EXHIBIT 10.8
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
RCN-BECOCOM, LLC
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
-----------
1.1 Certain Definitions............................................ 2
1.2 Other Definitions.............................................. 12
1.3 Construction................................................... 12
ARTICLE 2
ORGANIZATION
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2.1 Organization................................................... 12
2.2 Name........................................................... 12
2.3 Registered Office; Registered Agent; Principal Office in the
United States; Other Offices................................... 12
2.4 Purpose........................................................ 13
2.5 Company Powers................................................. 13
2.6 Foreign Qualification Governmental Filings..................... 14
2.7 Term........................................................... 14
2.8 No State-Law Partnership....................................... 14
2.9 Activities of the Members...................................... 14
ARTICLE 3
MEMBERS; DISPOSITIONS OF INTERESTS
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3.1 Members........................................................ 14
3.2 Restrictions on the Disposition of an Interest................. 15
3.3 Change of Control.............................................. 18
3.4 Interests in a Member.......................................... 20
3.5 Liability to Third Parties..................................... 20
ARTICLE 4
CAPITAL CONTRIBUTIONS
---------------------
4.1 Initial Capital Contributions.................................. 20
4.2 Additional Capital Calls....................................... 21
4.3 Failure to Pay a Capital Call.................................. 21
4.4 Return of Contributions........................................ 22
ARTICLE 5
INTENTIONALLY DELETED
---------------------
ARTICLE 6
MEMBER ACCOUNTS; ALLOCATIONS OF PROFIT AND LOSS; DISTRIBUTIONS
--------------------------------------------------------------
6.1 Capital Accounts............................................... 22
6.2 Allocations for Capital Account and Tax Purposes............... 23
ARTICLE 7
MANAGEMENT
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7.1 Management by the Members...................................... 26
7.2 Representatives................................................ 27
7.3 Place of Meeting of Representatives............................ 27
7.4 Regular Meetings of Representatives............................ 27
7.5 Special Meetings of Representatives............................ 27
7.6 Representative Compensation; Reimbursement..................... 28
7.7 Manner of Acting and Adjournment of Members.................... 28
7.8 Fundamental Business Actions................................... 28
7.9 Indemnification................................................ 31
7.10 Business Plan; Budget.......................................... 33
ARTICLE 8
RIGHTS OF MEMBERS
-----------------
8.1 Access to Information.......................................... 35
8.2 Audits......................................................... 35
ARTICLE 9
TAXES
-----
9.1 Tax Returns.................................................... 35
9.2 Tax Elections.................................................. 35
9.3 Tax Matters Partner............................................ 35
ARTICLE 10
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
------------------------------------------
10.1 Accounting..................................................... 36
10.2 Fiscal Year.................................................... 36
10.3 Statements and Reports......................................... 36
10.4 Inspection..................................................... 37
10.5 Bank Accounts.................................................. 37
ARTICLE 11
WITHDRAWAL, EXPULSION, BANKRUPTCY, ETC.
---------------------------------------
11.1 Withdrawal..................................................... 37
11.2 Bankrupt Members............................................... 37
ARTICLE 12
TERMINATION, DISSOLUTION AND LIQUIDATION OF THE COMPANY
-------------------------------------------------------
12.1 Termination and Dissolution.................................... 38
12.2 Liquidation.................................................... 39
ARTICLE 13
GENERAL PROVISIONS
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13.1 Representations................................................ 40
13.2 Additional Representations of RCN-Sub.......................... 41
13.3 Offset......................................................... 42
13.4 Notices........................................................ 42
13.5 Entire Agreement; Supersedure.................................. 43
13.6 Effect of Waiver or Consent.................................... 43
13.7 Amendment or Modification...................................... 43
13.8 Public Announcements........................................... 44
13.9 Confidentiality................................................ 44
13.10 Binding Effect................................................. 45
13.11 Governing Law; Severability.................................... 45
13.12 Specific Performance........................................... 45
13.13 Further Assurances............................................. 45
13.14 Counterparts................................................... 45
13.15 Interpretation................................................. 45
13.16 Use of Name.................................................... 45
13.17 Continued Support of RCN-Sub................................... 46
This AMENDED AND RESTATED OPERATING AGREEMENT OF RCN-BecoCom, LLC (this
"Agreement") is made and entered into effective as of June 17, 1997 (the
"Effective Date"), by and among the Members (as defined below).
WHEREAS, on December 23, 1996 RCN Telecom Services, Inc., a Delaware
corporation ("RCN"), and Boston Energy Technology Group, Inc., a Massachusetts
corporation ("BETG"), entered into the RCN-BETG, LLC Operating Agreement; and
WHEREAS, Boston Edison Company, a Massachusetts corporation ("BECO"), and
C-Tec Corporation, a Delaware corporation ("C-Tec"), have each executed
instruments of adherence with respect to certain provisions hereof; and
WHEREAS, RCN-BETG, LLC has changed its name to RCN-BecoCom, LLC; and
WHEREAS, RCN and BETG wish to revise the terms of their participations
in RCN-BecoCom, LLC, and to assign their interests therein to their respective
affiliates;
NOW, THEREFORE in consideration of the mutual covenants, rights, and
obligations set forth in this Agreement, the benefits to be derived therefrom,
and other good and valuable consideration, the receipt and the sufficiency of
which each Member acknowledges, the Members agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings:
"AAA" shall have the meaning set forth in Section 3.3(iv).
"Act" means the Massachusetts Limited Liability Company Act, Mass.
Gen. Xxxx Xxx. Ch. 156C, Section 1, et seq. and any successor
statute, as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as
of the end of the relevant fiscal year of the Company (i) increased by
an amount equal to the sum of such Member's allocable share of the
Company's Minimum Gain attributable to Company Nonrecourse Liabilities
and such Member's allocable share of the Company's Minimum Gain
attributable to Member Nonrecourse Debt, in each case as computed on the
last day of such fiscal year in accordance with applicable Regulations
and (ii) reduced by all reasonably expected adjustments, allocations and
distributions described in Regulations Sections 1.704 -
1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital
Account Deficit is intended to comply with the provisions of Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"Affiliate" means, with respect to any Person, any other Person
Controlling, Controlled by, or under common Control with that first
Person.
"Agreed Value" of any Contributed Property means the value of such
property or other consideration (a) as agreed by all of the Members and
as listed on Schedule I for that Contributed Property contributed as of
the Closing, and (b) as determined by all of the Members using such
reasonable method of valuation as they may adopt for that Contributed
Property contributed after the Closing; provided, however, that the
Agreed Value of any property deemed contributed to the Company for
federal income tax purposes upon termination and reconstitution thereof
pursuant to Section 708 of the Code shall be determined in accordance
with Section 6.2(c).
"Agreement" has the meaning given that term in the introductory
paragraph hereof.
"Appraiser" has the meaning given that term in Section 3.3(i).
"Appraiser's Certificate" has the meaning given that term in
Section 3.3(ii).
"Arbitrator" has the meaning given that term in Section 7.8(e)(i).
"Arbitration Act" has the meaning given that term in Section
7.8(e)(i).
"Award" has the meaning given that term in Section 7.8(e)(i).
"Bankrupt Member" means any Member:
(a) that (i) makes a general assignment for the benefit of
creditors, (ii) files a voluntary bankruptcy petition, (iii)
becomes the subject of an order for relief or is declared
insolvent in any federal or state bankruptcy or insolvency
proceeding, (iv) files a petition or answer seeking for such
Member a reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any law, (v)
files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against such Member
in a proceeding of the type described in clauses (i)-(iv), (vi)
seeks, consents to, or acquiesces in the appointment of a trustee,
receiver, or liquidator of the Member or of all or any substantial
part of the Member's properties, or
(b) with respect to which (i) a proceeding is commenced
seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any law and 90
days have expired without the proceeding being dismissed, or (ii)
without that Member's consent or acquiescence, a trustee,
receiver, or liquidator is appointed of that Member or of all or
any substantial part of its properties and 90 days have expired
without the appointment being vacated or stayed, or if stayed, 90
days have expired after the date of expiration of a stay, unless
the appointment has been vacated.
"Basic Agreements" has the meaning set forth in the Construction
and Indefeasible Right of Use Agreement, dated as of the date hereof, by
and between BecoCom and the Company (the "IRU Agreement").
"BecoCom" means BecoCom, Inc., a Massachusetts corporation and a
wholly-owned subsidiary of BETG.
"BecoCom Contributed Assets" means those certain existing assets
listed in footnote 2 of Schedule 1.
"Budget" has the meaning set forth in Section 7.10.
"Business Day" means any day other than a Saturday, a Sunday or a
holiday on which banks in Massachusetts generally are closed.
"Business Plan" has the meaning set forth in Section 7.10 hereof.
"Capital Account" means the capital accounts maintained with
respect to Membership Interests pursuant to Section 6.1.
"Capital Call" means a request for additional contributions of
capital to the Company.
"Carrying Value" means, with respect to any asset, the asset's
adjusted tax basis for federal income tax purposes except as follows:
(a) The initial Carrying Value of any asset contributed to
the Company by a Member shall be the Agreed Value of such asset;
(b) Consistent with the provisions of Section
1.704-1(b)(2)(iv)(f) of the Regulations, the Carrying Value of all
Company assets shall be adjusted to equal their respective gross
fair market values upon the happening of any of the following
events: (i) issuance of additional Membership Interests to new or
existing Members for more than a de minimis amount of cash or
Contributed Property, (ii) immediately prior to a distribution to
a Member of more than a de minimis amount of Company property
(other than a distribution solely of cash that is not in
redemption or retirement of a Membership Interest) in consideration
for an interest in the Company and (iii) the liquidation of the
Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g).
(c) The Carrying Values of Company assets shall be
increased or decreased to reflect any adjustments to the adjusted
basis of such assets pursuant to Section 734(b) or Section 743(b)
of the Code, but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m), Section 6.2(b)(vii)
hereof and paragraph (e) of the definition of Net Income or Net
Loss.
If the Carrying Value of an asset has been determined or adjusted
pursuant to subparagraphs (a), (b) or (c) of the definition for Carrying
Value, such Carrying Value shall be adjusted thereafter by the Depreciation
taken into account with respect to such asset for purposes of computing the
amount of Net Income or Net Loss.
"Cash Capital Contribution" means the amount set forth under the
column "Cash Capital Contribution" on Schedule 1.
"Category A Fundamental Business Actions" has the meaning given
that term in Section 7.8(a).
"Category B Fundamental Business Actions" has the meaning given
that term in Section 7.8(b).
"Certificate" has the meaning given that term in Section 2.1.
"Certificate Date" has the meaning given that term in Section
3.3(ii).
"Change of Control" of a Member shall be deemed to have occurred
when (i) an Entity, other than a Member Parent of such Member or a
Wholly Owned Affiliate of such Member Parent (an "Unaffiliated Entity")
shall acquire (whether by merger, consolidation, sale, assignment,
lease, transfer or otherwise, in one transaction or a series of related
transactions), or otherwise beneficially own, directly or indirectly,
more than 50% of the outstanding voting interests in such Member
entitled to vote generally in the election of directors, managers or
other members of the management group of such Member or otherwise
control such Member (a "Control Entity"), (ii) the Member Parent of such
Member shall otherwise cease to beneficially own a majority of such
outstanding voting securities in such Member or any Control Entity of
such Member, or (iii) an Unaffiliated Entity shall become a Control
Entity of a Member Parent after the Effective Date.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Company" means RCN-BecoCom, LLC, a Massachusetts limited liability
company.
"Company Debt" shall have the meaning set forth in Section
2.5(a)(iv).
"Company Nonrecourse Deductions" means, with respect to Company
Nonrecourse Liabilities, the amount of deductions, losses and expenses
equal to the net increase during the year in Minimum Gain attributable
to Company Nonrecourse Liabilities, reduced (but not below zero) by the
proceeds, if any, of such Company Nonrecourse Liabilities distributed
during the year, as determined in accordance with applicable
Regulations.
"Company Nonrecourse Liabilities" means nonrecourse liabilities
(or portions thereof) of the Company for which no Member (or any Person
related to a Member) bears the Economic Risk of Loss.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Act, but excluding cash, contributed to
the Company (or deemed contributed to the Company on termination and
reconstitution thereof pursuant to Section 708 of the Code).
"Control" of an Entity means power to direct or cause the
direction of the management or policies of such Entity, whether through
the ownership of voting securities, by agreement or otherwise.
"Deadlock Event" shall have the meaning set forth in Section
7.8(c)(ii) hereof.
"Default Interest Rate" means three percent above LIBOR.
"Delinquent Member" with respect to a Capital Call means a Member
who fails to pay its portion of such Capital Call at the time and in the
amount required under this Agreement.
