhibits and Schedules................................................9
1.03. Other Capitalized Terms...............................................9
ARTICLE II GENERAL.............................................................9
2.01. Formation and Management..............................................9
2.02. Name of the Limited Liability Company.................................9
2.03. Office of the Limited Liability Company and Agent
for Service of Process...............................................10
2.04. Qualification........................................................10
2.05. Purposes.............................................................10
2.06. Members..............................................................10
2.07. Term.................................................................10
2.08. Liability of Members.................................................10
2.09. No Partnership.......................................................11
2.10. Title to Company Property............................................11
2.11. No Individual Authority..............................................11
2.12. Investment Representations...........................................11
ARTICLE III CAPITAL CONTRIBUTIONS; ADDITIONAL FINANCING......................11
3.01. Capital Accounts.....................................................11
3.02. Capital Contributions................................................12
3.03. Other Contributions: No Withdrawal of or Interest on Capital.........12
3.04. Third Party Loans....................................................12
3.05. Member Loans.........................................................12
3.06. Reduction of Capital Accounts........................................12
3.07. Capital Accounts.....................................................12
3.08. Negative Capital Accounts............................................14
3.09. No Resignation or Withdrawal of Capital..............................14
ARTICLE IV DISTRIBUTIONS......................................................14
4.01. Distribution of Cash Flow............................................14
4.02. Distribution of Capital Proceeds.....................................14
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4.03. Limitations on Distributions.........................................14
4.04. Class B Member Distribution Preference in Bankruptcy.................14
4.05. Tax Withholding......................................................15
4.06. No Limitations on Redemption.........................................15
ARTICLE V ALLOCATION OF NET PROFITS AND NET LOSSES...........................16
5.01. Net Profit...........................................................16
5.02. Net Loss.............................................................16
5.03. Limitation on Net Loss Allocations...................................16
5.04. Other Items..........................................................16
5.05. Special Allocations..................................................16
5.06. Curative Allocations.................................................18
5.07. Other Allocation Rules...............................................18
5.08. Section 704(c) Allocation............................................19
ARTICLE VI MANAGEMENT........................................................19
6.01. Management of the Company............................................19
6.02. Officers.............................................................20
6.03. Binding the Company..................................................21
6.04. Contracts with Members...............................................21
6.05. Required Approval by Members.........................................21
6.06. Member Action........................................................22
6.07. Indemnification......................................................23
ARTICLE VII FISCAL MATTERS...................................................25
7.01. Books and Records....................................................25
7.02. Financial and Other Reports..........................................26
7.03. Bank Accounts........................................................26
7.04. Tax Matters Partner..................................................26
7.05. Tax Elections and Decisions..........................................27
ARTICLE VIII TRANSFERS OF INTERESTS..........................................27
8.01. General Restrictions on Transfer.....................................27
8.02. Redemption of Interest of Class B Interest...........................28
8.03. Mandatory Exchange for New Securities................................30
ARTICLE IX DISSOLUTION AND LIQUIDATION.......................................33
9.01. Events Causing Dissolution...........................................33
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9.02. Procedures on Dissolution............................................33
9.03. Distributions Upon Liquidation.......................................34
ARTICLE X MISCELLANEOUS PROVISIONS...........................................35
10.01. Applicable Law.......................................................35
10.02. Counterparts.........................................................35
10.03. Separability of Provisions...........................................35
10.04. Article and Section Titles...........................................35
10.05. Amendments...........................................................35
10.06. No Third Party Beneficiaries.........................................35
10.07. Successors and Assigns...............................................36
10.08. Notice...............................................................36
10.09. Subordination........................................................37
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ARRIS INTERACTIVE L.L.C.
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
of ARRIS INTERACTIVE L.L.C., a Delaware limited liability company (the
"Company"), dated and effective as of August 3, 2001 (the "Closing Date"), by
and among ANTEC Corporation, a Delaware corporation that is in the process of
changing its name to Arris International, Inc. ("ANTEC"), Arris Group, Inc., a
Delaware corporation ("Newco"), and Nortel Networks LLC, a Delaware limited
liability company ("Nortel").
WHEREAS, ANTEC and Nortel, as the only members, are parties to the
Amended and Restated Limited Liability Company Agreement of Arris Interactive
L.L.C., dated as of March 31, 1999 (the "Amended and Restated Limited Liability
Company Agreement");
WHEREAS, in connection with the transactions contemplated by the
Agreement and Plan of Reorganization, dated as of October 18, 2000, as amended
(the "Agreement and Plan of Reorganization"), among ANTEC, Newco, Broadband
Transition Corporation, a Delaware corporation, Nortel Networks Inc., a Delaware
corporation ("Nortel Networks"), Nortel, and the Company, the parties hereto
desire to amend and restate the Amended and Restated Limited Liability Company
Agreement in its entirety.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, ANTEC and Nortel hereby agree to
amend and restate the Amended and Restated Limited Liability Company Agreement
in its entirety as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. The following capitalized terms used in this
Agreement shall have the respective meanings ascribed to them below:
"Act" shall mean the Delaware Limited Liability Company Act, as
amended from time to time.
"Administrative Agent" shall have the meaning specified in the Senior
Credit Agreement.
"Adjusted Capital Account Balance" shall mean with respect to any
Member, the balance, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
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(i) credit to such Capital Account any amounts which such
Member is obligated to restore, because of a promissory note to the
Company or otherwise pursuant to Regulation Section
1.704-1(b)(2)(ii)(c), or is deemed to be obligated to restore pursuant
to the penultimate sentence in each of Regulation Sections
1.704-2(g)(1)(ii) and 1.704-2(i)(5); and
(ii) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
This definition of Adjusted Capital Account Balance is intended to
comply with Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently with such Regulations.
"Affiliate" shall mean, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person; provided, however, that none of the Company, Newco and ANTEC shall, for
the purposes of this Agreement, be, or be deemed or construed to be, an
Affiliate of Nortel, Nortel Networks or any of their respective Affiliates.
"Agreement" shall mean this Second Amended and Restated Limited
Liability Company Agreement as it may be amended, restated, amended and
restated, supplemented, or otherwise modified from time to time.
"ANTEC" shall have the meaning set forth in the introductory paragraph
hereof.
"Assignee" shall have the meaning set forth in Section 8.01(a) hereof.
"Bankruptcy" means the occurrence of any of the events specified in
Section 8.6 or Section 8.7 of the Senior Credit Agreement.
"Borrowers" shall have the meaning specified in the Senior Credit
Agreement.
"Capital Account" shall have the meaning specified in Section 3.07
hereof.
"Capital Contribution" shall mean any contribution by a Member to the
capital of the Company.
"Capital Proceeds" shall mean the net proceeds from:
(i) loans to the Company in excess of current or reasonably
anticipated Company needs (including reasonable reserves for Company
debt obligations and working capital as determined by the Managing
Member) or excess funds received from refinancing of any Company
indebtedness (x) after the payment of, or provision for the payment
of, all costs and expenses incurred by the Company in connection with
such refinancing, and (y) after deduction or retention of such sums as
are deemed necessary to be retained as a reserve for the conduct of
the business of the Company; and
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(ii) any sale, exchange, condemnation or other disposition
of any capital asset of the Company or from claims on policies of
insurance maintained by the Company for damage to or destruction of
capital assets of the Company or the loss of title thereto (to the
extent that such proceeds exceed the actual or estimated costs of
repairing or replacing the assets damaged or destroyed if, pursuant to
this Agreement, such assets are repaired or replaced) (x) after the
payment of, or provision for the payment of, all costs and expenses
incurred by the Company in connection with such sale or other
disposition or the receipt of such insurance proceeds, as the case may
be, and (y) after deduction or retention of such sums as are deemed
necessary by the Managing Member to be retained as a reserve for the
conduct of the business of the Company.
"Cash Flow" shall mean for any period the Gross Receipts of the
Company for such period less Operating Expenses for such period.
"Certificate" shall mean the Certificate of Formation of the Company
filed under and pursuant to the Act with the Office of the Secretary of State of
the State of Delaware, as it may, from time to time, be amended in accordance
with the Act.
"Certificate of Designations" shall mean the Certificate of
Designations of Series A Convertible Subordinated Preferred Stock of Newco in
the form of Exhibit 1 hereto.
"Change of Control," with respect to Newco, shall have the meaning set
forth in the Indenture dated as of May 18, 1998, between ANTEC and The Bank of
New York, as it may be amended, restated, amended and restated, supplemented or
otherwise modified from time to time.
"Class A Interest" shall mean all of a Class A Member's limited
liability company interest in the Company, including the rights to receive
allocations and distributions, to vote, and to consent or approve.
"Class A Members" shall mean ANTEC and Newco and any transferees of
ANTEC or Newco permitted hereunder.
"Class A Sharing Ratio" shall mean, with respect to each Class A
Member, the percentage set forth opposite such Class A Member's name on Schedule
A.
"Class B Interest" shall mean the Class B Member's limited liability
company interest in the Company, which includes the specified right to receive
allocations pursuant to Article V and distributions pursuant to Article IV and
the redemption rights provided in Section 8.02 but does not include the right to
vote in matters of the Company unless expressly stated otherwise in this
Agreement or required by the Act.
"Class B Member" shall mean Nortel and any transferee of Nortel
permitted hereunder so long as the Class B Interest has not been redeemed in
full.
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"Class B Return" shall mean an amount equal to ten percent (10%) per
annum, compounded annually determined on the basis of a 360 day year, accruing
to the extent not paid pursuant to Sections 4.01, 4.02, 8.02 or 9.03 herein, of
the average daily balance of Class B Unreturned Capital during the period
commencing on the Closing Date and ending on the date of any calculation.
"Class B Unreturned Capital" shall mean an amount equal to the excess,
if any, of (i) the sum of (A) the Initial Class B Balance and (B) the Class B
Return compounded as set forth in the definition of "Class B Return" herein,
over (ii) the aggregate amount actually distributed to Class B Member after the
Closing Date pursuant to Sections 4.01, 4.02, 8.02 or 9.03 herein.
"Closing Date" shall have the meaning set forth in the introductory
paragraph hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Company" shall have the meaning set forth in the introductory
paragraph hereof.
"Default" and "Event of Default" shall have the meaning specified in
the Senior Credit Agreement.
"Depreciation" shall mean for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Managing Member.
"DGCL" shall mean the General Corporation Law of the State of
Delaware, as amended from time to time.
"Excess Availability" shall have the meaning specified in the Senior
Credit Agreement.
"Fair Market Value" shall mean, with respect to Newco Common Stock,
the average closing price per share of Newco Common Stock on The Nasdaq Stock
Market (or, if Newco Common Stock is not then trading thereon, such other
nationally recognized stock market or exchange, if any, on which Newco Common
Stock may then be actively traded) for the twenty (20) consecutive trading days
ending two (2) trading days prior to the date of determination. In the absence
of trading of Newco Common Stock in such trading markets, the Fair Market Value
shall be as reasonably determined by the board of directors of Newco based upon
a written valuation report prepared by an independent valuation firm.
