EXHIBIT 99.1
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EXECUTION COPY
THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
TIME WARNER ENTERTAINMENT-ADVANCE/XXXXXXXX PARTNERSHIP
Dated as of December 31, 2002
THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
TIME WARNER ENTERTAINMENT-ADVANCE/XXXXXXXX PARTNERSHIP
TABLE OF CONTENTS
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Section 1 DEFINITIONS..................................................2
1.1 Terms Defined in this Section................................2
1.2 Terms Defined Elsewhere in this Agreement...................16
Section 2 THE PARTNERSHIP AND ITS BUSINESS............................18
2.1 Formation...................................................18
2.2 Partnership Name and Trade Names............................19
2.3 Term of the Partnership.....................................20
2.4 Purposes....................................................20
2.5 Principal Office and Other Offices..........................21
2.6 Foreign Qualification.......................................21
2.7 Fiscal Year.................................................21
2.8 Addresses of the Partners...................................21
2.9 Property....................................................21
2.10 Certain Compliance Policies.................................21
Section 3 MANAGEMENT OF THE PARTNERSHIP...............................22
3.1 Management Powers...........................................22
3.2 Limitations On Management Powers............................30
3.3 Financing the Selected Business.............................31
Section 4 PARTNERSHIP CAPITAL.........................................31
4.1 Partnership Units...........................................31
4.2 Contributions...............................................32
Section 5 CASH DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES;
ADJUSTMENTS AND TAX PROCEEDINGS.............................33
5.1 Distributions With Respect to the Residual Business.........33
5.2 Application of First Amended Agreement......................38
5.3 Allocations of Net Profit and Net Loss With Respect
to the Residual Business....................................38
5.4 Section 754 Adjustment......................................41
5.5 Other Rules Governing Allocations With Respect to
the Residual Business.......................................41
5.6 Tax Allocations With Respect to the
Residual Business...........................................43
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5.7 Regulatory Allocations......................................44
5.8 Allocations With Respect to the Residual Business
in Event of Transfer........................................44
5.9 Other Distributions.........................................44
5.10 Adjustments.................................................44
5.11 Tax Proceedings.............................................45
Section 6 TRANSFERS OF PARTNERSHIP INTERESTS..........................46
6.1 Restrictions on Transfer....................................46
Section 7 FINANCING COVENANTS AND REPRESENTATIONS.....................47
7.1 Representations, Warranties and Covenants
of Advance/Xxxxxxxx.........................................47
7.2 Representations, Warranties and Covenants of TWE............48
Section 8 RESTRUCTURING OF PARTNERSHIP AT ELECTION OF
EITHER PARTNER..............................................49
8.1 Restructuring Rights........................................49
8.2 Limitations with Respect to the Selected Business...........50
8.3 TWE Right of First Offer....................................53
8.4 Special Right of First Offer................................58
Section 9 [Intentionally Omitted.]....................................62
Section 10 OTHER BUSINESS ACTIVITIES...................................62
10.1 Survival of this Section....................................62
10.2 Cable Television Systems....................................62
10.3 Programming for Carriage Deals..............................64
Section 11 BOOKS AND RECORDS; INFORMATION RIGHTS; OPERATION
OF SELECTED BUSINESS........................................64
11.1 Books and Records...........................................64
11.2 Tax Return Information......................................64
11.3 Information Rights..........................................64
11.4 Bank Accounts...............................................65
11.5 Tax Allocations.............................................66
Section 12 DISSOLUTION.................................................66
12.1 Causes of Dissolution.......................................66
12.2 Effect of Dissolution.......................................67
12.3 Winding Up and Liquidation..................................67
Section 13 INDEMNIFICATION.............................................69
13.1 Indemnification by Partnership..............................69
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13.2 Indemnification by Partners.................................69
13.3 Procedures..................................................71
13.4 Survival....................................................71
Section 14 REPRESENTATIONS.............................................71
14.1 Organization, Standing, and Authority.......................72
14.2 Absence of Conflicting Agreements...........................72
14.3 Claims and Legal Actions....................................72
Section 15 MISCELLANEOUS...............................................72
15.1 Acknowledgments.............................................72
15.2 Xxxx for Partition..........................................72
15.3 Notices.....................................................73
15.4 Amendments..................................................73
15.5 Waivers and Further Assurances; Entire Agreement............73
15.6 Severability................................................73
15.7 Specific Enforcement; Attorney's Fees.......................74
15.8 Counterparts................................................74
15.9 Captions; Gender............................................74
15.10 Governing Law; Venue; Disputes..............................74
15.11 Interpretation..............................................74
15.12 Binding Effect..............................................75
15.13 Third Parties...............................................75
15.14 Confidentiality.............................................75
15.15 Liability of Partners.......................................75
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THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
TIME WARNER ENTERTAINMENT-ADVANCE/XXXXXXXX PARTNERSHIP
This Third Amended and Restated Partnership Agreement, dated as of
December 31, 2002, by and among Advance/Xxxxxxxx Partnership, a New York general
partnership (collectively with any of its permitted successors subsequently
admitted as a Partner, "ADVANCE/XXXXXXXX"), Time Warner Entertainment Company,
L.P., a Delaware limited partnership (collectively with any of its permitted
successors subsequently admitted as a Partner, "TWE"), and Paragon
Communications, a Colorado general partnership (collectively with any of its
permitted successors subsequently admitted as a Partner, "PARAGON"), amends and
restates in its entirety the Second Amended and Restated Partnership Agreement,
dated as of August 1, 2002, (the "SECOND AMENDED AGREEMENT"), by and among
Advance/Xxxxxxxx, TWE and Paragon.
PRELIMINARY STATEMENT
The Partnership was formed pursuant to the Partnership Agreement, dated
as of September 9, 1994, between Advance/Xxxxxxxx and TWE, as amended by the
First Amendment thereto, dated as of February 12, 1998, the Second Amendment
thereto, dated as of December 31, 1998, and the Third Amendment thereto, dated
as of March 1, 1999 and the Amended and Restated Partnership Agreement, dated as
of February 1, 2001, as amended by the First Amendment thereto, dated as of
March 2, 2001 (the "FIRST AMENDED AGREEMENT"). Concurrently with the execution
of the Second Amended Agreement, Advance/Xxxxxxxx, TWE, Paragon and certain
other parties entered into a Master Transaction Agreement (such agreement, and
as the same may be amended, modified or supplemented from time to time in
accordance with its terms, the "MASTER TRANSACTION AGREEMENT") providing for,
among other things, the restructuring of the Partnership, the allocation of
profit and loss, cash flow, and other proceeds of the Partnership among the
Partners, the respective rights, obligations, and interests of the Partners to
each other and to the Partnership, and certain other matters. In connection with
the Closing (as defined in the Master Transaction Agreement), which is occurring
on the date hereof, the parties now desire to enter into this Agreement to
reflect changes to the Second Amended Agreement and to set forth the respective
rights, obligations and interests of the Partners to each other and to the
Partnership, and certain other matters.
AGREEMENTS
In consideration of the mutual covenants and agreements set forth in
this Agreement, the parties, intending to be bound legally, agree as follows.
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SECTION 1 DEFINITIONS
1.1 TERMS DEFINED IN THIS SECTION. As used in this Agreement, the
following terms have the following meanings:
"Act" means the New York Uniform Partnership Law, as from time to time
in effect.
"Advance" means Advance Publications, Inc., a New York corporation.
"Advance/Xxxxxxxx Accountants" means the independent auditors or other
auditors selected by Advance/Xxxxxxxx.
"Advance/Xxxxxxxx Group" means Advance/Xxxxxxxx and each of its
Affiliates.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person, except that:
(i) neither the Partnership nor any Person controlled by
the Partnership shall be deemed to be an Affiliate of a Partner or of any
Affiliate of such Partner solely by virtue of such Partner's Partnership
Interest;
(ii) no Partner nor any Affiliate of any Partner shall be
deemed to be an Affiliate of the other Partners or of any Affiliate of the other
Partners solely by virtue of the Partners' Partnership Interests;
(iii) neither Paragon nor USW shall be deemed an Affiliate
of TWE, the TWE Cable Division or ATW;
(iv) for the avoidance of doubt, the Selected Business
shall not be an Affiliate of TWE or any of its Affiliates and the Selected
Business shall be deemed to be an Affiliate of Advance/Xxxxxxxx and its
Affiliates; and
(v) for the avoidance of doubt, the Residual Business
shall not be an Affiliate of Advance/Xxxxxxxx or any of its Affiliates and the
Residual Business shall be deemed to be an Affiliate of TWE and its Affiliates.
"Agreement" means this Third Amended and Restated Partnership
Agreement, as it may be amended, modified, or supplemented from time to time in
accordance with its terms.
"Amended and Restated Indemnity Agreement" means the Indemnity
Agreement dated as of December 31, 2002, by and among Advance/Xxxxxxxx, the
Selected Subsidiary, TWE and the Partnership, as the same may be amended,
modified or supplemented from time to time in accordance with its terms.
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"AOL High Speed Services Agreement" means the High Speed Services
Agreement, effective as of January 31, 2001, between America Online, Inc. and
Time Warner Cable.
"ATW" means AOL Time Warner, Inc.
"Capital Account" means an account to be maintained for each of TWE and
Paragon which, subject to any contrary requirements of the Code, shall equal the
aggregate value of such Partner's Partnership Interest as of the close of
business on July 31, 2002,
(A) increased by (i) the amount of cash contributed by such
Partner to the Partnership on or after August 1, 2002 (not
including interest amounts paid by such Partner pursuant to
Section 5.1(a)(iii)(z) or Section 5.1(b)(iii)(z); (ii) the
fair market value without regard to Code Section 7701(g) of
property contributed by such Partner to the Partnership on or
after August 1, 2002 (net of liabilities secured by such
contributed property that the Partnership is considered to
assume or take subject to under Code Section 752); (iii)
allocations to it on or after August 1, 2002 of Gross Profit
and Net Profit pursuant to Section 5; (iv) the amount of any
liabilities of the Partnership that are assumed by such
Partner on or after August 1, 2002 pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(c); and (v) other
additions made in accordance with the Code and the provisions
of Treasury Regulations Section 1.704-1(b)(2)(iv); and
(B) decreased by (i) the amount of cash distributed to such
Partner by the Partnership on or after August 1, 2002; (ii)
allocations to the Partner on or after August 1, 2002 of Gross
Loss and Net Loss pursuant to Section 5; (iii) the fair market
value without regard to Code Section 7701(g) of property
distributed to such Partner by the Partnership on or after
August 1, 2002 (net of liabilities secured by such distributed
property or that such Partner is considered to assume or take
subject to under Code Section 752) (excluding any distribution
of or from the Selected Business); (iv) the amount of such
Partner's individual liabilities that are assumed by the
Partnership on or after August 1, 2002 pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(c); and (v) other
deductions made in accordance with the Code and the provisions
of Treasury Regulations Section 1.704-1(b)(2)(iv).
Notwithstanding the foregoing, for purposes of determining Capital Accounts, all
of the adjustments and distributions required pursuant to the Restructuring
Transaction Agreements shall be treated as if they had been made on July 31,
2002 and such adjustments and distributions shall not give rise to any
adjustments to Capital Account balances or redetermination of amounts
contributed by or distributed to TWE or Paragon.
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"Capital Contribution" means either a Common Capital Contribution, a
Series A Preferred Capital Contribution, a Series B Preferred Capital
Contribution or a Series C Preferred Capital Contribution.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent federal law of similar import, and, to the extent
applicable, the Treasury Regulations.
"Common Capital Contribution" means with respect to each of Paragon and
TWE, the excess of (A) the amount of cash contributed by such Partner to the
Partnership pursuant to this Agreement plus the fair market value without regard
to Code Section 7701(g) of property contributed by such Partner to the
Partnership pursuant to this Agreement (net of liabilities that are secured by
such contributed property or that either Partner is considered to assume under
Code Section 752), over (B) in the case of Paragon, the sum of the Series A
Preferred Capital Contribution and the Series B Preferred Capital Contribution
and the Series C Preferred Capital Contribution of such Partner and, in the case
of TWE, the Series C Preferred Capital Contribution of such Partner.
"Common Tax Amount" means, for any year, with respect to TWE or
Paragon, the amount obtained by multiplying (a) the Effective Tax Rate for such
year by (b) the excess, if any, of (i) the sum of the Net Profit or Gross Profit
allocated to such Partner for such year (other than pursuant to Sections
5.3(b)(i), 5.3(b)(ii), 5.3(b)(iii), 5.3(d)(i) and 5.3(d)(ii)), over (ii) the Net
Loss or Gross Loss allocated to such Partner for each prior year (other than
pursuant to Section 5.3(d)(ii) and 5.3(c)(ii)) but only to the extent that the
amounts set forth in this clause (ii) were not used in reducing the Common Tax
Amount for such prior year or any intervening year. For purposes of determining
the Common Tax Amount, Net Profit, Gross Profit, Net Loss and Gross Loss, shall
be calculated without taking into account the items described in clause (i),
clause (ii), clause (iii), clause (vi), and clause (vii) of the definition of
"Net Profit" and "Net Loss" or, with respect to any year (or portion thereof)
prior to August 1, 2002, the items described in clause (i), clause (ii), clause
(iii), clause (vi), clause (vii) and clause (ix) of the definition of "Net
Profit" and "Net Loss" of the First Amended Agreement.
"Consent Decrees" means the Consent Order dated December 14, 2000 and
related decisions and orders of the Federal Trade Commission issued to ATW (or
any of its Affiliates or predecessors).
"control" (including the terms "controlled by," and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Controlled Affiliate" means, with respect to any Person, any Affiliate
of such Person that is controlled by such Person, directly or indirectly through
one or more intermediaries.
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"Debt Assumption Agreement" means the Instrument of Debt Assumption,
dated as of August 1, 2002, by and between the Partnership and Advance/Xxxxxxxx,
as the same may be amended, modified or supplemented from time to time in
accordance with its terms.
"Delayed Transfer Assets" has the meaning ascribed thereto in the
Contribution Agreement.
"Depreciation" means, for each fiscal period, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such fiscal period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes
Depreciation shall be determined as set forth in Treasury Regulations Section
1.704-3(d).
"Distributable Cash" means, at any time, all cash of the Partnership
that, in the judgment of the Managing Partner, can then be distributed to the
Partners without violating any contractual restriction to which the Partnership
is subject and that is not otherwise necessary for the operation of the Residual
Business (including any reserves of such cash established by the Partnership for
any Partnership purpose).
"DMA" means "Designated Market Area" in the Code of Federal Regulations
at 47 C.F.R. 76.55.
"EBITDA" means, with respect to each of the Residual Business and the
Selected Business, for any period, operating income before interest, income
taxes, depreciation and amortization for such period determined in accordance
with the prior practices of the Managing Partner with respect to the Residual
Business and Advance/Xxxxxxxx, with respect to the Selected Business, in each
case consistently applied, and/or as the Partners shall otherwise mutually
agree; provided that for purposes of determining EBITDA of the Selected Business
during any of the four fiscal quarters immediately following August 1, 2002,
EBITDA shall be determined in accordance with the prior practices of the
Managing Partner, consistently applied or Advance/Xxxxxxxx, consistently applied
(whichever produces lower EBITDA).
"Effective Tax Rate" means, at any time, and from time to time, the
percentage determined by the Managing Partner to be a reasonable estimate of the
highest marginal combined Federal, state, and local income tax rate (giving
effect to the deduction of state and local income taxes, as applicable, for
Federal and state income tax purposes), applicable to corporations doing
business in New York City, with respect to taxable income allocated to the
Partners by the Partnership for Federal income tax purposes.
"Employee Matters Agreement" means the Employee Matters Agreement among
TWE, the Partnership and Advance/Xxxxxxxx dated as of December 31, 2002, as the
same may be amended, modified or supplemented from time to time in accordance
with its terms.
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"Final Determination" means a settlement, compromise or other agreement
with the Internal Revenue Service or the relevant state or local Governmental
Authorities, whether contained in an Internal Revenue Service Form 870 or other
comparable form, or otherwise, or such procedurally later event, such as a
closing agreement with the Internal Revenue Service or the relevant state and
local Governmental Authorities, an agreement contained in Internal Revenue
Service Form 870-D or other comparable form, an agreement that constitutes a
determination under Section 1313(a)(4) of the Code, a deficiency notice with
respect to which the period for filing a petition with the Tax Court or the
relevant state or local tribunal has expired or a decision of any court of
competent jurisdiction that is not subject to appeal or as to which the time for
appeal has expired.
"First Effective Date" means February 12, 1998.
"First Transaction Agreement" means the Amended and Restated
Transaction Agreement, dated as of October 27, 1997, among Advance, Xxxxxxxx,
Advance/Xxxxxxxx, TWE, TW Holding Co. and the Partnership.
"Fourth Effective Date" means February 1, 2001.
"Fourth Transaction Agreement" means the Amended and Restated
Transaction Agreement, dated as of February 1, 2001, among Advance, Xxxxxxxx,
Advance/Xxxxxxxx, TWE, Paragon and the Partnership.
"Franchise" means written "franchise" within the meaning of Section
602(8) of the Cable Communications Policy Act of 1984 (47 U.S.C. ss.522(9)).
"Franchising Authority" has the meaning that term is given by Section
602(9) of the Cable Communications Policy Act of 1984 (47 U.S.C. ss.522(10)).
"Free Cash Flow" has the meaning ascribed thereto in the Contribution
Agreement.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Governmental Authority" means any supranational, national, state,
municipal or local government, political subdivision or other governmental
department, court, commission, board, bureau, agency, instrumentality, or other
authority thereof, or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or quasi-governmental
authority, whether domestic or foreign.
"Gross Asset Value" means: in the case of any asset held by the
Partnership on July 31, 2002, the gross fair market value of such asset as of
the close of business on July 31, 2002, and in the case of any asset acquired by
the Partnership after July 31, 2002, the asset's adjusted basis for federal
income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership after July 31, 2002 shall be the
gross fair market value of such asset;
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(ii) The Gross Asset Value of all assets of the
Partnership shall be adjusted to equal their respective gross fair market
values, as agreed to by TWE and Paragon, as of the following times: (a) the
acquisition of an additional interest in the Partnership by TWE or Paragon in
exchange for more than a de minimis Common Capital Contribution; (b) the
distribution by the Partnership to TWE and Paragon of more than a de minimis
amount of Partnership property as consideration for an interest in the
Partnership; and (c) the liquidation of the Partnership within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that the
adjustments pursuant to clauses (a) and (b) above shall be made only if TWE and
Paragon agree that such adjustments are necessary or appropriate to reflect the
relative economic interests of such Partners in the Partnership;
(iii) The Gross Asset Value of any asset distributed by the
Partnership to TWE or Paragon shall be the gross fair market value of such asset
on the date of distribution as determined by such Partner and the Partnership;
and
(iv) The Gross Asset Value of the assets of the
Partnership shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m) and Section 5.4; provided, however, that Gross Asset Value
shall not be adjusted pursuant to this paragraph (iv) to the extent that an
adjustment was made pursuant to paragraph (ii) of this definition in connection
with any transaction that would otherwise have resulted in an adjustment
pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted as
described above, other than pursuant to paragraph (iii), of this definition, the
Gross Asset Value of such asset shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing Net
Profit and Net Loss.
"Gross Loss" means, with respect to any year, the items of deduction or
loss of the Partnership computed on the same basis that Net Profit and Net Loss
are computed for purposes of this Agreement.
"Gross Profit" means, with respect to any year, the items of income and
gain of the Partnership computed on the same basis that Net Profit and Net Loss
are computed for purposes of this Agreement.
"Guarantee Agreement" means the Guarantee Agreement, dated as of August
1, 2002, by Advance Publications, Inc., Xxxxxxxx Broadcasting Corporation, and
Xxxxxxxx Programming Holdings Corp., as the same may be amended, modified or
supplemented from time to time in accordance with its terms.
"Income Tax" shall mean any Tax which is based upon, measured by, or
calculated with respect to (i) net income or profits (including, but not limited
to, any capital gains or minimum Tax) or (ii) multiple bases (including, but not
limited to,
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corporate franchise, doing business or occupation Taxes), if one or more of the
bases upon which such Tax may be calculated is described in clause (i) hereof.
"Indebtedness" means (i) debt for money borrowed and similar monetary
obligations evidenced by bonds, notes, debentures, or other similar instruments,
other than trade accounts payable in the ordinary course of business, (ii)
obligations with respect to letters of credit, and (iii) guaranties,
endorsements, and other contingent obligations whether direct or indirect in
respect of liabilities of others of any of the types described in clauses (i)
and (ii) above (other than endorsements for collection or deposit in the
ordinary course of business).
"Indemnity Agreement" means the Indemnity Agreement, dated as of August
1, 2002, by and among Advance/Xxxxxxxx, the Selected Business, TWE and the
Residual Business.
"Initial Closing Date" means April 1, 1995.
"Intellectual Property Agreement" means the Intellectual Property
Agreement among TWE, the Selected Business, Advance/Xxxxxxxx and the Selected
Subsidiary, dated as of August 1, 2002, as the same may be amended, modified or
supplemented from time to time in accordance with its terms.
"Maximum Income Amount" means, for any year, with respect to any
Partner, an amount equal to the product of (i) the Tax Adjustment Percentage for
such year, and (ii) the Special Income of such Partner for such year.
"MSO" means a Person that operates multiple Systems.
"Net Profit" and "Net Loss" mean, for each Fiscal Year or other period,
an amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Partnership that is exempt from
Federal income tax and not otherwise taken into account in computing Net Profit
or Net Loss shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), that are not
otherwise taken into account in computing Net Profit or Net Loss shall be
subtracted from such taxable income or loss;
(iii) If the Gross Asset Value of any asset of the
Partnership is adjusted pursuant to paragraph (ii) or (iii) of the definition of
Gross Asset Value, the amount of
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such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profit or Net Loss;
(iv) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized for
Federal income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax basis
of such property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year or
other period;
(vi) To the extent any adjustment to the adjusted tax
basis of any asset of the Partnership pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts as
a result of a distribution other than in liquidation of a Partner's interest in
the Partnership, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the asset
and shall be taken into account for purposes of computing Net Profit and Net
Loss; and
(vii) For purposes of this Agreement, any deduction for a
loss on a sale or exchange of Partnership property that is disallowed to the
Partnership under Code Section 267(a)(1) or Code Section 707(b) shall be treated
as a Code Section 705(a)(2)(B) expenditure.
"Net Tax Amount" means, for any year, with respect to TWE or Paragon,
the sum of (i) the Common Tax Amount of such Partner for such year and (ii) the
Special Tax Amount of such Partner for such year.
"Xxxxxxxx" means Xxxxxxxx Broadcasting Corporation, a New York
corporation.
"Non-Income Tax" means any Tax, other than an Income Tax.