"Depreciation" means, for each fiscal year or other relevant
period, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such year or
other relevant period, except that if the Carrying Value of an asset
differs from its adjusted basis for federal income tax purposes at the
beginning of such year, Depreciation shall be an amount which bears the
same ratio to such beginning Carrying Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such
year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method
selected by the Tax Matters Partner.
"Dispose," "Disposing," or "Disposition" means a sale, assignment,
transfer, exchange, pledge, grant of a security interest, or other
disposition or encumbrance, or the acts thereof.
"Disputing Member" has the meaning given that term in Section
7.8(d)(i).
"Dispute Notice" has the meaning given that term in Section
7.8(d)(i).
"Dispute Price" has the meaning given that term in Section
7.8(d)(i).
"Economic Risk of Loss" has the meaning ascribed to it in Section
1.752-2 of the Regulations.
"Effective Date" has the meaning given that term in the
introductory paragraph hereof.
"Entity" means any corporation, limited liability company, general
partnership, limited partnership, venture, trust, business trust, estate
or other entity.
"Exchange Agreement" means that certain Exchange Agreement entered
into between BecoCom and C-Tec of even date herewith.
"Exchange Securities" means any securities into which a Membership
Interest (or any part thereof) is exchanged pursuant to the Exchange
Agreement.
"Fair Market Value" has the meaning given that term in Section 3.3.
"First Appraiser" has the meaning given that term in Section
3.3(i).
"Fundamental Business Actions" has the meaning given that term in
Section 7.8.
"GAAP" means the generally accepted accounting principles in the
United States of America in effect from time to time.
"General Interest Rate" means a rate per annum equal to the lesser
of (a) a varying rate per annum that is equal to the interest rate
publicly quoted by Citibank, N.A. from time to time as its prime
commercial or similar reference interest rate, with adjustments in that
varying rate to be made on the same date as any change in that rate, and
(b) the maximum rate permitted by applicable law.
"Governmental Entity" has the meaning given that term in Section
2.5(c).
"Higher Value" has the meaning given that term in Section 3.3(iii).
"Holding Company" means a Holding Company as defined in Section
2(a)(7) of PUHCA.
"Initial Capital Contribution" has the meaning given that term in
Section 4.1.
"Initial LLC Agreement" means that certain operating agreement,
dated as of December 23, 1996, entered into by RCN and BETG.
"Investment Percentage" of a Person means the percentage set forth
opposite such Person's name on Schedule 2, as adjusted on account of
Capital Calls (pursuant to Section 4.3), Dispositions (pursuant to
Section 3.2, but not Dispositions in exchange for Exchange Securities
pursuant to the Exchange Agreement) or the disposition of Exchange
Securities received upon an exchange made pursuant to the Exchange
Agreement.
"Joint Investment and Non-Competition Agreement" shall mean that
certain Joint Investment and Non-Competition Agreement entered into by
RCN-Sub, BecoCom and NEWCO of even date herewith.
"LIBOR" means the rate of interest equal to the average (rounded
upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum
at which dollar deposits in immediately available funds are offered in
the London interbank eurodollar market as at or about 2:00 P.M. New York
time on the date the Default Interest Rate becomes effective, adjusted
from time to time as such rate changes.
"Lower Value" has the meaning given that term in Section 3.3(iii).
"Majority Interest" means, in combination, Membership Interests of
one or more Members which, in the aggregate, are entitled to a combined
Sharing Ratio of more than 50%.
"Management Agreement" means that certain Management Agreement
entered into by and among RCN Operating Services, Inc., BecoCom and the
Company of even date herewith.
"Manager" shall have the meaning set forth in Section 7.10(b).
"Member" means any Person executing this Agreement as of the date
hereof as a member or hereafter admitted to the Company as a member as
provided in this Agreement, but does not include any Person who has
ceased to be a member in the Company.
"Membership Interest" means the interest of a Member in the
Company, including, without limitation, such rights to distributions
(liquidating or otherwise), allocations, information and to consent or
approve as shall be provided by law or by this Agreement.
"Member Nonrecourse Debt" means any nonrecourse debt of the
Company for which any Member bears the Economic Risk of Loss.
"Member Nonrecourse Deductions" means, with respect to Member
Nonrecourse Debt, the amount of deductions, losses and expenses equal to
the net increase during the year in Minimum Gain attributable to Member
Nonrecourse Debt, reduced (but not below zero) by the proceeds, if any,
of such Member Nonrecourse Debt distributed during the year to the
Members who bear the Economic Risk of Loss for such debt, as determined
in accordance with applicable Regulations.
"Member Parent" means, with respect to RCN-Sub, RCN (as defined
above), and, with respect to BecoCom, BETG, and their respective
successors and assigns, whether by means of merger, spinoff or otherwise.
"Minimum Gain" means (i) with respect to Company Nonrecourse
Liabilities, the amount of gain that would be realized by the Company if
it disposed of (in a taxable transaction) all Company properties that
are subject to Company Nonrecourse Liabilities in full satisfaction of
such liabilities, computed in accordance with applicable Regulations or
(ii) with respect to each Member Nonrecourse Debt, the amount of gain
that would be realized by the Company if it disposed of (in a taxable
transaction) the Company property that is subject to such Member
Nonrecourse Debt in full satisfaction of such debt, computed in
accordance with applicable Regulations.
"Net Agreed Value" means (i) in the case of any Contributed
Property, the Agreed Value of such property reduced by any liabilities
either assumed by the Company upon such contribution or to which such
property is subject when contributed, and (ii) in the case of any
property distributed to a Member by the Company, the Company's Carrying
Value of such property (as adjusted pursuant to Section 6.2(d)(ii)) at
the time such property is distributed, reduced by any liabilities either
assumed by such Member upon such distribution or to which such property
is subject at the time of distribution, in either case, as determined
under Section 752 of the Code.
"Net Income" or "Net Loss" means, for each fiscal year or other
period, the taxable income or loss of the Company, as determined in
accordance with Section 703 of the Code, with the following adjustments:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net
Income or Net Loss shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i)
and not otherwise taken into account in computing Net Income or
Net Loss shall be subtracted from such taxable income or loss;
(c) In the event that the Carrying Value of any Company
asset is adjusted pursuant to paragraph (b) of the definition for
Carrying Value, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for
purposes of computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the
Carrying Value of the property disposed of, notwithstanding that
the adjusted tax basis of such property differs from its carrying
value;
(e) To the extent that an adjustment to the adjusted tax
basis of any Company asset pursuant to Section 734(b) or Section
743(b) of the Code is required pursuant to Regulations 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 Income or Net Loss;
(f) In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable
income or loss, Depreciation shall be taken into account.
(g) Any items which are specially allocated pursuant to
Section 6.2(b) hereof shall not be taken into account in computing
Net Income or Net Loss.
"Nondelinquent Member" has the meaning given that term in Section
4.3(a).
"Notice" has the meaning given that term in Section 7.8(e)(i).
"Other Members" has the meaning given that term in Section
7.8(d)(i).
"Person" means any natural person or Entity.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended from time to time, 15 U.S.C. Section 79-792-6.
"Purchasing Members" has the meaning given that term in Section
11.2.
"RCN Contributed Assets" mean those certain existing assets listed
in footnote 1 of Schedule 1.
"RCN-Sub'" means RCN Telecom Services of Massachusetts, Inc., a
Massachusetts corporation and wholly-owned subsidiary of RCN.
"Regulations" means the final and temporary Income Tax Regulations
promulgated under the Code, as amended from time to time, and including
corresponding provisions of succeeding regulations.
"Relevant Market" means those certain cities and towns, as set
forth on Exhibit F attached hereto.
"Representative" has the meaning given that term in Section 7.2.
"Respondent" has the meaning given that term in Section 7.8(e)(i).
"Rules" has the meaning given that term in Section 7.8(e)(i).
"Second Appraiser" has the meaning given that term in Section
3.3(i).
"Secretary of State" means the Secretary of State of the
Commonwealth of Massachusetts.
"Selling Member's Interest" has the meaning given that term in
Section 3.3.
"Services" means the provision of data, voice, video, other
communications services, and the communications support of
energy-related customer services offered by BECO, to residential and
commercial customers in the Relevant Market or elsewhere.
"Sharing Ratio" with respect to a particular Member means the
percentage set forth opposite such Member's name on Schedule 1, as
adjusted on account of Dispositions (pursuant to Section 3.2 or pursuant
to the Exchange Agreement) or Capital Calls (pursuant to Section 4.3).
"Tax Matters Partner" means such Entity designated by Members
holding Sharing Ratios aggregating more than 50%.
"Third Appraiser" has the meaning given that term in Section
3.3(iv).
"Third Party Sale" has the meaning given that term in Section
3.2(b)(v).
"Third Value" has the meaning given that term in Section 3.3(iv).
"Unrealized Gain" or "Unrealized Loss" attributable to any item of
Company property means, as of any date of determination, the excess or
shortfall, respectively, of (a) the fair market value of such property
as of such date (as determined under Section 6.1(d)) over (b) the
Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 6.1(d) as of such date).
"Wholly Owned Affiliate" means as to any Entity, (i) an Affiliate
all of the equity interests of which are owned, directly or indirectly,
by a Member or by another Wholly Owned Affiliate of such Member or (ii)
an Affiliate which owns, directly or indirectly, all of the equity
interests of a Member.
1.2 Other Definitions. Other terms defined herein have the meanings
so given them.
1.3 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter.
All references to Articles and Sections refer to articles and Sections of this
Agreement, and all references to Exhibits are to Exhibits attached hereto,
each of which is made a part hereof for all purposes.
ARTICLE 2
ORGANIZATION
------------
2.1 Organization. The Company was organized on December 24, 1996
pursuant to a Certificate of Organization filed in the office of the Secretary
of State (the "Certificate") and the Initial LLC Agreement as of December 23,
1996 by and between RCN and BETG. Concurrently with the execution of this
Agreement, RCN is assigning its Membership Interest to RCN-Sub and BETG is
assigning its Membership Interest to BecoCom, and each of BETG and RCN hereby
consents to the admission of RCN-Sub and BecoCom, as the case may be, as a
member, and the withdrawal of RCN and BETG, as the case may be.
2.2 Name. The name of the Company is "RCN-BecoCom, LLC" and all
Company business must be conducted in that name or such other names that
comply with applicable law as the Managers may select from time to time.
2.3 Registered Office; Registered Agent; Principal Office in the
United States; Other Offices. The registered office of the Company in the
Commonwealth of Massachusetts shall be the initial registered office
designated in the Certificate or such other office (which need not be a place
of business of the Company) as the Members may designate from time to time in
the manner provided by law. The registered agent of the Company in the
Commonwealth of Massachusetts shall be the initial registered agent designated
in the Certificate, or such other Person or Persons as the Members may
designate from time to time in the manner provided by law. The principal
office of the Company in the United States shall be at 000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000, or such other place(s) as the Members may
designate from time to time, which must be in the Commonwealth of
Massachusetts. The Company may have such other offices as the Members may
determine appropriate.
2.4 Purpose. Subject to Section 7.8, the business purpose of the
Company is (i) to create, lease and operate a network to provide the Services,
(ii) to market the Services to business and residential customers in the
Relevant Market, and (iii) to engage in and carry on any lawful business,
purpose or activity which is approved pursuant to Section 7.8 hereof not
prohibited by the Act or other applicable law.
2.5 Company Powers.
(a) In furtherance of the business purpose specified in Section
2.4 hereof, but subject to the limitations and restrictions set forth in this
Agreement, the Company shall be empowered to do or cause to be done, or omit
to do or cause to be done, any and all acts deemed to be necessary or
advisable in furtherance of the business purpose of the Company, including,
without limitation, the power and authority to:
(i) Have, maintain or close one or more offices within or
without the Commonwealth of Massachusetts and in connection therewith to
rent or acquire office space and to engage personnel;
(ii) Open, maintain and close bank and money market
accounts, including the power to draw checks or other orders for the
payment of moneys, and to invest such funds as are temporarily not
required for Company purposes in short-term investments;
(iii) Bring and defend actions and proceedings at law or
equity before any domestic or foreign governmental or regulatory
authority, agency or commission (each, a "Governmental Entity");
(iv) Have outstanding at any time any indebtedness
(including any indebtedness of subsidiaries) for money borrowed,
guarantee the obligations of others or otherwise become contingently
liable with respect to any indebtedness or obligations of others
(collectively, "Company Debt"), and, in connection therewith, to grant
security interests, if and only if the Company Debt was incurred in
connection with, or for the purpose of entering into, the financing of
the operations of the business of or for other business purposes of the
Company; provided, that "Company Debt" shall, for purposes of this
Agreement, be deemed to include all interest, fees (including commitment,
guaranty and facility fees), expenses thereon and all other amounts due
in respect thereof;
(v) Enter into, perform and carry out contracts and
agreements of every kind necessary or incidental to the accomplishment
of the Company's purposes, and to take or omit to take such other action
in connection with the business of the Company as may be necessary or
desirable to further the purposes of the Company; and
(vi) Carry on any other activities necessary to, in
connection with, or incidental to any of the foregoing or the Company's
business.