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"Fiscal Year" shall mean the twelve month period ending December 31 of
each year; provided that the last Fiscal Year shall be the period beginning on
January 1 of the calendar year in which the final liquidation and termination of
the Company is completed and ending on the date such final liquidation and
termination is completed (to the extent any computation or other provision
hereof provides for an action to be taken on a Fiscal Year basis, an appropriate
proration or other adjustment shall be made in respect of the first or final
Fiscal Year to reflect that such period is less than a full calendar year period
as determined by the Managing Member in its reasonable discretion).
"Gross Asset Value" shall mean with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed
by a Member to the Company shall be the gross fair market value of
such asset, as determined by the contributing Member and the Managing
Member.
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Managing Member in its reasonable discretion, at
each of the following times: (a) the acquisition of an additional
Interest in the Company by any new or existing Member for more than a
de minimis contribution; (b) the distribution by the Company to a
Member of more than a de minimis amount of Company property as
consideration for an Interest in the Company; and (c) the liquidation
of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Regulations; provided, however, that the adjustments pursuant to
clauses (a) and (b) above shall be made only if the Managing Member
reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members
in the Company.
(iii) The Gross Asset Value of any Company asset distributed
to any Member shall be the gross fair market value of such asset on
the date of distribution as determined by the Managing Member in its
reasonable discretion.
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining the Capital Accounts pursuant to Regulation
Section 1.704-1(b)(2)(iv)(m), clause (iv) of the definition of "Net
Profit" or "Net Loss," and Section 5.05(g) hereof, provided, however,
that Gross Asset Values shall not be adjusted pursuant to this
subsection to the extent the Managing Member determines that an
adjustment pursuant to subsection (ii) of this definition is necessary
or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this subsection.
(v) If the Gross Asset Value of an asset has been determined
or adjusted
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pursuant to paragraphs (i), (ii) or (iv) above, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Profit and
Net Loss.
"Gross Receipts" shall mean receipts (other than Capital Proceeds and
Capital Contributions), calculated on an accrual basis, from the conduct of the
business of the Company from all sources.
"Indemnitee" shall have the meaning set forth in Section 6.07 hereof.
"Initial Class B Balance" shall mean the amount of $100,000,000.
"Interest" shall mean Class A Interest or Class B Interest (if any) or
any other class of interest in the Company subsequently created pursuant to this
Agreement.
"Law" or "Laws" shall mean federal, state and local statutes, case
law, rules, regulations, ordinances, codes and the like which are in full force
and effect from time to time and which affect the Company or the operation of
the Company's business.
"Liquidator" shall mean any Person or Persons (including the Managing
Member and one or more officers of the Company) charged with winding up and/or
liquidating the business, affairs and/or assets of the Company in accordance
with the provisions hereof, each of which Persons shall be deemed to be a
"liquidating trustee" within the meaning of the Act.
"Managing Member" shall mean initially Newco, or any successor
Managing Member elected by the Class A Members owning, in the aggregate, a
majority of the Class A Interests.
"Maximum Quarterly Class B Redemption" shall have the meaning set forth
in Section 8.02(a) hereof.
"Member" shall mean each of Newco, ANTEC and Nortel and any other
Person hereafter admitted to the Company as a member as provided in this
Agreement, but such term does not include any Person which has ceased to be a
member of the Company, unless the Agreement states otherwise.
"Member Loan" shall mean a loan made by a Member pursuant to Section
3.05.
"Net Profit" or "Net Loss" shall mean for each Fiscal Year the
Company's taxable income or taxable loss for such Fiscal Year, as determined
under Section 703(a) of the Code, and Regulation Section 1.703-1, but with the
following adjustments:
(i) Any tax exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Company during such Fiscal
Year shall be added to such taxable income or taxable loss;
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(ii) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code for such Fiscal Year or treated as being so
described in Regulation Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in this subsection shall be subtracted from such
taxable income or taxable loss;
(iii) The amount of any gain or loss required to be
recognized by the Company during such Fiscal Year by reason of a sale
or other disposition of Company property, and any depreciation,
amortization or cost recovery deductions with respect to Company
property to which the Company is entitled for any Fiscal Year, shall
be computed as if the Company's adjusted basis in such property for
income tax purposes were equal to the Gross Asset Value (and taking
into account Depreciation in lieu of such depreciation, amortization
or cost recovery deductions), and any adjustment to the Gross Asset
Value shall be treated as a Net Profit or Net Loss; and
(iv) to the extent an adjustment to the adjusted tax basis
of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulation Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in complete
liquidation of a Member's Interest, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of
the asset) from the disposition of the asset and shall be taken into
account for purposes of computing Net Profit or Net Loss.
This definition is intended to comply with the Regulations and any and
all other items which must be included in Net Profit or Net Loss in order for
this Agreement to comply with said Regulations shall be included in such
concept. Notwithstanding any other provision of this definition, any items of
income, gain, deduction, loss or credit which are specially allocated shall not
be taken into account in computing Net Profit or Net Loss. The intent of this
definition is that no reference to Net Profit or Net Loss include such specially
allocated items.
"New Securities" shall have the meaning set forth in Section 8.03
hereof.
"Newco" shall have the meaning set forth in the introductory paragraph
hereof.
"Newco Preferred Stock" shall mean the Series A Convertible
Subordinated Preferred Stock of Newco, par value $1.00 per share, having the
powers, designations, preferences and rights specified in the Certificate of
Designations.
"Nortel" shall have the meaning set forth in the introductory
paragraph hereof.
"Officers" shall have the meaning set forth in Section 6.02 hereof.
"Operating Expenses" shall mean all expenditures of any kind incurred
by the Company after the Closing Date hereof in the normal course of its
business, including, without limitation, debt service (principal and interest)
payable on indebtedness of the Company (whether to a third party or to a
Member), plus such sums as are deemed reasonably necessary by the Managing
Member as a reserve to be retained for the conduct of the business of the
Company, and capital
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expenditures and investments in other assets, but excluding, without
duplication: (A) payments with respect to federal, state or local income,
franchise or similar taxes of any Member and all kinds of taxes payable in lieu
thereof, and (B) any non-cash charges for depreciation or amortization of any
Company asset.
"Optional Indemnitee" shall have the meaning set forth in Section 6.07
hereof.
"Person" shall mean any corporation, limited or general partnership,
limited liability company, trust, unincorporated association, any other entity
or organization, governmental agency, bureau, department or other body, or an
individual.
"Regulations" shall mean the United States Department of Treasury
Regulations (including Temporary Regulations) promulgated under the Code.
"Revolving Loan Commitment Termination Date" shall have the meaning
specified in the Senior Credit Agreement.
"Regulatory Allocations" shall have the meaning set forth in Section
5.06 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Credit Agreement" shall mean the Credit Agreement, of even
date herewith, by and among the Company, ANTEC, Credit Suisse First Boston, The
CIT Group/Business Credit, Inc., and a syndicate of banks, financial
institutions and other investors party thereto, as such Credit Agreement may be
amended, restated, amended and restated, supplemented, or otherwise modified.
References to provisions of, and terms defined in, the Senior Credit Agreement
shall be interpreted as applying equally to the comparable provisions and terms
of any such amendment, restatement, amendment and restatement, supplement or
other modification.
"Senior Credit Facilities" shall mean (i) the senior secured revolving
credit facility providing for revolving loans and other extensions of credit in
an aggregate principal amount of $175,000,000 pursuant to the Senior Credit
Agreement as such $175,000,000 in aggregate principal amount of revolving loans
and other extensions of credit may be increased by additional revolving loans
and additional extensions of credit pursuant to an uncommitted facility of up to
$25,000,000 in aggregate principal amount made available to the Borrowers
pursuant to the Senior Credit Agreement; (ii) any refinancing, refunding,
replacement, restatement, amendment, amendment and restatement, renewal,
restructuring (including without limitation to increase the amount of available
borrowing thereunder (but not above $200,000,000 in aggregate principal amount
outstanding at any time), supplement or other modification of such facilities
and (iii) the definitive documentation including credit, guarantee, security,
intercreditor and other related instruments and documentation evidencing such
facilities, in each case as amended, restated, amended and restated, refinanced,
refunded, renewed, replaced, restructured (including without limitation to
increase the amount of available borrowing thereunder (but not above
$200,000,000 in aggregate principal amount outstanding at any time),
supplemented or otherwise modified.
"Senior Debt" shall have the meaning specified in the Subordination
Agreement.
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"Special Allocations" shall mean allocations made pursuant to Section
5.05 hereof.
"Subordination Agreement" shall mean the Subordination Agreement dated
as of August 3, 2001, among Nortel, The CIT Group/Business Credit, Inc., as
Administrative Agent, Newco, and the Company, as such Subordination Agreement
may be amended, restated, amended and restated, supplemented or otherwise
modified from time to time.
"Transfer" shall refer to any sale, exchange, redemption, assignment,
conveyance, license, sublicense, encumbrance, hypothecation, gift, pledge, grant
of a security interest, or other transfer, disposition or alienation in any way
(whether voluntarily, involuntarily, by reason of merger involving the Company,
by operation of law, or otherwise). Transfer shall specifically include
assignments and distributions resulting from death, incompetency, bankruptcy,
insolvency, liquidation and dissolution.
1.02 EXHIBITS AND SCHEDULES. The Exhibits and Schedules attached
hereto are hereby incorporated by this reference.
1.03 OTHER CAPITALIZED TERMS. Capitalized terms not otherwise defined
herein shall have the respective meanings given them in the Agreement and Plan
of Reorganization.
ARTICLE II
GENERAL
2.01 FORMATION AND MANAGEMENT. On November 9, 1995, the Company was
formed as a Delaware limited liability company by delivering the Certificate to
the Delaware Secretary of State in accordance with the provisions of the Act.
The Company shall be managed by the Managing Member in accordance with Section
6.01 of this Agreement and the rights and obligations of the Members shall be
governed by this Agreement and by the Act. If there is a conflict between the
provisions of this Agreement and the Act, the provisions of the Act shall
control (it being understood that if the Act provides for a particular rule but
allows the members of a limited liability company to provide to the contrary in
the limited liability company agreement, and if the parties hereto have so
provided hereunder, then such provisions shall not be deemed to constitute a
conflict for purposes of the foregoing).
2.02 NAME OF THE LIMITED LIABILITY COMPANY. The name of the Company is
"Arris Interactive L.L.C." The name of the Company may be changed at any time or
from time to time by the Managing Member.
2.03 OFFICE OF THE LIMITED LIABILITY COMPANY AND AGENT FOR SERVICE OF
PROCESS. The address of the registered office of the Company in the State of
Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000. The name of the resident agent at such address for service of process on
the Company in the State of Delaware is The
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Corporation Trust Company. The Managing Member may cause the Company to change
from time to time its resident agent for service of process, or the location of
its registered office in the State of Delaware. The Company's principal place of
business shall be located at Atlanta, Georgia. The Managing Member may establish
places of business of the Company within and without the State of Georgia, as
and when required by the Company's business and in furtherance of its purposes
set forth in Section 2.05 hereof, and may appoint agents for service of process
in all jurisdictions in which the Company shall conduct business.