"Original Contribution Agreement" means the Contribution Agreement,
dated as of September 9, 1994, as amended from time to time, among the
Partnership, the Partners, Advance and Xxxxxxxx.
"Other TWE Systems" means the Systems owned by TWE or its Affiliates
other than the Partnership Systems.
"Paragon Residual Percentage Interest" means 2.85%.
"Parents Agreement" means the Agreement dated as of September 9, 1994
among Advance, Xxxxxxxx and TWX.
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"Partners" means Advance/Xxxxxxxx, TWE and Paragon and "Partner" means
any of such Partners, except as otherwise provided in Section 5A or Section 5.
"Partnership" means the partnership created by the Partners pursuant to
this Agreement.
"Partnership Interest" means, (a) as to TWE or Paragon all of the
interest of such Person in the Partnership, which includes only such Person's
(i) right to a distributive share of the income, gain, losses, and deductions of
the Partnership in accordance with this Agreement, which shall be measured by
the number and type of Partnership Units held by such Person under this
Agreement, (ii) right to a distributive share of the Residual Business' assets,
which shall be measured by the number and type of Partnership Units held by such
Person under this Agreement, (iii) other rights and all obligations hereunder,
and (iv) rights and responsibilities with respect to the management of the
business and affairs of the Residual Business, as provided herein or by law; and
(b) as to Advance/Xxxxxxxx, all of the interest of such Person in
the Partnership, which includes only such Person's (x) right to receive
distributions of and from the Selected Business, (y) other rights and all
obligations hereunder and (z) rights and responsibilities with respect to the
management of the business and affairs of the Selected Business, as provided
herein or by law.
"Partnership Systems" means all Systems now owned or hereafter
acquired, directly or indirectly, by the Partnership, including the Residual
Systems and the Selected Systems.
"Partnership Unit" means either a "Series SB Common Partnership Unit,"
a "Series RB Common Partnership Unit", a "Series A Preferred Partnership Unit,"
a Series B Preferred Partnership Unit", or a "Series C Preferred Partnership
Unit," and all "Partnership Interests" associated therewith each as defined in
this Agreement.
"Person" means any natural person, corporation, general or limited
partnership, limited liability company, joint venture, trust, association,
unincorporated entity of any kind, or a government or any department or agency
thereof.
"Preferred Sub-Account" means, with respect to TWE or Paragon, the
portion of such Partner's Capital Account that is equal to the aggregate amount
of Series A Preferred Capital Contributions, Series B Preferred Capital
Contributions and Series C Preferred Capital Contributions made by such Partner,
(A) INCREASED BY allocations of Net Profit made with respect to such Partner
pursuant to Section 5.3(b)(i) or Section 5.3(b)(ii); and (B) DECREASED BY (x)
distributions made with respect to such Partner pursuant to Section 5.1(a)(ii),
Section 5.1(b)(ii) or Section 5.1(b)(iv), and (y) allocations of Net Loss made
with respect to such Partner pursuant to Section 5.3(c)(ii).
"Prior Partnership Unit" means a Prior Common Partnership Unit or a
Prior Preferred Partnership Unit.
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"Prior Common Partnership Unit" means a Common Partnership Unit and all
"Partnership Interests" associated therewith in each case as defined in the
First Amended Agreement.
"Prior Preferred Partnership Unit" means a "Series A Preferred
Partnership Unit," a "Series B Preferred Partnership Unit" or a "Series C
Preferred Partnership Unit," and all "Partnership Interests" associated
therewith in each case as defined in the First Amended Agreement.
"Priority Return" shall mean the sum of the Series A Priority Return,
the Series B Priority Return and the Series C Priority Return.
"Residual Business" means the Partnership and all of the businesses,
assets and liabilities of the Partnership (whether conducted or owned itself or
through direct or indirect divisions, Subsidiaries, joint ventures or other
investments), including, without limitation all of the assets and liabilities of
the Partnership under the Restructuring Transaction Agreements, or any of their
predecessors or successors, in each case other than the Selected Business
(including, without limitation, any assets or liabilities of the Selected
Business under the Restructuring Transaction Agreements). For the avoidance of
doubt, references to actions taken by, or to be taken by, the Residual Business
shall mean that the Partnership will take such action solely on behalf of and
with respect to the Residual Business.
"Residual Percentage Interests" means the Paragon Residual Percentage
Interest and the TWE Residual Percentage Interest.
"Residual Systems" means all Systems now owned or hereafter acquired,
directly or indirectly, by the Residual Business.
"Restructuring Transactions" means the transactions contemplated to be
consummated on or prior the date hereof under the Restructuring Transaction
Agreements.
"Restructuring Transaction Agreements" means the Master Transaction
Agreement, this Agreement, the Services Agreement, the Contribution Agreement
(including the Xxxx of Sale, Instrument of Assignment and Instrument of
Assumption executed and delivered thereunder), the Intellectual Property
Agreement, the Management Agreement, the Guarantee Agreement, the Indemnity
Agreement, the Debt Assumption Agreement, the Employee Matters Agreement, the
Amended and Restated Indemnity Agreement, and all other agreements and
instruments delivered in connection therewith.
"Road Runner" means Road Runner HoldCo LLC, a Delaware limited
liability company.
"Second Effective Date" means December 31, 1998.
12
"Second Transaction Agreement" means the Transaction Agreement No. 2,
dated as of June 23, 1998, among Advance, Xxxxxxxx, Advance/Xxxxxxxx, TWE,
Paragon and the Partnership.
"Selected Business" (a) with respect to periods ending prior to the
date hereof, shall have the meaning ascribed thereto in the Master Transaction
Agreement and (b) with respect to periods ending on and after the date hereof,
shall mean all of the businesses, assets and liabilities granted or contributed
to, or otherwise assumed, by the Selected Subsidiary or any other member of the
Advance/Xxxxxxxx Group pursuant to the Contribution Agreement or any other
Restructuring Transaction Agreement, all Indebtedness incurred or secured by the
Selected Subsidary and all of the Advance/Xxxxxxxx Group's rights in respect of
the Selected Business and the Restructuring Transaction Agreements, and also
includes the Delayed Transfer Assets and the Free Cash Flow therefrom, if any,
and including any assets (including cash) generated on or after August 1, 2002
by the assets of the Selected Business, subject to any Liabilities (as defined
in the Master Transaction Agreement) incurred by the Selected Business (as
defined in clause (a) above) on or after August 1, 2002 or by the Selected
Subsidiary after the date hereof. For the avoidance of doubt, references to
actions taken by, or to be taken by, the Selected Business shall mean that the
Selected Subsidiary will take such action on behalf of itself and any Delayed
Transfer Assets. References to the Selected Business shall be deemed to be
references to the Selected Subsidiary and the Delayed Transfer Assets, including
Free Cash Flow therefrom, if any.
"Selected Subsidiary" means TWEAN Subsidiary, LLC, a Delaware limited
liability company of which the Partnership is the sole member, which shall be
deemed to include any Delayed Transfer Assets held by the Partnership for the
benefit of TWEAN Subsidiary, LLC, and any Free Cash Flow therefrom.
"Selected Systems" means all Systems now owned or hereafter acquired,
directly or indirectly, by the Selected Business.
"Selection Date" means June 24, 2002.
"Series A Preferred Capital Contribution" means, with respect to
Paragon, a Capital Contribution by Paragon of assets having a fair market value
of $1,000 for each Prior Preferred Partnership Unit issued to Paragon pursuant
to Section 4.2(b)(i) of the First Amended Agreement.
"Series A Preferred Partnership Unit" means Paragon's right to
distributions in an amount equal to the Series A Priority Return allocable to
the Series A Preferred Capital Contribution of $1,000 and the right to a return
of such Series A Preferred Capital Contribution in redemption thereof, all of
which shall be payable in accordance with Section 5, together with all
allocations of income attributable thereto, as specified in Section 5.
"Series A Priority Return" means, with respect to each outstanding
Series A Preferred Partnership Unit, a sum equal to 10 1/4 percent for the
actual number of days in
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the period for which the Series A Priority Return is being calculated,
cumulative and compounded annually, on the amount of $1,000 plus any accrued and
unpaid Series A Priority Return with respect to such Series A Preferred
Partnership Unit, commencing on the First Effective Date.
"Series B Preferred Capital Contribution" means with respect to
Paragon, a Capital Contribution by Paragon of assets having a fair market value
of $1,000 for each Prior Preferred Partnership Unit issued to Paragon pursuant
to Section 4.2(b)(ii) and 4.2(b)(iii) of the First Amended Agreement.
"Series B Preferred Partnership Unit" means, with respect to Paragon,
such Partner's right to distributions in an amount equal to the Series B
Priority Return allocable to such Partner's Series B Preferred Capital
Contribution of $1,000 and the right to a return of such Series B Preferred
Capital Contribution in redemption thereof, all of which shall be payable in
accordance with Section 5, together with all allocations of income attributable
thereto, as specified in Section 5.
"Series B Priority Return" means, with respect to each outstanding
Series B Preferred Partnership Unit, a sum equal to 2% plus the Partnership's
cost of borrowing under its senior credit facility for the actual number of days
in the period for which the Series B Priority Return is being calculated,
cumulative and compounded annually, on the amount of $1,000 plus any accrued and
unpaid Series B Priority Return with respect to such Series B Preferred
Partnership Unit, commencing on the (i) Second Effective Date, in the case of
Series B Preferred Partnership Units deemed issued on the Second Effective Date
or (ii) the Third Effective Date, in the case of Series B Preferred Partnership
Units deemed issued on the Third Effective Date.
"Series C Preferred Capital Contribution" means with respect to TWE and
Paragon, a Capital Contribution by such Partner of assets having a fair market
value of $1,000 for each Prior Preferred Partnership Unit issued to such Partner
pursuant to Section 4.2(a)(v)(B) or 4.2(b)(iv) of the First Amended Agreement.
"Series C Preferred Partnership Unit" means, with respect to TWE and
Paragon, such Partner's right to distributions in an amount equal to the Series
C Priority Return allocable to such Partner's Series C Preferred Capital
Contribution of $1,000 and the right to a return of such Series C Preferred
Capital Contribution in redemption thereof, all of which shall be payable in
accordance with Section 5, together with all allocations of income attributable
thereto, as specified in Section 5.
"Series C Priority Return" means, with respect to each outstanding
Series C Preferred Partnership Unit, a sum equal to 2% plus the Partnership's
cost of borrowing under its Senior Credit facility for the actual number of days
in the period for which the Series C Priority Return is being calculated,
cumulative and compounded annually, on the amount of $1,000 plus any accrued and
unpaid Series C Priority Return with respect to such Series C Preferred
Partnership Unit, commencing on the Fourth Effective Date.
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"Series RB Common Partnership Unit" means the measure of a Partner's
right to certain distributions and allocations with respect to the Residual
Business, as specified in Section 5A and Section 5.
"Series SB Common Partnership Unit" means the measure of a Partner's
right to receive distributions and allocations with respect to the Selected
Business, as specified in Section 5A and Section 5.
"Special Effective Tax Rate" means, at any time, and from time to time,
the effective combined rate of Federal, state and local income and franchise tax
that the Partnership would be required to pay, if it were a corporation, on its
taxable income for such year, for Federal income tax purposes.
"Special Income" means, for any year, with respect to TWE or Paragon,
the sum of:
(i) the excess, if any, of (a) such Partner's
distributive share of Depreciation and loss determined as provided in clause
(iv) of the definition of Net Profit and Net Loss for such year, over (b) such
Partner's distributive share of depreciation, amortization, and other cost
recovery deductions and loss for such year for Federal income tax purposes, to
the extent such excess results from a difference between the basis for Federal
income tax purposes of any assets and the Gross Asset Value of such assets;
(ii) the excess, if any, of (a) such Partner's
distributive share of gain for Federal income tax purposes for such year, over
(b) such Partner's distributive share of gain determined as provided in clause
(iv) of the definition of Net Profit and Net Loss for such year, to the extent
such excess results from a difference between the basis for Federal income tax
purposes of any assets and the Gross Asset Value of such assets; and
(iii) any remedial items allocated to such Partner pursuant
to Treasury Regulations Section 1.704-3(d) for such year.
"Special Tax Amount" means, for any year, with respect to TWE or
Paragon, the amount obtained by multiplying (a) the Special Effective Tax Rate
for such year, by (b) the excess, if any, of (i) the sum of (x) the sum of the
Net Profit and Gross Profit allocated to such Partner pursuant to Sections
5.3(b)(iii) and 5.3(d)(ii) for such year, (y) the Special Income, if any,
allocated to such Partner for such year, and (z) to the extent that the Common
Tax Amount of such Partner for such year is reduced by any Net Loss or Gross
Loss allocated to such Partner for any prior year which was used to reduce such
Partner's Special Tax Amount for any prior year, an amount (expressed as a
positive number) equal to the sum of such Net Loss and Gross Loss, over (ii) the
sum of (x) the Gross Loss allocated to such Partner pursuant to Section
5.3(d)(ii) for the current year, and (y) the Net Loss or Gross Loss allocated to
such Partner for the current or prior year (other than pursuant to Section
5.3(c)(ii) and 5.3(d)(ii)) but only to the extent that the amounts set forth in
this clause (y) were not used in reducing the Common Tax Amount for the current
year or the Special Tax Amount for any prior year. For purposes of determining
the Special Tax Amount, Net Profit, Gross Profit, Net Loss and Gross Loss,
15
shall be calculated without taking into account the items described in clause
(i), clause (ii), clause (iii), clause (vi) and clause (vii) of the definition
of "Net Profit" and "Net Loss" or, with respect to any year (or portion thereof)
prior to August 1, 2002, the items described in clause (i), clause (ii), clause
(iii), clause (vi), clause (vii) and clause (ix) of the definition of "Net
Profit" and "Net Loss" of the First Amended Agreement.
"Subscriber" means a subscriber to basic cable television service on
the applicable System.
"Subsidiary" means, with respect to any Person, any other Person
controlled by such first Person.
"System" means a "cable television system" within the meaning of
Section 602(7) of the Communications Act of 1934, as amended.
"Tax" shall mean all forms of taxes, fees, imposts, levies or other
assessments whenever created or imposed, and whether of the United States or
elsewhere, and whether imposed by a Governmental Authority, and, without
limiting the generality of the foregoing, shall include income, gross receipts,
business and occupation, property, sales, use, license, excise, franchise,
capital stock, employment, payroll, unemployment insurance, social security,
stamp, environmental, value added, alternative or added minimum, ad valorem,
trade, recording, withholding, occupation or transfer tax, custom or duty or
other like governmental assessment or charge of any kind whatsoever, whether
computed on a separate, consolidated, unitary, combined or any other basis,
together with any related interest, penalties and additions imposed by any
Governmental Authority.
"Tax Adjustment Percentage" means, with respect to any year, the amount
obtained by dividing (A) the Special Effective Tax Rate for such year by (B) the
excess of one (1) over such Special Effective Tax Rate.
"Tax Proceeding" means any Tax audit, examination, controversy or
litigation with or against any Governmental Authority.
"Taxable Income" or "Taxable Loss" means net income or loss of the
Partnership as determined for Federal income tax purposes.
"TCI Contribution Agreement" has the meaning ascribed thereto in the
Second Transaction Agreement.
"Third Effective Date" means March 1, 1999.
"Third Transaction Agreement" means the Transaction Agreement No. 3,
dated as of September 15, 1998 among Advance, Xxxxxxxx, Advance/Xxxxxxxx, TWE,
Paragon and the Partnership.
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"Transaction Agreements" means, collectively, the First Transaction
Agreement, the Second Transaction Agreement, the Third Transaction Agreement and
the Fourth Transaction Agreement.
"Treasury Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"TWE Accountants" means the independent auditors or other auditors
selected by TWE.
"TWE Cable Division" means the Cable Division of TWE.
"TWE Group" means TWE and its Affiliates.
"TWE Partnership Agreement" means the Agreement of Limited Partnership,
dated as of October 29, 1991, as amended from time to time, among TWI, Itochu
Corporation, Toshiba Corporation, USW and certain of their respective
subsidiaries.
"TWE Residual Percentage Interest" means 97.15%.
"TWE Systems" means all Systems now owned or hereafter acquired,
directly or indirectly, by TWE or its Affiliates, but shall not include any
Systems owned by or beneficially held for the Selected Subsidiary.
"TWI" means Time Warner Inc., a Delaware corporation.
"USW" means U S WEST, Inc., a Colorado corporation, and its successors
and assigns in respect of its interests under the TWE Partnership Agreement.
1.2 TERMS DEFINED ELSEWHERE IN THIS AGREEMENT. For purposes of
this Agreement, the following terms have the meanings set forth in the sections
indicated:
TERM SECTION
---- -------
Adjustment Report 11.5
Advance/Xxxxxxxx Preamble
Advance/Xxxxxxxx System Opportunity 10.2(a)
Advance/Xxxxxxxx Opportunity Notice 10.2(a)
Appraiser 8.4(j)
ATW Securities 3.1(h)
Cable Company 8.3(h)
Closing Price 3.1(h)
Consideration Period 8.4(d)
17
TERM SECTION
---- -------
Contribution 8.2
Contribution Agreement 3.1(a)
Contribution Entity 8.2
Contribution Entity Certification 8.3(c)
Contribution Entity EBITDA 8.2(c)
Credit Partner 5.5(f)
Eligible Option Holder 3.1(h)
Equity for Carriage Programming Opportunity 10.3(a)
Executive Committee 3.1(b)
Final Restructuring Date 8.1
First Amended Agreement Preamble
Fiscal Year 2.7
Intercompany Account 3.3(a)
Liquidator 12.3(a)
Managed Systems 3.1(h)
Management Agreement 2.10(a)
Managing Partner 3.1(a)
Master Transaction Agreement Preamble
Xxxxxxxx Family Member 6.1(a)
NYSE 3.1(h)
Offer Notice 8.3(a)
Offer Period 8.4(f)
Operating Cash Flow 8.2(c)
Other Corporate Security 8.3(b)
Paragon Preamble
Post-Bid Offer Notice 8.3(a)
Pre-Bid Offer Notice 8.3(a)
Regular Distributions 8.2(c)
Required Minimum Price 8.4(e)
Refinancing Consent 7.2(c)
Residual Business Percentage 12.3(b)
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TERM SECTION
---- -------
Restructuring Notice 8.1
ROFO Required Minimum Price 8.4(f)
ROFO Termination Notice 8.4(d)
Second Amended Agreement Preamble
Selected Business Percentage 12.3(b)
Services Agreement 3.1(a)
Special Distributions 8.2(c)
Special ROFO Assets 8.4(a)
Special ROFO Asset Value 8.4(c)
Special ROFO Event 8.4(a)
Special ROFO Notice 8.4(a)
Special ROFO Period 8.4(a)
Special ROFO Process 8.4(a)
Tax Matters Partner 3.1(g)
Third Party Programming 3.1(h)
Transfer Assets 8.3(a)
Transferee 8.2(i)
TWE Preamble
TWE Cable Expenses 3.1(h)
TWE System Opportunity 10.2(b)
TWE Opportunity Notice 10.2(b)
Valuation Notice 8.4(c)
Wholly-Owned Affiliates 3.1(h)
SECTION 2 THE PARTNERSHIP AND ITS BUSINESS
2.1 FORMATION.
(a) FORMATION OF PARTNERSHIP. The Partnership was
initially formed as a general partnership as of September 9, 1994 pursuant to
the provisions of the Act. The Partners hereby expressly agree to continue the
Partnership. Except as provided in this Agreement, all rights, liabilities, and
obligations of the Partners (in their capacities as such), both as among
themselves and with respect to Persons not parties to this Agreement, shall be
as provided in the Act, and this Agreement shall be construed in
19
accordance with the provisions of the Act. To the extent that the rights or
obligations of any Partner are different by reason of any provision of this
Agreement from what they would be under the Act in the absence of such
provision, this Agreement shall, to the extent permitted by the Act, control.
(b) FORMATION OF SUBSIDIARY. The Selected Subsidiary was
formed on July 9, 2002 and the Partnership remains its sole member.
Notwithstanding anything in this Agreement to the contrary, at no time prior to
the Final Restructuring Date shall the Selected Subsidiary be permitted, or have
the power, to become an employer or to establish employee benefit plans or
arrangements.
2.2 PARTNERSHIP NAME AND TRADE NAMES.
(a) Partnership Name; Subsidiary Name.
(i) Subject to the following sentence, the name
of the Partnership shall continue to be "Time Warner
Entertainment-Advance/Xxxxxxxx Partnership" or such other name(s) as may from
time to time be agreed to by each of the Partners. Within 30 days following the
Final Restructuring Date, the name of the Partnership shall be changed to a name
selected by TWE and thereafter to such other name(s) as may from time to time be
set forth by TWE; provided, however, that such name shall not include
"Advance/Xxxxxxxx", "Advance", "Xxxxxxxx" or any derivation thereof.
(ii) The name of the Selected Subsidiary may be
changed to such other name(s) as may from time to time be selected by
Advance/Xxxxxxxx (subject to the Intellectual Property Agreement). Within 30
days following the Final Restructuring Date, the name of the Selected Subsidiary
shall be changed to a name selected by Advance/Xxxxxxxx and thereafter to such
other name(s) as may from time to time may be set forth by Advance/Xxxxxxxx, in
each instance subject to the Intellectual Property Agreement; provided, however,
that such name shall not include "Time Warner Entertainment," "TWE" or any
derivative thereof.
(b) TRADE NAMES. Within 90 days following the date
hereof, the trade names used by the Selected Business shall be changed in
accordance with the Intellectual Property Agreement. Each other business of the
Partnership shall be conducted under the name of the Partnership or, upon
compliance with applicable laws and the Intellectual Property Agreement, any
other name that TWE deems appropriate or advisable.
(c) ASSUMED NAME FILINGS. The Partnership and the
Selected Subsidiary shall each file any assumed name certificates and similar
filings, and any amendments thereto, that TWE or Advance/Xxxxxxxx respectively,
considers appropriate or advisable.
20
2.3 TERM OF THE PARTNERSHIP. The term of the Partnership commenced
on September 9, 1994 and, unless the Partnership is earlier terminated pursuant
to Section 12 of this Agreement or otherwise, shall continue until December 31,
2045.
2.4 PURPOSES.
(a) GENERALLY. The purposes of the Partnership shall be,
to the extent permitted under applicable law, to engage in the business,
directly or indirectly through interests in one or more Subsidiaries (including
the Selected Subsidiary), of:
(i) acquiring, developing, owning, operating,
managing, and selling the Systems and other assets from time to time contributed
to the Partnership by the Partners;
(ii) acquiring, developing, owning, operating,
managing and selling additional Systems;
(iii) acquiring, developing, owning, operating,
managing, and selling, or investing in, businesses related to the operation of
Systems, including without limitation programming and information services,
personal communications and cable advertising businesses;
(iv) developing, owning, operating, managing, and
selling residential and business telephony services associated with such
Systems, including alternative access services, personal communications services
and other similar services;
(v) developing, owning, operating, managing, and
selling other businesses that utilize broadband distribution facilities, in
addition to residential and business telephony services;
(vi) managing Systems;
(vii) selling at the retail level equipment and
other goods used or useful in connection with the businesses described in
clauses (i) through (vi) above;
(viii) conducting other businesses desired by any
of the Partners; and
(ix) engaging in all activities and transactions
incidental to the foregoing (including owning or leasing real property and
incurring Indebtedness).