(b) Notwithstanding anything in Section 2.5(a) to the contrary,
the Company will not take any action, nor will any Member or officer or
employee of the Company take any action, which, in each such case, would cause
the Company, any Member or any Affiliate of a Member to be in violation of any
applicable statute, rule or regulation of any Governmental Entity.
2.6 Foreign Qualification Governmental Filings. Prior to the Company's
conducting business in any jurisdiction other than the Commonwealth of
Massachusetts, the Members shall cause the Company to comply, to the extent
procedures are available, with all requirements necessary to qualify the
Company as a foreign limited liability company in such jurisdiction. Each
Member shall execute, acknowledge, swear to and deliver all certificates and
other instruments conforming to this Agreement that are necessary or
appropriate to qualify, or, as appropriate, to continue or terminate such
qualification of, the Company as a foreign limited liability company in all
such jurisdictions in which the Company may conduct business.
2.7 Term. The Company commenced on the date the Certificate for the
Company was filed with the Secretary of State, and shall continue in existence
until December 31, 2060.
2.8 No State-Law Partnership. The Members intend that the Company not
be a partnership or limited partnership, and that no Member be a partner of
any other Member, for any purposes other than federal, state and local income
tax purposes, and this Agreement shall not be construed to suggest otherwise.
2.9 Activities of the Members. Except as expressly restricted by the
Joint Investment and Non-Competition Agreement, each Member and its Affiliates
may engage in or hold interests in other business ventures and activities of
any nature, including, without limitation, ventures and activities similar to
those of the Company, and neither the Company nor the other Members shall, by
virtue of this Agreement, have any interest or rights in or to such other
ventures or business or any liability or obligation with respect thereto.
ARTICLE 3
MEMBERS; DISPOSITIONS OF INTERESTS
----------------------------------
3.1 Members. The Members of the Company are the Persons executing
this Agreement and/or Persons admitted as substitute or additional Members
as permitted by this Article 3.
3.2 Restrictions on the Disposition of an Interest.
(a) Except as provided in this Section 3.2 and the Exchange
Agreement, a Disposition by a Member of all or any part of a Membership
Interest may be effected only with the prior express written consent of each
other Member. Any attempted Disposition by a Person of a Membership Interest,
or any part thereof, other than in accordance with this Section 3.2 or the
terms of the Exchange Agreement is void and the Company shall not recognize it.
(b) Subject to the provisions of Section 3.2(c), (d), (e), and
(f) and the Exchange Agreement, from and after the date that is three years
from the Effective Date, a Member may Dispose of part or all of its Membership
Interest provided that the Member who wishes to Dispose of its Membership
Interest (an "Offeror") first offers such Membership Interest to the other
Members (the "Offerees") and Disposes of such Membership Interest in
accordance with the following procedures:
(i) The Offeror shall give written notice of the material
terms of the offer, including the price, terms of payment, the Sharing
Ratio of such Offeror's Membership Interest offered and the Sharing
Ratios of all Membership Interests then held by the Offeror (an "Offer
Notice") to the Offerees and the Company.
(ii) Each Offeree shall have 60 days, commencing with the
date on which it has received the Offer Notice, to purchase all or part
of its proportionate share (to be determined by each Offeree's Sharing
Ratio or by such other basis upon which the Offerees agree) of the
Membership Interest offered. Any Membership Interest which an Offeree
does not elect to purchase may be purchased by the other Offerees in a
proportion equal to that which such Offerees' Sharing Ratios bear to
each other.
(iii) An Offeree may exercise this election to purchase the
Membership Interest by giving the Offeror and the Company written notice
thereof within 30 days of such Offeree's receipt of the Offer Notice,
and the Company shall then specify the date and time of the closing of
the purchase at the Company's principal office, which shall be
reasonably acceptable to the Offeror and the Offerees, but shall not be
later than 60 days following the Offerees' receipt of the Offer Notice
(unless the Offerees and the Offeror agree upon another time and/or
place of closing).
(iv) At the closing, the purchasing Offerees (if any) shall
purchase the Membership Interest at the price and on the terms set forth
in the Offer Notice, and the Offeror shall deliver such usual and
customary documents and instruments of transfer and conveyance.
(v) Should the Offerees fail to purchase all of the
offered Membership Interests specified in the Offer Notice, then the
Offeror shall not be required to Dispose of any of its Membership
Interest to the Offerees, but shall be permitted to Dispose of all (but
not less than all) of the offered Membership Interest specified in the
Offer Notice to a third party on terms no more favorable to the third
party than the terms set forth in the Offer Notice (a "Third Party
Sale"), provided that the Third Party Sale is consummated within 120
days of the date of the Offer Notice.
(vi) In addition to the rights set forth above in this
Section 3.2(b), if an Offeror proposes to sell more than 33% of its
Membership Interest in one or a series of Third Party Sales, whether
related or unrelated, the Offeror shall give notice to the Offerees and
the Company, not less than 30 and not more than 60 days prior to the
consummation of the Third Party Sale, of the material terms of the Third
Party Sale, including the price, terms of payment, and the Sharing Ratio
of such Offeror's Membership Interest offered and the Sharing Ratios of
all Membership Interests then held by the Offeror. Each Offeree who so
elects by written notice (an "Electing Member") to the Company and the
Offeror within 15 days thereafter shall be entitled to sell a portion of
its Membership Interest in the Third Party Sale that is equal to the
proportion that the Sharing Ratio of the Membership Interest being sold,
together with that previously sold, bears to the Sharing Ratio of the
Membership Interest originally owned by the Offeror.
(c) The Company may not recognize for any purpose any purported
Disposition of all or part of a Membership Interest unless and until the other
applicable provisions of this Section 3.2 have been satisfied and each
non-Disposing Member has received, on behalf of the Company, a document
(i) executed by both the Member effecting the Disposition
and the Person to which the Membership Interest or part thereof is
Disposed,
(ii) including the notice address of any Person to be
admitted to the Company as a Member and its agreement to be bound by
this Agreement in respect of the Membership Interest or part thereof
being obtained,
(iii) setting forth the Sharing Ratios after the Disposition
of the Member effecting the Disposition and the Person to which the
Membership Interest or part thereof is Disposed (which together must
total the sum of the Sharing Ratios of such Person and the Member
effecting the Disposition before the Disposition),
(iv) containing representations and warranties by such
Person and such Member that the Disposition was made in accordance with
all applicable laws and regulations (including securities laws) and
(v) containing a condition to closing requiring a
certificate, dated as of the date of the Disposition, duly executed by
such Person, to the effect that the representations and warranties in
Section 3.2 are true and correct with respect to that Person.
Each Disposition complying with the provisions of this Section
3.2(c) is effective as of the first day of the calendar month immediately
succeeding the month in which all requirements of this Section 3.2 have been
met.
(d) Notwithstanding the foregoing, the provisions of this
Section 3.2 shall not apply to any transfer from a Member to its Member
Parent, or a Wholly Owned Affiliate, provided that such transferee shall
comply with all of the requirements of Section 3.2(c) hereof.
(e) For the right of a Member to Dispose of a Membership
Interest or any part thereof and of any Person to be admitted to the Company
in connection therewith to exist or be exercised (if applicable), either (i)
the Membership Interest or part thereof subject to the Disposition or
admission must be registered under the Securities Act of 1933, as amended, and
any applicable state securities laws or (ii) the Company must receive a
favorable opinion of the Company's legal counsel or of other legal counsel
reasonably acceptable to each non-Disposing Member to the effect that the
Disposition or admission is exempt from registration under those laws. Each
non-Disposing Member, however, may waive the requirements of this Section
3.2(e).
(f) The Member effecting a Disposition shall pay, or reimburse
the Company for, all costs incurred by the Company in connection with the
Disposition or admission (including, without limitation, the legal fees
reasonably incurred in connection with the legal opinions referred to in
Section 3.2(e)) on or before the 10th Business Day after the receipt of the
Company's invoice for the amount due by that Person. If payment is not made
by the date due, the Person owing such amount shall pay interest on the unpaid
amount from the date due until paid at a rate per annum equal to the Default
Interest Rate, and such amount may be withheld from any future distributions.
(g) Notwithstanding any other provisions of this Agreement, if
the Investment Percentage of any Member becomes less than 25% (the "Minority
Member"), then for so long as the Minority Member's Investment Percentage
remains below 25%, the other Members (the "Majority Members") shall have the
option to purchase, pro rata based on their respective Investment Percentages,
the Membership Interest (not including any Exchange Securities) of the
Minority Member. The Majority Members (or any one of them) may initiate
procedures to determine the Fair Market Value (as defined in Section 3.3) of
the Membership Interest to be purchased in the manner provided in Section 3.3
below. Within 30 days after such determination of Fair Market Value, the
Majority Members shall purchase, or elect (by notice given to the Minority
Member) not to purchase, the Membership Interest of the Minority Member. Once
the Majority Members initiate procedures to determine Fair Market Value, the
option granted herein shall remain effective for 30 days after such Fair
Market Value is finally determined, regardless of whether, during such time,
the Minority Member's Investment Percentage becomes 25% or greater. If any of
the Majority Members elect not to purchase their pro rata share of the
Minority Member's Membership Interest, the other Majority Members may purchase
such additional share, pro rata based on their respective Investment
Percentages.
3.3 Change of Control. Upon any Change of Control of either RCN-Sub or
BecoCom, the Member subject to the Change of Control shall promptly give
notice thereof to the other Members and the Members not undergoing the Change
of Control shall be entitled to, at any time within a 90-day period following
the later of such notice or the effective date of such Change of Control,
purchase, on a pro rata basis based upon the respective Investment Percentages
(provided that, if any Member elects not to participate in such purchase, the
other Members may purchase their pro rata share), all but not less than all of
the Membership Interest of the Member undergoing the Change of Control, not
including any Exchange Securities held by such Member or its Affiliates (the
"Selling Member's Interest"), at a purchase price equal to the Fair Market
Value of the Selling Member's Interest determined as described below. The
"Fair Market Value", as of the date of determination, of a Selling Member's
Interest shall be determined (1) by mutual agreement of the Members or (2) if
no such agreement is reached within 10 days of the relevant date of
determination, as follows:
(i) Selection of Appraisers. The Member selling the
Selling Member's Interest, on the one hand, and the purchasing Members,
on the other hand, each shall designate by written notice to the Company
and each other Member a firm of recognized national standing familiar
with appraisal techniques applicable to assets of the type being
evaluated to serve as an appraiser (an "Appraiser") pursuant to this
Section 3.3 (the firms designated by the Members being referred to
herein as "First Appraiser" and the "Second Appraiser," respectively)
within 15 business days after the failure to reach agreement in
accordance with the terms of clause (1) above. In the event that either
Appraiser is not designated within the foregoing time period, the other
Appraiser will serve as the only Appraiser, and its appraisal will be
binding on all Members for purposes of this Section 3.3.
(ii) Evaluation Procedures. Each Appraiser shall be
directed to determine the Fair Market Value of the Selling Member's
Interest. Each Appraiser will also be directed to deliver a certificate
(an "Appraiser's Certificate") setting forth such Appraiser's valuation
of the Selling Member's Interest to each Member on or before the 30th
day after their respective designation (the "Certificate Date"), upon
the conclusion of its evaluation, and each Appraiser Certificate once
delivered may not be retracted or modified in any respect. Each
Appraiser will keep confidential all information disclosed by the
Company in the course of conducting its evaluation, and, to that end,
will execute such customary documentation as the Company may reasonably
request with respect to such confidentiality obligation. The Members
will cooperate in causing the Company to provide each Appraiser with
such information within the Company's possession that may be reasonably
requested in writing by the Appraiser for purposes of its evaluation
hereunder. Each Member shall have full access to each Appraiser's work
papers. Each Appraiser will be directed to comply with the provisions
of this Section 3.3, and to that end each party will provide to its
respective Appraiser a complete and correct copy of this Section 3.3
(and the definitions of capitalized terms used in this Section 3.3 that
are defined elsewhere in this Agreement).