2.04 QUALIFICATION. The Managing Member shall cause to be filed such
certificates and documents as may be necessary or appropriate to comply with the
Act and any other applicable requirements for the operation of a limited
liability company in accordance with the laws of the jurisdictions in which the
Company shall conduct business, and shall continue to do so for so long as the
Company conducts business therein.
2.05 PURPOSES. The Company is formed 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.
2.06 MEMBERS. The current Members of the Company are Newco, ANTEC and
Nortel. Subject to Section 6.05 and compliance with the other provisions of this
Agreement, additional members may be admitted to the Company, solely upon the
prior written consent of the Managing Member, which may be withheld for any or
no reasons, unless stated otherwise in this Agreement (including, without
limitation, Section 8.01(b)).
2.07 TERM. The existence of the Company commenced upon the
effectiveness of the Certificate and the Company shall have a perpetual
existence, unless and until it is dissolved and terminated in accordance with
Article IX.
2.08 LIABILITY OF MEMBERS. Except as otherwise expressly provided by
the Act, the debts, obligations and liabilities of the Company, whether arising
in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member shall be obligated personally for any
such debt, obligation or liability of the Company solely by reason of being a
Member. Without limiting the foregoing, (a) no Member, in its capacity as a
Member, shall have any liability or obligation to restore any negative balance
in its Capital Account, and (b) the failure of the Company to observe any
formalities or requirements relating to exercise of its powers or management of
its business or affairs under this Agreement or the Act shall not be grounds for
imposing personal liability on the Members for liabilities of the Company.
2.09 NO PARTNERSHIP. The Company is not intended to be a general
partnership, limited partnership or joint venture, and no Member shall be
considered to be a partner or joint venture of any other Member, for any
purposes other than foreign and domestic federal, state, provincial and local
income tax purposes, and this Agreement shall not be construed to suggest
otherwise.
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2.10 TITLE TO COMPANY PROPERTY. All property owned by the Company,
whether real or personal, tangible or intangible, shall be deemed to be owned by
the Company as an entity, and no Member, individually, shall have any ownership
of such property. The Company may hold any of its assets in its own name or in
the name of its nominee, which nominee may be one or more trusts. Any property
held by a nominee trust for the benefit of the Company shall, for purposes of
this Agreement, be treated as if such property were directly owned by the
Company.
2.11 NO INDIVIDUAL AUTHORITY. No Member shall, without the express,
prior written consent of the Managing Member, take any action for or on behalf
of or in the name of the Company, or assume, undertake or enter into any
commitment, debt, duty or obligation binding upon the Company, except for
actions expressly provided for in this Agreement, and any action taken in
violation of the foregoing limitation shall, to the fullest extent permitted by
law, be void.
2.12. INVESTMENT REPRESENTATIONS.
(a) Investment Intent. Each Member hereby represents and warrants to
each other Member and to the Company that it has acquired its interest in the
Company solely for its own account with the intention of holding such interest
for investment purposes only.
(b) Unregistered Interests. Each Member hereby acknowledges that it is
aware that its Interests have not been registered under the Securities Act or
under any state securities laws. Each Member further understands and
acknowledges that its representations and warranties contained in this Section
2.13 are being relied upon by the Company and by the other Members as the basis
for the exemption of the Members' Interests in the Company from the registration
requirements of the Securities Act and under all state securities laws. Subject
to Section 6.05(c), each Member further acknowledges that the Company will not
and has no obligation to recognize any sale, transfer, or assignment of a
Member's Interest in the Company to any Person unless and until the provisions
of Article VIII hereof applicable to such sale, transfer or assignment have been
fully satisfied.
ARTICLE III
CAPITAL CONTRIBUTIONS; ADDITIONAL FINANCING
3.01 CAPITAL ACCOUNTS. For each Member (and each permitted assignee),
the Company shall establish and maintain a separate Capital Account. The initial
Capital Account balances of the Members as of the Closing Date shall be set
forth in Schedule A.
3.02 CAPITAL CONTRIBUTIONS. Pursuant to the Agreement and Plan of
Reorganization, on the Closing Date, Nortel shall contribute the amounts
specified in Section 4.02 of the Agreement and Plan of Reorganization. In
exchange for such contribution, the Company shall issue to Nortel the Class B
Interest.
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3.03 OTHER CONTRIBUTIONS: NO WITHDRAWAL OF OR INTEREST ON CAPITAL.
Each Class A Member may contribute to the capital of the Company any amounts
requested by the Managing Member to be so contributed. The Class B Member may
not further contribute to the capital of the Company and shall have no
obligation to make any further or additional Capital Contribution. No interest
shall accrue on any Capital Contributions, and no Member shall have the right to
withdraw or to have returned or be repaid any Capital Contribution made by it or
to receive any other payment in respect of its Interest, except as specifically
provided in this Agreement (including, without limitation, Sections 8.02 and
9.03).
3.04 THIRD PARTY LOANS. In the event that the Company requires
additional funds to carry out its purposes, to conduct its business and affairs,
or to meet its obligations, or to make any expenditure authorized by this
Agreement, the Company may borrow funds from such Persons, and on such terms and
conditions, as may be approved by the Managing Member.
3.05 MEMBER LOANS. Any Member, including the Managing Member, may lend
funds to the Company to carry out its purposes, to conduct its business and
affairs, or to meet its obligations, or to make any expenditure authorized by
this Agreement, in each case upon the approval of the Managing Member (provided
that the Class B Member shall have no obligation to lend any such funds to the
Company, and this Agreement shall not be construed to suggest otherwise). Unless
otherwise agreed by the lender and the Managing Member, a Member Loan shall bear
interest at the "prime rate" published by The Wall Street Journal plus two
percent (2%) and shall be payable out of Cash Flow, Capital Proceeds or on
liquidation as provided in Sections 4.01, 4.02 and 9.03, respectively; provided
that in all events all other terms of any Member Loan shall be commercially
reasonable and established on an arms-length basis.
3.06 REDUCTION OF CAPITAL ACCOUNTS. Any distribution to a Member,
whether pursuant to Section 4.01 or 4.02 or any other Section of this Agreement,
shall reduce the amount of such Member's Capital Account in accordance with
Section 3.07, but no adjustment in the Interests of any Member shall be made on
account of any such distribution, except as otherwise specifically provided in
this Agreement.
3.07. CAPITAL ACCOUNTS.
(a) "Capital Account" means an account that shall be maintained for
each Member and which, as of any given date, shall be an amount equal to the
following:
(i) The aggregate amount of cash that has been contributed
to the capital of the Company as of such date by or on behalf of such
Member; plus
(ii) The agreed upon Gross Asset Value (as of the date of
contribution) of any property other than cash that has been
contributed to the capital of the Company as of such date by such
Member and the amount of liabilities assumed by any such Member under
Section 752 of the Code or which is secured by any Company property
distributed to such Member; plus
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(iii) The aggregate amount of the Company's Net Profit that
has been allocated to such Member as of such date pursuant to the
provisions of Section 5.01 or any items of income or gain which are
specially allocated to such Member or other positive adjustment
required by the Regulations and which have not been previously taken
into account in determining Capital Accounts; minus
(iv) The aggregate amount of the Company's Net Loss that has
been allocated to such Member as of such date pursuant to Section 5.02
and the amount of any item of expense deduction or loss which is
specially allocated to such Member; and minus
(v) The aggregate amount of cash and the agreed upon Gross
Asset Value of all other property (as of the date of distribution)
that has been distributed to or on behalf of such Member and the
amount of any liabilities of such Member assumed by the Company under
Section 752 of the Code or which are secured by any property
contributed by such Member to the Company or other negative adjustment
required by the Regulations and which have not been previously taken
into account in determining Capital Accounts.
(b) Upon the sale, transfer, assignment or other disposition of an
Interest in the Company after the date of this Agreement, the Capital Account of
the transferor Member that is attributable to the transferred Interest will be
carried over to the transferee Member. In the case of a sale or exchange of any
Interest in the Company at a time when an election under Code Section 754 is in
effect, the Capital Account of the transferee Member shall not be adjusted to
reflect the adjustments to the adjusted tax bases of Company property required
under Code Sections 754 and 743, except as otherwise permitted by Regulation
Section 1.704-1(b)(2)(iv)(m).
(c) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulation Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulation. In the event the Members shall determine
that it is prudent to modify the manner in which the Capital Accounts, or any
debits or credits thereto (including, without limitation, debits or credits
relating to liabilities that are secured by contributed or distributed property
or that are assumed by the Company or the Members), are computed in order to
comply with such Regulation, the Managing Member may make such modification,
provided that such modification is not likely to have a material effect on the
amounts distributable to any Member pursuant to Section 9.03 hereof upon the
dissolution of the Company.
3.08 NEGATIVE CAPITAL ACCOUNTS. Any Member having a deficit or
negative balance in its Capital Account shall not be required to restore such
deficit capital amount or otherwise to contribute capital to the Company to
restore its Capital Account.
3.09 NO RESIGNATION OR WITHDRAWAL OF CAPITAL. Except as provided in
Article VIII, no Member shall have the right to resign or withdraw from the
Company or to withdraw any portion of the capital of the Company at any time.
Upon dissolution of the Company, the Members' capital shall be distributed
pursuant to Section 9.03 hereof.
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ARTICLE IV
DISTRIBUTIONS
4.01 DISTRIBUTION OF CASH FLOW. Subject to Section 9.03, the Company
shall distribute Cash Flow as follows: (a) to the Class B Member to make the
redemption payments specified in Section 8.02 in respect of the Class B
Interest; (b) to repay amounts borrowed pursuant to Section 3.05 as and when
determined by the Managing Member; and (c) to the Class A Members as and when
determined by the Managing Member; provided that it is acknowledged and agreed
that (x) this Section 4.01 is not intended to, and shall not, override or
otherwise qualify the limitations on the Company's obligations contained in
Section 8.02 hereof, and (y) the Company shall not have any obligation to make,
and shall not make, any redemption payments with respect to the Class B Interest
pursuant to Section 4.01(a) unless and until such redemption payment is
permitted by Section 8.02.
4.02 DISTRIBUTION OF CAPITAL PROCEEDS. The Company shall distribute to
the Members Capital Proceeds as provided herein (including, without limitation,
Section 8.02 and Section 9.03), and otherwise as and when determined by the
Managing Member; provided that it is acknowledged and agreed that (x) this
Section 4.02 is not intended to, and shall not, override or otherwise qualify
the limitations on the Company's obligations contained in Section 8.02 hereof,
and (y) the Company shall not have any obligation to make, and shall not make,
any redemption payments with respect to the Class B Interest pursuant to Section
4.02 unless and until such redemption payment is permitted by Section 8.02.
4.03 LIMITATIONS ON DISTRIBUTIONS. Except as provided in Sections
4.01, 4.02, 4.04, 8.02 and 9.03, distributions of cash or other property shall
be made to the Members at such time or times, in such amounts, and in such
manner, as the Managing Member shall determine. Notwithstanding any provision to
the contrary contained in this Agreement, the Company shall not make a
distribution to any Member on account of its Interest if such distribution would
violate the Act or other applicable law or, in the case of a distribution with
respect to the Class B Interest, violate Section 8.02(b) or exceed the Class B
Unreturned Capital plus any unpaid Class B Return.