(b) EFFECT ON POWERS OF PARTNERS. The listing of the
purposes of the Partnership in this Section 2.4 shall not be construed to impair
the limitations on the powers of the Partners set forth in Section 3.2 or any of
the other limitations expressly set forth in this Agreement.
21
2.5 PRINCIPAL OFFICE AND OTHER OFFICES. The principal office of
the Partnership shall be located at 000 Xxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx. The
Partnership may maintain other offices at other places as the Managing Partner
deems advisable.
2.6 FOREIGN QUALIFICATION. The Partners shall take all necessary
actions to cause the Partnership to be authorized to conduct business legally in
all appropriate jurisdictions, including registration or qualification of the
Partnership in those jurisdictions that provide for registration or
qualification.
2.7 FISCAL YEAR. The Partnership's fiscal year (each, a "FISCAL
YEAR") shall be the calendar year. The Partnership shall have the same Fiscal
Year for Income Tax purposes and for financial and partnership accounting
purposes.
2.8 ADDRESSES OF THE PARTNERS. The respective addresses of the
Partners are set forth on the signature page to this Agreement.
2.9 PROPERTY. Except as otherwise contemplated herein or in the
Restructuring Transaction Agreements, all assets and property, whether real,
personal, or mixed, tangible or intangible, including contractual rights, owned
or possessed by the Partnership shall be held or possessed in the name of the
Partnership or in the name of an appropriate nominee, and such assets, property,
and rights shall be deemed to be owned or possessed by the Partnership as an
entity; and no Partner shall have any separate ownership interest in such
assets, property, or rights. Each Partner's interest in the Partnership is
personal property for all purposes.
2.10 CERTAIN COMPLIANCE POLICIES.
(a) The Partnership will, and each of the Partners will
exercise its powers hereunder and under the Restructuring Transaction Agreements
(including, without limitation, the Management Agreement, dated as of the date
hereof, by and among TWE, Paragon, the Partnership, Advance/Xxxxxxxx and the
Selected Subsidiary, as amended, modified or supplemented from time to time in
accordance with its terms (the "Management Agreement")) to cause the Partnership
to, conduct its business and operations including the Selected Business and the
Residual Business in such manner as to comply with the Consent Decrees, to the
extent applicable, and any other laws and regulations applicable to the TWE
Cable Division and its Affiliates.
(b) TWE will provide Advance/Xxxxxxxx with copies of all
reports submitted by TWE or its Affiliates with respect to the Consent Decrees
(redacted as necessary with respect to matters not applicable to the Selected
Business) and will notify Advance/Xxxxxxxx sufficiently in advance of any new
consent decrees applicable to the TWE Cable Division and its Affiliates so that
Advance/Xxxxxxxx may protect its interest and, if it so chooses, to cause the
consummation of a restructuring under Section 8.1 before the Selected Business
becomes subject to such new consent decree.
(c) Any litigation, compromise or regulatory activity
(including lobbying) by the Selected Business will be conducted by
Advance/Xxxxxxxx in its own name and will not be attributed to the Partnership
or any member of the TWE Group.
22
Any litigation, compromise or regulatory activity (including lobbying) by the
Residual Business will not be attributed to the Selected Subsidiary or any
member of the Advance/Xxxxxxxx Group.
SECTION 3 MANAGEMENT OF THE PARTNERSHIP
3.1 MANAGEMENT POWERS.
(a) GENERALLY. From and after the date hereof, TWE will
continue as Managing Partner with exclusive management rights with respect to
the Partnership and the Residual Business; provided that the Selected Subsidiary
will be managed exclusively by Advance/Xxxxxxxx pursuant to the Management
Agreement; and provided further that (i) TWE Cable will continue to manage
programming matters for the Selected Subsidiary and the Selected Business and
provide other services to the Selected Subsidiary and the Selected Business on
the terms and conditions set forth in the Services Agreement, dated as of August
1, 2002, by and among TWE, Advance/Xxxxxxxx and the Selected Subsidiary, as the
same may be amended, modified or supplemented from time to time in accordance
with its terms (the "Services Agreement") and (ii) TWE will continue to manage
the Delayed Transfer Assets to the extent required by the Contribution Agreement
by and among the Partnership, the Selected Subsidiary, and Advance/Xxxxxxxx,
dated as of the date hereof, as the same may be amended, modified or
supplemented from time to time in accordance with its terms (the "Contribution
Agreement").
(b) RIGHTS, POWERS, AND DUTIES. The Managing Partner
shall be responsible for the management and operations of the Partnership and
shall have all powers necessary to manage and control the Partnership, to
conduct its business, and to implement any decision of the Partners adopted
pursuant to this Agreement, and all powers possessed by general partners under
the Act. Notwithstanding the preceding sentence, the exercise by the Managing
Partner of any of the powers described in the preceding sentence or listed below
in this Section 3.1(b) is subject to Section 3.1(a), Section 3.2 and any other
limitations set forth in this Agreement. Except as expressly provided herein, no
Partner other than the Managing Partner shall have any right to vote on, or
consent to, any action of any nature whatsoever taken or proposed to be taken by
the Partnership and no Partner other than the Managing Partner shall give any
consent on any matter or take any action as a Partner, including, without
limitation, acting on behalf of or binding the Partnership, unless such matter
or action shall first have been approved or consented to by the Managing Partner
or the Executive Committee. Subject to the foregoing, the powers of the Managing
Partner include, without limitation, the power on behalf of the Partnership, for
itself or on behalf of any Subsidiary of the Partnership, to:
(i) construct, operate, maintain, improve,
expand, buy, own, sell, convey, assign, mortgage, finance, refinance, rent, or
lease real or personal property, which may be held in the name of the
Partnership or any Subsidiary of the Partnership;
23
(ii) enter into, perform, and carry out contracts
and agreements of any kind necessary to, in connection with, or incidental to
accomplishing the purposes of the Partnership;
(iii) negotiate for and conclude agreements for
the sale, exchange, or other disposition of all or any part of the property of
the Partnership or of any Subsidiary of the Partnership, for property, cash, or
on terms, or any combination thereof, or for the purchase or lease of additional
property of the Partnership or any Subsidiary of the Partnership;
(iv) bring and defend actions in law and equity;
(v) execute and modify leases and other
agreements (including leases and agreements for terms extending beyond the term
of the Partnership or the term of any Subsidiary of the Partnership), and
execute and modify options, licenses, or agreements with respect to any of the
assets or the business of the Partnership or any Subsidiary;
(vi) obtain loans, secured and unsecured, for the
Partnership or any Subsidiary of the Partnership and secure the same by
mortgaging, assigning for security purposes, pledging, or otherwise
hypothecating, all or any part of the property and assets of the Partnership or
of any Subsidiary of the Partnership (and in connection therewith to place
record title to any such property or assets in the name or names of a nominee or
nominees);
(vii) prepay in whole or in part, refinance,
recast, increase, decrease, modify, amend, restate, or extend any such mortgage,
security assignment, pledge, or other security instrument, and in connection
therewith to execute and deliver, for and on behalf of the Partnership or any
Subsidiary of the Partnership, any extensions, renewals, or modifications
thereof, any new mortgage, security assignment, pledge, or other security
instrument in lieu thereof;
(viii) draw, make, accept, endorse, sign, and
deliver any notes, drafts, or other negotiable instruments or commercial paper;
(ix) establish, maintain, and draw upon checking,
savings, and other accounts in the name or any trade name of the Partnership or
any Subsidiary of the Partnership in such banks or other financial institutions
as the Managing Partner may from time to time select;
(x) employ, fix the compensation of, oversee,
and discharge agents and employees of the Partnership and of any Subsidiary of
the Partnership as the Managing Partner deems advisable in the operation and
management of the business of the Partnership, including accountants, attorneys,
architects, consultants, engineers, and appraisers, on such terms and for such
compensation, as the Managing Partner shall determine;
24
(xi) enter into management agreements with third
parties pursuant to which the management, supervision, or control of the
business or assets of the Partnership may be delegated to third parties for
reasonable compensation;
(xii) enter into joint ventures, general or
limited partnerships, or other agreements relating to the Partnership's
purposes;
(xiii) compromise any claim or liability due to the
Partnership or any Subsidiary of the Partnership;
(xiv) execute, acknowledge, verify, and file any
notifications, applications, statements, and other filings that the Managing
Partner considers necessary or desirable to be filed with any state or federal
securities administrator or commission;
(xv) execute, acknowledge, verify, and file any
and all certificates, documents, and instruments that the Managing Partner
considers necessary or desirable to permit the Partnership or any Subsidiary of
the Partnership to conduct business in any state;
(xvi) do any or all of the foregoing,
discretionary or otherwise, through agents selected by the Managing Partner and
compensated or uncompensated by the Partnership; and
(xvii) take any other actions and execute any other
contracts, documents, and instruments that the Managing Partner deems
appropriate to carry out the intents and purposes of this Agreement.
(c) COMPOSITION OF EXECUTIVE COMMITTEE. A committee (the
"EXECUTIVE COMMITTEE") shall be established which shall be composed of from
three to six individuals. The Executive Committee shall only have the power to
act with regard to those matters set forth in Section 3.2 hereof. Up to three of
the members of the Executive Committee shall be designated from time to time by
TWE, up to two of the members of the Executive Committee shall be designated
from time to time by Advance/Xxxxxxxx, and one of the members of the Executive
Committee shall be designated from time to time by Paragon. Any member of the
Executive Committee may be removed and replaced at any time, and from time to
time, by the Partner that originally designated such member. Any Partner, or at
least two members of the Executive Committee, may call a special meeting of the
Executive Committee upon no less than 48 hours' notice to each member. Each
designated member of the Executive Committee shall have one vote. The
affirmative vote (or written consent) of all of the voting power of all members
of the Executive Committee (whether or not present) shall constitute action by
the Executive Committee. Regular or special meetings of the Executive Committee
may be held in person or telephonically. Each member of the Executive Committee
entitled to vote at any meeting of the Executive Committee may authorize another
person to act for him by proxy (provided that such proxy must be signed by such
member or his attorney-in-fact and shall be revocable by such member at any time
prior to such meeting).
25
(d) DAY-TO-DAY CONDUCT OF PARTNERSHIP BUSINESS. The
day-to-day operations of the Residual Business shall be the responsibility of
the Managing Partner and the day-to-day operations of the Selected Business
shall be the responsibility of Advance/Xxxxxxxx. Without limiting any other
provisions hereof, it is agreed that Advance/Xxxxxxxx shall cause the Selected
Subsidiary to:
(i) maintain books and records separate from any
other person or entity;
(ii) maintain its bank accounts separate from any
other person or entity;
(iii) not commingle assets with those of any other
entity;
(iv) generally conduct its own business in its
own name, except that it may continue to use certain trade
names as permitted by the Partnership until no later than
March 31, 2003;
(v) maintain separate financial statements;
(vi) pay its own liabilities out of its own
funds;
(vii) observe all limited liability company
formalities;
(viii) maintain an arm's length relationship with
its affiliates;
(ix) not guarantee or become obligated for the
debts of any other entity or hold out its credit as being
available to satisfy the obligations of others;
(x) not acquire obligations or securities of the
Partnership;
(xi) allocate fairly and reasonably any overhead
for shared office space;
(xii) use separate stationary, invoices, and
checks;
(xiii) not pledge its assets for the benefit of any
other entity or make loans or advances to any entity except
pursuant to Section 8.5 of the Amended and Restated Limited
Liability Agreement, executed on December 11, 2002 and dated
as of he date hereof, as the same may be amended, modified or
supplemented from time to time in accordance with its terms;
(xiv) correct any known misunderstanding regarding
its separate identity; and
26
(xv) maintain adequate capital in light of its
contemplated business operations.
(e) EXECUTIVE OFFICERS. The Managing Partner may delegate
that part of its day-to-day operational responsibility for the Partnership as
the Managing Partner deems reasonable and prudent to individuals, who will be
the Executive Officers of the Partnership.
(f) FIDUCIARY OBLIGATIONS. To the greatest extent
permitted by law, a Partner shall not be liable to another Partner under this
Agreement or the Act with respect to any business of the Partnership (whether
the Selected Business or the Residual Business) by reason of any fiduciary or
similar duty, provided that this section shall in no way excuse any Partner from
the performance of its obligations and liabilities under this Agreement or the
other Transaction Agreements.
(g) TAX MATTERS PARTNER. The tax matters partner of the
Partnership pursuant to Code Section 6231(a)(7) (the "TAX MATTERS PARTNER")
shall be TWE or any successor tax matters partner designated by TWE. The Tax
Matters Partner shall , except as otherwise provided in Section 5.11, have all
powers necessary to perform fully its responsibilities under the Code. To the
extent and in the same manner as provided by applicable law, the Tax Matters
Partner (i) shall furnish the name, address, and taxpayer identification number
of each Partner to the Secretary of the Treasury or his delegate and (ii) shall
keep each Partner informed of any administrative and judicial proceedings for
the adjustment at the Partnership level of any items required to be taken into
account by such Partner for income tax purposes. The Tax Matters Partner shall
give notice to each Partner of a Partnership audit affecting such Partner. The
Tax Matters Partner shall prepare and file, or cause to be prepared and filed,
all tax returns (including amended tax returns) filed by the Partnership. The
Tax Matters Partner shall be reimbursed by the Partnership for all out-of-pocket
costs and expenses incurred by it in connection with any administrative or
judicial proceeding with respect to any tax matter involving the Partnership or
the Partners in their capacity as Partners; provided, that, with respect to any
taxable period (or portion thereof) beginning on or after August 1, 2002, such
reimbursement shall be made only out of cash attributable to the Residual
Business, and not the Selected Business.
(h) COMPENSATION OF PARTNERS AND REIMBURSEMENT OF
EXPENSES AFTER THE DATE HEREOF. This Section 3.1(h) shall apply to services
rendered after the date hereof.
(i) TWE shall be compensated by the Residual
Business for its services as Managing Partner in an amount equal to (A) the
Partnership's pro rata share, based on the ratio of the number of Subscribers
served by the Residual Systems to the total number of Subscribers served by the
Residual Systems and the Other TWE Systems, of the following: (1) TWE Cable
Expenses (as defined below), (2) the management fees payable by TWE to USW
pursuant to Section 8(h) of the Admission Agreement, dated as of May 16, 1993,
between TWE and USW, attributable to services received by the TWE Cable
Division, and (3) TWE's obligations under Section 17.7(b) of the TWE Partnership
27
Agreement (or any successor provision) to reimburse ATW with respect to options
exercised by employees of TWE's Cable Division (other than (x) Eligible Option
Holders (who are covered by paragraph (iii) below) and (y) system-level
employees of TWE who perform substantially all of their duties on behalf of one
or more Other TWE Systems), and (B) all specific costs and expenses incurred by
TWE and its Affiliates on behalf of the Partnership. For purposes of the
foregoing, "TWE CABLE EXPENSES" shall mean all expenses incurred in connection
with managing and operating the TWE Cable Division (other than direct and
identifiable costs or expenses relating to the Other TWE Systems, which would
not be appropriately allocated to the Partnership); provided that such expenses
shall be calculated net of any management fees received by TWE with respect to
the management of partially owned Systems ("MANAGED SYSTEMS"), it being
understood that in determining the Partnership's pro rata share of any costs or
expenses described in this Section 3.1(h), the Subscribers served by the Managed
Systems shall be excluded from the number of Subscribers served by the Residual
Systems and the number of Subscribers served by the Other TWE Systems. By way of
example, TWE Cable Expenses include, without limitation, the general costs and
expenses incurred by or allocated to the TWE Cable Division in connection with
the development of the Full Service Network and telephony service and legal
expenses incurred by the TWE Cable Division in connection with legal proceedings
(such as "test cases") which generally affect the TWE Cable Division, but do not
include expenses incurred in connection with the current operations of NY 1.
Notwithstanding the foregoing, to the extent that any TWE Cable Expenses are
paid more than one year beyond the end of the year in which such expenses arise,
the Partnership shall reimburse TWE for such expenses when such expenses are
paid; and to the extent that any TWE Cable Expenses are paid more than one year
in advance of the year in which they arise, the Partnership shall reimburse TWE
for such expenses when they are paid. The Partnership shall reimburse TWE for
all costs and expenses for each calendar month for which TWE is entitled to
reimbursement hereunder on the fifteenth day of such month based on TWE's
reasonable estimate thereof; provided that any discrepancies between actual
costs (as set forth in a certificate signed by an appropriate officer of TWE)
and estimated costs and expenses shall be settled quarterly in arrears by
payment by the Partnership to TWE of the amount of any underpayment for such
quarter or by allocating to the Partnership a credit against future payments
required by this paragraph in the amount of any overpayment for such quarter.
(ii) Subject to the Services Agreement in respect
of the Selected Business, TWE, as Managing Partner, shall make all programming
and any other service or product decisions with respect to the Partnership
Systems, and shall use reasonable best efforts to cause such systems to be
included in all programming and other relevant agreements to which the TWE Cable
Division or any of its Controlled Affiliates is a party. Subject to the Services
Agreement in respect of the Selected Business, TWE shall be compensated by the
Partnership for such programming as follows (whether or not the Partnership
Systems are included within such programming or other agreements):
(A) With respect to Third Party
Programming (as defined below), the Partnership shall pay TWE for such
programming at a net effective rate (taking into account the
appropriate economic benefit and/or detriment to TWE, if any,
including, without limitation, discounts, credits,
28
marketing support, rate reimbursement, advertising support, channel
position fees, rebates, prepayment loans, deductions for unallocated
accounts and other incentives) equal to the net effective rate per
subscriber paid or accrued for such programming by the TWE Cable
Division or its Controlled Affiliate pursuant to the master programming
agreement or similar agreement between the provider of such programming
and the TWE Cable Division or such Controlled Affiliate.
(B) With respect to any other
programming, the Partnership shall pay TWE for such programming at a
rate equal to the pro rata portion of the costs to TWE or such
Affiliate of producing such programming (such pro rata portion to be
determined based on the ratio of the number of Subscribers served by
the Partnership Systems offering such programming to the total number
of Subscribers served by the Partnership Systems and the Other TWE
Systems offering such programming, or, in the case of a la carte
programming, the ratio of the number of Partnership System Subscribers
subscribing to such programming to the number of Subscribers of the
Partnership Systems and the Other TWE Systems subscribing to such
programming).
For the purpose of the foregoing, subject to the provisions of the
Services Agreement in respect of the Selected Business, "THIRD PARTY
PROGRAMMING" shall mean (x) any programming purchased by the TWE Cable Division
or any of its Controlled Affiliates from any person that is not a Wholly-Owned
Affiliate (as defined below) of TWE and (y) any programming (including, without
limitation, HBO and Cinemax) purchased by the TWE Cable Division or its
Controlled Affiliates from TWE or any of its Wholly-Owned Affiliates (as defined
below), provided, with respect to this clause (y), that (1) such programming is
offered by TWE or such Affiliate to unaffiliated third parties for use on
Systems, and (2) the amount paid by the TWE Cable Division or its Controlled
Affiliates for such programming is consistent with the amount paid for such
programming by similarly situated third parties and is otherwise consistent with
the principles previously agreed to by the parties. "WHOLLY-OWNED AFFILIATE" of
TWE shall mean (x) any division or subdivision of TWE or (y) any direct or
indirect subsidiary of TWE all of the capital stock or other equity interests of
which are owned, directly or indirectly, by TWE.
The parties acknowledge that the amounts required to be paid by the
Partnership pursuant to this clause (ii) are to be used in calculating TWEAN's
Programming Payable (as defined in the Services Agreement). In accordance with
Section 2.2 of the Services Agreement, a portion of such amount will be paid to
TWE Cable directly by the Selected Subsidiary.
(iii) Upon exercise by any Eligible Option Holder
(as defined below) of options to purchase securities of ATW or any of its
Affiliates ("ATW SECURITIES"), the Residual Business shall pay to TWE for each
share of stock or each $1,000 principal amount of debt securities, as the case
may be (such share or $1,000 principal amount being referred to herein as a
"unit" of ATW Securities), issuable upon exercise of such options an amount
equal to the excess of (A) the Closing Price (as defined below) of a unit of
such ATW Securities as of the date of exercise, over (B)
29
either (1) for options issued prior to the Initial Closing Date, the greater of
(x) the exercise price paid by such Eligible Option Holder for each such unit of
ATW Securities and (y) the Closing Price of a unit of such ATW Securities on the
Initial Closing Date, or (2) for options issued after the Initial Closing Date,
the exercise price paid by such Eligible Option Holder for each such unit of ATW
Securities.
For the purpose of this Section 3.1(h)(iii), the term "ELIGIBLE OPTION
HOLDER" shall mean any officer or other employee of the Partnership or of TWE or
any of its Subsidiaries who (x) in such capacity performs substantially all of
his or her duties on behalf of the Partnership and (y) has been, or from time to
time is, issued options to purchase units of ATW Securities; and the term
"CLOSING PRICE" shall mean, with respect to any ATW Securities on any day, the
last reported sale price of a unit of such ATW Securities (regular way) on such
day as shown on the New York Stock Exchange ("NYSE") Composite Transaction Tape,
or in case no such sale takes place on such day, the average of the closing bid
and asked prices of a unit of such ATW Securities on such day on the NYSE, or,
if such ATW Securities are not listed or admitted to trading on the NYSE, on the
principal national securities exchange on which such ATW Securities are listed
or admitted to trading, or, if they are not listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices of
such ATW Securities on such day as reported by NASDAQ, or if such ATW Securities
are not so reported, the average of the closing bid and asked prices of a unit
of such ATW Securities on such day as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to time by ATW for
that purpose; provided that in each case, the Closing Price shall be equitably
adjusted to take into account any recapitalizations, reclassifications, mergers,
consolidations, spin-offs, extraordinary dividends or distributions,
subdivisions or combinations or the like affecting the ATW Securities.
(iv) Except as expressly provided in the
Restructuring Transaction Agreements or herein, including without limitation
Section 3.1(g), Section 3.1(h), Section 3.1(i) and Section 13.1 of this
Agreement, or in the Original Contribution Agreement, no Partner shall be
entitled hereunder, without the prior written consent of the other Partners, to
compensation for its services on behalf of the Partnership, the Residual
Business or the Selected Business or to be reimbursed for any costs or expenses
incurred by such Partner or any of its Affiliates, agents, or representatives on
behalf of the Partnership, the Residual Business or the Selected Business.