(iii) Fair Market Value Determination. The Fair Market
Value of the Selling Member's Interest shall be determined on the basis
of the Appraiser's Certificates in accordance with the provisions of
this subparagraph (iv), provided, that there shall be no "controlling
interest premium" if the Selling Member's Interest has an Investment
Percentage of less than 66 2/3%, nor any "minority interest discount" if
the Selling Member's Interest has an Investment Percentage of greater
than 33 1/3%. The higher of the values set forth on the Appraisers
Certificates is hereinafter referred to as the "Higher Value," and the
lower of such values is hereinafter referred to as the "Lower Value."
If the Higher Value is not more than 110% of the Lower Value, the Fair
Market Value of the Selling Member's Interest will be the arithmetic
average of the Higher Value and the Lower Value. If the Higher Value is
more than 110% of the Lower Value, a third appraiser shall be selected
in accordance with the provisions of subparagraph (iv) below, and the
Fair Market Value of the Selling Member's Interest will be determined in
accordance with the provisions of subparagraph (v) below.
(iv) Selection of and Procedures for Third Appraiser. If
the Higher Value is more than 110% of the Lower Value, within seven days
thereafter the First Appraiser and the Second Appraiser shall agree upon
and jointly designate a third Appraiser (the "Third Appraiser"), by
written notice to each Member. If the First Appraiser and the Second
Appraiser cannot agree upon a Third Appraiser within seven days, the
Third Appraiser shall be chosen by the American Arbitration Association
("AAA") in Boston, Massachusetts. The First Appraiser and the Second
Appraiser shall direct the Third Appraiser to determine the Fair Market
Value of the Selling Member's Interest (the "Third Value") in accordance
with the provisions of subparagraph (ii) above, and to deliver to the
Members an Appraiser's Certificate on or before the 30th day after the
designation of such Appraiser hereunder. The Third Appraiser will be
directed to comply with the provisions of this Section 3.3, and to that
end each of the parties will provide to the Third Appraiser a complete
and correct copy of this Section 3.3 (and the definitions of capitalized
terms used in this Section 3.3 that are defined elsewhere in this
Agreement).
(v) Alternative Determination of Fair Market Value. Upon
the delivery of the Appraiser's Certificate of the Third Appraiser, the
Fair Market Value of the Selling Member's Interest will be determined as
provided in this subparagraph (v). The Fair Market Value of the Selling
Member's Interest will be (w) the Lower Value, if the Third Value is
less than the Lower Value, (x) the Higher Value, if the Third Value is
greater than the Higher Value, (y) the arithmetic average of the Third
Value and either the Higher Value or the Lower Value (whichever is
closer to the Third Value) if the Third Value falls within the range
between (and including) the Lower Value and the Higher Value and (z) the
Third Value, if the Lower Value and the Higher Value are equally close
to the Third Value.
(vi) Costs. Each Member will bear the cost of the
Appraiser designated by it or on its behalf. If the Higher Value is not
more than 115% of the Lower Value, or if the Higher Value and the Lower
Value are equally close to the Third Value, each Member shall bear 50%
of the cost of the Third Appraiser, if any; otherwise, the Member (or
group of Members, pro rata as per their Investment Percentages), whose
Appraiser's determination of the Fair Market Value of the Selling
Member's Interest is further away from the Third Value shall bear the
entire costs of the Third Appraiser. The Members agree to pay when due
the fees and expenses of the Appraisers in accordance with the foregoing
provisions.
(vii) Conclusive Determination. To the fullest extent
provided by law, the determination of the Fair Market Value of the
Selling Member's Interest made pursuant to this Section 3.3 shall be
final and binding on the Company and the Members hereto, and such
determination shall not be appealable to or reviewable by any court or
arbitrator, but judgment on such determination may be entered in any
court having jurisdiction thereof; provided, however, that the foregoing
shall not limit a Member's rights to seek arbitration of the obligations
of the other Members and the Company hereunder.
3.4 Interests in a Member. Notwithstanding the foregoing, without the
prior express written consent of each other Member, no Member shall Dispose of
all or any part of its Membership Interest in such a manner that, after the
Disposition, (i) the Company would be considered to have terminated within the
meaning of Section 708 of the Code if such termination would result in
material adverse tax consequences to the non-transferring Members or (ii) the
Company would become an association taxable as a corporation for federal
income tax purposes.
3.5 Liability to Third Parties. No Member shall have any personal
obligation for any liabilities of the Company, whether such liabilities arise
in contract, tort or otherwise, except to the extent that any such liabilities
are expressly assumed in writing by such Member; provided, however, that
nothing in this Section 3.5 shall be construed as an agreement by the Company
to indemnify or hold harmless any Member.
ARTICLE 4
CAPITAL CONTRIBUTIONS
---------------------
4.1 Initial Capital Contributions. Contemporaneously with the
execution hereof, (a) each Member shall make the Cash Capital Contribution set
forth opposite such Member's name on Schedule 1 (the "Initial Capital
Contribution") (to the extent not previously paid to the Company) and (b) each
of RCN-Sub and BecoCom shall contribute the RCN Contributed Assets and the
BecoCom Contributed Assets, respectively, to the Company and shall receive a
credit to the amount of its Initial Capital Contribution in the amount set
forth on Schedule 1.
4.2 Additional Capital Calls.
(a) Each Member shall be required to make payment when due, in
proportion to its respective Investment Percentage, of all of its share of the
Capital Calls set forth in the then annual Budget, as such may be amended from
time to time.
(b) In addition, subject to the limitations set forth in Section
7.8 hereof, upon 30 days prior written notice to the Members the Company may,
from time to time, issue Capital Calls, requiring the Members to make
additional contributions of capital to the Company in proportion to their
respective Investment Percentages. Capital Calls specifically referred to in
any annual Budget may be made by the chief executive officer of the Company.
4.3 Failure to Pay a Capital Call.
(a) If any Member fails to make payment when due of all or any
portion of its share of a Capital Call (a "Delinquent Member"), the secretary
of the Company shall give written notice of the failure to such Delinquent
Member, with a copy to all other Members. If the Delinquent Member fails to
pay the amount due within 10 days following receipt of notice, the secretary
shall promptly give notice of such failure to the other Members. At any time
within 15 days following receipt of such notice, then, unless the Members
other than the Delinquent Member ("Nondelinquent Members") elect to make
capital contributions in accordance with Section 4.3(b) hereof, (i) the amount
contributed by each Nondelinquent Member pursuant to the Capital Call shall be
treated as a loan to the Company for a term to be specified by such
Nondelinquent Member, bearing interest payable quarterly at the Default
Interest Rate and (ii) each Nondelinquent Member may make an additional loan
to the Company for a term to be specified by such Nondelinquent Member, also
bearing interest payable quarterly at the Default Interest Rate, in an amount
equal to all or any portion of the unpaid contribution. If two or more
Members desire to provide funds under clause (ii) of the preceding sentence,
the total amount of funds provided shall be allocated among such Members in
the same proportion as such Members' then current Sharing Ratios bear to each
other or in such other manner as they may agree.
(b) If a Nondelinquent Member so elects, then in lieu of making
loans to the Company in accordance with Section 4.3(a) hereof, (A) the amount
contributed by such Nondelinquent Member pursuant to the Capital Call shall be
treated as a contribution to the capital of the Company in exchange for an
additional interest in the Company and (B) each Nondelinquent Member may make
an additional contribution of capital to the Company in exchange for an
additional interest in the Company in an amount equal to all or any portion of
the unpaid contribution. If two or more Members desire to make capital
contributions under clause (B) of the preceding sentence, the total amount of
capital to be contributed shall be allocated among such Members in the same
proportion as such Members' then current Investment Percentages bear to each
other or in such other manner as they may agree.
(c) The amounts contributed pursuant to Section 4.3(b) hereof
shall increase the Capital Accounts of the contributing Members in accordance
with the terms of this Agreement. In addition, the Sharing Ratios and
Investment Percentages shall be recalculated (and such recalculated Sharing
Ratios and Investment Percentages shall thereafter apply for all purposes of
this Agreement) such that the Sharing Ratios and Investment Percentages of each
Member shall equal the ratio of its specified Capital Account to the aggregate
specified Capital Account of all of the Members, adjusted, in the case of
Sharing Ratios, to reflect any conversion pursuant to the Exchange Agreement.
(d) Notwithstanding any other provision of this Agreement, if a
Person's Capital Account ever equals $1 and such Person fails to make payment
to the Company of its entire share of the Company's next Capital Call, then
such Person's Investment Percentage and Sharing Ratio shall each equal zero %;
upon the payment of $1 to such Person, such Person's Membership Interest and
all rights hereunder shall be extinguished.
4.4 Return of Contributions. A Member is not entitled to the return
of any part of its Capital Contributions or to be paid interest in respect of
either its Capital Account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of the other Members. A
Member is not required to contribute or to lend any cash or property to the
Company to enable the Company to return the other Members' Capital
Contributions.
ARTICLE 5
INTENTIONALLY DELETED
---------------------
ARTICLE 6
MEMBER ACCOUNTS; ALLOCATIONS OF PROFIT AND LOSS; DISTRIBUTIONS
--------------------------------------------------------------
6.1 Capital Accounts.
(a) A Capital Account shall be established and maintained for
each Member in accordance with the rules of Section 1.704-1(b)(2)(iv) of the
Regulations. Such Capital Account shall be increased by (i) the amount of
cash and the Net Agreed Value of all property transferred to the Company as
Capital Contributions with respect to such Member's Interest pursuant to this
Agreement and (ii) the amount of Net Income allocated to the Member pursuant
to Article 6 hereof, and decreased by (iii) the amount of cash and the Net
Agreed Value of all actual and deemed distributions of cash or property made
with respect to such Interest pursuant to this Agreement and (iv) the amount
of Net Loss allocated to the Member pursuant to Article 6 hereof.
(b) A transferee of a Membership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Membership Interest so transferred; provided, however, that, if the transfer
causes a termination of the Company under Section 708(b)(1)(B) of the Code,
the rules under the Regulations promulgated under Section 708 of the Code
shall govern the treatment of the Company and the Members upon a termination
of the Company pursuant to Section 708 of the Code.
(c) Capital Accounts shall be adjusted, in a manner consistent
with this Section 6.1, to reflect any adjustments in items of the Company's
income, gain, loss or deduction that result from amended returns filed by the
Company or pursuant to an agreement by the Company with the Internal Revenue
Service or a final court decision.
6.2 Allocations for Capital Account and Tax Purposes.
(a) Net Income and Net Losses. After giving effect to the
special allocations set forth in Section 6.2(b), Net Income and Net Loss for
each taxable period shall be allocated as set forth below.
(i) Net Income shall be allocated between the Members in
the following manner:
(A) First, to each Member having a deficit balance
in its Capital Account, in the proportion that such deficit
balance bears to the total deficit balances in the Capital
Accounts of all Members, until each such Member has been allocated
Net Income equal to any such deficit balance in its Capital
Account;
(B) Second, to the Members previously allocated Net
Loss under Section 6.2(a)(ii)(A) pro rata to the extent of such
Net Loss previously allocated and not otherwise previously
recouped under Section 6.2(a)(i)(A) or this Section 6.2(a)(i)(B);
(C) Third, to the Members in accordance with their
respective Sharing Ratios.
(ii) Net Loss shall be allocated to the Members in the
following manner:
(A) First, to the Members in proportion to, and to
the extent of, the positive balances in their respective Capital
Accounts; and
(B) Second, the balance, if any, to the Members in
accordance with their respective Sharing Ratios.
(b) Special Allocations. Notwithstanding any other provision of
this Section 6.2, the following special allocations shall be made in the
following order:
(i) Company's Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 6.2, if there is a net decrease in
Minimum Gain attributable to Company's Nonrecourse Liabilities during
any Company taxable period, each Member shall be allocated items of
Company income and gain for such period (and, if necessary, subsequent
periods) in the manner and amounts provided in Sections 1.704-2(f)(1)
and (6), 1.704-2(g)(2) and 1.704-1(j)(2)(i) of the Regulations, or any
successor provisions. For purposes of this Section 6.2(b), each
Member's Capital Account balance shall be determined, and the allocation
of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.2(b)
with respect to such taxable period (other than allocations pursuant to
Sections 6.2(b)(v) and 6.2(b)(vi)). This Section 6.2(b)(i) is intended
to comply with the "partnership minimum gain chargeback" requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(ii) Chargeback of Member Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.2 (other than
Section 6.2(b)(i)), except as provided in Section 1.704-2(i)(4) of the
Regulations, if there is a net decrease in Minimum Gain attributable to
Member Nonrecourse Debt during any Company taxable period, any Member
with a share of Minimum Gain attributable to such Member Nonrecourse
Debt at the beginning of such taxable period shall be allocated items of
Company income and gain for such period (and, if necessary, subsequent
periods) in the manner and amounts provided in Sections 1.704-2(i)(4)
and 1.704-2(j)(2)(ii) of the Regulations, or any successor provisions.