4.04 CLASS B MEMBER DISTRIBUTION PREFERENCE IN BANKRUPTCY. If (a) a
Bankruptcy occurs as to the Company and (b) an exchange described in Section
8.03 has not occurred, no other Member of the Company shall be entitled to
receive any distributions under this Agreement until the Class B Member has
received a distribution of (i) the Class B Unreturned Capital and (ii) any
unpaid Class B Return. Nothing herein shall be construed to permit a
distribution to the Class B Member that otherwise is prohibited by the
Subordination Agreement.
4.05 TAX WITHHOLDING. If the Company incurs any obligation to pay any
amount in respect of taxes (including withholding taxes and any interest,
penalties or additions to tax) imposed on income of or distributions made to any
Member or former Member, any amount so required to be paid by the Company with
respect to such Person shall be treated for all purposes of this Agreement as if
it had been loaned to such Person, and the Managing Member shall cause
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the Company to give prompt written notice to such Person of the date and amount
of such loan. Any withholding taxes withheld pursuant to this Section 4.05 shall
be withheld at the maximum applicable statutory rate under the applicable tax
law unless the Managing Member shall have received an opinion of counsel or
other evidence, satisfactory to the Managing Member in its reasonable
discretion, to the effect that a lower rate is applicable or that no withholding
is applicable. Each Member covenants, for itself, its successors, assigns, heirs
and personal representatives, that such Person shall pay to the Company at any
time after notice of the loan has been given, but not later than twenty (20)
days after the Company delivers a written demand to such Person for such
repayment (which demand may be made at any time prior to or after the
dissolution of the Company or the withdrawal of such Person or its predecessors
from the Company); provided, however, that if any such repayment is not made
within such 20-day period, such Person shall pay interest to the Company at a
rate equal to the "prime rate" published by The Wall Street Journal, adjusted
daily, for the entire period commencing on the date on which the Company paid
such amount and ending on the date on which such Person repays such amount to
the Company together with all accrued but previously unpaid interest. The
Company shall (1) collect such unpaid amounts (including interest) from any
Company distributions that otherwise would be made to such Person and/or (2)
subtract from the Capital Account of such Person, no later than the day prior to
the Company's initial liquidating distribution, any such unpaid amounts (plus
unpaid interest) not so collected, in each case treating the amount so collected
or subtracted as having been distributed to such Person at the time of such
collection or subtraction.
4.06. NO LIMITATIONS ON REDEMPTION. For the avoidance of doubt,
notwithstanding anything to the contrary in this Agreement (including, without
limitation, the provisions of Section 4.01 and Section 4.02 to the extent they
may be construed to imply that the Company shall not, unless otherwise
determined by the Managing Member, be obligated to distribute assets other than
Cash Flow and Capital Proceeds in connection with the redemption of the Class B
Interest required by the provisions of Section 8.02 hereof), the provisions of
this Article IV shall be in all respects subject to, and shall not in any way
limit or restrict, the Company's obligations under Section 8.02(a) and Section
9.03 (in each case subject to the limitations set forth in Section 8.02(b) and
the Subordination Agreement), except for amounts owed to the Company pursuant to
Section 4.05.
ARTICLE V
ALLOCATION OF NET PROFITS AND NET LOSSES
5.01. NET PROFIT. Except as otherwise provided in this Article V, all
Net Profit of the Company for each Fiscal Year shall be allocated to the Members
as follows:
(a) First, to the Members, pro rata in proportion to the cumulative
allocations of Net Loss to each Member pursuant to Section 5.03 until the
cumulative Net Profit allocated to each Member pursuant to this clause (a) is
equal to the cumulative Net Loss allocated to such Member pursuant to Section
5.03 (such Net Profit to be allocated in reverse chronological order of the
allocation of the Net Loss pursuant to Section 5.03 which has not been
previously offset by an allocation under this Section 5.01(a));
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(b) Second, to the Class A Members, pro rata in proportion to the
cumulative Net Loss allocated to each Class A Member pursuant to Section 5.02
until the cumulative Net Profit allocated to each Class A Member pursuant to
this clause (b) is equal to the cumulative Net Loss allocated to such Class A
Member pursuant to Section 5.02 (such Net Profit to be allocated in reverse
chronological order of the allocation of the Net Loss pursuant to Section 5.02
which has not been previously offset by an allocation under this Section
5.01(b)); and
(c) Thereafter, to the Class A Members pro rata in proportion to their
then respective Class A Sharing Ratios.
5.02. NET LOSS. Except as otherwise provided in this Agreement, all
Net Loss of the Company for each Fiscal Year shall be allocated to the Class A
Members pro rata in proportion to their then respective Class A Sharing Ratios.
5.03. LIMITATION ON NET LOSS ALLOCATIONS. Notwithstanding any
provision of this Agreement to the contrary, except as otherwise specifically
provided in this Section 5.03 in no event shall Net Loss be allocated to a
Member if such allocation would result in such Member's having a negative
Adjusted Capital Account Balance at the end of any Fiscal Year. All Net Loss in
excess of the limitation set forth in this Section 5.03 shall be allocated to
any remaining Member with a positive Adjusted Capital Account Balance, and if
all such Adjusted Capital Account Balances are zero or negative, to the Class A
Members pursuant to Section 5.02 above.
5.04. OTHER ITEMS. Except as provided herein, for tax purposes, all
items of income, gain, loss, deduction or credit shall be allocated in the same
manner as are Net Profit and Net Loss.
5.05. SPECIAL ALLOCATIONS. Notwithstanding Sections 5.01, 5.02 and
5.03 above, the following allocations of Net Profit or Net Loss or items thereof
shall be made in the following order of priority:
(a) MINIMUM GAIN CHARGEBACK. To the extent required by Regulation
Section 1.704-2(f), if there is a net decrease in "partnership minimum gain"
(within the meaning of Regulation Section 1.704-2(b)(2)), then each Member will
be allocated items of income and gain (calculated in accordance with clauses
(i), (ii) and (iii) of the definition of "Net Profit" or "Net Loss"), before any
other allocation of Net Profit or Net Loss, equal to that Member's share of the
net decrease in partnership minimum gain determined in accordance with
Regulation Section 1.704-2(g)(2).
(b) MEMBER MINIMUM GAIN CHARGEBACK. If a Member suffers a net decrease
in "partner nonrecourse debt minimum gain" (within the meaning of Regulation
Section 1.704-2(i)(4)) in any Fiscal Year, then that Member will be allocated
items of income and gain (calculated in accordance with clauses (i), (ii) and
(iii) of the definition of "Net Profit" or "Net Loss") to the extent required by
Regulation Section 1.704-2(i)(4).
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(c) QUALIFIED INCOME OFFSET. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Regulation
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), items of Company income and gain (calculated in
accordance with clauses (i), (ii) and (iv) of the definition of "Net Profit" or
"Net Loss") shall be specially allocated to each such Member in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the
negative Adjusted Capital Account Balance of such Member as quickly as possible,
provided that an allocation pursuant to this clause (c) shall be made if and
only to the extent that such Member would have a negative Adjusted Capital
Account Balance after all other allocations provided for in this Article V. This
provision is intended to constitute a "qualified income offset" within the
meaning of Regulation Section 1.704-2(b)(ii)(d).
(d) GROSS INCOME ALLOCATION. In the event any Member has a deficit
Capital Account at the end of any Fiscal Year that is in excess of the sum of
(i) the amount such Member is obligated to restore (pursuant to the terms of a
promissory note to the Company or otherwise), and (ii) the amount such Member is
deemed to be obligated to restore pursuant to the penultimate sentence of each
of Regulation Sections 1.704-2(g)(1)(ii) and 1.704-2(i)(5) 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
clause (d) shall be made if and only to the extent that such Member would have a
deficit Capital Account in excess of such sum after all other allocations
provided for in this Article V have been tentatively made as if Section 5.05(c)
and this clause (d) were in not in this Article V.
(e) NONRECOURSE DEDUCTIONS. If there are any "nonrecourse deductions"
(within the meaning of Regulation Sections 1.704-2(b)(1) and 1.704-2(c)) in a
Fiscal Year, then such deductions shall be allocated to the Class A Members pro
rata in accordance with their then respective Class A Sharing Ratios.
(f) MEMBER NONRECOURSE DEDUCTIONS. If there are any "partner
nonrecourse deductions" (within the meaning of Regulation Section 1.704-2(i)(1))
in a Fiscal Year, then such deductions will be allocated to the Member who bears
the economic risk of loss for the "partner nonrecourse liability" (within the
meaning of Regulation Section 1.704-2(b)(4)) to which the deductions are
attributable.
(g) SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Regulations.
(h) CLASS B PRIORITY ALLOCATION. At the end of each Fiscal Year, all
or part of the Company items of gross income or gross gain for the Fiscal Year
remaining after the application of Sections 5.05(a)-(g), if any, shall be
specially allocated to the Class B Member(s),
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pro rata in accordance with their Class B Interests, in proportion to and to the
extent of the excess of (x) the cumulative distributions of the Class B Return
pursuant to this Agreement from the Closing Date to the end of such Fiscal Year,
or with respect to such Fiscal Year, over (y) the cumulative items of gross
income or gross gain previously allocated to such Class B Member pursuant to
this Section 5.05(h).
5.06. CURATIVE ALLOCATIONS. The allocations set forth in Sections
5.05(a) through 5.05(e) (the "Regulatory Allocations") are intended to comply
with certain requirements of Regulation Sections 1.704-1(b) and 1.704-2(b).
Notwithstanding any other provisions of this Agreement, other than the
Regulatory Allocations, the Regulatory Allocations shall be taken into account
in allocating other items of income, gain, loss and deduction among the Members
so that, to the extent possible, the net amount of such allocations of other
items and the Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to such Member if the Regulatory
Allocations had not occurred. The Members shall, with respect to each Fiscal
Year, apply the provisions of this Section 5.06 in whatever manner is likely to
minimize the economic distortions that might otherwise result from the
Regulatory Allocations.
5.07. OTHER ALLOCATION RULES. The following rules shall apply for
purposes of making tax allocations:
(a) "Excess nonrecourse liabilities" of the Company within the meaning
of Regulations Section 1.752-3(a)(3), shall be allocated to the Class A Members
in proportion to their respective Class A Sharing Ratios.
(b) For purposes of determining the Net Profit, Net Loss or any other
items allocable to any period, Net Profit, Net Loss and any such other items
shall be determined on a daily, monthly or other basis, pursuant to any
permissible method under Code Section 706 and the Regulations promulgated
thereunder as selected by the Managing Member in its reasonable discretion
without regard to the tax consequences to any Member.
(c) The Members are aware of the income tax consequences of the
allocations made by this Article V and hereby agree to be bound by the
provisions of this Article V in reporting their shares of the Company income and
loss for income tax purposes.
(d) To the extent permitted by Regulations Section 1.704-2(h)(3), the
Members shall treat distributions of Capital Proceeds as not allocable to an
increase in "partnership minimum gain" (within the meaning of Regulation Section
1.704-2(b)(2)) to the extent the distribution does not cause or increase a
deficit balance in the Adjusted Capital Account Balance of any Member.