(v) Each of the Partners shall bear its own
expenses, including fees and expenses of legal counsel, financial advisors,
brokers or finders, and consultants incurred by it or its Affiliates in the
negotiation and preparation of this Agreement.
(i) COMPENSATION OF PARTNERS AND REIMBURSEMENT OF
EXPENSES ON OR PRIOR TO DATE HEREOF. For services rendered on or prior to the
date hereof, TWE shall be compensated by the Residual Business and the Selected
Business in accordance with Section 3.1(h) of the Second Amended Agreement, and
such compensation shall be subject to the provisions of the Second Amended
Agreement, including, without
30
limitation, Section 3.1(h)(vii) thereof and the last three sentences of Section
3.1(h)(i) thereof and the parties shall comply with such provisions.
3.2 LIMITATIONS ON MANAGEMENT POWERS. Notwithstanding any
provision in this Agreement or any Restructuring Transaction Agreement to the
contrary, and in addition to any other consent or approval that may be required
by the express terms of this Agreement, neither the Partnership nor any of its
Subsidiaries shall, and neither the Managing Partner nor any Partner
individually shall have the authority to, and neither TWE nor Advance/Xxxxxxxx
shall cause the Partnership or any of its Subsidiaries to, take any of the
following actions without (i) the consent of the Partners or (ii) the unanimous
consent (in person or by proxy) of all members of the Executive Committee:
(a) sell, assign, or otherwise dispose of all or
substantially all of the assets of the Residual Business or the Selected
Business, in each case taken as a whole, except upon the restructuring of the
Partnership in accordance with Section 8 or Section 12 of this Agreement;
(b) merge or consolidate the Residual Business or the
Selected Business with any other Person;
(c) liquidate or dissolve the Residual Business or the
Selected Business;
(d) admit any new member, or otherwise issue equity in,
the Residual Business or the Selected Business, or establish the terms and
conditions of any such admission or issuance; provided, for the avoidance of
doubt, that nothing herein shall limit the ability of TWEAN to change the
allocation of equity as between TWE and Paragon, including through the issuance
of additional equity to one of such Partners, thereby diluting the equity of the
other such Partner; provided that such issuance does not adversely affect
Advance/Xxxxxxxx;
(e) the incurrence, creation or assumption by the
Residual Business of any additional Indebtedness if the ratio of (x) all
Indebtedness of the Residual Business (including such additional Indebtedness),
to (y) EBITDA of the Residual Business for the last four fiscal quarters, would
exceed 5:1;
(f) incurrance, creation or assumption by the Selected
Business of any additional Indebtedness if the ratio of (x) all Indebtedness of
the Selected Business (including such additional Indebtedness), to (y) EBITDA of
the Selected Business for the last four fiscal quarters, would exceed 5:1;
(g) enter into a new line of business that is reasonably
expected to require an investment in excess of $50,000,000 without providing
three months' prior written notice to the Partners;
(h) require capital contributions from any Partner;
31
(i) commence any bankruptcy or insolvency proceeding,
acquiesce in the appointment of a receiver, trustee, custodian or liquidator,
admit to the material allegations of a petition filed against the Residual
Business in any bankruptcy proceeding or make, execute or deliver any general
assignment for the benefit of the Residual Business's creditors; or
(j) commence any bankruptcy or insolvency proceeding,
acquiesce in the appointment of a receiver, trustee, custodian or liquidator,
admit to the material allegations of a petition filed against the Selected
Business in any bankruptcy proceeding or make, execute or deliver any general
assignment for the benefit of the Selected Business's creditors.
In addition, notwithstanding any provision in this Agreement or any
Restructuring Transaction Agreement to the contrary, and in addition to any
other consent or approval that may be required by the express terms of this
Agreement, neither the Partnership nor the Managing Partner shall have the
authority to, and shall not cause the Partnership to, take any of the following
actions without (x) the consent of the Partners or (y) the unanimous consent (in
person or by proxy) of all members of the Executive Committee: (A) sell, give,
assign, hypothecate, pledge, encumber, grant a security interest in or otherwise
dispose of (whether by operation of law or otherwise) any equity interest in the
Selected Subsidiary (except in accordance with the Refinancing Consent) or (B)
enter into any agreement that would restrict distributions of cash or other
assets from the Selected Subsidiary to Advance/Xxxxxxxx.
3.3 FINANCING THE SELECTED BUSINESS. From and after August 1,
2002,
(a) the Partnership shall promptly remit to
Advance/Xxxxxxxx (or, in the case of cash, to the accounts as may be
designated from time to time by Advance/Xxxxxxxx in writing) any cash
amounts or other assets or property thereafter received by the
Partnership that should have been received by the Selected Business;
and
(b) Advance/Xxxxxxxx shall be solely responsible for
providing cash and any other capital needed by the Selected Business,
including for any amounts due and owing to TWE or any of its Affiliates
pursuant to the Restructuring Transaction Agreements.
SECTION 4 PARTNERSHIP CAPITAL
4.1
PARTNERSHIP UNITS. All Prior Partnership Units held or
receivable by the Partners immediately prior to August 1, 2002 were converted as
of August 1, 2002 as follows:
(a) TWE AND PARAGON.
(i) TWE's Prior Common Partnership Units were
converted into 9715 Series RB Common Partnership Units and TWE's Prior Preferred
Partnership
32
Units were converted into 24,415 Series C Preferred Partnership Units (which
shall be deemed to have been issued on the Fourth Effective Date); and
(ii) Paragon's Prior Common Partnership Units
were converted into 285 Series RB Common Partnership Units and Paragon's Prior
Preferred Partnership Units were converted into 150,190 Series A Preferred
Partnership Units (which shall be deemed to have been issued on the First
Effective Date), 30,084 Series B Preferred Partnership Units (which shall be
deemed to have been issued on the Second Effective Date), 27,264 Series B
Preferred Partnership Units (which shall be deemed to have been issued on the
Third Effective Date) and 2,732 Series C Preferred Partnership Units (which
shall be deemed to have been issued on the Fourth Effective Date), respectively.
(b) ADVANCE/XXXXXXXX. Advance/Xxxxxxxx'x Prior
Partnership Units were converted into 100 Series SB Common Partnership Units.
4.2 CONTRIBUTIONS.
(a) NO FURTHER CONTRIBUTIONS REQUIRED. No Partner shall
be required to make further capital contributions.
(b) TREATMENT OF CONTRIBUTIONS. Any capital contributed
to the Partnership by TWE or Paragon after August 1, 2002, and any capital
contributed to the Partnership by any Partner on August 1, 2002, shall be
applied to and used for the exclusive benefit of the Residual Business. Any
capital contributed to the Partnership by Advance/Xxxxxxxx after August 1, 2002
shall be applied to and used for the exclusive benefit of the Selected Business.
SECTION 5A TAX MATTERS RELATING TO RESTRUCTURING TRANSACTIONS
5A.1 REDEMPTION OF ADVANCE/XXXXXXXX'X PARTNERSHIP INTEREST.
Advance/Xxxxxxxx, TWE and Paragon agree that, as of August 1, 2002, for all
Income Tax Purposes, the Selected Business shall be treated as having been
distributed to Advance/Xxxxxxxx in complete redemption of its interest in the
Partnership. Accordingly, as of August 1, 2002, Advance/Xxxxxxxx shall no longer
constitute a partner of the Partnership for all Income Tax purposes, and any
reference in Section 5 (other than Section 5.7 (in the event that Section 5A.3
becomes applicable) or Section 5.9, 5.10 or 5.11) to "Partner" or "Partners"
shall not include Advance/Xxxxxxxx.
5A.2 NO PARTNERSHIP BETWEEN SELECTED BUSINESS AND RESIDUAL
BUSINESS. Advance/Xxxxxxxx, TWE and Paragon agree to take the position for all
Income Tax purposes that the Selected Business and the Residual Business are not
operated as a partnership at any time on or after August 1, 2002, unless
required to do otherwise as a result of a Final Determination that the Selected
Business and Residual Business are operated as a partnership. In furtherance of
the foregoing, the parties agree to the following:
33
(i) Distributions to TWE and Paragon, and the
Partnership distributions provided in Section 5.1, shall be made only from the
Residual Business (and not the Selected Business), and the allocations provided
in Sections 5.3, 5.5 and 5.6 shall be made only with respect to the Residual
Business (and not the Selected Business);
(ii) Distributions to Advance/Xxxxxxxx, and the
distributions provided in Section 5.9, shall be made only from the Selected
Business (and not the Residual Business);
(iii) Advance/Xxxxxxxx shall not be entitled to
any distributions of cash from the Partnership under Section 5, except as
provided in Section 5.9;
(iv) Advance/Xxxxxxxx shall not share in any
portion of any item of income, gain, loss, deduction or other tax items
attributable to the Residual Business;
(v) All items of income, gain, loss, deduction
and other tax items attributable to the Selected Business shall be treated as
derived directly by Advance/Xxxxxxxx (and not through an interest in the
Partnership) for all Income Tax purposes, except as may be required as a result
of a Final Determination that the Selected Business and Residual Business are
operated as a partnership; and
(vi) All items of income, gain, loss, deduction
and other tax items attributable to the Residual Business shall be allocated
between TWE and Paragon pursuant to the provisions of Section 5.
5A.3 RECHARACTERIZATION AS PARTNERSHIP FOR TAX PURPOSES. In the
event of a Final Determination that the Selected Business and the Residual
Business are operated as a partnership for any Income Tax purpose, the following
provisions shall apply:
(i) Income, gain, loss, deduction and other tax
items attributable to the Selected Business shall be allocated 100% to
Advance/Xxxxxxxx; and
(ii) Income, gain, loss, deduction and other tax
items attributable to the Residual Business shall be allocated between TWE and
Paragon pursuant to the provisions of Section 5.3.
SECTION 5 CASH DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES;
ADJUSTMENTS AND TAX PROCEEDINGS
5.1 DISTRIBUTIONS WITH RESPECT TO THE RESIDUAL BUSINESS.
(a) DISTRIBUTIONS PRIOR TO SIXTH ANNIVERSARY. Except as
provided in Sections 5.1(d) and 5.1(e), prior to the sixth anniversary of the
First Effective Date, all distributions by the Partnership shall be made as
follows:
(i) [INTENTIONALLY OMITTED]
34
(ii) With respect to any Fiscal Year in which
Paragon and TWE are expected (based on the Managing Partner's good faith
estimate) to be allocated Net Profit pursuant to Section 5.3(b)(ii), the
Partnership shall, at least quarterly, distribute (to the extent not prohibited
by any applicable contractual restrictions) all Distributable Cash to Paragon
and TWE (on a PARI PASSU basis in proportion to the excess amounts calculated
for each of them in clauses (A) and (B) below, respectively):
(A) until Paragon shall have received
distributions, with respect to the Series A Preferred Partnership
Units, the Series B Preferred Partnership Units and the Series C
Preferred Partnership Units held by it in an amount equal to the excess
of (I) the sum of (x) such estimated Net Profit expected to be
allocated to such Partner pursuant to Section 5.3(b)(ii)(A) and (y) the
Net Profit allocated to such Partner pursuant to Section 5.3(b)(ii)(A)
for all prior Fiscal Years, over (II) the distributions to Paragon
pursuant to this Section 5.1(a)(ii)(A) for all prior Fiscal Years,
which distributions shall be allocated among the Series A Preferred
Partnership Units, the Series B Preferred Partnership Units and the
Series C Preferred Partnership Units held by Paragon, PARI PASSU, in
proportion to such excess amount calculated for each of them; and
(B) until TWE shall have received
distributions with respect to the Series C Preferred Partnership Units
held by it in an amount equal to the excess of (I) the sum of (x) such
estimated Net Profit expected to be allocated to such Partner pursuant
to Section 5.3(b)(ii)(B) and (y) the Net Profit allocated to such
Partner pursuant to Section 5.3(b)(ii)(B) for all prior Fiscal Years,
over (II) the distributions to TWE pursuant to this Section
5.1(a)(ii)(B) for all prior Fiscal Years.
(iii) After the Partnership has made distributions
with respect to the Series A Preferred Partnership Units, Series B Preferred
Partnership Units and Series C Preferred Partnership Units in accordance with
clause (ii), the Partnership shall, at least quarterly, distribute (to the
extent not prohibited by any applicable contractual restrictions) to the
Partners Distributable Cash, in proportion to the respective amounts required to
be distributed to each such Partner pursuant to this Section 5.1(a)(iii), in an
amount equal to 25 percent of such Partner's Net Tax Amount for the taxable year
that includes such calendar quarter (as estimated in good faith by the Managing
Partner). The Managing Partner's estimate of such Partner's Net Tax Amount for
such year shall be revised prior to each distribution for such year and upon the
filing of the Partnership's Federal income tax return for such year, and
following such revision, (y) the Partnership shall distribute to such Partner
the excess (if any) of the amount that should have been distributed to such
Partner pursuant to this Section 5.1(a)(iii) based on such revised estimate,
over the amount actually distributed to such Partner pursuant to this Section
5.1(a)(iii), plus interest thereon at the rate paid by the Partnership on its
senior Indebtedness, or (z) such Partner shall contribute to the Partnership the
excess (if any) of the amount actually distributed to such Partner pursuant to
this Section 5.1(a)(iii) over the amount that should have been distributed to
such Partner pursuant to this Section 5.1(a)(iii) based on such revised
estimate, plus interest thereon at the rate paid by the Partnership on its
senior Indebtedness. To the extent there is insufficient available
35
cash to make distributions pursuant to this Section 5.1(a)(iii) at the time
required, the Partnership shall pay interest on such shortfall at the rate paid
by the Partnership on its senior Indebtedness, and such interest shall be paid
out of the Partnership's first available Distributable Cash.
(iv) After the Partnership has made the
distributions required by clauses (ii) and (iii), any remaining Distributable
Cash shall, at least quarterly, be distributed to the Partners in accordance
with their Residual Percentage Interests; provided, however, that during the
period ending on the third anniversary of the Fourth Effective Date,
distributions to any Partner pursuant to this Section 5.1(a)(iv) shall not,
without the consent of TWE, exceed an amount which, when added to the
distributions to such Partner pursuant to Section 5.1(a)(iii), exceed the sum of
(x) such Partner's permitted "operating cash flow distribution," as determined
pursuant to Treasury Regulation Section 1.707-4(b), and (y) the amount of
Partnership indebtedness incurred by the Partnership during the taxable year
that includes such calendar quarter and the proceeds of which are distributed to
the Partners, to the extent such indebtedness is included in such Partner's
basis in its interest in the Partnership pursuant to Code Section 752 and
Treasury Regulation Section 1.707-5(a)(2).
(b) DISTRIBUTIONS AFTER SIXTH ANNIVERSARY. Except as
provided in Sections 5.1(d) and 5.1(e), on and after the sixth anniversary of
the First Effective Date, all distributions by the Partnership shall be made as
follows:
(i) [INTENTIONALLY OMITTED]
(ii) With respect to any Fiscal Year in which
Paragon and TWE are expected (based on the Managing Partner's good faith
estimate) to be allocated Net Profit pursuant to Section 5.3(b)(ii), the
Partnership shall, at least quarterly, distribute (to the extent not prohibited
by any applicable contractual restrictions) all Distributable Cash to Paragon
and TWE (on a PARI PASSU basis in proportion to the excess amounts calculated
for each of them in clauses (A) and (B) below, respectively):
(A) until Paragon shall have received
distributions, with respect to the Series A Preferred Partnership
Units, the Series B Preferred Partnership Units and the Series C
Preferred Partnership Units held by it in an amount equal to the excess
of (I) the sum of (x) such estimated Net Profit expected to be
allocated to such Partner pursuant to Section 5.3(b)(ii)(A) and (y) the
Net Profit allocated to such Partner pursuant to Section 5.3(b)(ii)(A)
for all prior Fiscal Years, over (II) the distributions to Paragon
pursuant to this Section 5.1(b)(ii)(A) and Section 5.1(a)(ii)(A) for
all prior Fiscal Years, which distributions shall be allocated among
the Series A Preferred Partnership Units, the Series B Preferred
Partnership Units and the Series C Preferred Partnership Units held by
Paragon, PARI PASSU, in proportion to such excess amount calculated for
each of them; and
(B) until TWE shall have received
distributions with respect to the Series C Preferred Partnership Units
held by it in an amount equal
36
to the excess of (I) the sum of (x) such estimated Net Profit expected
to be allocated to such Partner pursuant to Section 5.3(b)(ii)(B) and
(y) the Net Profit allocated to such Partner pursuant to Section
5.3(b)(ii)(B) for all prior Fiscal Years, over (II) the distributions
to TWE pursuant to this Section 5.1(b)(ii)(B) and Section 5.1(a)(ii)(B)
for all prior Fiscal Years.
(iii) After the Partnership has made distributions
with respect to the Series A Preferred Partnership Units, the Series B Preferred
Partnership Units and the Series C Preferred Partnership Units in accordance
with clause (ii), the Partnership shall, at least quarterly, distribute (to the
extent not prohibited by any applicable contractual restrictions) to the
Partners Distributable Cash, in proportion to the respective amounts required to
be distributed to each such Partner pursuant to this Section 5.1(b)(iii), in an
amount equal to 25 percent of such Partner's Net Tax Amount for the taxable year
that includes such calendar quarter (as estimated in good faith by the Managing
Partner). The Managing Partner's estimate of such Partner's Net Tax Amount for
such year shall be revised prior to each distribution for such year and upon the
filing of the Partnership's Federal income tax return for such year, and
following such revision, (y) the Partnership shall distribute to such Partner
the excess (if any) of the amount that should have been distributed to such
Partner pursuant to this Section 5.1(b)(iii) based on such revised estimate,
over the amount actually distributed to such Partner pursuant to this Section
5.1(b)(iii), plus interest thereon at the rate paid by the Partnership on its
senior Indebtedness, or (z) such Partner shall contribute to the Partnership the
excess (if any) of the amount actually distributed to such Partner pursuant to
this Section 5.1(b)(iii) over the amount that should have been distributed to
such Partner pursuant to this Section 5.1(b)(iii) based on such revised
estimate, plus interest thereon at the rate paid by the Partnership on its
senior Indebtedness. To the extent there is insufficient available cash to make
distributions pursuant to this Section 5.1(b)(iii) at the time required, the
Partnership shall pay interest on such shortfall at the rate paid by the
Partnership on its senior Indebtedness, and such interest shall be paid out of
the Partnership's first available Distributable Cash.
(iv) After the Partnership has made the
distributions required by clauses (ii) and (iii), the Partnership shall
distribute (to the extent not prohibited by any applicable contractual
restrictions) any remaining Distributable Cash to Paragon and TWE on a PARI
PASSU basis in redemption of outstanding Series A Preferred Partnership Units,
Series B Preferred Partnership Units and Series C Preferred Partnership Units,
at a redemption price of $1,000 per Series A Preferred Partnership Unit, Series
B Preferred Partnership Unit or Series C Preferred Partnership Unit, as the case
may be, so that the Partnership shall have redeemed such Series A Preferred
Partnership Units, Series B Preferred Partnership Units and Series C Preferred
Partnership Units in accordance with the following:
(A) Prior to the seventh anniversary of
the First Effective Date, the Partnership shall have redeemed one-third
of the number of Series A Preferred Partnership Units and Series B
Preferred Partnership Units originally issued pursuant to Section
4.2(a)(v)(B) or Section 4.2(b) of the First Amended Agreement;
37
(B) Prior to the eighth anniversary of
the First Effective Date, the Partnership shall have redeemed, in the
aggregate, two-thirds of the number of Series A Preferred Partnership
Units and Series B Preferred Partnership Units, plus one-third of the
number of Series C Preferred Partnership Units, in each case that were
originally issued pursuant to Sections 4.2(a)(v)(B) and 4.2(b) of the
First Amended Agreement; and
(C) Prior to the ninth anniversary of
the First Effective Date, the Partnership shall have redeemed, in the
aggregate, all of the outstanding number of Series A Preferred
Partnership Units and Series B Preferred Partnership Units, plus
two-thirds of the number of Series C Preferred Partnership Units, in
each case that were originally issued pursuant to Sections 4.2(a)(v)(B)
and 4.2(b) of the First Amended Agreement; and
(D) On and after the tenth anniversary
of the First Effective Date, the Partnership shall have redeemed all
outstanding Series A Preferred Partnership Units, Series B Preferred
Partnership Units and Series C Preferred Partnership Units.
Each distribution pursuant to this Section 5.1(b)(iv) shall be made
with respect to the Series A Preferred Partnership Units, the Series B Preferred
Partnership Units and Series C Preferred Partnership Units, as applicable, held
by Paragon and TWE, pari PASSU, in proportion to the number of each outstanding.
(v) After the Partnership shall have made all
distributions required by clauses (ii), (iii) and (iv), any remaining
Distributable Cash shall, at least quarterly, be distributed to the Partners in
accordance with their Residual Percentage Interests.
(c) [INTENTIONALLY OMITTED]
(d) NET PROCEEDS OF SALE. Following the sale, exchange,
or other disposition of all or substantially all of the assets of the
Partnership, or upon the liquidation of the Partnership within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g), and after payment of, or
adequate provision for, the debts and obligations of the Partnership, the
remaining assets of the Partnership shall be distributed to the Partners (after
giving effect to all contributions, distributions, allocations, and other
Capital Account adjustments for all taxable years, including the year during
which such liquidation occurs) as follows:
(i) [INTENTIONALLY OMITTED]
(ii) First, the Priority Return accrued and
unpaid as of the date of liquidation shall be distributed to Paragon and TWE in
respect of the Series A Preferred Partnership Units, the Series B Preferred
Partnership Units and the Series C Preferred Partnership Units held by each of
them, as applicable, on a PARI PASSU basis in proportion to the amounts of such
returns;
38
(iii) Second, all outstanding Series A Preferred
Partnership Units, Series B Preferred Partnership Units and Series C Partnership
Units shall be redeemed at a redemption price of $1,000 per Series A Preferred
Partnership Unit, Series B Partnership Unit or Series C Partnership Unit, as the
case may be; and
(iv) Finally, the remaining assets of the
Partnership shall be distributed to the Partners so as to effectuate the
agreement among the Partners that the distributions remaining after paying Taxes
on the Partners' Special Income and Gross Profit and Gross Loss allocated under
Section 5.3(d)(ii) with respect to the year of such distribution are in
proportion to their respective Residual Percentage Interests, assuming all
Partners are taxed at the Special Effective Tax Rate.
(e) WITHHOLDING. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any payment
or distribution to a Partner shall be treated as amounts distributed to such
Partner pursuant to Section 5.1 for all purposes of this Agreement.