For purposes of this Section 6.2(b)(ii), each Member's Capital Account
balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any
other allocations pursuant to this Section 6.2(b), other than Sections
6.2(b)(i), 6.2(b)(v) and 6.2(b)(vi), with respect to such taxable
period. This Section 6.2(b)(ii) is intended to comply with the
chargeback of items of income and gain requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(iii) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income
and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate, to the extent required by the Regulations
promulgated under Section 704(b) of the Code, its Adjusted Capital
Account Deficit created by such adjustments, allocations or
distributions as quickly as possible unless such deficit balance is
otherwise eliminated pursuant to Section 6.2(b)(i) or (ii).
(iv) Gross Income Allocations. In the event any Member has
a deficit balance in its Capital Account at the end of any Company
taxable period in excess of the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of
Regulations Section 1.704-2(g)(1) and Section 1.704-2(i)(5), such Member
shall be specially allocated items of Company gross income and gain in
the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.2(b)(iv) shall be made only if and
to the extent that such Member would have a deficit balance in its
Capital Account after all other allocations provided for in this Section
6.2(b) have been tentatively made as if this Section 6.2(b)(iv) were not
in this Agreement.
(v) Company Nonrecourse Deductions. Company Nonrecourse
Deductions for any taxable period shall be allocated to the Members in
accordance with their respective Sharing Ratios. If the Members
determine in their good faith discretion that the Company's Nonrecourse
Deductions must be allocated in a different ratio to satisfy the safe
harbor requirements of the Regulations promulgated under Section 704(b)
of the Code, the Members are authorized to revise the prescribed ratio
to the numerically closest ratio that does satisfy such requirements.
(vi) Member Nonrecourse Deductions. Member Nonrecourse
Deductions for any taxable period shall be allocated 100% to the Member
that bears the Economic Risk of Loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Section 1.704-2(i) of the Regulations.
If more than one Member bears the Economic Risk of Loss with respect to
a Member Nonrecourse Debt, such Member Nonrecourse Deductions
attributable thereto shall be allocated between or among such Members in
accordance with the ratios in which they share such Economic Risk of
Loss.
(vii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Company asset pursuant to
Section 734(b) or 743(b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in
determining Capital Accounts, the amount of such adjustment to the
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 item of 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.
(viii) Any special allocations of items of income or gain
pursuant to Section 6.2(b)(iii) or (iv) shall be taken into account in
computing subsequent allocations pursuant to Section 6.2(a) so that, for
each Member, the net amount of any such special allocations and all
allocations pursuant to Section 6.2(a) shall, to the extent possible, be
equal to the net amount that would have been allocated to such Member
pursuant to the provisions of Section 6.2(a) without application of
Section 6.2(b)(iii) or (iv).
(c) Special Rules.
(i) It is intended that (a) the Capital Accounts be
maintained at all times in accordance with Section 704 of the Code and
applicable Regulations, (b) the Capital Accounts be increased or
decreased by any items required by the Regulations under Section 704(b)
of the Code to increase or decrease, respectively, a Member's Capital
Account, and (c) the provisions hereof relating to the Capital Accounts
be interpreted in a manner consistent therewith. The Members shall be
authorized to make appropriate amendments to the allocations of items
pursuant to this Section 6.2 if necessary in order to comply with
Section 704 of the Code or applicable Regulations thereunder.
(ii) All items of income, gain, loss, depreciation,
amortization and cost recovery deductible in respect of Contributed
Property for federal income tax purposes shall be allocated among the
Members in the manner provided under Section 704(c) of the Code that
takes into account the variation between the Agreed Value of such
property and its adjusted tax basis at the time of contribution. In the
event that the Carrying Value of any Company asset is adjusted pursuant
to paragraph (b) of the definition of Carrying Value hereof, subsequent
allocations of income, gain, loss and deduction with respect to such
asset shall take account any variation between the adjusted tax basis of
such asset and its Carrying Value in the same manner as under Section
704(c) of the Code and the Regulations thereunder.
(iii) Company Nonrecourse Liabilities. For purposes of
Section 1.752-3(a)(3) of the Regulations, the Members agree that Company
Nonrecourse Liabilities in excess of the sum of (A) the amount of
Minimum Gain attributable to Company Nonrecourse Liabilities and (B) the
total amount of taxable gain, if any, that would be allocated to the
Members under Section 704(c) of the Code if the Company were to dispose
of all Company assets (in a taxable transaction) subject to one or more
Company Nonrecourse Liabilities in full satisfaction thereof shall be
allocated among the Members in accordance with their respective Sharing
Ratios.
ARTICLE 7
MANAGEMENT
----------
7.1 Management by the Members. The business and affairs of the
Company shall be managed by the Members, subject to the binding effect of the
Management Agreement. The Members shall delegate authority to such officers,
employees, agents and/or representatives of the Company as they may from time
to time deem appropriate; provided, however, that for as long as the
Investment Percentage of BecoCom is at least 33 1/3%, BecoCom shall be entitled
to (i) appoint a qualified individual to serve as the Company's chief
financial officer; and (ii) appoint one full-time staff member serving the
Company in an operational capacity. Notwithstanding the immediately preceding
sentence, in the event RCN-Sub or an Affiliate of RCN-Sub is not the manager
under the Management Agreement, and for so long as the Sharing Ratio of
RCN-Sub is at least 33 1/3%, RCN-Sub shall be entitled to (A) appoint a
qualified individual to serve as a senior executive officer of the Company;
and (B) appoint one full-time staff member serving the Company in an
operational capacity. Any delegation of authority to take any action must be
approved in the same manner as would be required for the Members to directly
approve such action. No Member shall take any action in the name of or on
behalf of the Company, including without limitation assuming any obligation or
responsibility on behalf of the Company, unless such action, and the taking
thereof by such Member, shall have been expressly authorized by the Members or
shall be expressly and specifically authorized by this Agreement.
7.2 Representatives. The Members shall designate an aggregate of five
representatives (each, a "Representative"), pro rata in accordance with their
respective Investment Percentages rounded to the nearest whole number
(initially three Representatives appointed by RCN-Sub and two Representatives
appointed by BecoCom), to take any action required to be taken by Members
hereunder and to serve as an operating committee. Such appointment shall be
effected by written notice given to the Company and to each of the other
Members. In the event any Member appoints more than one Representative, each
other Member may rely on the action of any Representative as constituting the
actions of its Member. Each such representative shall be an officer or
employee or former employee of a Member or an Affiliate thereof.
7.3 Place of Meeting of Representatives. The Representatives may hold
their meetings at such place or places within or outside the Commonwealth of
Massachusetts as the Members holding Investment Percentages aggregating at
least 66 2/3% may from time to time determine or as may be designated in the
notice calling the meeting. If a meeting place is not so designated, the
meeting shall be held at the Company's principal office. Representatives may
participate by means of a conference telephone or similar communications
equipment by means of which all persons participating can hear each other, and
such participation shall constitute presence in person at the meeting.
7.4 Regular Meetings of Representatives. Regular meetings of the
Representatives may be held without notice at such time and place as shall be
designated from time to time by resolution of Members holding Investment
Percentages aggregating at least 66 2/3%, but such meetings shall be held at
least monthly through December 1998 unless otherwise specified by the Members.
If the date fixed for any such regular meeting is a Saturday, Sunday or legal
holiday under the laws of the state where such meeting is to be held, then the
meeting shall be held on the next succeeding business day or at such other
time as may be determined by resolution of Members holding Investment
Percentages aggregating at least 66 2/3%. At such meetings the
Representatives shall transact such business as may properly be brought before
the meeting.
7.5 Special Meetings of Representatives. Special meetings of the
Representatives may be called by any Member or by the chief executive officer
of the Company. Notice of each such meeting shall be given to each
Representative by telephone, telecopy, telegram or similar method (in which
case notice shall be given at least three days before the time of the meeting)
or sent by first-class mail (in which case notice shall be given at least
three days before the meeting), unless otherwise specified by the
Representatives. Each such notice shall state the time, place and purpose of
the meeting to be so held.
7.6 Representative Compensation; Reimbursement. Representatives shall
receive no compensation for performing their duties under this Agreement;
provided, however, that one Representative of each of the Members shall be
entitled to receive, out of Company funds available therefor, reimbursement of
all amounts expended by such Representative in payment of reasonable expenses
incurred by such Representative in attending meetings of the Representatives.
7.7 Manner of Acting and Adjournment of Members. Any action of the
Members shall require the affirmative vote (in person, by proxy or by written
consent) by the Representatives of Members holding a majority of the
Investment Percentages of all Members, unless otherwise required in this
Agreement.
7.8 Fundamental Business Actions. Notwithstanding anything to the
contrary set forth in this Agreement, for as long as BecoCom's Investment
Percentage is at least 33 1/3% the actions set forth below ("Fundamental
Business Actions") may not be taken by the Company without the affirmative
vote or consent of Members holding Investment Percentages aggregating at least
66 2/3%; Fundamental Business Actions shall be categorized as follows:
(a) Category A Fundamental Business Actions ("Category A
Fundamental Business Actions") shall mean:
(i) a merger, consolidation or reorganization of the
Company or a disposition of substantially all of its assets;
(ii) the issuance by the Company of any equity or
equity-like instruments including effecting an initial public offering
of equity securities;
(iii) voluntary liquidation, dissolution or winding-up of
the Company, except as specifically provided in Section 12.1, or
voluntary initiation by and with respect to the Company of bankruptcy or
similar proceedings;
(iv) amendments to the Company's Certificate of
Organization, this Agreement, or any of the Basic Agreements,
(v) expansion of the operations of the Company beyond the
Services; or
(vi) any acquisition of any other business which has a
purchase price of $1,000,000 or more.
(b) Category B Fundamental Business Actions ("Category B
Fundamental Business Actions") shall mean:
(i) individual capital expenditures in excess of 25% of
the amount set forth for such capital expenditures in the Budget during
any fiscal year;
(ii) capital commitments in aggregate in excess of 25% of
the amount set forth in the Budget during any fiscal year;
(iii) transactions with Affiliates in excess of $50,000
singularly or $500,000 in the aggregate in any fiscal year (except as
set forth in the Basic Agreements);
(iv) incurrence of Company Debt in excess of $5,000,000 in
the aggregate;
(v) guarantees made by the Company involving matters in
excess of $5,000,000 in the aggregate;
(vi) annual expenditures that exceed the amount set forth
in the Budget by more than 33% during any fiscal year;
(vii) appointment of and any change in the auditors of the
Company;
(viii) the granting of any lien to secure any debt to any
Member or any Affiliate of a Member; or
(ix) except as otherwise provided in Section 12.2, any
distribution of cash or other assets to the Members.
(c) Upon the occurrence of a dispute of any matter under this
Section 7.8, the Members shall first use their good faith efforts to resolve
such matter in a mutually satisfactory manner. If, after seven days from the
date on which any Member notifies the other Members that a dispute exists, the
Members cannot reach a mutually satisfactory solution, the Members shall
resolve such matter as provided herein:
(i) Each Member shall immediately refer the matter to its
chief executive officer for resolution of the matter.
(ii) Should the chief executive officers of the respective
Members fail to resolve the matter within 20 days from such referral,
the matter shall be considered a deadlock event (a "Deadlock Event"),
and shall be resolved in accordance with the provisions of paragraphs
(d) or (e) below, as the case may be.
(d) In the event of any Deadlock Event arising from a Category A
Fundamental Business Action, the parties agree that such Deadlock Event will
not be referred to any court but that one or more Members shall purchase the
entire Membership Interest of the other Member (not including Exchange
Securities held by such Member or its Affiliates) in accordance with the
provisions of this Section 7.8(d).
(i) Any Member (the "Disputing Member") may submit a
notice (a "Dispute Notice") to the other Members (the "Other Members")
within 60 days of the date the matter becomes a Deadlock Event. The
Dispute Notice shall set forth, in reasonable detail, the nature of the
dispute and the price (the "Dispute Price") at which the Disputing
Member is willing to either sell its Membership Interest to the Other
Members or purchase all Membership Interests from the Other Members.
(ii) The Dispute Price shall be determined by selecting a
price for the entire Company, and pro-rating such price by the Sharing
Ratio of the Membership Interest to be purchased or sold.
(iii) Within 30 days after the Other Members' receipt of the
Dispute Notice, the Other Members will signify in writing their
election, whether to buy the Disputing Member's Membership Interest at
the Dispute Price or to sell their Membership Interest at the Dispute
Price. If the Other Members fail to make such election within such 30
day period, the Disputing Member may, within 15 days thereafter, elect
to buy the Other Members' Membership Interests.