5.08. SECTION 704(C) ALLOCATION. Notwithstanding any other provision
of this Agreement to the contrary, any gain or loss and any depreciation and
cost recovery deductions recognized by the Company for income tax purposes in
any Fiscal Year with respect to all or any part of the Company's property that
is required or permitted to be allocated among the Members in accordance with
Section 704(c) of the Code and any Regulations promulgated thereunder so as to
take into account the variation, if any, between the adjusted tax basis of such
property at the
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time of its contribution and the Gross Asset Value of such property at the time
of its contribution, shall be allocated to the Members for income tax purposes
using any method described in Section 1.704-3 of the Regulations as selected by
the Members. If and when the Capital Accounts of the Members are adjusted
pursuant to the definition of "Gross Asset Value" or otherwise pursuant to
Regulation Sections 1.704-1(b)(2)(iv)(f) or (g) with respect to a revaluation of
any asset of the Company, then subsequent allocations of income, gain, loss, and
deduction, including without limitation depreciation or deductions for cost
recovery with respect to such asset, shall take into account any variation
between the then existing adjusted basis of such asset for federal income tax
purposes and the agreed value of such asset, as such computations may be
required under Sections 704(b) and 704(c) of the Code and Regulation Section
1.704-1(b)(4)(i). Any elections or other decisions relating to such allocations
shall be made by the Managing Member in its reasonable discretion without regard
to the tax consequences to any Member.
ARTICLE VI
MANAGEMENT
6.01. MANAGEMENT OF THE COMPANY.
(a) The management of the Company is fully reserved to the Class A
Members, and the Company shall not have non-member "managers," as such term is
used in the Act. Subject to the other provisions of this Agreement, the powers
of the Company shall be exercised by or under the authority of, and the business
and affairs of the Company shall be managed under the direction and authority of
the Managing Member who, in its sole and absolute discretion, shall make all
decisions and take all actions for the Company. Except as set forth in the
foregoing provisions of this Section 6.01 or expressly provided otherwise
elsewhere in this Agreement, no Member (in its capacity as a Member) has the
right, power or authority to act for or on behalf of the Company, to do any act
that would be binding on the Company, or to incur any expenditures on behalf of
the Company. Decisions or actions with respect to the Company taken by the
Managing Member in accordance with this Agreement shall constitute decisions or
actions by the Company and shall be binding on the Company and each Member,
officer and employee of the Company.
(b) The Managing Member in its sole and absolute discretion may
delegate all or any of its duties hereunder to such other Persons as the
Managing Member deems necessary or desirable for the transaction of the business
of the Company, and in furtherance of any such delegation, shall have the right
to appoint, employ or contract with and pay reasonable compensation to any other
Persons, but in such event the Managing Member will not be released from its
responsibilities hereunder. Such Persons may, under the supervision of the
Managing Member, administer, or assist in the administration of the routine
day-to-day management of the Company and its business and affairs; may serve as
advisors and consultants to the Managing Member in connection with decisions
made by the Managing Member; may act as consultants, accountants,
correspondents, attorneys, brokers, escrow agents, or in any other capacity; and
may perform such other acts or services for the Company as the Managing Member
in its sole and absolute discretion may approve.
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6.02. OFFICERS.
(a) The officers of the Company shall consist of such officers as may
be determined by the Managing Member ("Officers"); provided, however, that, if
the Managing Member determines to establish any officer position with a title
expressly referenced in the DGCL or customarily used in corporations organized
under the DGCL, such Officer shall, to the maximum extent possible, have the
duties and responsibilities, and be deemed to have been delegated to him by the
Managing Member the rights, powers and authority, associated with such officer
position under the DGCL or customarily associated with such officer position in
such corporations, as the case may be.
(b) No Officer need be a Member. Any two or more offices may be held
by the same person. Each Officer of the Company shall be required to devote only
such time to the business and affairs of the Company as may be reasonably
necessary for the discharge of his duties and responsibilities to the Company in
such capacity, and no Officer of the Company shall be required to devote full
time to the business and affairs of the Company unless the Managing Member
determines otherwise.
(c) Except as otherwise provided by Law or by this Agreement, each
Officer shall hold office until his death, resignation or removal, unless a
different term is specified in the action of the Managing Member designating
him. Any Officer may resign by delivering his written resignation to the
Managing Member. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event. Any Officer may be removed at any time, with or without cause, by action
of the Managing Member.
(d) Except as the Managing Member may otherwise determine, no Officer
who resigns or is removed shall have any right to any compensation as an Officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the Company.
(e) The Managing Member may, in its discretion, fill any
vacancy occurring in any office of the Company for any reason or leave such
vacancy unfilled for such period as it may determine.
6.03. BINDING THE COMPANY. Except as the Managing Member may generally
or in any particular case or cases otherwise authorize, and subject to the other
provisions of this Agreement, all deeds, leases, contracts, bonds, notes,
checks, drafts or other obligations made, accepted or endorsed by the Company
shall be signed by the Managing Member or any one or more Officers of the
Company.
6.04. CONTRACTS WITH MEMBERS. The Company may engage in business with,
or enter into one or more agreements, leases, contracts or other arrangements
for the furnishing to or by the Company of funds, goods, services or space with,
any Member or Affiliate of a Member, and
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may pay reasonable compensation in connection with such business, funds, goods,
services or space. Contracts with Members or Affiliates of Members, at the
discretion of the Managing Member, need not be in writing.
6.05. REQUIRED APPROVAL BY MEMBERS.
(a) The following actions and decisions shall require the affirmative
approval, either by vote or by written consent, of Members representing a
majority of the Class A Interests:
(i) to admit any new Member to the Company, other than (A)
as specifically permitted in this Agreement (including, without
limitation, Section 8.01(b)) or (B) as provided for in Section 6.05(c)
below;
(ii) to institute proceedings to adjudicate the Company a
bankrupt, or consent to the filing of a bankruptcy proceeding against
the Company, or file a petition or answer or consent seeking
reorganization of the Company under the Federal Bankruptcy Code or any
other similar applicable federal, state or foreign law, or consent to
the filing of any such petition against the Company, or consent to the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or of its property, or make an
assignment for the benefit of creditors of the Company, or admit in
writing the Company's inability to pay its debts generally as they
become due;
(iii) to dissolve or wind-up the Company; and
(iv) to merge or consolidate the Company with or into
another Person.
(b) Subject only to Section 6.05(c) and the transactions described in
Section 8.03(a)(x), but notwithstanding anything else in this Agreement to the
contrary, for so long as any Class B Member remains a Member, any (i) merger,
consolidation or other business combination involving the Company, (ii)
conversion of the Company into any other form of entity, and (iii) amendment of
this Agreement (whether in connection with admission of a new Member or
otherwise), in each case causing or resulting in any direct or indirect
reduction of the benefits or increase of the detriments to be received by the
Class B Member hereunder, or otherwise adversely affecting the Class B Interest,
also shall require the prior affirmative written approval of a majority of Class
B Members.
(c) The Members acknowledge that a full and complete security interest
in the Class A Interest has been granted by each of the Class A Members to the
Administrative Agent, for the benefit of the lenders pursuant to the Senior
Credit Facilities. Notwithstanding anything in this Agreement to the contrary,
the Administrative Agent and the lenders under, and the other beneficiaries of,
the Senior Credit Facilities, and their successors and assigns, shall have the
absolute and unconditional right to become Class A Members, with no need for any
approval, consent or other action of the Managing Member, the Class A Members,
the Class B Members, the Company or any other Person, upon notice to the
Managing Member in connection with the Administration Agent's enforcement of
such security interest after an Event of Default under the
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Senior Credit Facilities, whether through foreclosure, Transfer in lieu of
foreclosure, other exercise of rights under the Senior Credit Facilities or
otherwise (including without limitation the exercise of rights of a secured
lender).
6.06. MEMBER ACTION. In the event that any matter is required to be
submitted to the Members for their approval under the terms of this Agreement or
the Act, the following provisions shall apply:
(a) Meetings of the Members may be called by the Managing Member. The
Members entitled to vote may vote on any such matter at a meeting to be held at
such time and place as shall be designated by the Managing Member. Any meeting
of the Members may be held by conference telephone or similar communication
equipment so long as all Members entitled to vote participating in the meeting
can hear one another. Members entitled to vote on the matter shall be given at
least three (3) business days' prior written notice of any meeting; provided
that any Member may waive such notice prior to, at or after the meeting. The
notice shall specify the place, date and hour of the meeting and the general
nature of the business to be transacted.
(b) Each Class A Member shall be entitled to vote in accordance with
its Class A Sharing Ratio of the Company. At any meeting of Members, the
presence of Class A Members holding at least a majority of the Class A Sharing
Ratios and the Class B Member when entitled to vote at such meeting, shall
constitute a quorum for the transaction of business. Except as otherwise
required by this Agreement or applicable Law, the affirmative vote of Class A
Members representing more than fifty percent (50%) of the Class A Sharing Ratios
is required to constitute approval of the Class A Members.
(c) Any action that may be taken at any meeting of Members may be
taken without a meeting and without prior notice if a consent in writing setting
forth the action so taken is signed by all Members entitled to vote on the
matter. Any such written consent may be executed and given by telecopy or
similar electronic means and such consents shall be filed with the minutes of
the proceedings of the Members.
(d) From time to time each Class A Member shall, by notice to each
other Member, designate one or more individuals who shall be authorized to act
under this Agreement for and on behalf of any such Class A Member. Any written
act, approval, consent or vote of any such representative shall be deemed the
act, approval, consent or vote of the Class A Member that designated such
representative. Each Class A Member may change any one or more of its
representatives at any time and from time to time by written notice to each
other Member.
(e) Each Class A Member agrees to indemnify, hold harmless and defend
the other Members from any liability whatsoever arising out of such other
Member's relying on the written act, approval, consent or vote of the
indemnifying Class A Member's designated representatives. If any Member relies
on any act, approval, consent or vote of any other Person associated with a
Class A Member other than the designated representative, such relying Member
assumes the risk that such act, approval, consent or vote has not been duly
authorized
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by the Class A Member allegedly taking or giving such act, approval, consent or
vote, and shall not be entitled to rely on any such Person's apparent or implied
authority to perform or give any such act, approval, consent or vote on behalf
of the Class A Member allegedly performing or giving same. Upon the transfer by
a Class A Member of its entire Interest, any representative appointed by such
Class A Member shall automatically cease to be a representative of such Class A
Member hereunder effective upon notice of such transfer to each other Member.
6.07. INDEMNIFICATION.
(a) The Company shall, to the fullest extent permitted by Law,
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such Person is an Officer of the Company, or is or was serving at the request of
the Company as a director or officer of any other Person (each, an
"Indemnitee"), against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding with respect to any Indemnitee,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe was unlawful.
(b) In addition, the Company may indemnify any Person who is not an
Indemnitee who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
Person is an employee or agent of the Company, or was serving at the request of
the Company as an employee or agent of any other Person (each, an "Optional
Indemnitee"), against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the interests of the Company,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe was unlawful.