5.2 APPLICATION OF FIRST AMENDED AGREEMENT. For the avoidance of
doubt, any reference to an allocation or distribution for any prior Fiscal Year
pursuant to Section 5 (or any subsection thereof) of this Agreement shall
include, as appropriate, any allocation or distribution pursuant to Section 5
(or the corresponding section thereof) of the First Amended Agreement.
5.3 ALLOCATIONS OF NET PROFIT AND NET LOSS WITH RESPECT TO THE
RESIDUAL BUSINESS.
(a) [INTENTIONALLY OMITTED]
(b) ALLOCATIONS OF NET PROFIT. Except as otherwise
provided in Section 5.3(d), after giving effect to the allocations provided in
Section 5.5, the Net Profit for each Fiscal Year (or portion thereof) shall be
allocated to the Partners as follows:
(i) First, Net Profit shall be allocated to
Paragon and TWE (on a PARI PASSU basis in proportion to the excess amounts
calculated in clauses (A) and (B) below, respectively):
(A) until Paragon shall have been
allocated, with respect to the Series A Preferred Partnership Units,
the Series B Preferred Partnership Units and the Series C Preferred
Partnership Units held by it, Net Profit in an amount equal to the
excess, if any, of (I) the aggregate Net Loss allocated to Paragon
pursuant to Section 5.3(c)(ii)(A) for all prior Fiscal Years over (II)
the aggregate Net Profit allocated to such Partnership Units pursuant
to this Section 5.3(b)(i)(A) for all prior Fiscal Years, which
allocation shall be divided among the Series A Preferred Partnership
Units, the Series B Preferred Partnership Units and the Series C
Preferred Partnership Units held by Paragon, PARI PASSU, in proportion
to such excess amount calculated for each of them; and
39
(B) until TWE shall have been
allocated, with respect to the Series C Preferred Partnership Units
held by it, Net Profit in an amount equal to the excess, if any, of (I)
the aggregate Net Loss allocated to TWE pursuant to Section
5.3(c)(ii)(B) for all prior Fiscal Years over (II) the aggregate Net
Profit allocated to such Partnership Units pursuant to this Section
5.3(b)(i)(B) for all prior Fiscal Years.
(ii) Second, Net Profit shall be allocated to
Paragon and TWE (on a PARI PASSU basis in proportion to the excess amounts
calculated in clauses (A) and (B) below, respectively):
(A) until Paragon shall have been
allocated, with respect to the Series A Preferred Partnership Units,
the Series B Preferred Partnership Units and the Series C Preferred
Partnership Units held by it, Net Profit in an amount equal to the
excess, if any, of (I) the cumulative Series A Priority Return, the
cumulative Series B Priority Return and the cumulative Series C
Priority Return, in each case accrued through the end of such Fiscal
Year (or portion thereof) over (II) the aggregate Net Profit allocated
to such Partner pursuant to this Section 5.3(b)(ii)(A) for all prior
Fiscal Years, which amount of Net Profit shall be allocated among the
Series A Preferred Partnership Units, the Series B Preferred
Partnership Units and the Series C Preferred Partnership Units held by
Paragon, PARI PASSU, in proportion to such excess amount calculated for
each of them; and
(B) until TWE shall have been allocated
with respect to the Series C Partnership Units held by it, Net Profit
in an amount equal to the excess, if any, of (I) the cumulative Series
C Priority Return accrued through the end of such Fiscal Year (or
portion thereof) over (II) the aggregate Net Profit allocated to such
Partner pursuant to this Section 5.3(b)(ii)(B) for all prior Fiscal
Years.
(iii) Third, Net Profit shall be allocated to the
Partners, in proportion to and to the extent of the amount required to be
allocated pursuant to this Section 5.3(b)(iii), until each such Partner has been
allocated Net Profit pursuant to this Section 5.3(b)(iii) in an amount equal to
the excess of (y) such Partner's aggregate Maximum Income Amount for such Fiscal
Year and all prior Fiscal Years, over (z) the aggregate Net Profit allocated to
such Partner pursuant to this Section 5.3(b)(iii) for all prior Fiscal Years;
and
(iv) Thereafter, Net Profit shall be allocated to
the Partners in accordance with their Residual Percentage Interests.
(c) ALLOCATIONS OF NET LOSS. Except as otherwise provided
in Section 5.3(d), after giving effect to the allocations provided in Section
5.5, Net Loss for each Fiscal Year (or portion thereof) shall be allocated as
follows:
40
(i) First, Net Loss for such Fiscal Year (or
portion thereof) shall be allocated to the Partners in accordance with their
Residual Percentage Interests until each Partner's Capital Account is reduced to
the sum of (x) the excess, if any, of the aggregate Net Profit allocated to such
Partner pursuant to Section 5.3(b)(iii) for all prior Fiscal Years, over the
aggregate Special Tax Amounts distributed to such Partner pursuant to Sections
5.1(a)(iii) and 5.1(b)(iii) for all prior Fiscal Years, PLUS (y) the amount of
such Partner's Preferred Sub-Account.
(ii) Second, Net Loss for such Fiscal Year (or
portion thereof) shall be allocated to Paragon and TWE (on a PARI PASSU basis in
proportion to the excess amounts calculated in clauses (A) and (B) below,
respectively):
(A) with respect to the Series A
Preferred Partnership Units and the Series B Preferred Partnership
Units and the Series C Preferred Partnership Units held by Paragon,
until Paragon's Capital Account has been reduced to the excess, if any,
of the aggregate Net Profit allocated to Paragon pursuant to Section
5.3(b)(iii) for all prior Fiscal Years, over the aggregate Special Tax
Amounts distributed to pursuant to Sections 5.1(a)(iii) and 5.1(b)(iii)
for all prior Fiscal Years, which allocation shall be divided among the
Series A Preferred Partnership Units, the Series B Preferred
Partnership Units and the Series C Preferred Partnership Units held by
Paragon, PARI PASSU, in proportion the amount calculated with respect
to each of them; and
(B) with respect to the Series C
Preferred Partnership Units held by TWE, until TWE's Capital Account
has been reduced to the excess, if any, of the aggregate Net Profit
allocated to TWE pursuant to Section 5.3(b)(iii) for all prior Fiscal
Years, over the aggregate Special Tax Amounts distributed to pursuant
to Sections 5.1(a)(iii) and 5.1(b)(iii) for all prior Fiscal Years.
(iii) Thereafter, Net Loss for such Fiscal Year
(or portion thereof) shall be allocated to the Partners in accordance with their
Residual Percentage Interests.
(d) ALLOCATION OF GAIN OR LOSS UPON SALE. Notwithstanding
Section 5.3(b) and Section 5.3(c), in the event of a sale, exchange, or other
disposition of all or substantially all of the assets of the Partnership, or
upon the liquidation of the Partnership within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(g), beginning in the year in which the
contract or agreement for such sale is entered into or, if such contract or
agreement is entered into on or prior to the date on which the Partnership's
Federal income tax return with respect to the prior year is required to be filed
(not including any extensions), beginning in such prior year:
(i) First, Gross Profit shall be allocated to
Paragon and TWE (on a PARI PASSU basis in proportion to the excess amounts
calculated in clauses (A) and (B) below, respectively):
41
(A) until Paragon shall have been
allocated Gross Profit in an amount equal to the excess, if any, of (I)
the sum of (x) the aggregate Net Loss allocated to Paragon pursuant to
Section 5.3(c)(ii)(A) for all prior Fiscal Years, and (y) the
cumulative Series A Priority Return, Series B Priority Return and
Series C Priority Return accrued through the end of such Fiscal Year
(or portion thereof), over (II) the aggregate Net Profit allocated to
Paragon pursuant to Sections 5.3(b)(i)(A) and Section 5.3(b)(ii)(A) for
all prior Fiscal Years, which allocation shall be divided among the
Series A Preferred Partnership Units, the Series B Preferred
Partnership Units and the Series C Preferred Partnership Units held by
Paragon, PARI PASSU, in proportion to such excess amount calculated for
each of them; and
(B) Until TWE shall have been allocated
Gross Profit in an amount equal to the excess, if any, of (I) the sum
of (x) the aggregate Net Loss allocated to TWE pursuant to Section
5.3(c)(ii)(B) for all prior Fiscal Years, and (y) the cumulative Series
C Priority Return accrued through the end of such Fiscal Year (or
portion thereof), over (II) the aggregate Net Profit allocated to TWE
pursuant to Sections 5.3(b)(i)(B) and Section 5.3(b)(ii)(B) for all
prior Fiscal Years.
(ii) Finally, Gross Profit and Gross Loss shall
be allocated to the Partners so as to cause the credit balance in each Partner's
Capital Account to equal, as nearly as possible, the amount each Partner would
receive in a distribution on dissolution, if the distribution were made in
accordance with Section 5.1(d).
In the event that such sale or liquidation does not take place within
the year following the year of the signing of the contract or agreement, or upon
the termination of such contract or agreement, if earlier, allocations of Gross
Profit or Gross Loss shall be made to reverse, as rapidly as possible, the
effect of any such allocations made pursuant to this Section 5.3(d).
5.4 SECTION 754 ADJUSTMENT. To the extent any adjustment to the
adjusted tax basis of any asset of the Partnership pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, 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 such basis), and such gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Treasury
Regulations. Any Partner may cause the Partnership to make any election
permitted under Code Section 754.
5.5 OTHER RULES GOVERNING ALLOCATIONS WITH RESPECT TO THE RESIDUAL
BUSINESS.
(a) In the event that the Partnership is entitled to an
income tax deduction for the excess of the Closing Price of a unit of TWX
Securities on the Initial
42
Closing Date over the exercise price paid by the Eligible Option Holder for such
unit of TWX Securities, such deduction and an equal amount of Gross Loss shall
be specifically allocated to TWE or Paragon, as appropriate, and TWE or Paragon,
as appropriate, shall be deemed to have made a capital contribution to the
Partnership in the same amount.
(b) In the event that, pursuant to any Final
Determination of the Partnership's Taxable Income or Taxable Loss or the
Partner's distributive shares thereof, (i) the Partnership's Taxable Income or
Taxable Loss is adjusted or (ii) the Partners' distributive shares of the
Partnership's Taxable Income or Taxable Loss are adjusted, Gross Profit or Gross
Loss shall be allocated to the Partners to reflect the adjustments to the
Partnership's Taxable Income or Taxable Loss or the Partners' distributive
shares thereof so as to place the Partners as rapidly as possible, in
conjunction with any distribution or contribution pursuant to Section
5.1(a)(iii) and Section 5.1(b)(iii), in the same relative positions they would
have been in had the Taxable Income or Taxable Loss or distributive shares
thereof as adjusted been taken into account originally (including any interest
with respect to any deficiency or any refund).
(c) In the event that interest is paid by the Partnership
to a Partner pursuant to Section 5.1(a)(iii) or Section 5.1(b)(iii), a special
allocation of Gross Profit shall be made to such Partner in an amount equal to
the amount of such interest.
(d) If any fees or other payments deducted for federal
income tax purposes by the Partnership are recharacterized by a Final
Determination of the Internal Revenue Service as nondeductible distributions to
any Partner, then, notwithstanding all other allocation provisions, Gross Profit
shall be allocated to such Partner (for each Fiscal Year in which such
recharacterization occurs) in an amount equal to the fees or payments
recharacterized.
(e) All items of Partnership income, gain, loss,
deduction, and any other allocations not otherwise provided for shall be
allocated among the Partners in the same proportion as they share the Net
Profits, Net Losses, Gross Profits or Gross Loss to which such items relate for
the Fiscal Year. Any credits against income tax shall be allocated among the
Partners in accordance with their Residual Percentage Interests.
(f) For any year with respect to which the Partnership is
required to pay New York City Unincorporated Business Tax, such tax shall be
allocated among the Partners in a manner so that the benefit of any deduction,
credit, exemption or exclusion that is available to the Partnership as a result
of the activities, income or status of or payments by a particular Partner (a
"Credit Partner") shall be allocated entirely to such Credit Partner. The
foregoing shall be accomplished by charging the amount of such tax to the
Capital Account of any Partner that is not a Credit Partner and by distributing
to any Credit Partner an amount that bears the same proportion to such tax as
such Credit Partner's Residual Percentage Interest bears to the Residual
Percentage Interest of the Partner that is not a Credit Partner.
(g) [INTENTIONALLY OMITTED]
43
(h) In the event that any item or items of income, gain,
loss or deduction of the Partnership or any Partner is reallocated between the
Partnership and any Partner, then the allocations of the income, gain, loss or
deduction of the Company for the year in which such reallocation occurs shall be
made in such a fashion that the Capital Accounts of all Partners, after taking
into account any deemed contributions or distributions arising in connection
with such reallocation, shall be, to the greatest extent possible, in the same
amounts as they would have been in had such reallocation not occurred.
5.6 TAX ALLOCATIONS WITH RESPECT TO THE RESIDUAL BUSINESS.
(a) Income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership, including property
purchased with cash contributed to the capital of the Partnership by a Partner
shall, solely for tax purposes, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such property to the
Partnership for Federal income tax purposes and its initial Gross Asset Value in
accordance with the remedial allocation method set forth in Treasury Regulations
Section 1.704-3(d).
(b) If the Gross Asset Value of any asset of the
Partnership is adjusted pursuant to paragraph (ii) of the definition of Gross
Asset Value, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for Federal income tax purposes and its Gross Asset Value in
accordance with Section 704(c) and the Treasury Regulations promulgated
thereunder, including Treasury Regulations Sections 1.704-1(b)(4)(i) and
1.704-3(d).
(c) Subject to Section 11.5, any election or other
decision relating to any allocations pursuant to this Section 5.6 shall be made
by the Partnership, upon the approval of such election or other decision by the
Managing Partner, in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 5.6 are solely
for purposes of Federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Partner's Capital Account or share
of Net Profit, Net Loss, other items, or distributions pursuant to any provision
of this Agreement.
44
5.7 REGULATORY ALLOCATIONS. The provisions of Section 5.3 (and
Section 5A.3, if applicable), are intended to comply with Treasury Regulations
Section 1.704-1(b) and shall be interpreted and applied in a manner consistent
with such Treasury Regulation. The Managing Partner shall be authorized to make
appropriate amendments to the allocation of items pursuant to Section 5.3 (and
Section 5A.3, if applicable) if necessary to comply with Section 704 of the Code
or the applicable Treasury Regulations thereunder; provided that, nothing in
this Section 5.7 shall affect any amounts to be distributed to the Partners
hereunder (including, in the event that Section 5A.3 becomes applicable,
distributions to Advance/Xxxxxxxx from the Selected Business).
5.8 ALLOCATIONS WITH RESPECT TO THE RESIDUAL BUSINESS IN EVENT OF
TRANSFER. If any Partnership Units of TWE or Paragon are transferred in
accordance with Section 6.1, the Net Profit and Net Loss of the Partnership
shall be allocated between the periods before and after the transfer by the
closing of the books method. As of the date of such transfer, the transferee
shall succeed to the Capital Account, Common Capital Contribution, Series A
Preferred Capital Contribution, Series B Preferred Capital Contribution and
Series C Preferred Capital Contribution of the transferor Partner, to the extent
that the transferor's Capital Account, Common Capital Contribution, Series A
Preferred Capital Contribution, Series B Preferred Capital Contribution and
Series C Preferred Capital Contribution relate to the transferred interest. This
Section shall apply for purposes of computing a Partner's Capital Account and
for federal income tax purposes.
5.9 OTHER DISTRIBUTIONS. Following August 1, 2002, (i) the
Partnership hereby authorizes the Selected Business to make payments to
Advance/Xxxxxxxx out of funds available in the Selected Business as
Advance/Xxxxxxxx requests in its sole discretion; and (ii) any distribution of
cash or other property or assets from the Selected Subsidiary to the Partnership
(excluding, for the avoidance of doubt, payments owed to the Partnership or any
of its Affiliates under any of the Restructuring Transaction Agreements) shall
be delivered by the Partnership to Advance/Xxxxxxxx immediately upon receipt by
the Partnership and the Partnership hereby authorizes the Selected Subsidiary to
make such distributions to Advance/Xxxxxxxx.
5.10 ADJUSTMENTS.
In the event that, on or after August 1, 2002, an adjustment is made by
any Governmental Authority that results in an increase or decrease in Tax owed
by any Partner with respect to its Partnership Interest (as defined in the First
Amended and Restated Agreement) for any taxable year (or portion thereof) ending
prior to August 1, 2002, the following provisions shall apply:
(a) If the adjustment results in an increase in Tax:
(i) no Partner shall have any right of
reimbursement from any other Partner for such increase in Tax; and
45
(ii) Advance/Xxxxxxxx shall have no right to
additional distributions, other than from the Selected Business.
(b) If the adjustment results in a decrease in Tax:
(i) no Partner shall have any obligation to make
any payment to any other Partner in respect of such decrease in Tax; and
(ii) no Partner shall have any obligation to make
contributions to the Partnership.
5.11 TAX PROCEEDINGS. The Partners agree as follows:
(a) TAX PROCEEDINGS RELATING TO NON-INCOME TAXES.
(i) Advance/Xxxxxxxx shall have sole control
over any Tax Proceeding relating to Non-Income Taxes of the Selected Business,
regardless of the taxable period to which the proceeding relates.
(ii) TWE shall have sole control over any Tax
Proceeding relating to Non-Income Taxes of the Residual Business, regardless of
the taxable period to which the proceeding relates.
(b) TAX PROCEEDINGS RELATING TO INCOME TAXES.
(i) TWE shall handle Tax Proceedings of the
Partnership relating to Income Taxes for all taxable periods (or portions
thereof) ending prior to August 1, 2002, pursuant to its authority as Tax
Matters Partner.
(ii) Advance/Xxxxxxxx shall have sole control
over any Tax Proceeding relating to Income Taxes of the Selected Business for
any taxable period (or portion thereof) that begins on or after August 1, 2002.
(iii) TWE shall have sole control over any Tax
Proceeding relating to Income Taxes of the Residual Business for any taxable
period (or portion thereof) that begins on or after August 1, 2002.
(c) COOPERATION.
(i) Advance/Xxxxxxxx agrees to provide such
cooperation to TWE as TWE may reasonably request in connection with any Tax
Proceeding, including providing TWE with access to those portions of the books
and records of the Selected Business that may be relevant to such Tax
Proceeding.
(ii) TWE agrees to provide such cooperation to
Advance/Xxxxxxxx as Advance/Xxxxxxxx may reasonably request in connection with
any Tax Proceeding, including providing Advance/Xxxxxxxx with access to those
46
portions of the books and records of the Residual Business that may be relevant
to such Tax Proceeding.
SECTION 6 TRANSFERS OF PARTNERSHIP INTERESTS
6.1 RESTRICTIONS ON TRANSFER.
(a) TRANSFERS GENERALLY PROHIBITED. Except in connection
with a restructuring under Section 8.1, prior to the Final Restructuring Date,
no Partner shall, directly or indirectly, sell, transfer, assign, grant a
participation in, or otherwise dispose of all or any part of its Partnership
Interest (including through the issuance of equity interests in such Partner)
unless:
(i) the transaction complies with all agreements
entered into by the Partnership with third parties to which transfers of
Partnership Interests are subject; and
(ii) the transferee of the Partner's Partnership
Interest is admitted to the Partnership as a Partner and agrees to be bound by
all the provisions of this Agreement; and
(iii) the transaction is (A) a transfer of all of
a Partner's Partnership Interest (1) to a Xxxxxxxx Family Member, or to an
Affiliate of Advance/Xxxxxxxx so long as at least 80% of the equity of such
Affiliate is owned directly or indirectly by one or more Xxxxxxxx Family
Members, in the case of Advance/Xxxxxxxx, (2) to a Wholly-Owned Affiliate of
TWE, in the case of TWE, or (3) to TWE, ATW or a Wholly-Owned Affiliate of TWE
or ATW, in the case of Paragon, (B) a transfer to the partners of TWE pursuant
to a liquidation of TWE in which ATW or one or more of its Affiliates receives a
majority of the Series RB Common Partnership Units owned by TWE, and ATW or such
Affiliates agree to assume all the obligations of Managing Partner of the
Partnership hereunder, (C) a transfer in connection with the incorporation of
TWE (including any public offering of the stock of the corporate successor of
TWE) pursuant to Article XIII of the TWE Partnership Agreement or otherwise,
provided that ATW (or its Affiliates) exercises control over the corporate
successor to TWE, and such corporate successor agrees to assume all the
obligations of Managing Partner of the Partnership hereunder, (D) a transfer in
connection with the incorporation of Advance/Xxxxxxxx or pursuant to a public
offering of partnership units in Advance/Xxxxxxxx (or of stock in the corporate
successor of Advance/Xxxxxxxx) so long as, after giving effect to such public
offering, Xxxxxxxx Family Members would own directly or indirectly at least 20%
of the equity interests, and a majority of the voting interests, in
Advance/Xxxxxxxx (or its corporate successor); (E) an issuance by TWE of any
partnership interest in TWE so long as, after giving effect to such issuance,
ATW would directly or indirectly own an interest at least equal to the TWI
Minimum Interest (as defined in the TWE Partnership Agreement as in effect on
September 9, 1994); (F) a "spinoff" or other distribution of TWE or its
corporate successor to the shareholders of ATW; or (G) a pledge by any Partner
of all or any portion of its Partnership Interests to a
47
bank or other financial institution in connection with securing a bona fide loan
made to such Partner; and
(iv) the transferee of such Partner's Partnership
Interests is a domestically incorporated corporation, or a partnership or
limited liability company, all of the partners or members of which are
domestically incorporated corporations, or partnerships or limited liability
companies of such type.
For the purposes of the foregoing, "XXXXXXXX FAMILY MEMBER" shall mean any
Person who is a lineal descendant (including adoptees) of Xxxxx and Xxxx
Xxxxxxxx, or any entity which is wholly-owned directly or indirectly by one or
more of such lineal descendants, or any trust established for the sole benefit
of one or more of such lineal descendants or their spouses.
(b) OWNERSHIP. Except as expressly permitted by this
Agreement, each Partner shall (i) be the owner of the Partnership Interest
indicated in the Partnership's records as being owned by such Partner, and (ii)
have sole voting power with respect to its Partnership Interest and will not
grant any proxy with respect to such Partnership Interest, enter into any voting
trust or other voting agreement or arrangement with respect to such Partnership
Interest, or grant any other rights to vote such Partnership Interest; provided,
however, that the foregoing shall not limit the ability of a Partner to enter
into agreements not inconsistent with this Agreement that restrict such
Partner's ability to transfer its Partnership Interest.
(c) TRANSFEREES BOUND. After any sale, assignment,
transfer, or other conveyance of a Partnership Interest in accordance with the
provisions of this Agreement, the transferred Partnership Interest shall
continue to be subject to all of the provisions of this Agreement, including the
provisions of this Section 6.
SECTION 7 FINANCING COVENANTS AND REPRESENTATIONS
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF ADVANCE/XXXXXXXX.