(iv) Each Member agrees to execute and deliver all deeds,
assignments, releases, agreements, receipts or other documents necessary
to consummate the transfer of the Membership Interests being sold and
delivered upon payment by the purchasing Member of the consideration
provided for in the Dispute Notice.
(v) The closing of the purchase and sale pursuant to this
Section 7.8(d) shall occur no later than 30 days following the receipt
of the election by the Disputing Member or the Other Members, as the
case may be.
(e) In the event of any Deadlock Event arising from a Category B
Fundamental Business Action or pursuant to Section 7.10(d), the parties agree
that such Deadlock Event will not be referred to any court but will be
referred to binding arbitration, and the provisions of this Section 7.8(e)
shall apply.
(i) The arbitration shall be governed by the AAA
Commercial Arbitration Rules (the "Rules"), as modified by this
Section 7.8(e), and by the United States Arbitration Act, 9 U.S.C.
Section 1 et seq. (the "Arbitration Act"). Any conflict between the
Rules and the Arbitration Act shall be decided in favor of the Rules.
The Member wishing to submit such matter to arbitration shall, within
seven days of the date the matter in dispute becomes a Deadlock
Event, give written notice (the "Notice") to the other Member (the
"Respondent") of its intention to arbitrate. The place of the
arbitration shall be Boston, Massachusetts. The arbitration shall be
conducted, and the final resolution of the Deadlock Event (the
"Award") shall be rendered by one arbitrator (the "Arbitrator") to be
mutually selected by the Members. If the Members cannot agree to a
mutually acceptable Arbitrator within seven days of Respondent's
receipt of the Notice, the Arbitrator shall be selected in accordance
with rule 13 of the Rules.
(ii) All hearings shall be held within 30 days following
the appointment of the Arbitrator. At a time designated by the
Arbitrator, each party shall simultaneously submit to the Arbitrator and
exchange with each other its final proposed Award, and in rendering the
final Award, the Arbitrator shall be limited to choosing the Award
proposed by either of the parties without modification. The Arbitrator
shall issue the final Award no later than 15 days from the completion of
the hearings. The Award of the Arbitrator shall be final and binding.
Judgment on any Award may be entered in any court having jurisdiction
thereof.
(iii) To the extent that the parties are permitted under
this Section 7.8(e) to pursue a judicial remedy in aid of arbitration,
each party consents and submits to the non-exclusive jurisdiction of and
venue in the federal courts located in Boston, Massachusetts (or, in
case such a federal court does not have jurisdiction, the state courts
located in Boston, Massachusetts). Each party consents to service of
the notice of arbitration, and any other paper in the arbitration, by
registered mail or personal delivery at its address specified in Section
13.3 hereof. Nothing in this subsection (iii) shall limit the
jurisdiction of other courts for purposes of enforcement of a final
arbitral Award.
(iv) The fact that any party has invoked the provisions of
this Section 7.8(e) shall be considered to be confidential information
under Section 13.9 of this Agreement and shall not relieve either party
of any obligations it may otherwise have to continue performance in
accordance with the provisions of this Agreement.
(v) This agreement to arbitrate a Deadlock Event in
accordance with this Section 7.8(e) and any Award made hereunder shall
be binding upon the successors and assigns and any trustee or receiver
of each Member.
7.9 Indemnification.
(a) Subject to paragraph (c) below, the Company shall indemnify,
defend and hold harmless 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 (other
than an action by or on behalf of a Member), by reason of the fact that he is
or was a Representative or officer of the Company, or is or was an officer of
the Company serving at the request of the Company as a manager, director,
officer, employee or agent of another Entity against expenses (including
reasonable 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 best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) Subject to paragraph (c) below, the Company shall 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 by or on behalf of
a Member to procure a judgment in its favor by reason of the fact that he is
or was a Representative or officer of the Company, or is or was an officer of
the Company serving at the request of the Company as a manager, director,
officer, employee or agent of another Entity against expenses (including
reasonable attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Company; except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable unless and only to the extent that the court
in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
(c) Any indemnification under this Section 7.9 (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 Representative or
officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (a) or (b) above. Such
determination shall be made (i) by a majority vote of the disinterested
Members, or (ii) if the Members so direct, by independent legal counsel in a
written opinion. Notwithstanding the foregoing, to the extent, however, that
a Representative or officer of the Company has been successful on the merits
or otherwise in defense of any action, suit or proceeding described above, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including reasonable attorneys' fees) actually and
reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case.
(d) For purposes of any determination under this Section 7.9, a
person shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Company or another enterprise, or on
information supplied to him by the officers of the Company or another
enterprise in the course of their duties, or on the advice of legal counsel
for the Company or another enterprise or on information or records given or
reports made to the Company or another enterprise by an independent certified
public accountant or by an appraiser or other expert selected with reasonable
care by the Company or another enterprise. The term "another enterprise" as
used in this paragraph (d) shall mean any Entity which such person is or was
serving at the request of the Company.
(e) Notwithstanding the foregoing, any Representative or officer
may apply to any court of competent jurisdiction in the Commonwealth of
Massachusetts for indemnification to the extent otherwise permissible under
paragraphs (a) and (b) above by reason of the fact that he has met the
applicable standard of conduct. If successful, in whole or in part, the
Representative or officer seeking indemnification shall also be entitled to be
paid the expense of prosecuting such application.
(f) Expenses incurred by a Representative or officer in
defending or investigating a threatened or pending action, suit or proceeding
shall be paid by the Company in advance of the final disposition thereof upon
receipt of an undertaking to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Company as
authorized in this Section 7.9.
(g) The indemnification and advancement of expenses in this
Section 7.9 shall not be deemed exclusive of any other rights which may apply,
it being the policy of the Company that indemnification of the persons
specified in paragraphs (a) and (b) above shall be made to the fullest extent
permitted by law. The provisions of this Section 7.9 shall not preclude the
indemnification of any person who is not specified herein but whom the Company
has the power or obligation to indemnify under the Act, or otherwise.
(h) The Company may purchase and maintain insurance on behalf of
the persons specified in Section 7.9(a) against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Company would have the power or the obligation to
indemnify him under this Section 7.9.
(i) The indemnification and advancement of expenses provided by
this Section 7.9 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a Representative or officer and
shall inure to the benefit of the heirs, executors and administrators of such
a person.
(j) Except for proceedings to enforce rights to indemnification
(which shall be governed by paragraph (e) above), the Company shall not be
obligated to indemnify any Representative or officer in connection with a
proceeding (or part thereof) initiated by such person unless such proceeding
(or part thereof) was authorized or consented to by the Members.
7.10 Business Plan; Budget. (a) All of the Members have adopted an
initial one-year business plan for the Company and shall cause to be prepared
an annual business plan for each succeeding year. Each business plan shall
include (i) an operating budget, (ii) a budget for capital expenditures, (iii)
a budget for capital contributions required from the Members (collectively,
the "Budget"), (iv) sales and marketing plan, (v) financial pro forma balance
sheet, income statement and statement of cash flows, and (vi) performance
milestones (collectively, a "Business Plan"). Once approved as provided in
this Section 7.10, the Budget may not be revised without the approval of
Members with Investment Percentages aggregating at least 66 2/3%. The
methodology for allocation of overhead in each Business Plan shall be that
utilized in the initial one-year Business Plan, unless an alternative
allocation method shall be agreed to by the Members with Investment
Percentages aggregating at least 66 2/3%.
(b) Each Budget shall set forth the operations of the Company
(including provision for employee incentive compensation, employee benefits
and compensation pursuant to the Management Agreement) between January 1 to
December 31 of the applicable year and shall be prepared by the manager (the
"Manager") of the Company (pursuant to the terms of the Management Agreement).
A preliminary budget shall be delivered to the Members by the Manager no later
than October 15 of the previous year. The Manager shall consult with Members,
as it deems appropriate, in the process of preparing such preliminary budget.
Each Member shall thereafter have 30 days to review the preliminary budget and
to propose revisions. The Manager and each Member shall then have an
additional 30 days to resolve any differences in and to finalize the Budget.
If, after such additional 30 day period, any Member continues to object to any
line item of such preliminary budget, such Member may deliver written notice
(the "Budget Dispute Notice") to the Manager, specifying in reasonable detail
its objections. Any Member who does not submit a Budget Dispute Notice within
the given time shall be deemed to have accepted the preliminary budget in its
entirety, which then shall become the Budget.
(c) If a Member submits a Budget Dispute Notice, the matter
shall be referred to the chief executive officers of the respective Members
for resolution.
(d) Should the chief executive officers of the respective
Members fail to resolve the matter within 20 days after such referral, the
matter shall be considered a Deadlock Event, to be resolved in accordance with
the provisions set forth in Section 7.8(e). Pending the resolution of such
Deadlock Event, (i) all line items not in dispute in the preliminary budget
shall take effect and (ii) (a) with respect to the 1998 and 1999 Budgets, the
amount budgeted in the previous year will be in effect, as if restated in the
new Budget, for those line items in dispute and (b) thereafter, the actual
amounts spent on the disputed line items in the previous year will be in
effect, as if restated in the new Budget, for those line items in dispute.
(e) At such time as all disputes on the preliminary budget have
been resolved, the preliminary budget as so resolved shall become the Budget.
ARTICLE 8
RIGHTS OF MEMBERS
-----------------
8.1 Access to Information. In addition to the other rights
specifically set forth in this Agreement, each Member shall have access to all
information to which a Member is entitled to have access pursuant to the Act
and such other information regarding the Company and its business and affairs,
as it may reasonably request from time to time.
8.2 Audits. Each Member shall have the right to conduct, or cause to
be conducted, from time to time, but in any case no more than once in any
calendar year, an audit of the books and records of the Company. Such audit
shall be conducted during normal business hours in a manner so as not to
disrupt the normal business operations of the Company. The Member conducting,
or causing to be conducted, the audit shall bear the entire expense of the
audit.
ARTICLE 9
TAXES
-----
9.1 Tax Returns. The Tax Matters Partner shall cause to be prepared
and filed all necessary federal and state income tax returns for the Company,
including making the elections described in Section 9.2. Each other Member
shall furnish to the Tax Matters Partner all pertinent information in its
possession relating to Company operations that is necessary to enable the
Company's income tax returns to be prepared and filed. The Tax Matters Partner
shall prepare all federal and state tax returns on a timely basis and shall
furnish to each other Member copies of returns that are actually filed
promptly after their filing.
9.2 Tax Elections. The Company shall make such elections on tax
returns as are deemed appropriate by the Tax Matters Partner. It is the
intent of the Members that the Company be treated as a partnership for federal
income tax purposes and, to the extent permitted by applicable law, for state
and local franchise and income tax purposes, and the Company will make any
election to achieve that status. Neither the Company nor any Member may make
an election for the Company to be excluded from the application of the
provisions of subchapter K of chapter 1 of subtitle A of the Code or any
similar provisions of applicable state or local law, and no provision of this
Agreement (including, without limitation, Section 2.8) shall be construed to
sanction or approve such an election.
9.3 Tax Matters Partner. The Tax Matters Partner shall take such
action as may be necessary to cause each other Member to become a "notice
partner" within the meaning of Section 6223 of the Code. The Tax Matters
Partner shall inform each other Member of all significant matters that may
come to its attention in its capacity as tax matters partner by giving notice
thereof on or before the fifth Business Day after becoming aware thereof and,
within that time, shall forward to each other Member copies of all significant
written communications it may receive in that capacity. The Tax Matters
Partner may take any action contemplated by Sections 6222 through 6232 of the
Code without the consent of each other Member, but this sentence does not
authorize the Tax Matters Partner to take any action left to the determination
of an individual Member under Sections 6222 through 6232 of the Code.
ARTICLE 10
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
------------------------------------------
10.1 Accounting. Except as may be otherwise agreed to by Members
holding Investment Percentages aggregating at least 66 2/3%, the Company will
maintain books and records for tax purposes in accordance with federal income
tax accounting principles utilizing the accrual method of accounting, and for
accounting purposes in accordance with GAAP. In addition, the Company shall
cause to be prepared with respect to each fiscal year of the Company financial
statements based on GAAP. Appropriate records will be kept so that upon each
closing of the Company books it is possible to determine, among other items
defined in this Agreement, (i) the amount of capital (whether in cash or as a
Contributed Asset) actually contributed by each Member; (ii) the amount of
cash or other property distributed to each Member; (iii) the effect of all
Company items of profit, loss, income, gain, loss, deduction or credit on each
Member's Capital Account; and (iv) all pertinent expenses and cash disbursement
accounts.