(c) To the extent that an Indemnitee has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
6.07(a), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) To the extent that an Optional Indemnitee has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 6.07(b), or in defense of any claim, issue or matter therein, he may
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(e) The Company may pay the expenses (including attorneys' fees)
incurred by an Indemnitee or Optional Indemnitee in defending a civil, criminal,
administrative or investigative action, suit or proceeding brought by a party
against the Indemnitee or Optional Indemnitee in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Indemnitee or Optional Indemnitee to repay such amount
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if it shall ultimately be determined that he is not entitled to be indemnified
by the Company as authorized in this Section 6.07.
(f) Any indemnification under this Section 6.07 (unless ordered by a
court) shall be made by the Company only as authorized in the specific case upon
a determination that indemnification of the Indemnitee or Optional Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 6.07(a) and Section 6.07(b). Such determination
shall be made by the Managing Member.
(g) The right of indemnification and reimbursement provided in this
Section 6.07 shall be in addition to any rights to which an Indemnitee or
Optional Indemnitee may otherwise be entitled and shall inure to the benefit of
the executors, administrators, personal representatives, successors or assigns
of each Indemnitee and Optional Indemnitee.
(h) The rights to indemnification and reimbursement provided for in
this Section 6.07 may be satisfied only out of the assets of the Company and to
the extent of the Capital Contributions of the Members and none of the Members
shall be personally liable for any claim for indemnification or reimbursement
against the Company under this Section 6.07.
(i) Except as set forth in Section 6.06(e) hereof, no Managing Member
and no Member (nor any director, shareholder, member, manager, officer or
employee of such Member, direct or indirect) shall be personally liable or
personally accountable to the Company or to any of the Members, in damages or
otherwise, for any error of judgment, for any mistake of fact or of law, or for
any other act or thing which it may do or refrain from doing in connection with
the business and affairs of the Company, except for claims and damages resulting
from fraud, willful misconduct, bad faith, gross negligence or a material breach
of this Agreement.
(j) To the fullest extent permitted by Law, the Company (to the extent
of its assets) hereby agrees to indemnify, defend and hold harmless each Member
and its Affiliates from and against any loss, expense, or damage (including
reasonable attorneys' fees and court costs) suffered by such Member or its
Affiliate by reason of anything the Company may do or refrain from doing or such
Member may do or refrain from doing hereafter for and on behalf of the Company
and in furtherance of its interests or by reason of such Member's status as a
Member of the Company.
(k) Each Class A Member shall defend and indemnify the Company and the
other Members against, and shall hold them harmless from, any damage, loss,
liability or expense, including reasonable attorneys' fee, as and when incurred
by the Company or such other Members in connection with or resulting from such
indemnifying Class A Member's unauthorized actions, bad faith, gross negligence,
fraud, or willful misconduct.
(l) The Company and each Member that is not a Class B Member (each, an
"Indemnifying Member"), jointly and severally, shall indemnify, defend and hold
harmless each Class B Member and its Affiliates from and against any loss, cost,
expense or damage (including, without limitation, attorneys' fees and costs,
costs of investigation and court and arbitration costs) suffered by such Class B
Member or any such Affiliate by reason of, or in connection
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with, (i) anything the Company may do or refrain from doing or any Indemnifying
Member may do or refrain from doing hereafter in connection with, or in any way
relating to, the business and affairs of the Company, (ii) such Class B Member's
status as a Member of the Company and/or (iii) any action or omission by such
Class B Member (or any such Affiliate) taken or omitted to be taken in
connection with any exercise of, or any waiver of or failure to exercise, any of
such Class B Member's rights and powers under this Agreement. The Company and
each Indemnifying Member hereby agree that neither any Class B Member nor any
Affiliate of a Class B Member shall have any liability or accountability, in
damages or otherwise, to the Company, any Indemnifying Member or any of their
respective Affiliates with respect to any claim, cause of action, suit or
proceeding to the extent the same is based, in whole or in part, on any actual
or alleged action or omission of a type or kind described in clause (i), (ii) or
(iii) of the preceding sentence.
ARTICLE VII
FISCAL MATTERS
7.01. BOOKS AND RECORDS. The Managing Member shall keep or cause an
officer, employee or agent of the Company or a designated third party to keep,
at the principal office of the Company or in such other location as the Managing
Member or such officer, employee, agent or third party may designate, complete
and accurate books and records of the Company, maintained in such form and
manner as the Managing Member or such other Person may determine, as well as any
other documents and information required to be furnished to the Members under
the Act.
7.02. FINANCIAL AND OTHER REPORTS.
(a) Within fifteen (15) days after the end of each month and within
forty-five (45) days after the end of each fiscal quarter, the Managing Member
shall cause the Company to provide each Member with:
(i) an unaudited balance sheet as of the end of, and
unaudited statements of income, cash flow and Members' equity for,
each such period prepared in accordance with generally accepted
accounting principles, consistently applied, for the Company; and
(ii) to the extent not included in (i), unaudited statement
of distributions, changes in capital accounts, and tax allocations,
for the Company.
(b) Not later than the earlier of (x) five (5) business days after the
same become available to the Company, or (y) 120 days after the end of each
Fiscal Year, the Company shall provide each Member with:
(i) an audited balance sheet as of the end of, and audited
statements of income, cash flow and Members' equity for, each such
period prepared in accordance
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with generally accepted accounting principles, consistently applied,
for the Company; and
(ii) to the extent not included in (i), audited statements
of distributions, changes in capital accounts, and tax allocations of
the Company.
(c) Not later than 120 days after the end of each fiscal year, the
Company shall provide each Member with such information as is necessary to
complete federal and state income tax or information returns, and a copy of the
Company's federal, state and local income tax or information returns for that
year.
7.03. BANK ACCOUNTS. The Managing Member shall (or shall authorize and
direct one or more Officers of the Company to) cause the Company to open and
maintain one or more accounts with such one or more financial institutions as
the Managing Member or any such Officer may determine to be necessary or
advisable.
7.04. TAX MATTERS PARTNER. The Managing Member shall serve as the "tax
matters partner" of the Company. The "tax matters partner" is hereby authorized
to and shall perform all duties and have all powers of a "tax matters partner"
under the Code and shall serve as "tax matters partner" until its resignation or
until the designation of its successor, whichever occurs sooner. The "tax
matters partner" shall be reimbursed by the Company, for all reasonable expenses
actually incurred by the "tax matters partner" in connection with its
performance of its duties as such, and the Company shall indemnify and hold
harmless the "tax matters partner," to the maximum extent permissible under the
Act, from and against any and all losses, claims, liabilities, costs and
expenses incurred by the "tax matters partner" in connection with its
performance of its duties as such, except insofar as the same may have been
incurred by reason of gross negligence or willful misconduct of such "tax
matters partner."
7.05. TAX ELECTIONS AND DECISIONS. Any and all federal, state and
local tax elections and decisions for the Company shall be made by the Managing
Member in its reasonable discretion without regard to the tax consequences to
any Member; provided, however, the Managing Member may not cause the Company to
be classified for federal income tax purposes as other than a partnership unless
approved in writing by all the Members.
ARTICLE VIII
TRANSFERS OF INTERESTS
8.01. GENERAL RESTRICTIONS ON TRANSFER.
(a) Except in connection with a foreclosure, a Transfer in lieu of
foreclosure, or other exercise of rights in connection with the Senior Credit
Facilities or otherwise (including without limitation exercise of rights of a
secured lender) and except as otherwise provided in Section 6.05(c), no Class A
Member may Transfer all or any part of its Interest (including the interest of
an assignee within the meaning of Section 18-702 of the Act) or its share of
capital, profits,
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losses, allocations or distributions hereunder to any Person without first
meeting the following requirements:
(i) the prior written approval of the Managing Member;
(ii) the execution by the transferring Member of an
instrument of transfer of such Interest in form and substance
reasonably satisfactory to the Managing Member;
(iii) the execution by the transferee of the Interest (the
"Assignee") of a written agreement, in form and substance satisfactory
to the Managing Member, to assume all of the duties and obligations of
the transferring Member under this Agreement and the agreement by such
Assignee to be bound by and subject to all the terms and conditions
contained herein;
(iv) the execution by the transferring Member and the
Assignee of a written agreement, in form and substance reasonably
satisfactory to the Managing Member, to indemnify and hold harmless
the Company and the non-transferring Members from and against any
expense, loss or liability arising out of such Transfer;
(v) the execution by the transferring Member of a written
agreement, in form and substance reasonably satisfactory to the
Managing Member, acknowledging the termination of all the transferring
Member's rights and interests as a Member of the Company, effective
immediately upon such Transfer;
(vi) if requested by the Managing Member, a written opinion,
delivered by and at the expense of the transferring Member, of counsel
for the Company, or other counsel reasonably satisfactory to the
Managing Member, that the Transfer will not result in (i) a violation
of applicable law or this Agreement; (ii) the Company being classified
as an association or taxable as a corporation for federal income tax
purposes; (iii) the Company being deemed terminated pursuant to
Section 708(b)(1)(B) of the Code; or (iv) a requirement for a
registration of the transaction or the Interest under applicable
federal and state securities laws; and
(vii) unless otherwise waived by the Managing Member, the
payment of the Assignee or the transferring Member of all expenses
incurred by the Company in connection with the Transfer and the
admission of the Assignee to the Company as a Member.
(b) Subject to compliance with non-waivable provisions of applicable
Law, any Class B Member may Transfer all or any portion of its Class B Interest
to any Person (whether one or more) at any time or from time to time, with no
need for any approval, consent or other action of the Managing Member, the Class
A Members, the Company or any other Person, provided that the Transferee
executes and delivers to the Transferor, the Managing Member and the
Administrative Agent (and receives a written acknowledgment from the
Administrative Agent of such delivery to the Administrative Agent) a written
instrument in substantially the form attached hereto as Exhibit 3 with the
blanks therein appropriately completed (the "Admission Agreement"). Upon
acquisition of all or any portion of the Class B Interest and execution and
delivery of the Admission Agreement and the Administrative Agent's
acknowledgment thereof, such Transferee shall, to the extent it was granted such
right by the terms of the Transfer by
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virtue of which such Transferee acquired its Class B Interest, but with no need
for any other approval, consent or other action of the Managing Member, the
Class A Members, the Company or any other Person, be admitted to the Company as
a Class B Member (unless it is already a Class B Member at the time of such
acquisition, execution and delivery). Any attempt to transfer all or any portion
of the Class B Interest without compliance with the foregoing provisions shall
be void ab initio.
8.02. REDEMPTION OF INTEREST OF CLASS B INTEREST.
(a) PERIODIC REDEMPTION PAYMENTS. Subject to the limitations of
Section 8.02(b), the Company shall redeem the Class B Interest held by the Class
B Member for an aggregate amount equal to Initial Class B Balance plus the Class
B Return, for cash, as follows:
(i) in quarterly installments, commencing on the first
business day after the six-month anniversary of the Closing Date and
thereafter on each successive three-month anniversary thereof, in the
maximum aggregate amount permitted under Section 8.02(b) up to (and
including) $33,000,000 per such installment (the "Maximum Quarterly
Class B Redemption"), until redeemed in full (as defined below); and
(ii) in any event, in full (as defined below), at the
earlier of (1) the date occurring six (6) months after the Revolving
Loan Commitment Termination Date, (2) a Change of Control of Newco,
(3) Bankruptcy of Arris and (4) acceleration of the Senior Credit
Facilities in accordance with the terms thereof.