(a) Advance/Xxxxxxxx represents and warrants to the TWE
Group that as of August 1, 2002:
(i) the ratio of (A) the sum of all outstanding
Indebtedness of Advance/Xxxxxxxx, each of its Controlled Affiliates (including
the Selected Business) to (B) EBITDA of the Selected Business for the last four
fiscal quarters, is not in excess of 5:1.
(ii) all financing arrangements entered into by
any member of the Advance/Xxxxxxxx Group (A) permit the payments required by the
Master Transaction Agreement and all Restructuring Transaction Agreements and
all transactions contemplated thereby, and (B) are nonrecourse to all members of
the TWE Group.
(b) Advance/Xxxxxxxx hereby covenants and agrees that:
48
(i) the ratio of (i) the sum of all outstanding
Indebtedness of Advance/Xxxxxxxx, each of its Controlled Affiliates (including
the Selected Business) to (ii) EBITDA of the Selected Business for the trailing
last four complete fiscal quarters, shall not exceed 5:1; and
(ii) all financing arrangements entered into by
any member of the Advance/Xxxxxxxx Group shall (A) permit the payments required
by the Master Transaction Agreement and all Restructuring Transaction Agreements
and all transactions contemplated thereby, and (B) be nonrecourse to all members
of the TWE Group.
7.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF TWE.
(a) TWE represents and warrants to the Advance/Xxxxxxxx
Group that as of August 1, 2002:
(i) the ratio of (A) the sum of all Indebtedness
of the Residual Business to (B) EBITDA of the Residual Business for the last
four fiscal quarters, is not in excess of 5:1; and
(ii) all financing arrangements entered into by
any member of the TWE Group (A) permit the payments required by the Master
Transaction Agreement and all Restructuring Transaction Agreements and all
transactions contemplated thereby, and (B) are nonrecourse to all members of the
Advance/Xxxxxxxx Group (excluding any Delayed Transfer Assets or Free Cash Flow
included in the Selected Business, but including the Selected Subsidiary).
(b) TWE hereby covenants and agrees that:
(i) the ratio of (i) the sum of all Indebtedness
of the Residual Business to (ii) EBITDA of the Residual Business for the
trailing last four complete fiscal quarters, shall not exceed 5:1; and
(ii) all financing arrangements entered into by
any member of the TWE Group shall (A) permit the payments required by the Master
Transaction Agreement and all Restructuring Transaction Agreements and all
transactions contemplated thereby, and (B) be nonrecourse to all members of the
Advance/Xxxxxxxx Group (excluding any Delayed Transfer Assets or Free Cash Flow
included in the Selected Business, but including the Selected Subsidiary).
(c) The Partners and the Partnership have delivered to XX
Xxxxxx Xxxxx Bank, as Collateral Agent, on its own behalf and on behalf of the
other Secured Parties, a Consent and Agreement dated as of the date hereof (the
"Refinancing Consent") relating to certain matters arising under the Credit
Agreement and the Guarantee and Collateral Agreement entered into by
Advance/Xxxxxxxx and certain of its Affiliates as of the date hereof. TWE and
Paragon hereby extend to the Advance/Xxxxxxxx Group the same agreement set forth
in clause 2(a)(vi) of such Refinancing Consent as if the same clause were set
forth herein and additionally agree
49
that as so incorporated herein the following clause "(or any subsequent
refinancings of such refinanced debt)" shall be deemed to be included after the
reference to "Credit Agreement" in such clause.
SECTION 8 RESTRUCTURING OF PARTNERSHIP AT ELECTION OF EITHER PARTNER
8.1 RESTRUCTURING RIGHTS. Advance/Xxxxxxxx or TWE, at any time
after the date hereof may, upon written notice (the "RESTRUCTURING NOTICE") to
the other Partner, state its intention to cause a restructuring of the
Partnership.
(a) On the earliest practical date following the delivery
of a Restructuring Notice by either Advance/Xxxxxxxx or TWE (the date of
consummation of restructuring, "FINAL RESTRUCTURING DATE"), the Selected
Business shall be distributed to Advance/Xxxxxxxx in complete liquidation of its
Series SB Partnership Units as follows:
(i) On the Final Restructuring Date, the
Partnership shall execute and deliver to Advance/Xxxxxxxx a stock power in blank
or other similar form of instrument of assignment, transferring the
Partnership's membership interests in the Selected Subsidiary to
Advance/Xxxxxxxx free and clear of any liens created by the Residual Business
and the TWE Group.
(ii) On the Final Restructuring Date,
Advance/Xxxxxxxx shall pay cash to TWE by wire transfer of immediately available
funds to an account designated by TWE in an amount equal to any accrued and
unpaid Pre-Closing Operating Costs (as defined in the Second Amended Agreement).
(iii) On the Final Restructuring Date, the Parents
Agreement and all restrictions thereunder shall automatically terminate without
any further action of the parties.
(iv) Consummation of a restructuring pursuant to
this Section 8.1 shall be subject to compliance with applicable laws and receipt
of all required approvals from Governmental Authorities not previously received.
Each Partner will cooperate and use its commercially reasonable efforts to cause
the restructuring to occur as promptly as practicable after the delivery of a
Restructuring Notice, including obtaining all consents from Franchising
Authorities, Governmental Authorities and other Persons required in connection
with the restructuring and otherwise consummating the restructuring in
compliance with all applicable laws.
(b) As of the Final Restructuring Date, Advance/Xxxxxxxx
shall no longer be deemed a Partner (as defined in this Agreement) and all of
its Partnership Interests shall terminate, except for (x) the rights and
obligations of Advance/Xxxxxxxx under Section 5.11, this Section 8.1, Section
8.2, Section 8.3, Section 8.4, Section 11.3, Section 13 and Section 11.5 and (y)
the rights set forth in Section 3.1(i) in respect of the last three sentences of
Section 3.1(h)(i) of the Second Amended Agreement.
50
8.2 LIMITATIONS WITH RESPECT TO THE SELECTED BUSINESS. Until
January 1, 2005, Advance/Xxxxxxxx may not contribute or assign (on a beneficial
basis or otherwise) any assets in the Selected Business or any rights related
thereto (a "CONTRIBUTION") to a partnership, limited liability company, joint
venture or other entity (a "CONTRIBUTION ENTITY"); provided that nothing herein
shall be deemed to (i) prevent Advance/Xxxxxxxx from receiving any securities
from a third party or parties in connection with a transaction under Section 8.3
or (ii) prevent any transfers of assets in the Selected Business to any Xxxxxxxx
Family Member, so long as such transferee remains subject to the same provisions
of this Agreement with respect to such transferred assets as does
Advance/Xxxxxxxx. Following such date, Advance/Xxxxxxxx may make such
contribution of all or any portion of the assets in the Selected Business, so
long as the following terms are adhered to in connection with such contribution:
(a) In connection with its contribution of assets in the
Selected Business, Advance/Xxxxxxxx must receive and maintain at least 33.33% of
the common equity interests (which may be characterized, in addition to or in
lieu of common stock, as partnership interests, whether limited or general, or
limited liability company interests) or other similar interests in a
Contribution Entity, but subject to Section 8.2(i) below.
(b) Advance/Xxxxxxxx shall not receive (except as
provided in the provisos hereto), and the Contribution Entity shall be
prohibited from providing, any consideration in connection with its contribution
of assets in the Selected Business to a Contribution Entity other than common
equity in such Contribution Entity; provided that nothing herein shall be deemed
to limit receipt by Advance/Xxxxxxxx of (i) preferred equity interests in such
Contribution Entity in consideration for (A) contributions by Advance/Xxxxxxxx
of additional capital (not constituting assets in the Selected Business),
whether in cash or in property, to a Contribution Entity; or (B)
Advance/Xxxxxxxx foregoing receipt of distributions from the Contribution Entity
that are otherwise permitted hereunder; or (ii) up to an aggregate amount equal
to the sum of (x) the Assumed Debt (as defined in and as may be adjusted
pursuant to the Master Transaction Agreement) plus (y) one-third of the Cash
Amount (as defined in and as may be adjusted pursuant to the Master Transaction
Agreement), which consideration may be received in any combination of cash or
assumption of Indebtedness by the Contribution Entity.
(c) Advance/Xxxxxxxx may receive distributions from the
Contribution Entity, and the Contribution Entity may be allowed to make
distributions to Advance/Xxxxxxxx, only as provided in this Section 8.2(c).
Advance/Xxxxxxxx may receive distributions to the extent of its pro rata share
of Operating Cash Flow (as hereinafter defined), it being understood and agreed
that such Operating Cash Flow shall be determined on a cumulative basis during
the entire period of Advance/Xxxxxxxx'x ownership interest in the Contribution
Entity ("REGULAR DISTRIBUTIONS"). In addition to Regular Distributions,
Advance/Xxxxxxxx may receive distributions to the extent of its pro-rata
ownership share in the Contribution Entity of the cash proceeds of (1)
borrowings, (2) issuances of equity in the Contribution Entity, or (3) sales of
assets by the Contribution Entity or its Subsidiaries ("SPECIAL DISTRIBUTIONS").
Special Distributions (measured on a cumulative basis during the entire period
of Advance/Xxxxxxxx'x
51
ownership interest in the Contribution Entity) to Advance/Xxxxxxxx out of the
proceeds of borrowings or equity issuances or sales of assets of the
Contribution Entity to which the right of first offer described in Section 8.3
does not apply shall not exceed Advance/Xxxxxxxx'x pro-rata share of an amount
equal to (x) 2 times (y) Contribution Entity EBITDA for the twelve month period
calculated as of the end of the calendar month immediately preceding the date of
the distribution; provided that in connection with an asset sale, in calculating
Contribution Entity EBITDA pro forma effect shall be given such asset sale by
reducing Contribution Entity EBITDA by the amount of Contribution Entity EBITDA
generated by such assets during the preceding twelve month period. Special
Distributions resulting from asset sales by the Contribution Entity to which the
right of first offer applies will not be subject to the limitations set forth in
the preceding sentence. For purposes of this Section 8.2(c), "OPERATING CASH
FLOW" shall mean, for any applicable period, the Contribution Entity's
consolidated (if applicable) net income (x) plus, for such period, depreciation,
amortization, decreases in working capital (other than cash), losses on sales of
assets, equity losses, dividends or distributions from subsidiaries to the
extent of any income of such subsidiaries previously excluded from this
definition of Operating Cash Flow under clause (z) of this sentence, (y) minus,
for such period, capital expenditures, increases in working capital (other than
cash), gains on sales of assets, equity income (except to the extent of
dividends or distributions actually received) and (z) minus, for such period,
income from subsidiaries to the extent dividends or distributions from such
entities are prohibited (by law or agreement), determined in accordance with
generally accepted accounting principles consistently applied; and "CONTRIBUTION
ENTITY EBITDA" shall mean, for any applicable period, the Contribution Entity's
consolidated (if applicable) operating income before interest, income taxes,
depreciation and amortization for such period, determined in accordance with
generally accepted accounting principles consistently applied; provided that if
for any portion of any applicable period the Contribution Entity was not in
existence, Operating Cash Flow and Contribution Entity EBITDA shall be
calculated for such portion of the applicable period based on the results of
operations of the assets in the Contribution Entity during such portion of the
applicable period. It is understood and agreed that nothing in this Partnership
Agreement shall be deemed to limit in any respect borrowings by the Contribution
Entity or its subsidiaries for purposes other than distributions to its equity
holders. For purposes of this clause (c), (i) borrowings by Advance/Xxxxxxxx in
anticipation of the contribution of assets to, and which borrowings are assumed
by, a Contribution Entity, and recourse borrowings by Advance/Xxxxxxxx that
become nonrecourse to Advance/Xxxxxxxx upon the contribution of assets to the
Contribution Entity, shall each be deemed borrowings by the Contribution Entity
and the distribution of an equivalent amount to Advance/Xxxxxxxx, which shall be
subject to the foregoing limitations, and (ii) any sale of assets by
Advance/Xxxxxxxx or its Affiliate to a Contribution Entity for a price in excess
of the fair market value of such assets shall be deemed a distribution of the
amount in excess of such fair market value, which shall be subject to the
foregoing limitations.
(d) Any sale or disposition by the Contribution Entity of
assets in the Selected Business shall be subject to the right of first offer set
forth in Section 8.3 below, but subject to Section 8.2(i) below.
52
(e) Without the prior written consent of TWE, the equity
interest in the Contribution Entity received by Advance/Xxxxxxxx shall not be
assignable, other than an assignment of such interest, in whole or in part, to a
Xxxxxxxx Family Member which is subject to the same provisions of this
Partnership Agreement with respect to such transferred interest as are
applicable to Advance/Xxxxxxxx.
(f) Advance/Xxxxxxxx may pledge or otherwise encumber its
equity interest in the Contribution Entity received in respect of the assets in
the Selected Business contributed to the Contribution Entity provided that the
institution holding such pledge or encumbrance agrees that in the event of
foreclosure (or similar exercise of remedies), it may transfer such interest,
but the transferee of such interest shall be subject to the same limitations set
forth in this Section 8.2 and in Section 8.3 that are applicable to
Advance/Xxxxxxxx.
(g) In the event of any liquidation of the Contribution
Entity Advance/Xxxxxxxx must receive (except for any properties or assets that
have been sold or disposed of by the Contribution Entity without any violation
of this Section 8.2) the Systems (and related assets and subscribers) in the
Preferred Cluster Area (as defined in the First Amended Agreement) and in
respect of other Systems (and related assets and subscribers), either the
Systems (and related assets and subscribers) that were in the Selected Business
or the Systems (and related assets and subscribers) that were received in
exchange for such systems by the Contribution Entity and the governing documents
relating to the Contribution Entity shall contain a provision to the effect set
forth in this Section 8.2(g).
(h) Any such Contribution to a Contribution Entity must
be entered into by Advance/Xxxxxxxx in good faith as a true joint ownership
enterprise of the contributed assets and not a disguised sale of the assets in
the Selected Business.
(i) Notwithstanding anything to the contrary in the
foregoing in this Section 8.2, it is agreed that the Contribution Entity may
transfer or assign a portion of the assets in the Selected Business that was
initially transferred to it by Advance/Xxxxxxxx (alone or together with other
assets) to another entity (the "TRANSFEREE") in return solely for a common
equity interest in such entity, subject to the following limitations:
(i) the fair market value of the assets in the
Selected Business being contributed to the Transferee shall represent less than
fifty percent (50%) of the fair market value of the total assets of the Selected
Business owned by the contributing Contribution Entity;
(ii) none of the other equity owners in the
Transferee is an Affiliate of any of the equity owners of the Contribution
Entity or any of the Affiliates of such equity owners;
(iii) the indirect, effective ownership interest
of Advance/Xxxxxxxx in the common equity of the Transferee (taking into account
the
53
ownership of Advance/Xxxxxxxx in the Contribution Entity) shall be at least
sixteen and six tenths percent (16.6%); and
(iv) the Transferee shall be subject to the
provisions of Section 8.4 to the same extent as such provisions are applicable
to the Contribution Entity.
The provisions of this Section 8.2 shall be applicable to the Selected
Subsidiary as well as to Advance/Xxxxxxxx so that the Selected Subsidiary shall
also have the rights and obligations under this Section 8.2 as are applicable to
Advance/Xxxxxxxx.
Notwithstanding anything to the contrary in this Section 8.2, following
the later of (a) the Final Restructuring Date and (b) January 1, 2005,
Advance/Xxxxxxxx will be permitted to make a Contribution of assets in the
Selected Business indirectly through an issuance of equity in the Selected
Subsidiary without transferring the assets of the Selected Subsidiary to a new
Contribution Entity so long as all of the requirements of this Section 8.2 are
satisfied treating (x) all assets and liabilities in the Selected Subsidiary and
its Subsidiaries as having been transferred by Advance/Xxxxxxxx to the Selected
Subsidiary, which accepted and assumed such assets and liabilities, (y) all
interests of Advance/Xxxxxxxx in the Selected Subsidiary after giving effect to
such issuance, and relief of debt in the amount of all debt of the Selected
Subsidiary and its Subsidiaries deemed to have been assumed by the Selected
Subsidiary in clause (x) above, as consideration received by Advance/Xxxxxxxx on
the date of such issuance in exchange for the transfer of such assets and (z)
the Selected Subsidiary as the Contribution Entity; PROVIDED that for purposes
of Section 8.2(c), Advance/Xxxxxxxx'x ownership of such Contribution Entity, and
such Contribution Entity's existence, shall be deemed to have begun on the date
of such issuance and deemed transfer of assets and liabilities. Without limiting
the generality of the foregoing, prior to any such issuance, the limited
liability company agreement and other governing documents of the Selected
Subsidiary must be amended to comply with the requirements of Section 8.2 (g).
Such issuance will thereafter be treated for all purposes of this Agreement as
described in clauses (x),(y) and (z) above. For the avoidance of doubt, in
connection with such issuance Advance/Xxxxxxxx will be permitted to receive all
consideration it would be entitled to receive under Section 8.2(b) (after taking
into account the consideration it is deemed to receive pursuant to clause (y)
above) if Advance/Xxxxxxxx were effecting the transfer of all assets in the
Selected Subsidiary to a Contribution Entity.
Notwithstanding anything to the contrary herein, no equity issuance or
any other Contribution (other than transfers of assets to wholly-owned
Subsidiaries of the Selected Subsidiary) shall be permitted under this Section
8.2 before the Final Restructuring Date.
8.3 TWE RIGHT OF FIRST OFFER.
(a) If at any time Advance/Xxxxxxxx or any of its
Affiliates that succeed to its interest in the Selected Business (including,
without limitation, the Selected Subsidiary) desires to sell or otherwise
dispose of all or any portion of the assets of the Selected Business or any
direct or indirect equity interest therein, but excluding the
54
transactions referred to in Section 8.3(h) below (the "TRANSFER ASSETS"),
Advance/Xxxxxxxx shall first offer to sell such Transfer Assets on the terms and
subject to the conditions set forth in this Section 8.3, by giving written
notice thereof to TWE (the "OFFER NOTICE"). Advance/Xxxxxxxx may either provide
an Offer Notice prior to commencing substantive discussions with or soliciting
offers from third parties (a "PRE-BID OFFER NOTICE") or provide an Offer Notice
after commencing substantive discussions or soliciting bids from other parties
(a "POST-BID OFFER NOTICE"); provided it is understood and agreed that
Advance/Xxxxxxxx may, in connection with a Pre-Bid Offer Notice, consult with
and receive advice from investment bankers or other advisors as to what third
parties are likely to offer so long as such investment bankers or advisors do
not contact potential buyers in connection with providing such advice. It is
understood and agreed that for all purposes of this Section 8.3, if substantive
discussions with third parties are commenced, but such discussions do not result
in offers being solicited, then after the lapse of six months from the date such
substantive discussions have ended, such discussions shall no longer be
considered to have taken place for purposes of determining if an Offer Notice is
a Pre-Bid Offer Notice or a Post-Bid Offer Notice.
(b) An Offer Notice shall specify: (i) the price for the
Transfer Assets subject to the Offer Notice; (ii) the types of currency (and
terms of, if applicable) for payment of such price, which currency may consist
only of cash; debt; common stock; preferred stock; convertible preferred stock;
or such other corporate security (an "OTHER CORPORATE SECURITY") that (1) is
generally accepted by the financial community for use in acquisition
transactions and (2) may be replicated by ATW using commercially reasonable
efforts; and (iii) other material terms of the proposed offer to sell,
including, without limitation, whether such transaction is to be tax-advantaged
or tax-deferred, which terms shall be such that ATW could comply with or satisfy
using commercially reasonable efforts. For purposes of this Section 8.3,
commercially reasonable efforts shall include, without limitation, requesting
any necessary shareholder, lender, governmental or other third party consents or
approvals for the lawful issuance of such securities referred to above or the
lawful undertaking of the transactions contemplated hereby that would be
customary in comparable transactions.
(c) Upon receipt of an Offer Notice, TWE may, within 10
days of receiving such Offer Notice, by written notice to Advance/Xxxxxxxx
request information regarding the Transfer Assets subject to the Offer Notice
reasonably required to enable TWE to evaluate the proposed Offer Notice (unless
such information has been provided with or prior to the delivery of the Offer
Notice). Within the earlier of: (x) 20 business days following receipt of the
Offer Notice if TWE does not request additional information pursuant to the
preceding sentence; (y) where the Transfer Assets are not owned by a
Contribution Entity, 30 business days following receipt by TWE of written
certification from Advance/Xxxxxxxx that the information provided by
Advance/Xxxxxxxx to TWE is all the information that Advance/Xxxxxxxx has
provided, or will provide, to prospective purchasers of the Transfer Assets
(except for updated information to be supplied to maintain the accuracy of the
furnished information); or (z) where the Transfer Assets are owned by a
Contribution Entity, 30 business days following receipt by TWE of a written
certification from Advance/Xxxxxxxx (the "CONTRIBUTION ENTITY CERTIFICATION")
that TWE has been delivered such information as is
55
reasonably required by TWE to enable TWE to evaluate the proposed Offer Notice
and as is reasonably available to Advance/Xxxxxxxx or the Contribution Entity
(which certification may accompany the Offer Notice in the event such
information has been provided with or prior to the Offer Notice), but subject,
in the case of clause (z), to Section 8.3(g)(i), TWE shall, by written notice to
Advance/Xxxxxxxx, either accept or reject the offer set forth in the Offer
Notice or make a counter-offer (which counter-offer shall contain a price, the
types of currency (and the terms thereof) proposed to be paid and other material
terms of the proposed counter-offer; provided, however, that to qualify as a
proper counter-offer pursuant to this Section 8.3 any counter-offer by TWE must
match the type or types of currency proposed by Advance/Xxxxxxxx and in the same
proportions as proposed by Advance/Xxxxxxxx and, if Advance/Xxxxxxxx specifies a
tax-advantaged or tax-deferred transaction, such counter-offer must also specify
a similar transaction). If TWE disputes a Contribution Entity Certification
given by Advance/Xxxxxxxx pursuant to Section 8.3(c)(z) that it has delivered to
TWE such information as is reasonably required to enable TWE to evaluate the
proposed Offer Notice and is reasonably available to Advance/Xxxxxxxx or the
Contribution Entity, TWE shall give written notice of such dispute to
Advance/Xxxxxxxx within 3 days of receipt of such certification from
Advance/Xxxxxxxx.