10.2 Fiscal Year. Except as may be otherwise determined by Members
holding Investment Percentages aggregating at least 66 2/3%, the fiscal year
of the Company shall be the twelve months ending December 31 of each year.
Notwithstanding the foregoing, the taxable year of the Company shall be
determined in accordance with Code Section 706(b).
10.3 Statements and Reports. Except as may be otherwise determined by
Members holding Investment Percentages aggregating at least 66 2/3%, as soon
as practicable, but in no event later than 90 days after the close of each
fiscal year of the Company, the Company will cause to be prepared and will
have furnished to each of the Members, with respect to such period, (i) a
profit and loss statement, (ii) a statement of cash flows, (iii) a Company
balance sheet as of the close of such period, and (iv) such other statements
showing in reasonable detail each Member's interest in each of the items
described in Section 10.1. The foregoing statements will be prepared in
accordance with GAAP, consistently applied, and audited by an independent
certified public accounting firm of national reputation which shall be
designated by Members holding Investment Percentages aggregating at least 66
2/3%, and the cost of preparing the statements and of each such audit will be
paid for by the Company. In addition, (i) unaudited quarterly financial
reports and updates with respect to the Company's business shall be prepared
and furnished to each Member as soon as practicable after the end of each
fiscal quarter, but in no event later than 45 days following the close of each
fiscal quarter and (ii) unaudited monthly internal reports and updates with
respect to the Company's business shall be prepared and furnished to each
Member as soon as practicable after the end of each calendar month, but in no
event later than 20 days following the last day of each month.
10.4 Inspection. The Company shall maintain or cause to be maintained
complete and accurate books and records with respect to its business. All
books of account and all other records of the Company including an executed
counterpart of this Agreement and all amendments hereto will at all times be
kept at the Company's principal place of business. Any Member and its
representatives may inspect the books and records of the Company. The Company
shall provide, during regular business hours, access to the facilities,
systems and books and records of the Company to the extent reasonably
necessary for such inspection. Whenever any such inspection is conducted by
any Member and its representatives, such Member shall advise the other Members
and permit the other Members and their representatives to be present during
such audit.
10.5 Bank Accounts. The Company shall maintain appropriate accounts at
one or more financial institutions for all funds of the Company. Such
accounts shall be used solely on the business of the Company. Withdrawal from
such accounts shall be made only upon the signature of those persons
authorized by the Members.
ARTICLE 11
WITHDRAWAL, EXPULSION, BANKRUPTCY, ETC.
---------------------------------------
11.1 Withdrawal. Each Member agrees that it will not resign or
withdraw from the Company without the consent of each other Member. If a
Member attempts or purports to resign or withdraw from the Company in breach
of this Section 11.1, the other Members may (i) recover damages from such
breaching Member, including, without limitation, the reasonable cost of
obtaining replacement of the services that such breaching Member is obligated
to perform (if any), (ii) seek specific performance of such breaching Member's
obligations to the Company (and each Member hereby waives any defense that
money damages would be a satisfactory remedy for such breach), (iii) pursue
any other remedies available under applicable law, if any, and (iv) effect
recovery of damages by offsetting those damages against the amount otherwise
distributable to such Member.
11.2 Bankrupt Members. This Section 11.2 shall apply if any Member
becomes a Bankrupt Member. In such event, the other Members (the "Purchasing
Members"), shall have the option (but not the obligation), exercisable by
notice to the Bankrupt Member (or its representative) at any time prior to the
90th day after receipt of notice or obtaining actual knowledge of the
occurrence of the event causing such Member to become a Bankrupt Member, to
buy or cause their designee to buy, and on the exercise of this option the
Bankrupt Member (or its representative) shall sell, its Membership Interest
(not including any Exchange Securities held by the Bankrupt Member or its
Affiliates). The purchase shall be made by the Purchasing Members in
proportion to their respective Percentage Interests at the relevant time. The
purchase price shall be an amount equal to the fair market value of the
Membership Interest determined by agreement by the Bankrupt Member (or its
representative) and the Purchasing Members; however, if those Persons do not
agree on the fair market value on or before the 30th day following the
exercise of the option, such fair market value shall be determined by an
independent appraiser mutually satisfactory to the Bankrupt Member and the
Purchasing Members (without any "controlling interest premium" if the Bankrupt
Member's Membership Interest has a Sharing Ratio of less than 66 2/3%, nor any
"minority interest discount" if the Bankrupt Member's Membership Interest has
a Sharing Ratio of greater than 33 1/3%. The Purchasing Members shall pay the
fair market value as so determined in four equal cash installments, the first
due on closing and the remainder (together with accumulated interest on the
amount unpaid at the General Interest Rate) due on each of the first three
anniversaries of the closing. The payment to be made to the Bankrupt Member
or its representative under this Section 11.2 is in complete liquidation and
satisfaction of all the rights and interest of the Bankrupt Member and its
representative (and of all Persons claiming by, through, or under the Bankrupt
Member and its representative) in and in respect of the Company, including,
without limitation, any Membership Interest, any rights in specific Company
property, any rights with respect to the management, control or operation of
the Company and any rights against the Company and (insofar as the affairs of
the Company are concerned) against the Members.
ARTICLE 12
TERMINATION, DISSOLUTION AND LIQUIDATION OF THE COMPANY
-------------------------------------------------------
12.1 Termination and Dissolution.
Except as provided below in this Section 12.1, the Company shall
terminate and dissolve upon the earliest to happen of any of the following
events:
(a) The expiration of its term;
(b) The Company shall have only one Member;
(c) A decision approved by Members holding Investment Percentages
aggregating at least 80% to dissolve the Company;
(d) The death, insanity, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member;
(e) A sale of all or substantially all of the assets of the
Company; or
(f) The happening of any other event, act or omission causing
the dissolution of the Company under the Act or any other
laws of the Commonwealth of Massachusetts.
The dissolution of the Company shall be effective on the day on
which the event occurs giving rise to the dissolution, unless (and only if and
to the extent permitted by the Act), Members holding Investment Percentages
aggregating at least 66 2/3% of the remaining Sharing Ratios elect to continue
the Company in the manner provided by the Act. Any necessary certificate of
dissolution shall be filed under the Act upon the dissolution and the
commencement of winding up of the Company; provided, however, that the Company
shall not terminate until the assets of the Company have been distributed as
provided in Section 12.2.
12.2 Liquidation.
(a) As soon as practicable after the dissolution of the Company,
the Liquidator (as defined in Section 12.2(e)) shall notify Members of such
fact and shall prepare a plan as to whether and in what manner the assets of
the Company shall be liquidated.
(b) The Liquidator shall take full account of the Company's
assets and liabilities. The Company's assets shall be liquidated as promptly
as is consistent with obtaining the fair market value thereof and after the
allocation of Net Income or Net Loss in accordance with Article 6 above, the
proceeds of liquidation shall be applied and distributed in the following
order and priority:
(i) First, to secured creditors (including Members and
their Affiliates) in accordance with the priority of their
security interests;
(ii) Next, to the payment of debts and liabilities of the
Company to general unsecured creditors;
(iii) Next, to the establishment of any reserves which are
reasonably necessary for contingent, unmatured, unliquidated,
disputed, or unforeseen liabilities and obligations of the Company;
(iv) Last, to the Members in proportion to the positive
balances in their respective Capital Accounts.
(c) The amount of any reserves established pursuant to Section
12.2(b)(iii) above shall be determined with the approval of the Members who
are, or may be, liable for any liabilities or obligations of the Company for
which such reserves are being established. If any or all of the amount of the
reserves are no longer required by the Company and become available for
distribution to the Members, such amounts shall be distributed to the Members
in accordance with Section 12.2(b)(iv) above.
(d) Distributions to Members pursuant to this Section 12.2 may
be made pursuant to a trust established for the benefit of the Members for the
purpose of liquidating the assets of the Company, collecting amounts owed to
the Company, and paying any contingent or unforeseen liabilities or
obligations of the Company. The assets of any such trust shall be distributed
to the Members from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as would have applied pursuant to this
Agreement to liquidating distributions by the Company to the Members.
(e) For the purposes of this Agreement, the "Liquidator" shall
be appointed by the Members from among their number; provided, however that if
upon the dissolution of the Company there is no Member willing or permitted to
serve as Liquidator, the trustee, receiver or other fiduciary who is appointed
or is otherwise authorized by consent of Members holding Investment
Percentages aggregating at least 66 2/3% to act on behalf of the Company in
its dissolution, winding up and liquidation, shall act as liquidator.
ARTICLE 13
GENERAL PROVISIONS
------------------
13.1 Representations. Each Member hereby represents and warrants to
the Company and each other Member that:
(a) If such Member is not a natural person, it is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and is duly qualified to conduct business in all
jurisdictions where such qualification is required.
(b) It has the power and authority (corporate or otherwise) to
execute, deliver and perform its obligations under this Agreement. Such
execution, delivery and performance have been duly authorized by all necessary
action on the part of such Member and do not and will not contravene the
organizational documents of such Member or conflict with, result in a breach
of, or entitle any party (with due notice or lapse of time or both) to
terminate, accelerate or call a default with respect to, any agreement or
instrument to which such Member is a party or by which such Member is bound.
The execution, delivery and performance by such Member of this Agreement will
not result in any violation by such Member of any law, rule or regulation
applicable to such Member. Such Member is not a party to, nor subject to or
bound by, any judgment, injunction or decree of any court or other
Governmental Entity which may restrict or interfere with the performance of
this Agreement by such Member. This Agreement is a valid and binding
obligation of such Member enforceable against such Member in accordance with
its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) the remedy of
specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
(c) Except as set forth on Schedule 13.1(c), no consent, waiver,
approval, authorization or order of, or registration, qualification or filing
with, any court or other Governmental Entity is required for the execution,
delivery and performance by such Member of this Agreement and the consummation
by such Member of the transactions contemplated hereby. No consent or waiver
of any party to any contract to which such Member is a party or by which it is
bound is required for the execution, delivery and performance by such Member
of this Agreement.
(d) Such Member is acquiring the Membership Interest hereunder
for its own account for investment and not with a view to the distribution
thereof, and such Member shall not offer to sell or otherwise dispose of any
of the Membership Interests so acquired by it in violation of the registration
requirements of the Securities Act or applicable state securities laws. Such
Member has such knowledge and experience in financial, business and tax
matters that such Member is capable of evaluating the merits and risks
relating to such Member's Membership Interest and is capable of bearing the
risk of loss of its entire investment in the Company.
(e) There is no action, suit, grievance, arbitration or
proceeding pending or, to the knowledge of such Member, threatened against or
affecting such Member at law or in equity, before any federal, state,
municipal or other governmental court, department, commission, board,
arbitrator, bureau, agency or instrumentality which prohibits or impairs its
ability to execute and deliver this Agreement or the other Basic Agreements or
to consummate any of the transactions contemplated hereby or thereby. To the
knowledge of such Member, it has not received written notice of any pending or
threatened investigation, inquiry or review by any Governmental Entity.
(f) No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission, or to the reimbursement of any
of its expenses, in connection with the transactions contemplated by this
Agreement based upon arrangements made by it or on its behalf.
(g) Such Member has no obligation or agreement, either actual or
contingent, to share any portion of its interest in the Company with any
Person.
(h) Such Member is not a Holding Company or otherwise subject to
regulation under PUHCA and the execution and delivery of the Basic Agreements
do not cause such Member to become a Holding Company or otherwise subject to
PUHCA.
13.2 Additional Representations of RCN-Sub. RCN-Sub hereby represents
and warrants to the Company and BecoCom that:
(a) RCN-Sub has the full and unrestricted right and authority to
contribute the RCN Contributed Assets to the Company.
(b) RCN-Sub has marketable title to all of the RCN Contributed
Assets, free and clear of all liens and encumbrances of any nature.
Notwithstanding the foregoing, with respect to the RCN-Sub's interest as a
lessee under any of the premises and locations included in the RCN Contributed
Assets, RCN-Sub has the unrestricted right to assign such interests to the
Company (or if the consent of any lessor of any such premises is required to
permit such assignment, such consent has been obtained in writing on or prior
to the date hereof).
(c) All items of equipment included in the RCN Contributed
Assets, including without limitation, the "Cable TV Headend" and the
"Telephone Switch" referenced on Schedule 1 hereto, are (i) in good operating
condition and order, reasonable wear and tear excepted, (ii) are suitable to
provide their intended functions and (iii) comply in all material respects
with all applicable laws, rules and regulations.