For the purposes hereof, the Class B Interest shall be redeemed in full at such
time as the Class B Member has received cash redemption payments equal, in the
aggregate, to the sum of (i) Class B Unreturned Capital and (ii) the aggregate
Class B Return that has not been added to Class B Unreturned Capital, calculated
through and including the date of such redemption in full. Redemption payments
shall be applied first to the payment of accrued Class B Return that has not
been paid or added to Class B Unreturned Capital, and then to payment of Class B
Unreturned Capital.
(b) CERTAIN LIMITATIONS. Until payment in full in cash of all Senior
Debt, the termination of any commitments to lend under the Senior Credit
Facilities and the cancellation or termination of any letters of credit issued
under the Senior Credit Facilities, no obligation to make redemption payments
shall arise, and no redemption payment shall be made, pursuant to Section
8.02(a)(i), and no redemption payment shall be made pursuant to Section
8.02(a)(ii), unless and until:
(1) prior to the date on which such redemption is made, the
Borrowers have delivered to the Administrative Agent all financial
statements, compliance certificates and other documents required to be
delivered in connection with the most recent fiscal quarter ending
prior to such date pursuant to the Senior Credit Agreement,
(2) both immediately before and after giving pro forma
effect to such redemption, no Event of Default shall have occurred and
be continuing,
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(3) after giving pro forma effect to such redemption, the
Borrowers shall have Excess Availability of at least $75 million, and
(4) the Borrowers shall have delivered an officer's
certificate of ANTEC signed by the chief financial officer of ANTEC
certifying as to the foregoing clauses (1)-(3) and attaching a
Borrowing Base Certificate demonstrating such Excess Availability, in
each case in form and substance satisfactory to Administrative Agent;
provided that, with respect to the fourth fiscal quarter of any fiscal
year, Borrowers shall be deemed to have satisfied the part of the
condition contained in clause (1) above requiring delivery of audited
financial statements for the fiscal year ended at the end of the
preceding fiscal quarter upon delivery of unaudited financial
statements for such fiscal year in lieu of audited financial
statements for such fiscal year and a certificate signed by the chief
financial officer of ANTEC certifying that, when delivered, the
audited financial statements shall not contain any material
differences from the unaudited financial statements.
(c) [Intentionally Omitted.]
(d) COMPANY COVENANT. So as to enable the exercise of the Class B
Member's redemption rights in this Section 8.02, the Company shall, and shall
cause ANTEC to, comply with all reporting requirements and document delivery
requirements contained in the Senior Credit Facilities, make all requisite
certifications under the Senior Credit Facilities, and take all such further
actions as may be reasonably requested by the Class B Member to enable the
Company, to the fullest extent possible, to make all redemption payments
contemplated by this Section 8.02 timely and in full (provided, however, that in
no event shall the Company be required by any of the foregoing provisions of
this Section 8.02(d) to take any action prohibited by the terms of the Senior
Credit Facilities). The Company shall notify the Class B Member in writing of
any Default or Event of Default, any material breach by the Company of this
Section 8.02, or any amendment, restatement, amendment and restatement,
supplement to, or other modification thereof, in each case not later than five
(5) business days after occurrence thereof.
(e) CESSATION OF CLASS B RIGHTS UPON COMPLETE REDEMPTION. Upon the
redemption in full of the Class B Interest as set forth in this Section 8.02,
the Class B Interest shall be completely extinguished (including, without
limitation, any preference or other claim with respect to the Class B Interest)
and neither Nortel, nor any transferee permitted pursuant to Section 8.01, shall
have any rights, claims, duties, liabilities or obligations whatsoever with
respect to the Company under the Class B Interest or otherwise as a Member of
the Company, and shall cease to be a Member for all purposes (provided that,
notwithstanding anything in this Agreement to the contrary, the complete
redemption of the Class B Interest as set forth in this Section 8.02 shall not
constitute or operate as a waiver or release of, or have any other effect on,
(i) any breach or violation of the provisions of this Agreement occurring prior
to such complete redemption, or (ii) any of the Class B Member's rights and
remedies (whether at law or in equity) with respect thereto).
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(f) NO LIMITATION ON OTHER PAYMENTS. For the avoidance of doubt, the
foregoing limitations on the Company's redemption obligations with respect to
the Class B Interest shall not apply to any other payments to be made by the
Company or Newco (or any of their Affiliates) to Nortel Networks or any of its
Affiliates (including Nortel), whether pursuant to the Agreement and Plan of
Reorganization, any of the Ancillary Agreements, in connection with purchases of
goods and/or services or licenses of intellectual property rights as of and
after the date hereof, or otherwise (including payments with respect to the
Inventory and the German Inventory specified on Schedule 8.01(f) to the
Agreement and Plan of Reorganization).
8.03. MANDATORY EXCHANGE FOR NEW SECURITIES.
(a) Until payment in full in cash of all Senior Debt, the termination
of all commitments to lend under the Senior Credit Facilities, and the
cancellation or termination of all letters of credit issued under the Senior
Credit Facilities, in the event that (x) ANTEC, Newco or any of their
Affiliates, or any of their successors and assigns, enter into and consummate an
agreement to Transfer all or any portion of their Interests, or the Company
Transfers all or substantially all of its assets, in each case to one or more
persons other than Newco or any of its subsidiaries, (y) there is any
foreclosure on any of the Interests held by ANTEC or Newco (or any of their
successors or assigns) or a Transfer in lieu of foreclosure or an exercise of
any rights or remedies of a secured creditor with respect to such Interests, in
each case pursuant to the Senior Credit Facilities or otherwise, or (z) during
the continuance of an Event of Default, then upon either (I) written notice by
the Class B Member to the Company and Newco in the event of the circumstances
described in clause (y), (II) written notice by the Administrative Agent to the
Class B Member, the Company and Newco in the event of the circumstances
described in clause (y) or clause (z), or (III) simultaneously in the event of
the circumstances described in clause (x), the Class B Interest automatically
shall be exchanged (at such time as may be specified in the notice or
immediately if no time is specified in the notice or no notice is required) for
such of the following as may be selected by the Class B Member by notice to the
Company:
(i) Duly authorized, validly issued, fully paid and
non-assessable shares of Newco common stock with a Fair Market Value
as of the date of exchange equal to the unredeemed portion of Initial
Class B Balance plus the unpaid Class B Return accrued to the date of
exchange,
(ii) One hundred thousand (100,000) shares of Newco
Preferred Stock, constituting all of the authorized shares of Newco
Preferred Stock, all of which shares shall be duly authorized, validly
issued, fully paid and non-assessable (provided, however, that the
provisions of Section 6 of Annex A to the Certificate of Designations,
and any other provisions thereof (including, without limitation, the
designation of Newco Preferred Stock) referencing convertibility of
Newco Preferred Stock shall be deleted from such Annex A and shall not
be part of the powers, designations, preferences and rights of Newco
Preferred Stock if the Class B Member so elects, in writing),
(iii) a subordinated note of Newco with a maturity date six
months after the final maturity of the Senior Credit Facilities in the
principal amount equal to
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the unredeemed portion of the Initial Class B Balance plus the Class B
Return accrued to the date of exchange, in the form of, and containing
the terms set forth in, Exhibit 2 hereto (provided, however, that the
provisions of Section 3 of such Exhibit 2, and any other provisions
thereof (including, without limitation, the title of such subordinated
note) referencing convertibility of such subordinated note, shall be
deleted from such Exhibit 2 and shall not be part of such subordinated
note if the Class B Member so elects in writing), or
(iv) any combination of the foregoing yielding an aggregate
value consistent with the foregoing equal to the unredeemed portion of
the Initial Class B Balance plus the Class B Return accrued to the
date of exchange
(the securities or other instruments receivable by Class B Member in such
exchange, the "New Securities"); provided that:
(V) if the Class B Member elects to receive a combination of
New Securities as described in clause (iv) above, the amount of
"Maximum Quarterly Redemption" referenced in Section 4(a)(ii)(A) of
Annex A to the Certificate of Designations and the amount of "Maximum
Quarterly Payment" referenced in Section 1(a)(i) of the form of
subordinated note of Newco attached hereto as Exhibit 2 shall be
reduced on a pro rata basis to reflect the proportion allocated to
each such New Security of the unredeemed portion of the Class B
Unreturned Capital plus the Class B Return accrued to the date of
exchange that has not been paid or added to Class B Unreturned
Capital;
(W) if the Class B Member shall not have given notice of its
selection prior to the effective time of an exchange, then (1) it
shall be presumed to have selected to receive a subordinated note as
provided in clause (iii) above that does not contain the references to
convertibility of such subordinated note, and (2) such subordinated
note may be exchanged by the Class B Member (notwithstanding its
having ceased to be a Member of the Company), by written notice to
Newco given not later than twenty (20) days after the effective time
of the exchange pursuant to clause (W)(1) of this proviso, for any of
the other New Securities described in clauses (i) through (iii) above
or, subject to clause (iv) above, any combination of the same;
(X) the Class B Member, by notice to the Company, may change
its selection at any time prior to the effective time of the exchange,
and, in the event that the New Securities can not be issued or are not
promptly issued as a result of inaction by Newco or otherwise, the
Class B Member shall be entitled to change its selection until the
earlier of when it receives the New Securities it selected and twenty
(20) days after such effective time (and for sixty (60) days
thereafter it may elect to add any convertibility provisions contained
in such New Securities);
(Y) if the Class B Member selects to receive either the
Newco common stock pursuant to clause (i) above or the Newco Preferred
Stock pursuant to clause (ii) above, and the exchange occurs, or by
its terms should occur, prior to
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completion of any filings or corporate formalities necessary for the
issuance of such common stock or Newco Preferred Stock (such as, by
way of example but not limitation, any necessary increase in the
number of shares of Newco common stock or preferred stock authorized
for issuance; approval by the Board of Directors of Newco of the
Certificate of Designations and filing of the same with the office of
the Secretary of State of the State of Delaware; and approval of the
issuance of such common stock or Newco Preferred Stock (as applicable)
by the Board of Directors of Newco) and the actual issuance thereof,
then (1) as part of the exchange, Newco shall, and the Company shall
cause Newco to, deliver to the Class B Member a subordinated note as
provided in clause (iii) above that does not contain references to
convertibility of such subordinated note, and (2) within ten (10) days
after the exchange, the Company shall cause Newco to complete such
filings and formalities and issue and deliver such common stock or
Newco Preferred Stock (as applicable) against return of the
subordinated note (provided that, prior to such issuance and delivery,
the Class B Member (notwithstanding its having ceased to be a Member
of the Company) shall be entitled to exercise the rights set forth in
clause (W)(2) above); and
(Z) the Class B Member shall not be entitled to select the
mix of New Securities which would result in a Change of Control of
Newco or a "Change in Control" as defined in the Senior Credit
Agreement.