(d) If TWE does not accept, within the time period
specified in Section 8.3(c) above, the offer set forth in the Offer Notice, or
if TWE makes a proper counter-offer within such time period as set forth in
Section 8.3(c) above, then, at the time of the lapse of such period for
acceptance or receipt of a written notice of rejection of such offer or a
counter-offer from TWE, Advance/Xxxxxxxx shall provide a written notice to TWE
as to whether Advance/Xxxxxxxx had provided a Pre-Bid Offer Notice or a Post-Bid
Offer Notice. If a Pre-Bid Offer Notice was provided, the written notice
delivered pursuant to this Section 8.3(d) shall contain a representation to the
effect that neither Advance/Xxxxxxxx nor any investment bankers or advisors
acting at the direction of or on behalf of Advance/Xxxxxxxx had previously
commenced substantive discussions with or solicited bids from other parties in
respect of the Transfer Assets subject to the Offer Notice; provided that if
Advance/Xxxxxxxx must reoffer the Transferred Assets as contemplated pursuant to
Sections 8.3(e) or (f) below, such representation shall only apply to
solicitation of bids in connection with the most recent reoffer.
(e) If TWE does not accept, within the time period set
forth in Section 8.3(c) above, the offer set forth in the Offer Notice, then,
subject to compliance with the time frames set forth in this Section 8.3(e) for
execution of definitive agreements, Advance/Xxxxxxxx may sell the Transfer
Assets subject to the Offer Notice to a third party that is not an Affiliate of
Advance/Xxxxxxxx:
(i) for the types of currency specified in the
Offer Notice and in at least ninety-five percent (95%) of the minimum amount of
each such type of currency set forth in the Offer Notice;
(ii) in a tax-advantaged or tax-deferred
transaction if Advance/Xxxxxxxx specified such a transaction in the Offer
Notice;
56
(iii) at a price equal to or greater than the
greater of (A) the value of TWE's last proper counter-offer pursuant to Section
8.3(c) (if any such proper counter-offer was made) taking into account the
amount and types of currency offered by TWE and (B) ninety-five percent (95%) of
the price specified by Advance/Xxxxxxxx in the Offer Notice (such price, the
"REQUIRED MINIMUM PRICE"); and
(iv) on the other material terms specified in the
Offer Notice.
If Advance/Xxxxxxxx does not sign definitive agreements for such a sale
pursuant to this Section 8.3(e) within (a) 90 days of TWE's non-acceptance of a
Post-Bid Offer Notice or (b) 180 days of TWE's non-acceptance of a Pre-Bid Offer
Notice, then the provisions of this Section 8.3 shall again be applicable.
(f) If TWE accepts, within the time period set forth in
Section 8.3(c) above, the offer set forth in the Offer Notice, or if
Advance/Xxxxxxxx accepts a counter-offer submitted by TWE, upon such acceptance,
the terms of such accepted offer or counter-offer, as the case may be, shall
become binding upon the parties. Advance/Xxxxxxxx and TWE shall negotiate in
good faith to enter into more formal agreements within 45 days of such
acceptances (as the case may be), but it is understood and agreed by TWE and
Advance/Xxxxxxxx that notwithstanding any failure to enter into more formal
agreements, the terms of the accepted offer or counter-offer, as the case may
be, shall be binding upon the parties and the transaction shall be consummated
on the terms set forth in such accepted offer or counter-offer, subject to
Section 8.3(g)(ii) below.
(g) (i) To the extent that there is a dispute under this
Section 8.3 regarding (1) the Contribution Entity Certification as specified in
the last sentence of Section 8.3(c) above; (2) the general acceptance of the
Other Corporate Security suggested by Advance/Xxxxxxxx or replication by ATW of
the Other Corporate Security by ATW using commercially reasonable efforts; or
(3) the ability of ATW to comply with or satisfy with the other material terms
proposed by Advance/Xxxxxxxx using commercially reasonable efforts, such dispute
shall be conclusively determined by a nationally recognized investment bank
selected in the same manner as provided for the selection of the Appraiser in
Section 8.4(j) hereof, except that the investment banking firms selected by each
party shall be chosen within five business days of delivery of the Offer Notice
and such investment banking firms shall be instructed to make the selection of
the third investment banking firm within 5 business days after their selection.
Such determination by the investment bank so chosen shall be made as soon as
practicable in accordance with procedures established by such investment bank,
except that in respect of any dispute under clause (1) hereof, such
determination shall be made within 30 business days following the Contribution
Entity Certification given by Advance/Xxxxxxxx pursuant to Section 8.3(c)(z)
above. The fees, costs, and expenses of the investment banking firm so selected
shall be borne one-half by Advance/Xxxxxxxx and one-half by TWE. To the extent
that the investment bank determines under clause (1) that additional information
must be delivered to TWE, then TWE shall, by written notice to Advance/Xxxxxxxx,
either accept or reject the offer set forth in the Offer Notice or make a
counter-offer (in accordance with and subject to the terms of Section 8.3(c)
57
above), within 30 business days of receipt by TWE of such additional
information. If the investment bank determines under clause (1) that no
additional information is required to be delivered to TWE, then TWE shall, by
written notice to Advance/Xxxxxxxx, either accept or reject the offer set forth
in the Offer Notice or make a counter-offer (in accordance with and subject to
the terms of Section 8.3(c) above), within the later of (x) 30 days following
receipt by TWE of the Contribution Entity Certification or (y) 2 business days
of such determination by the investment bank.
(ii) To the extent that following an acceptance
of an offer or counter-offer, as the case may be, under Section 8.3(f) above,
the parties fail to enter into more formal agreements, and a dispute arises as
to any additional customary matters that must be addressed to complete the
transaction that were not addressed in the accepted offer or counter-offer, such
dispute shall be resolved (including whether such matter must be addressed and,
if so, the terms of how such matter should be addressed) by a nationally
recognized investment bank selected in the manner and within the time frames
provided in Section 8.3(g)(i) above. Such determination by the investment bank
so chosen shall be made as soon as practicable in accordance with procedures
established by such investment bank. The fees, costs and expenses of the
investment banking firm so selected shall be borne one-half by TWE and one-half
by Advance/Xxxxxxxx.
(iii) To the extent there is a dispute under this
Section 8.3 regarding whether Advance/Xxxxxxxx is receiving the Required Minimum
Price, including any determination of the value of any counter-offer by TWE or
the value of an offer by Advance/Xxxxxxxx such dispute shall be conclusively
determined by a nationally recognized investment bank selected by
Advance/Xxxxxxxx, which selection shall be made within 10 business days of
notice of a dispute. Such determination by the investment banking firm so chosen
shall be made as soon as practicable in accordance with procedures established
by such investment bank. The fees, costs and expenses of the investment banking
firm so selected shall be borne by Advance/Xxxxxxxx.
(h) The right of first offer set forth in this Section
8.3 shall not apply to (w) any exchange of Systems (and related assets) in the
Selected Business (other than Systems in Preferred Cluster Areas (as defined in
the First Amended Agreement) for other cable systems (and related assets) of
third parties, including an exchange which contemplates cash or other property
being received by Advance/Xxxxxxxx to equalize the exchange so long as the cash
or other property being received by Advance/Xxxxxxxx does not exceed 15 percent
(15%) of the total value of the property being exchanged by it; (x) any sale or
disposition of used equipment and similar assets that are not necessary to, or
any longer useful in, the continued operation of the Systems in the Selected
Business and do not constitute a complete System; (y) any contribution or
transfer of assets permitted pursuant to Section 8.2 above; or (z) any issuance
or transfer of equity in any direct or indirect equity holder of
Advance/Xxxxxxxx; provided that (i) such equity holder is not a Cable Company
(as defined below), (ii) such issuance or transfer is in compliance with the
Parents Agreement and (iii) the transferee of such equity interest does not have
any direct or indirect equity interest in a Contribution Entity (other than as a
result of such issuance or transfer) and, from and after such issuance or
transfer, such transferee will not acquire any direct or indirect interest in a
Contribution Entity from a
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Xxxxxxxx Family Member (other than as a result of such issuance or transfer).
For purposes of the foregoing, a "CABLE COMPANY" means Advance/Xxxxxxxx or any
other entity that directly or indirectly (through the ownership of equity
interests) owns assets in the Selected Business if at least a majority of the
fair market value of such entity's assets (other than cash, cash equivalents and
marketable securities) is comprised of Systems or assets related thereto or a
direct or indirect equity interest in an entity owning or operating such assets.
(i) TWE may assign its rights under this Section 8.3 to
ATW or any of its Affiliates by delivering written notice of such assignment to
Advance/Xxxxxxxx; provided that no such assignment shall relieve TWE of its
obligations under this Section 8.3 and ATW shall use, and shall cause its
Affiliates to use, commercially reasonable efforts to prevent such assignment
from hindering or delaying consummation of the transactions contemplated under
this Section 8.3.
The provisions of this Section 8.3 shall be applicable to the Selected
Subsidiary as well as to Advance/Xxxxxxxx so that the Selected Subsidiary shall
also have the rights and obligations under this Section 8.3 as are applicable to
Advance/Xxxxxxxx.
8.4 SPECIAL RIGHT OF FIRST OFFER.
(a) Notwithstanding anything to the contrary in Section
8.3, during the 30-day period (the "SPECIAL ROFO PERIOD") immediately following
each of the first, seventh, thirteenth and nineteenth anniversaries of the date
of death of the last to die of Xxxxxx X. Xxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxx
(the "SPECIAL ROFO EVENT"), Advance/Xxxxxxxx may, if it wishes to sell any
Transfer Assets in a transaction otherwise subject to Section 8.3, elect to
comply with the special sale process described below (the "SPECIAL ROFO
Process") for the sale of all or any portion of the Transfer Assets (the
"SPECIAL ROFO ASSETS") to TWE by delivering written notice of the exercise of
such election to TWE (a "SPECIAL ROFO NOTICE") during such 30-day period.
(b) A Special ROFO Notice shall: (i) describe the Special
ROFO Assets in reasonable detail; (ii) specify the types of currency (and terms,
if applicable) for payment of the Special ROFO Asset Value (as defined below)
for the Special ROFO Assets, which currency may consist only of cash; debt;
common stock; preferred stock; convertible preferred stock; or Other Corporate
Security that (1) is generally accepted by the financial community for use in
acquisition transactions and (2) may be replicated by ATW using commercially
reasonable efforts; and (iii) specify other material terms of the proposed sale
of the Special ROFO Assets to TWE, including, without limitation, whether such
transaction is to be tax-advantaged or tax-deferred, which terms shall be such
that ATW could comply with or satisfy using commercially reasonable efforts. For
purposes of this Section 8.4, commercially reasonable efforts shall include
requesting any necessary shareholder, lender, governmental or other third party
consents or approvals for the lawful issuance of such securities referred to
above or the lawful undertaking of the transactions contemplated hereby that
would be customary in comparable transactions.
(c) (i) Within 60 days following the delivery by
Advance/Xxxxxxxx of the Special ROFO Notice to TWE, an appraiser selected in
accordance with paragraph (j) below (an "APPRAISER") shall determine the Special
ROFO Asset Value (as defined below) and shall deliver a written notice (the
"VALUATION NOTICE") to each of Advance/Xxxxxxxx and TWE setting forth such
Special ROFO Asset Value, which shall be final and binding on the parties.
"SPECIAL ROFO ASSET VALUE" shall mean (including taking into account the matters
referred to in this Section 8.4(c)) the fair market value, as of the date of
valuation, of the business of the Special ROFO Assets assuming a private market
sale of the Special ROFO Assets as an ongoing business to an unrelated third
party. The determination of Special ROFO Asset Value shall also take into
account (a) the types of currency (and terms of payment, if applicable) and (b)
whether such transaction is to be tax-advantaged or tax-deferred, each of the
foregoing clauses (a) and (b) as specified in the Special ROFO Notice. It is
expressly understood and agreed that TWE and Advance/Xxxxxxxx shall each be
entitled to provide the Appraiser with more information than is requested by the
Appraiser, in accordance with procedures established by the Appraiser, and that
the parties intend for the Appraiser to consider, to the extent it deems
appropriate, all such information, provided that it is also understood and
agreed that the other party shall be entitled to receive copies of such
additional information furnished to the Appraiser, subject to the same
confidentiality procedures referenced in this Section 8.4.
(ii) Advance/Xxxxxxxx shall, and shall cause its
Affiliates to, cooperate in furnishing all information that may be requested by
the Appraiser in accordance with procedures (including confidentiality
protections) established by the Appraiser; provided that the production of third
party agreements that contain competitively sensitive information or that are
subject to confidentiality restrictions shall be produced to TWE subject to such
protections as the Appraiser may determine are adequate to protect the
legitimate confidentiality concerns of Advance/Xxxxxxxx and its Affiliates
taking into account the need for TWE to review such agreements as part of its
presentation to the Appraiser. It is agreed that as part of such protections the
Appraiser may direct that in lieu of such agreements being produced to TWE
directly that such agreement may be delivered to TWE's legal counsel and other
advisors.
(d) Upon receipt of the Valuation Notice,
Advance/Xxxxxxxx may, within 20 days of receiving such Valuation Notice (the
"CONSIDERATION PERIOD"), by written notice to TWE (the "ROFO TERMINATION
NOTICE") terminate the Special ROFO Process. If Advance/Xxxxxxxx terminates the
Special ROFO Process, then notwithstanding Section 8.4(j), Advance/Xxxxxxxx
shall pay 100% of the fees, costs and expenses of the Appraiser. If
Advance/Xxxxxxxx does not so terminate the Special ROFO Process, then the
Special ROFO Notice shall be deemed to be an offer to sell the Special ROFO
Assets to TWE at a purchase price equal to the Special ROFO Asset Value on the
terms and conditions set forth below.
(e) If Advance/Xxxxxxxx does not deliver a ROFO
Termination Notice within the Consideration Period, then TWE may, within 10 days
of the expiration of the Consideration Period, by written notice to
Advance/Xxxxxxxx request information regarding the Special ROFO Assets
reasonably required to enable TWE to evaluate the
60
proposal contained in the Special ROFO Notice (unless such information has been
provided with or prior to the delivery of the Special ROFO Notice). Within the
earlier of: (i) 20 business days following the expiration of the Consideration
Period if TWE does not request additional information pursuant to the preceding
sentence; (ii) where the Special ROFO Assets are not owned by a Contribution
Entity, 30 business days following receipt by TWE of written certification from
Advance/Xxxxxxxx that the information provided by Advance/Xxxxxxxx to TWE is all
the information that Advance/Xxxxxxxx has provided, or will provide, to a
prospective purchaser of the Special ROFO Assets (except for updated information
to be supplied to maintain the accuracy of the furnished information); or (iii)
where the Special ROFO Assets are owned by a Contribution Entity, 30 business
days following receipt by TWE of a written certification from Advance/Xxxxxxxx
(the "ROFO CONTRIBUTION ENTITY Certification") that TWE has been delivered such
information as is reasonably required by TWE to enable TWE to evaluate the offer
contained in the Special ROFO Notice and as is reasonably available to
Advance/Xxxxxxxx or the Contribution Entity (which certification may accompany
the Special ROFO Notice in the event such information has been provided with or
prior to the Special ROFO Notice), but subject, in the case of the foregoing
clause (iii), to Section 8.4(h)(i), TWE may, by written notice to
Advance/Xxxxxxxx, either accept or reject the offer constituted by the Special
ROFO Notice. If TWE disputes a ROFO Contribution Entity Certification given by
Advance/Xxxxxxxx pursuant to Section 8.4(e)(iii) that it has delivered to TWE
such information as is reasonably required to enable TWE to evaluate the offer
contained in the Special ROFO Notice and is reasonably available to
Advance/Xxxxxxxx or the Contribution Entity, TWE shall give written notice of
such dispute to Advance/Xxxxxxxx within 3 days of receipt of such certification
from Advance/Xxxxxxxx.
(f) If TWE does not accept, within the applicable time
periods set forth in Section 8.4(e) above (the "OFFER PERIOD"), the offer set
forth in the Special ROFO Notice, then, subject to compliance with the time
frames set forth in this Section 8.4(f) for execution of definitive agreements,
Advance/Xxxxxxxx may not dispose of the Special ROFO Assets within 180 days of
the expiration of the Offer Period, unless it sells the Special ROFO Assets to a
third party that is not an Affiliate of Advance/Xxxxxxxx:
(i) for the types of currency specified in the
Special ROFO Notice and in at least ninety-five percent (95%) of the minimum
amount of each such type of currency set forth in the Special ROFO Notice;
(ii) in a tax-advantaged or tax-deferred
transaction if Advance/Xxxxxxxx specified such a transaction in the Special ROFO
Notice;
(iii) at a price equal to or greater than
ninety-five percent (95%) of the Special ROFO Asset Value (such price, the "ROFO
REQUIRED MINIMUM PRICE"); and
(iv) on the other material terms specified in the
Special ROFO Notice.
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If Advance/Xxxxxxxx does not sign definitive agreements for such a sale
pursuant to this Section 8.4(f) within 180 days of the expiration of the Offer
Period, then the provisions of Section 8.3 shall again be applicable.
(g) If TWE accepts the offer set forth in the Special
ROFO Notice in accordance with the provisions of Section 8.4(e) above, upon such
acceptance, the terms of such accepted offer shall become binding upon the
parties. Advance/Xxxxxxxx and TWE shall negotiate in good faith to enter into
more formal agreements within 45 days of such acceptances (as the case may be),
but it is understood and agreed by TWE and Advance/Xxxxxxxx that notwithstanding
any failure to enter into more formal agreements, the terms of the accepted
offer shall be binding upon the parties and the transaction shall be consummated
on the terms set forth in such accepted offer, subject to Section 8.4(h)(ii)
below.
(h) (i) To the extent that there is a dispute under this
Section 8.4 regarding (1) the ROFO Contribution Entity Certification as
specified in the last sentence of Section 8.4(e) above; (2) the general
acceptance of the Other Corporate Security suggested by Advance/Xxxxxxxx or
replication by ATW of the Other Corporate Security by ATW using commercially
reasonable efforts; or (3) the ability of ATW to comply with or satisfy with the
other material terms proposed by Advance/Xxxxxxxx using commercially reasonable
efforts, such dispute shall be conclusively determined by the Appraiser. Such
determination by the Appraiser shall be made as soon as practicable in
accordance with procedures established by such Appraiser, except that in respect
of any dispute under clause (1) hereof, such determination shall be made within
30 business days following the ROFO Contribution Entity Certification given by
Advance/Xxxxxxxx pursuant to Section 8.4(e)(iii) above. To the extent that the
Appraiser determines under clause (1) that additional information must be
delivered to TWE, then TWE shall, by delivery of a written notice to
Advance/Xxxxxxxx, either accept or reject the offer set forth in the Special
ROFO Notice (in accordance with and subject to the terms of Section 8.4(e)
above), within 30 business days of receipt by TWE of such additional
information. If the Appraiser determines under clause (1) that no additional
information is required to be delivered to TWE, then TWE shall, by delivery of a
written notice to Advance/Xxxxxxxx, either accept or reject the offer set forth
in the Special ROFO Notice (in accordance with and subject to the terms of
Section 8.4(e) above), within the later of (x) 30 days following receipt by TWE
of the ROFO Contribution Entity Certification or (y) 2 business days of such
determination by the Appraiser.
(ii) To the extent that following an acceptance
of an offer under Section 8.4(h) above, the parties fail to enter into more
formal agreements, and a dispute arises as to any additional customary matters
that must be addressed to complete the transaction that were not addressed in
the accepted offer, such dispute shall be resolved (including whether such
matter must be addressed and, if so, the terms of how such matter should be
addressed) by the Appraiser within the time frames provided in Section 8.4(h)(i)
above. Such determination by the Appraiser shall be made as soon as practicable
in accordance with procedures established by such Appraiser. The fees, costs and
expenses of the Appraiser shall be borne one-half by TWE and one-half by
Advance/Xxxxxxxx.
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(iii) To the extent there is a dispute under this
Section 8.4 regarding whether Advance/Xxxxxxxx is receiving the ROFO Required
Minimum Price, such dispute shall be conclusively determined by a nationally
recognized investment bank selected by Advance/Xxxxxxxx, which selection shall
be made within 10 business days of notice of a dispute. Such determination by
the investment banking firm so chosen shall be made as soon as practicable in
accordance with procedures established by such investment bank. The fees, costs
and expenses of the investment banking firm so selected shall be borne by
Advance/Xxxxxxxx.
(i) TWE may assign its rights under this Section 8.4 to
ATW or any of its Affiliates by delivering written notice of such assignment to
Advance/Xxxxxxxx; provided that no such assignment shall relieve TWE of its
obligations under this Section 8.4 and ATW shall use, and shall cause its
Affiliates to use, commercially reasonable efforts to prevent such assignment
from hindering or delaying consummation of the transactions contemplated under
this Section 8.4.
(j) An "APPRAISER" shall be a nationally recognized
investment banking firm selected by two other nationally recognized investment
banking firms, one selected by Advance/Xxxxxxxx and one selected by TWE;
provided that if one party fails to notify the other party of its selection
within the time period specified below, the Appraiser shall be the investment
banking firm selected by the party that has so notified the other party of its
selection. Each of Advance/Xxxxxxxx and TWE shall notify the other of its
selection of an investment banking firm (which notice shall identify such firm)
within ten business days following the delivery by Advance/Xxxxxxxx of the
Special ROFO Notice, and each of TWE and Advance/Xxxxxxxx shall instruct the
investment banking firms so selected to select the third investment banking firm
within twenty business days following delivery of the Special ROFO Notice, as
applicable. The fees, costs and expenses of the investment banking firm so
selected shall be borne equally by the parties and each party shall bear the
fees, costs and expenses of the investment banking firm selected by such party.
The provisions of this Section 8.4 shall be applicable to the Selected
Subsidiary as well as to Advance/Xxxxxxxx so that the Selected Subsidiary shall
also have the rights and obligations under this Section 8.4 as are applicable to
Advance/Xxxxxxxx.
SECTION 9 [INTENTIONALLY OMITTED.]
SECTION 10 OTHER BUSINESS ACTIVITIES
10.1 SURVIVAL OF THIS SECTION 10. Immediately upon delivery of a
Restructuring Notice in accordance with Section 8.1 hereto, all provisions of
this Section 10 shall immediately become null and void and of no further force
or effect.