(d) All specifications and other technical information relating
to all items of equipment included in the RCN Contributed Assets, including,
without limitation, the "Cable TV Headend" and the "Telephone Switch"
referenced on Schedule 1 hereto, have been provided by RCN-Sub to BecoCom.
13.3 Offset. Whenever the Company is to pay any sum to any Member, any
amounts such Member owes the Company may be deducted from that sum before
payment.
13.4 Notices. All notices, request and other communication hereunder
shall be deemed to have been duly delivered, given or made to or upon any
party hereto if in writing and delivered by hand against receipt, or by
certified or registered mail, postage prepaid, return receipt requested, or to
a courier who guarantees next Business Day delivery or sent by telecopy (with
confirmation) to such party at its address set forth below or to such other
address as such party may at any time, or from time to time, direct by notice
given in accordance with this Section 13.4.
if to RCN-Sub:
RCN Telecom Services of Massachusetts, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: General Manager
and
C-TEC Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000 and (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxxx, Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X Xxxxxx, Esq.
if to BecoCom:
c/o Boston Edison Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Vice President
Xxxxx Xxxxxxxxx, Esq., Legal Counsel
with a copy to:
Xxxxx, Xxxx & X'Xxxxxxxx, P.C.
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
The date of delivery of any such notice, request or other communication shall
be the earlier of (i) the date of actual receipt or (ii) three Business Days
after such notice, request or other communication is sent if sent by certified
or registered mail, (iii) if sent by courier who guarantees next Business Day
delivery, the Business Day next following the day such notice, request or
other communication is actually delivered to the courier or (iv) the day
actually telecopied.
13.5 Entire Agreement; Supersedure. This Agreement constitutes the
entire agreement of the Members relating to the Company and supersedes all
prior contracts or agreements with respect to the Company, whether oral or
written except the Basic Agreements.
13.6 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by
that Person of its obligations with respect to the Company is not a consent or
waiver to or of any other breach or default in the performance by that Person
of the same or any other obligations of that Person with respect to the
Company. Failure on the part of a Person to complain of any act of any Person
or to declare any Person in default with respect to the Company, irrespective
of how long that failure continues, does not constitute a waiver by that
Person of its rights with respect to that default until the applicable
limitations period has expired.
13.7 Amendment or Modification. This Agreement may be amended or
modified from time to time only by a written instrument executed by Members
holding Investment Percentages aggregating at least 66 2/3%, provided,
however, that so long as BecoCom's Investment Percentage is greater than 33
1/3%, amendments to Section 7.8 also will require the written consent of
BecoCom.
13.8 Public Announcements. Except as required by law, any governmental
agency or any securities exchange, the parties hereto agree to obtain the
prior approval of each other before issuing (or allowing their Affiliates to
issue) any press release, public disclosure or other announcement with respect
to this Agreement or any of the transactions contemplated by this Agreement.
In the event either party hereto is so required by law, any governmental
agency or any securities exchange to make a public disclosure or other
announcement as aforesaid, it shall use its best efforts to afford the other a
reasonable opportunity to review the form and content of the announcement or
disclosure prior to making same. In addition, the Members will consult on a
regular basis with regard to joint marketing and positioning efforts for the
Company. Each Member shall also use its reasonable efforts to prohibit its
employees, agents, consultants and representatives from utilizing the
corporate names "Boston Edison Company" as to BecoCom, and "RCN Telecom
Services, Inc." and "RCN Corporation" as to RCN-Sub, with respect to any
matters involving public officials or media activities, without having first
consulted with the other.
13.9 Confidentiality. Each of the parties hereto will hold, and will
use its reasonable, good faith efforts to cause its respective shareholders,
partners, members, directors, officers, employees, accountants, counsel,
consultants, agents and financial or other advisors (collectively "Agents") to
hold, in confidence, all information (whether oral or written), including this
Agreement and the documents contemplated herein, concerning the transactions
contemplated by this Agreement furnished to such party by or on behalf of any
other party in connection with such transactions, unless legally compelled (by
deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process, or by order of a court or tribunal of
competent jurisdiction, or in order to comply with applicable rules or
requirements of any stock exchange, government department or agency or other
regulatory authority, or by requirements of any securities law or regulation
or other legal requirement) to disclose any such information or documents, and
except to the extent that such information or documents can be shown to have
been (a) previously known on a nonconfidential basis by such party, (b) in the
public domain through no fault of such party or (c) acquired by such party on
a nonconfidential basis from sources not known by such party to be bound by
any obligation of confidentiality in relation thereto. Notwithstanding the
foregoing provisions of this Section 13.9, each party may disclose such
information to its Agents in connection with the transactions contemplated by
this Agreement or any of the other Basic Agreements and to its lenders in
connection with obtaining the financing for the transactions contemplated by
this Agreement so long as such Agents and lenders are informed by such party
of the confidential nature of such information and are directed by such party
to treat such information confidentially and to certain governmental agencies
in connection with the procurement of the governmental authorizations
contemplated by this Agreement. The obligation of each party to hold any such
information in confidence shall be satisfied if such party exercises the same
care with respect to such information as it would take to preserve the
confidentiality of its own similar information. If this Agreement is
terminated, each party will, and will use its reasonable, good faith efforts
to cause its respective Agents and lenders to destroy or deliver to the other
party, upon request, all documents and other materials, and all copies
thereof, obtained by such party or on its behalf from the other party hereto
in connection with this Agreement that are subject to such confidence.
13.10 Binding Effect. Subject to the restrictions on Dispositions set
forth in this Agreement this Agreement is binding on and inures to the benefit
of the Members and their respective heirs, legal representatives, successors,
and assigns.
13.11 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT
REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF
ANOTHER JURISDICTION. If any provision of this Agreement or its application
to any Person or circumstance is held invalid or unenforceable to any extent,
the remainder of this Agreement and the application of such provision to other
Persons or circumstances is not affected and such provision shall be enforced
to the greatest extent permitted by law.
13.12 Specific Performance. The Members agree that irreparable damage
will result if this Agreement is not performed in accordance with its terms,
and the Members agree that any damages available at law for a breach of this
Agreement would not be an adequate remedy. Therefore, the provisions hereof
and the obligations of the Members hereunder shall be enforceable in a court
of equity, or other tribunal with jurisdiction, by a decree of specific
performance in aid of arbitration, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies and all other
remedies provided for in this Agreement shall, however, be cumulative and not
exclusive and shall be in addition to any other remedies that a Member may
have under this Agreement, at law or in equity.
13.13 Further Assurances. In connection with this Agreement and the
transactions contemplated by it, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may
be necessary or appropriate to effectuate and perform the provisions of this
Agreement and such transactions.
13.14 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document. All counterparts shall be construed together and constitute the
same instrument.
13.15 Interpretation. In the event of any dispute concerning the
construction or interpretation of any provision of this Agreement or any
ambiguity thereof, there shall be no presumption that this Agreement or any
provision hereof be construed against the party who drafted this Agreement.
13.16 Use of Name. Promptly after the expiration date of the Term (as
defined in the Management Agreement), including any extensions thereof, the
Members shall cause the Company to change its name so as not to include "RCN",
"Residential Communications Network" or any other term which could cause
confusion with RCN and its Affiliates, and to not use any such name from and
after such date; provided, that RCN shall grant an exclusive license to the
Company to use any such name in the Relevant Market for a period not to exceed
one year, in the discretion of the Company.
13.17 Continued Support of RCN-Sub. For a period of two years after
RCN-Sub is no longer a Member of the Company, RCN-Sub or its Affiliates shall
continue to provide to the Company (or its successor) such assets and services
necessary to operate the Company and which were theretofore provided by
RCN-Sub or its Affiliates at cost. Notwithstanding the preceding sentence,
RCN-Sub's obligation to continue providing the Company with such assets and
services is conditioned upon RCN-Sub or any of its Affiliates not being
subject to any prohibition by an outside third party, whether financial or
otherwise, to provide such assets and services.
EXECUTED effective as of the date first set forth above.
MEMBERS:
RCN TELECOM SERVICES
OF MASSACHUSETTS, INC.
By: __________________________
Name:_________________________
Title:________________________
BECOCOM, INC.
By: __________________________
Name:_________________________
Title:________________________
WITHDRAWING MEMBERS:
RCN TELECOM SERVICES, INC.
By: __________________________
Name:_________________________
Title:________________________
BOSTON ENERGY TECHNOLOGY
GROUP, INC.
By: __________________________
Name:_________________________
Title:________________________
SCHEDULE 1
----------
Capitalization
Sharing Cash Capital Non-Cash Capital
Member Ratio Contribution Contribution Accounts
--------- --------- -------------- ---------------- -------------
RCN-Sub 51% $1,060,911 $13,445,527(1) $14,506,438
BecoCom 49% $2,343,162 $11,594,396(2) $13,937,558
TOTAL 100% $3,404,073 $25,039,923 $28,443,996
----------
(1) Represents the Agreed Value of the business developed by RCN and its
Affiliates prior to the Closing to provide Services in the Relevant
Market, including access to space, equipment (which includes, without
limitation, the "Cable TV Headend" and the "Telephone Switch") and
customers. Includes, without limitation, the rights granted pursuant to
the Dark Fiber IRU Agreement, dated May 8, 1997, by and between RCN and
Affiliates of Metropolitan Fiber Systems/WorldCom ("WorldCom") and the
services to be received pursuant to the Telephone Service to Reseller
Agreement, dated May 8, 1997, by and between RCN and WorldCom.
(2) Represents (i) the Agreed Value as of May 31, 1997 of access to and the
use of the "Existing BecoCom Facilities" pursuant to (and as such term
is used in) the IRU Agreement, and (ii) in the future, if the Company
requests that BecoCom expand the fiber optic network using transmission
rights of ways that connect to other transmission stations, BecoCom will
provide up to 150 square feet at these transmission stations as a part
of its initial contributed assets. The Company will pay to BecoCom a
ROW use fee, property taxes, O&M, and other fees associated with this
expansion as described in the IRU Agreement.
SCHEDULE 2
----------
Impact of Various Transactions on Investment Percentage(*)
---------
(*) The calculations in cases 1-6 assume a 49% Sharing Ratio as a starting
point. If the Sharing Ratio is altered due to capital calls or
dispositions, the calculations set forth herein would be similarly
altered.
(1) Total Exchange - No Disposition
-------------------------------
Member exchanges its entire 49% Membership Interest to securities
- Sharing Ratio = 0
- Investment Percentage = 49%
(2) Total Exchange - Total Disposition
----------------------------------
- Upon disposition of securities
- Sharing Ratio = 0
- Investment Percentage = 0
(3) Total Exchange - Partial Disposition
------------------------------------
a) Upon disposition of 50% of the securities received
- Sharing Ratio = 0
- Investment Percentage = 24.5% (50% of 49%)
b) Upon disposition of 25% of the securities received
- Sharing Ratio = 0
- Investment Percentage = 36.75% (49%-25% of 49%)
(4) Partial Exchange - No Disposition
---------------------------------
a) Upon exchange of 25% of Membership Interest
- Sharing Ratio = 36.75%
- Investment Percentage = 49%
b) Upon exchange of 50% of Membership Interest
- Sharing Ratio = 24.5%
- Investment Percentage = 49%
(5) Partial Exchange - Total Disposition
------------------------------------
a) Upon exchange of 25% of Membership Interest and disposition
of all the securities received
- Sharing Ratio = 36.75%
- Investment Percentage = 36.75%
b) Upon exchange of 50% of Membership Interest and disposition
of all the securities received
- Sharing Ratio = 24.5%
- Investment Percentage = 24.5%
(6) Partial Exchange - Partial Disposition
--------------------------------------
a) Upon exchange of 25% of Membership Interest and disposition
of 33 1/3% of the Securities received
- Sharing Ratio = 36.75%
- Investment Percentage = 45% (36.75 + (100-33 1/3)% of
(49-36.75))
b) Upon exchange of 60% of Membership Interest and disposition
of 75% of the Securities received
- Sharing Ratio = 19.6%
- Investment Percentage = 26.95% (19.6 + (100-75)% of
(49-19.6))
(7) Subsequent Transactions
-----------------------
a) If, following the transactions in case 6(a) above, the
Member exchanges an additional 10% Membership Interest and
disposes of 30% of the securities then held as a result of
such exchange and the earlier exchange
- Sharing Ratio = 26.75%
- Investment Percentage = 39.53% (45-30% of (45-26.75))
b) If, following the transactions in case 6(b) above, the
Member disposes of 40% of the securities then held as a
result of the earlier exchange
- Sharing Ratio = 19.6%
- Investment Percentage = 24.01% (26.95-40% of
(26.95-19.6))
Note that the value at time of exchange or time of disposition is irrelevant.
These calculations are purely percentage-based.