Promptly upon receipt of any notice from the Class B Members pursuant to clause
(I) above, the Company and Newco shall cause a copy thereof to be delivered to
the Administrative Agent. The Company and Newco shall give each Class B Member
written notice of the occurrence of any event described in clause (x) or (y)
above not later than five (5) business days after the occurrence of such event.
(b) CESSATION OF CLASS B RIGHTS UPON MANDATORY EXCHANGE. Upon the
exchange of the Class B Interest for the New Securities as set forth above in
this Section 8.03, the Class B Interest shall be completely extinguished
(including, without limitation, any preference or other claim relating thereto)
and neither Nortel nor any transferee permitted pursuant to Section 8.01 shall
have any rights, claims, duties, liabilities or obligations whatsoever with
respect to the Company under the Class B Interest or otherwise as a Member of
the Company, and shall cease to be a Member for all purposes; provided that,
notwithstanding the foregoing, Nortel and each transferee permitted pursuant to
Section 8.01 shall remain entitled, after effectiveness of such exchange, solely
to exercise the rights of a Class B Member set forth in clauses (W)(2), (X) and
(Y) of the first sentence of Section 8.03(a).
ARTICLE IX
DISSOLUTION AND LIQUIDATION
9.01. EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and
its affairs wound up upon the earlier of:
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(a) Any transaction authorized by or subject to Section 18-209 of the
Act as a result of which the Company is not the surviving entity;
(b) The election to dissolve the Company made by the holders of a
majority of the Class A Interests and the Class B Member;
(c) At any time there are no Members of the Company, unless the
business of the Company is continued pursuant to the Act; or
(d) The entry of a decree of judicial dissolution under Section 18-802
of the Act.
9.02. PROCEDURES ON DISSOLUTION. Dissolution of the Company shall be
effective on the day on which occurs the event giving rise to the dissolution,
but the Company shall not terminate until the assets of the Company shall have
been distributed as provided herein and the Certificate shall have been
canceled. 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. The Managing Member or one or more other Persons appointed as
Liquidator by the Managing Member shall liquidate the assets of the Company,
apply and distribute the proceeds thereof as contemplated by this Agreement and
cause the cancellation of the Certificate.
9.03. DISTRIBUTIONS UPON LIQUIDATION.
(a) Upon dissolution, the Company, by and through the Liquidator,
shall satisfy liabilities owing to creditors (including creating such reserves
as may be required by non-waivable provisions of Section 18-804(b) of the Act or
as the Liquidator otherwise deems reasonably necessary for any contingent
liabilities or obligations of the Company). Said reserves may be paid over by
the Liquidator to a bank, to be held in escrow for the purpose of complying with
any such provisions of Section 18-804(b) of the Act or paying any such
contingent liabilities or obligations and, at the expiration of such period as
may be required by non-waivable provisions of Section 18-804(b) of the Act or as
the Liquidator may deem advisable, such reserves shall be distributed to the
Members or their assigns in the manner set forth in Section 9.03(b).
(b) After satisfying such liabilities (including the creation of
reserves) as set forth in Section 9.03(a), the Liquidator shall cause the
remaining net assets of the Company to be distributed: first, to the Members to
the extent of any unpaid principal of and interest on any Member Loans; second,
subject to Section 8.02(b), to the Class B Member to the extent of the Class B
Unreturned Capital and Class B Return; and then to the Members pro rata in
proportion to the positive balances in their respective Capital Accounts (after
such Capital Accounts have been adjusted to reflect any Net Profit or Net Loss
or any items of income, gain, loss or deduction to be allocated to the Members
through the time of the dissolution and liquidation of the Company pursuant to
Article V hereof and the distributions made pursuant to the previous clauses of
this sentence). Distributions pursuant to this Section 9.03(b) shall be made by
the end of the Fiscal Year during which the dissolution of the Company occurs
(or, if later, within ninety
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(90) days of such dissolution). In the event that any part of such net assets
consists of notes or accounts receivable or other noncash assets, the Liquidator
may take whatever steps it deems appropriate to convert such assets into cash or
into any other form which would facilitate the distribution thereof. If any
assets of the Company are to be distributed in kind, such assets shall be
distributed on the basis of their fair market value net of any liabilities;
provided, however, that, unless Class B Members holding a majority of the
Class B Interests otherwise consent in writing prior to such distribution,
all distributions to the Class B Members pursuant to this Section 9.03(b)
shall be made solely in cash.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01. APPLICABLE LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware, including the Act, as
interpreted by the courts of the State of Delaware, notwithstanding any rules
regarding choice of law to the contrary.
10.02. COUNTERPARTS. This Agreement may be executed in several
counterparts and as so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all of the parties have not signed the same
counterpart.
10.03. SEPARABILITY OF PROVISIONS. Each provision of this Agreement
shall be considered separable. To the extent that any provision of this
Agreement is prohibited or ineffective under the Act, this Agreement shall be
considered amended to the smallest degree possible in order to make the
Agreement effective under the Act (and, if the Act is subsequently amended or
interpreted in such manner as to make effective any provision of this Agreement
that was formerly rendered invalid, such provision shall automatically be
considered to be valid from the effective date of such amendment or
interpretation).
10.04. ARTICLE AND SECTION TITLES. Article and section titles are
included herein for descriptive purposes only and shall not control or alter the
meaning of this Agreement as set forth in the text.
10.05. AMENDMENTS. Except as otherwise expressly provided herein, this
Agreement and the Certificate shall be amended only if such amendment is (i)
adopted by the Managing Member, (ii) approved by Class A Members representing
more than fifty percent (50%) of the Class A Sharing Ratios, and (iii) approved
by the Class B Member, if any.
10.06. NO THIRD PARTY BENEFICIARIES. The beneficiaries under the
Subordination Agreement and the parties to the Secured Credit Facilities shall
be third party beneficiaries of this Agreement. Otherwise, the provisions of
this Agreement are not intended to be for the benefit of any other creditor
(other than a Member who is a creditor) or other Person (other than a Member or
an Officer of the Company in his capacity as such) to whom any debts,
liabilities or obligations are owed by (or who otherwise has any claim against)
the Company or any of the Members. Moreover, except as provided in the first
sentence of this Section 10.06 but notwithstanding anything contained in this
Agreement, no such creditor or other Person shall
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obtain any rights under this Agreement or shall, by reason of this Agreement,
make any claim in respect of any debt, liability or obligation (or otherwise)
against the Company or any Member. Notwithstanding the foregoing, any Person
entitled to indemnification hereunder shall be deemed a third party beneficiary
hereof with respect to all matters relating to such indemnification, and shall
be entitled to enforce any and all such Person's rights relating to such
indemnification as if such Person were a party hereto.
10.07. SUCCESSORS AND ASSIGNS. 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. Except for the beneficiaries under the Subordination Agreement and the
parties to the Secured Credit Facilities, no Person other than the parties
hereto and their respective successors, executors, administrators, legal
representatives, heirs and permitted assigns shall have any rights or claims
under this Agreement.
10.08. NOTICE. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or three Business Days after being
mailed by registered or certified mail (return receipt requested) or one
Business Day after being delivered by overnight courier to such party at its
address set forth below or such other address as such party may specify by
notice to the parties hereto.
If to Nortel to:
Nortel Networks LLC
000 Xxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Legal Department
With a copy to:
Nortel Networks Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
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If to ANTEC or Newco, to:
ANTEC Corporation
00000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: X. Xxxxxxxx Xxxxxxxxx, Jr.
Fax: 000-000-0000
Phone: 000-000-0000
If to the Company, to:
Arris Interactive L.L.C.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: President
Fax: 000-000-0000
Phone: 000-000-0000
With a copy to:
Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: X. Xxxxxxxx Xxxxxxxxx, Jr.
Fax: 000-000-0000
Phone: 000-000-0000
If to the Administrative Agent, as specified in the Senior Credit
Agreement.
10.09. SUBORDINATION. All obligations to the Class B Member under this
Agreement and all amounts payable to the Class B Member under this Agreement
(including without limitation under or in respect to the Class B Interest, the
New Securities, if any, the redemption obligations under Section 8.02, the
distribution obligations under Sections 4.01 and 4.02, the dissolution
obligations under Section 9.02, the liquidation obligations under Section 9.03,
any indemnification payments under this Agreement, or otherwise) are
subordinated to the extent and in the manner set forth in the Subordination
Agreement. Each of this Section 10.09 and the Subordination Agreement shall
constitute a continuing offer to all persons who, in reliance upon
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such provisions, become holders of, or continue to hold, Senior Debt, and such
provisions are made for the benefit of the holders of the Senior Debt, and such
holders are made obligees hereunder and any one or more of them may enforce such
provisions.
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IN WITNESS WHEREOF, the Members have executed this Agreement effective
as of the Closing Date.
ARRIS GROUP, INC.
a Delaware corporation
By: /s/ Xxxxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
---------------------------------
Title:
---------------------------------
ANTEC CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
---------------------------------
Title:
---------------------------------
NORTEL NETWORKS LLC,
a Delaware limited liability company
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
---------------------------------
Title:
---------------------------------
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Schedule A
Effective as of the Closing Date
CLASS A MEMBERS
Capital
Name of Member Sharing Ratio Account Balance
-------------- ------------- ------------------
Arris Group, Inc. 84.26% [To be determined]
ANTEC Corporation 15.74% [To be determined]
CLASS B MEMBER
Capital
Name of Member Account Balance
-------------- ------------------
Nortel Networks LLC $100,000,000
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EXHIBIT 3
ADMISSION AGREEMENT
Reference is made to the Second Amended and Restated Limited Liability
Company Agreement (the "LLC Agreement") of Arris Interactive L.L.C. (the "LLC"),
dated and effective as of ___________, 2001, as amended, by and among ANTEC
Corporation, a Delaware corporation that was, as of such date, in the process of
changing its name to Arris International, Inc., Arris Group, Inc., a Delaware
corporation, and Nortel Networks LLC, a Delaware limited liability company.
Capitalized terms used but not defined herein shall have their respective
meanings set forth in the LLC Agreement.
1. The undersigned, being a Transferee of all or a portion of the
Class B Interest, hereby agrees that, upon acquisition by such Transferee of the
Transferred Class B Interest, the undersigned shall be bound by all of the terms
and provisions of the LLC Agreement and the Subordination Agreement (a copy of
which is attached hereto), to the same extent that such terms and provisions
were applicable to the Class B Member that is the Transferor of such Transferred
Class B Interest (provided that, if the Transferee was not granted the right to
become a Member by the terms of the Transfer by virtue of which the undersigned
acquired the Class B Interest, or a portion thereof, then the undersigned shall
be bound by the terms and provisions of the LLC Agreement and the Subordination
Agreement to the extent they are applicable to an assignee of the Class B
Interest that is not a Member) as of immediately prior to effectiveness of such
acquisition.
2. The undersigned hereby acknowledges receipt and sufficiency of
consideration in connection with this Admission Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Admission
Agreement to be duly executed and delivered effective as of __________________,
200_.
[Name of Transferee]
By:
------------------------------------
Name:
Title:
Received:
------------------------------------
Administrative Agent