10.2 CABLE TELEVISION SYSTEMS.
(a) In the event Advance/Xxxxxxxx or any of its
Affiliates, including the Subsidiary, desire to pursue any opportunity to
acquire or make an investment in any
63
business (other than any acquisition, whether direct or indirect, through
merger, consolidation or otherwise, of an MSO or all or substantially all of the
Systems of an MSO) (i) the majority of the revenues of which are derived from
the operation of Systems or (ii) consisting of Systems serving more than 25,000
Subscribers (an "ADVANCE/XXXXXXXX SYSTEM OPPORTUNITY"), and such
Advance/Xxxxxxxx System Opportunity is entirely within the DMA of the TWE
Systems, then Advance/Xxxxxxxx shall notify TWE in writing of such
Advance/Xxxxxxxx System Opportunity and describe such Advance/Xxxxxxxx System
Opportunity in reasonable detail (an "ADVANCE/XXXXXXXX OPPORTUNITY NOTICE"). TWE
or any of its Affiliates shall have the first right, exercisable by delivery of
written notice to Advance/Xxxxxxxx within 10 business days following delivery of
the Advance/Xxxxxxxx Opportunity Notice, to pursue such Advance/Xxxxxxxx System
Opportunity. If either (x) TWE or any such Affiliate does not elect to pursue
such Advance/Xxxxxxxx System Opportunity within such period, or (y) TWE or any
such Affiliate elects to pursue such Advance/Xxxxxxxx System Opportunity but
fails to consummate the acquisition of, or investment in, such Advance/Xxxxxxxx
System Opportunity within one year of such election, then Advance/Xxxxxxxx or
any of its Affiliates shall have the right to pursue such Advance/Xxxxxxxx
System Opportunity. In the event the Advance/Xxxxxxxx System Opportunity is
partially within the DMA of the TWE Systems and partially in a geographic area
other than the DMA of the TWE Systems, then Advance/Xxxxxxxx shall in good faith
consider whether a mutually beneficial arrangement involving the other Partners
should be explored with respect to such Advance/Xxxxxxxx System Opportunity.
(b) In the event TWE or any of its Affiliates, including
the Partnership (other than the Selected Subsidiary), desire to pursue any
opportunity to acquire or make an investment in any business (other than any
acquisition, whether direct or indirect, through merger, consolidation or
otherwise, of an MSO or all or substantially all of the Systems of an MSO) (i)
the majority of the revenues of which are derived from the operation of Systems
or (ii) consisting of Systems serving more than 25,000 Subscribers (a "TWE
SYSTEM OPPORTUNITY"), and such TWE System Opportunity is entirely within the DMA
of the Selected Systems, then TWE shall notify Advance/Xxxxxxxx in writing of
such TWE System Opportunity and describe such TWE System Opportunity in
reasonable detail (a "TWE OPPORTUNITY NOTICE"). The Selected Subsidiary shall
have the first right, exercisable by delivery of written notice to TWE within 10
business days following delivery of the TWE Opportunity Notice, to pursue such
TWE System Opportunity. If either (x) the Selected Subsidiary does not elect to
pursue such TWE System Opportunity within such period, or (y) the Selected
Subsidiary elects to pursue such TWE System Opportunity but fails to consummate
the acquisition of, or investment in, such TWE System Opportunity within one
year of such election, then TWE or any of its Affiliates shall have the right to
pursue such TWE System Opportunity. In the event the TWE System Opportunity is
partially within the DMA of the Selected Systems and partially in a geographic
area other than the DMA of the Selected Systems, then TWE shall in good faith
consider whether a mutually beneficial arrangement involving the other Partners
should be explored with respect to such TWE System Opportunity.
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10.3 PROGRAMMING FOR CARRIAGE DEALS. In the event the TWE Cable
Division or its Controlled Affiliates desire to pursue a transaction to exchange
carriage commitments for a third party's programming on Systems in exchange for
equity in such third party (an "EQUITY FOR CARRIAGE PROGRAMMING OPPORTUNITY"),
then TWE and the Selected Subsidiary shall participate in such Equity for
Carriage Programming Opportunity pro rata based on the number of Subscribers of
the TWE Systems and the Selected Systems, respectively, and, with respect to
regional programming, based on the number of Subscribers to the Selected Systems
and TWE Systems, respectively, in the region targeted by such programming.
SECTION 11 BOOKS AND RECORDS; INFORMATION RIGHTS; OPERATION OF
SELECTED BUSINESS
11.1 BOOKS AND RECORDS. The books and records of the Residual
Business shall be maintained at the location specified in Section 2.5. The
Residual Business shall keep current and complete records and books of account
in which shall be entered fully and accurately all transactions of the Residual
Business. The books and records of the Selected Business shall be maintained at
the location specified by Advance/Xxxxxxxx. The Selected Business shall keep
current and complete records and books of account in which shall be entered
fully and accurately all transactions of the Selected Business.
11.2 TAX RETURN INFORMATION. As soon as reasonably practicable
following the end of the Fiscal Year, but in no event later than July 31
following the end of such Fiscal Year, the Partnership shall furnish to each
Partner a preliminary draft Schedule K-1 of the Partnership. As soon as
practicable thereafter, the Partnership shall furnish to each Partner a final
report of the Net Profit or Net Loss, and distributions, if any, for such Fiscal
Year, a schedule setting forth each Partner's Capital Account as at the end of
the period covered by such statements and a Schedule K-1 for each Partner, a
copy of the Partnership's federal and state tax returns, and other information
required by applicable tax regulations or necessary for each Partner to prepare
its federal, state, and local tax returns. With respect to the 2002 Fiscal Year,
the Partnership shall effect a closing of the books of the Partnership as of the
close of business on the day immediately prior to August 1, 2002, and
Advance/Xxxxxxxx shall be entitled to receive 2002 Fiscal Year tax return
information only with respect to the portion of the 2002 Fiscal Year that ends
on the date of such closing of the books. Advance/Xxxxxxxx shall not be entitled
to any information under this Section 11.2 for any Fiscal Year, or portion
thereof, beginning on or after August 1, 2002.
11.3 INFORMATION RIGHTS. Advance/Xxxxxxxx shall have full access,
at Advance/Xxxxxxxx'x sole expense, to all premises, properties, financial and
accounting records, Contracts, other records and documents, and personnel, of
the Selected Business. Without limiting other rights expressly granted under the
Transaction Agreements, Advance/Xxxxxxxx shall have no rights with respect to
the premises, properties, financial and accounting records, contracts, other
records and documents, and personnel of the Residual Business; provided,
however, that Advance/Xxxxxxxx shall have the right to copies of contracts that
bind the Advance/Xxxxxxxx Group.
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11.4 BANK ACCOUNTS. Except as otherwise provided in Section 3.1(d):
(a) the Partnership shall maintain bank accounts in such
banks or institutions as the Managing Partner from time to time shall select,
and such accounts shall be drawn upon by check signed by such person or persons,
and in such manner, as may be designated by the Managing Partner; and
(b) all moneys of the Partnership shall be deposited in
the bank or other financial institution account or accounts of the Partnership.
In no event shall Partnership funds be commingled with those of any
other Person without the consent of the Managing Partner.
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11.5 TAX ALLOCATIONS. No later than 45 days prior to the filing of
the Partnership's federal information return and Schedules K-1 thereto with
respect to any Fiscal Year beginning prior to August 1, 2002, the Managing
Partner shall deliver a draft of such return to the Advance/Xxxxxxxx
Accountants, together with such workpapers as are necessary for the
Advance/Xxxxxxxx Accountants to review the proposed determinations of Special
Income, Maximum Income Amount, and Net Tax Amount of each of the Partners,
together with the allocations required by Sections 5.3(b)(iii) and 5.3(d)(ii) of
the First Amended Agreement. The Advance/Xxxxxxxx Accountants shall promptly
review such proposed determinations and allocations and shall deliver, within 30
days after receipt of the draft return and necessary workpapers, a report
("ADJUSTMENT REPORT") setting forth in reasonable detail the determinations and
allocations with which such Accountants disagree. Thereafter, the Managing
Partner and the Advance/Xxxxxxxx Accountants shall endeavor in good faith to
agree to such determinations and allocations prior to the filing of the
Partnership's information returns. If any dispute cannot be resolved by the
Managing Partner and the Advance/Xxxxxxxx Accountants within 10 days after the
delivery of the Adjustment Report, the disputed matters shall be referred to a
mutually satisfactory independent public accounting firm of national stature
which has not been employed by any Partner for the two year preceding the date
of such referral, such firm to be selected by the TWE Accountants and the
Advance/Xxxxxxxx Accountants. In settling any disputed matter, such independent
public accounting firm shall apply the understanding of the Partners that, until
August 1, 2002, on an annual basis the after-tax positions of the Partners with
respect to the contributed assets are to be in proportion to their respective
Percentage Interests (assuming all Partners are taxable at the Special Effective
Tax Rate). The fees of such firm shall be paid by the Partners in accordance
with their Percentage Interests. With respect to the 2002 Fiscal Year, the
Partnership shall effect a closing of the books of the Partnership as of the
close of business on the day immediately prior to August 1, 2002, and
Advance/Xxxxxxxx shall be entitled to review and challenge information relating
to the 2002 Fiscal Year only with respect to the portion of the 2002 Fiscal Year
that ends on the date of such closing of the books. This Section 11.5 shall not
be operative for any Fiscal Year beginning on or after August 1, 2002.
SECTION 12 DISSOLUTION
12.1 CAUSES OF DISSOLUTION. To the extent permitted by the Act, the
Partnership shall dissolve upon the first to occur of the following dates or
events:
(a) the sale, exchange, involuntary conversion, or other
disposition of all or substantially all of the assets of the Partnership;
(b) the expiration of the term of the Partnership as
specified in Section 2.3; or
(c) the bankruptcy (within the meaning of Section
1531(5), or any successor provision, of the Act) of any Partner.
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12.2 EFFECT OF DISSOLUTION. Upon the dissolution of the
Partnership, the Partnership shall cease its regular business operations, except
for the taking of such actions as shall be necessary for the performance and
discharge of the Partnership's obligations, the winding-up of its affairs, and
the liquidation and distribution of its assets in accordance with the provisions
of this Agreement.
12.3 WINDING UP AND LIQUIDATION.
(a) TRIGGERING OF RESTRUCTURING. To the extent permitted
by law, immediately upon the dissolution of the Partnership a restructuring of
the Partnership in accordance with Section 8.1 shall occur; provided that the
requirement that either TWE or Advance/Xxxxxxxx deliver a Restructuring Notice
shall be deemed waived.
(i) Following a restructuring described in the
preceding sentence, TWE shall act as liquidator (the "TWE Restructuring
Liquidator") to wind up the Partnership; provided, however, if TWE is the
subject of a bankruptcy proceeding, Paragon shall act as the TWE Restructuring
Liquidator. The TWE Restructuring Liquidator shall have full power and authority
to sell, assign, and encumber any or all of the Partnership's assets and to wind
up and liquidate the affairs of the of the Partnership in an orderly and
businesslike manner.
(ii) The proceeds of such liquidation of the
Partnership shall be applied first to the payment of the debts and liabilities
of the Partnership (including any loans made to the Partnership by TWE or
Paragon), the expenses of liquidation of the Partnership and the establishment
of any reserves that the TWE Restructuring Liquidator deems necessary for
potential or contingent liabilities of the Partnership. The remaining assets of
the Partnership shall be distributed to TWE and Paragon in accordance with the
priority allocation rules established in Section 5.1(d).
(b) ALTERNATIVE DISSOLUTION. If a dissolution and
restructuring of the Partnership described in clause (a) of this Section 12.3 is
not permitted by applicable law:
(i) LIQUIDATOR. Upon the dissolution of the
Partnership, the Managing Partner shall act as liquidator (the "LIQUIDATOR") to
wind up the Partnership; provided, however, if the Managing Partner is the
subject of a bankruptcy proceeding, Paragon shall act as Liquidator. The
Liquidator shall have full power and authority, subject to Section 3.2, to sell,
assign, and encumber any or all of the Partnership's assets and to wind up and
liquidate the affairs of the Partnership in an orderly and businesslike manner.
(ii) APPLICATION OF PROCEEDS. The proceeds of
liquidation shall be applied first to the payment of the debts and liabilities
of the Partnership (including any loans to the Partnership made by any Partner),
the expenses of liquidation, and the establishment of any reserves that the
Liquidator deems necessary for potential or contingent liabilities of the
Partnership (excluding for this purpose the Series A Preferred Partnership
Units, the Series B Partnership Units and the Series C Partnership Units). The
remaining assets of the Partnership shall be distributed to the Partners as
follows:
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(A) the Selected Business Percentage (as
defined below) of such assets to Advance/Xxxxxxxx;
(B) the Residual Business Percentage (as
defined below) of such assets to TWE and Paragon in accordance with the
priority allocation rules established in Section 5.1(d);
in each case as determined in good faith by the Liquidator.
For purposes hereof,
(x) the "SELECTED BUSINESS
PERCENTAGE" means a fraction (expressed as a percentage) (a) the
numerator of which is the fair value of the Selected Business, as of
the date of dissolution, taking into account all attendant
circumstances including, without limitation, all debt and other
liabilities attributable to the Selected Business and (b) the
denominator of which is the sum of clause (a) in this definition and
clause (a) in the definition of Residual Business Percentage.
(y) the "RESIDUAL BUSINESS
PERCENTAGE" means a fraction (expressed as a percentage) (a) the
numerator of which is the fair value of the Residual Business, as of
the date of dissolution, taking into account all attendant
circumstances including, without limitation, all debt and other
liabilities attributable to the Residual Business and (b) the
denominator of which is the sum of clause (a) in this definition and
clause (a) in the definition of Selected Business Percentage.
(iii) FINAL ACCOUNTING. Upon the dissolution and
winding up of the Partnership, a proper accounting shall be made from the date
of the last previous accounting to the date of winding up.
(iv) STATEMENT OF LIQUIDATION. Within a
reasonable time following the completion of the liquidation of the Partnership,
the Liquidator shall submit a statement (which need not be audited) to each
Partner setting forth the assets and liabilities of the Partnership as of the
date of liquidation and the amount of the distribution to each Partner.
(c) EFFECT OF WITHDRAWAL OF A PARTNER. To the extent
permitted by the Act, the withdrawal of a Partner, other than the withdrawal of
Advance/Xxxxxxxx in connection with a restructuring in accordance with Section
8.1 hereof, shall not alter the allocations and distributions to be made to the
Partners pursuant to this Agreement.
(d) TERMINATION OF PARTNERSHIP. Upon the completion of
the distribution of the Partnership's assets and the proceeds of liquidation as
provided in this Section 12.3, the Partnership shall be terminated.
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SECTION 13 INDEMNIFICATION
13.1 INDEMNIFICATION BY PARTNERSHIP.
(a) The Selected Business and Advance/Xxxxxxxx shall
indemnify and save harmless the Partnership, each Partner (other than
Advance/Xxxxxxxx), the officers, directors, and stockholders of each Partner
(other than Advance/Xxxxxxxx) and its Affiliates, and the officers and employees
of the Residual Business, from any loss, damage, or expense incurred by any of
them by reason of any act or omission to act on behalf of the Selected Business
(including any action or omission by the Partner acting as Tax Matters Partner),
performed by any of them in good faith and without gross negligence, willful
misconduct, or breach of this Agreement.
(b) The Residual Business, TWE and Paragon shall
indemnify and save harmless the Partnership, each Partner, the officers,
directors, and stockholders of each Partner and its Affiliates, and the officers
and employees of the Selected Business, from any loss, damage, or expense
incurred by any of them by reason of any act or omission to act on behalf of the
Residual Business (including any action or omission by the Partner acting as Tax
Matters Partner), performed by any of them in good faith and without gross
negligence, willful misconduct, or breach of this Agreement.
(c) Any reasonable expenses incurred by any indemnified
person pursuant to this Section 13.1 in defending any civil or criminal action,
suit or proceeding (or the threat thereof), other than a claim, action, suit, or
proceeding brought by the Partnership, which is based, in whole or in part, upon
any alleged act or omission to act on behalf of the Selected Business or
Residual Business, as the case may be, shall be borne and paid by the Selected
Business (and Advance Xxxxxxxx) or the Residual Business (and TWE and Paragon),
as the case may be, in advance of the final disposition of such action, suit, or
proceeding (or the threat thereof) upon receipt of a reasonably satisfactory
undertaking by or on behalf of the indemnified person to repay to the Selected
Business (and Advance Xxxxxxxx) or the Residual Business(and TWE and Paragon),
as the case may be, the amount of such expenses if it shall ultimately be
determined that such person is not entitled to the indemnification provided for
under this Section 13.1. Any indemnity under this Section 13.1 shall be provided
out of and to the extent of the Selected Business' or Residual Business', as the
case may be, assets only.
(d) The Selected Business and Advance/Xxxxxxxx shall
directly compensate the Partnership for the amount of any indemnification to be
provided to the Partnership in accordance with this Section 13.1.
13.2 INDEMNIFICATION BY PARTNERS.
(a) Advance/Xxxxxxxx shall indemnify and save harmless
the Residual Business and each other Partner and former Partner, the officers,
directors, and stockholders of each other Partner and former Partner, and any of
their respective officers, directors, shareholders, partners, employees, agents,
and Affiliates, from any
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loss, damage, or expense incurred by any of them by reason of or resulting from
any unauthorized act taken by the Selected Business orAdvance/Xxxxxxxx in the
name of the Selected Business, the Residual Business, the Partnership or any
other Partner.
(b) TWE and Paragon shall indemnify and save harmless the
Selected Business and each other Partner and former Partner, the officers,
directors, and stockholders of each other Partner and former Partner, and any of
their respective officers, directors, shareholders, partners, employees, agents,
and Affiliates, from any loss, damage, or expense incurred by any of them by
reason of or resulting from any unauthorized act taken by the Residual Business,
TWE or Paragon in the name of the Residual Business, the Selected Business, the
Partnership or any other Partner.
(c) Any reasonable expenses incurred by any Person
entitled to indemnification pursuant to this Section 13.2 in defending any civil
or criminal action, suit, or proceeding (or the threat thereof) by reason of or
resulting from any such indemnified matter shall be borne and paid by the
indemnifying Partner in advance of the final disposition of such action, suit or
proceeding (or the threat thereof) upon receipt of a reasonably satisfactory
undertaking by or on behalf of the indemnified Person to repay to the
indemnifying Partner the amount of such expenses if it shall ultimately be
determined that such Person is not entitled to the indemnification provided for
under this Section 13.2.
13.3 PROCEDURES. With respect to the indemnities provided above in
this Section 13, an indemnified party shall, with respect to any claim made
against such indemnified party for which indemnification is available, notify
the indemnifying party in writing of the nature of the claim as soon as
practicable but not more than ten days after the indemnified party shall have
received notice of the assertion thereof before any court or governmental
authority. The failure by an indemnified party to give notice as provided in the
foregoing sentence shall not relieve the indemnifying party of its obligations
under this Section except to the extent that the failure results in the failure
of actual notice to the indemnifying party and the indemnifying party is damaged
as a result of the failure to give notice. Upon receipt of notice by an
indemnifying party from an indemnified party of the assertion of any such claim,
the indemnifying party shall employ counsel reasonably acceptable to the
indemnified party and shall assume the defense of such claim. The indemnified
party shall have the right to employ separate counsel and to participate in (but
not control) any such action, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (a) the employment of counsel by
the indemnified party has been authorized by the indemnifying party, (b) the
indemnified party shall have been advised by its counsel in writing that there
is a conflict of interest between the indemnifying party and the indemnified
party in the conduct of the defense of such action (in which case the
indemnifying party shall not have the right to direct the defense of such action
on behalf of the indemnified party), or (c) the indemnifying party shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of such counsel shall be at the expense of the
indemnifying party. An indemnifying party shall not be liable for any settlement
of an action effected without its written consent (which consent shall not be
unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such action. Whether or not the
Partnership chooses to defend or prosecute a claim, each Partner shall, to the
extent requested by the Partnership and at the Partnership's expense, cooperate
in the prosecution or defense of such claim and shall furnish such records,
information, and testimony and attend such conferences, discovery proceedings,
hearings, trials, and appeals as may reasonably be requested in connection
therewith.
13.4 SURVIVAL. The provisions of this Section 13 shall survive the
withdrawal of any Partner from the Partnership and the dissolution of the
Partnership.
SECTION 14 REPRESENTATIONS
Each Partner represents and warrants to the other Partners as follows:
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14.1 ORGANIZATION, STANDING, AND AUTHORITY. Such Partner is a
partnership duly organized, validly existing, and in good standing under the
laws of its state of organization. Such Partner has all requisite power and
authority to execute and deliver this Agreement and the documents contemplated
hereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by it hereunder and thereunder.
14.2 ABSENCE OF CONFLICTING AGREEMENTS. The execution, delivery,
and performance of this Agreement by such Partner (with or without the giving of
notice, the lapse of time, or both): (a) do not require the consent of any third
party; (b) do not and will not conflict with any provision of the partnership
agreement or other organizational document of such Partner; (c) do not and will
not conflict with, result in a breach of, or constitute a default under, any
law, judgment, order, ordinance, injunction, decree, rule, regulation, or ruling
of any court or governmental instrumentality; and (d) do not and will not
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of any
performance required by the terms of, any agreement, instrument, license, or
permit to which either such Partner or any of its Affiliates is a party or by
which either such Partner or any of its Affiliates may be bound.
14.3 CLAIMS AND LEGAL ACTIONS. There is no claim, legal action,
counterclaim, suit, arbitration, governmental investigation or other legal,
administrative, or tax proceeding, in progress or pending, or to the knowledge
of such Partner, threatened, against or relating to such Partner or any of its
Affiliates, and no order, decree, or judgment has been issued against such
Partner or any of its Affiliates, that may impair such Partner's ability to
perform and comply with all of the terms, covenants, and conditions to be
performed and complied with by it under this Agreement.
SECTION 15 MISCELLANEOUS
15.1 ACKNOWLEDGMENTS. Each Partner affirms and acknowledges that no
representations, warranties, or statements have been made to it by any party to
this Agreement other than those expressly set forth in this Agreement or any
Restructuring Transaction Agreement and that, in entering into this Agreement,
it has not relied upon anything done or said with respect to this Agreement or
with respect to the relationship between the parties, other than as expressly
set forth in this Agreement or any Restructuring Transaction Agreement.
15.2 XXXX FOR PARTITION. Each of the Partners covenants that
neither it nor any Person claiming through or under it will file a xxxx for
partition of the Partnership property.
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15.3 NOTICES. All notices and other communications hereunder shall
be (a) in writing (except to the extent otherwise expressly provided hereunder);
(b) delivered by telecopy, by commercial overnight or same-day delivery service
with all delivery costs paid by sender, or by registered or certified mail with
postage prepaid, return receipt requested; (c) deemed given on the date and at
the time shown on the telecopy confirmation of receipt (if delivered by
telecopy), on the date and at the time (if recorded) of delivery by the
commercial delivery service, as shown in the records thereof (if delivered by
commercial overnight or same-day delivery service), or on the date shown on the
return receipt (if delivered by registered or certified mail); and (d) addressed
to the parties at their addresses specified on the signature page to this
Agreement (or at such other address for a party as shall be specified by like
notice).
15.4 AMENDMENTS. This Agreement may not be amended nor shall any
waiver, change, modification, consent, or discharge be effected, except by an
instrument in writing signed by each Partner; provided that Advance/Xxxxxxxx
hereby agrees to any amendments or modifications to this Agreement necessitated
by (i) the distribution by TWE of its Partnership Interest to the partners of
TWE (upon a liquidation of TWE otherwise permitted by Section 6.1), (ii) the
incorporation of TWE pursuant to Article XIII of the TWE Partnership Agreement
or otherwise or (iii) any other amendments altering the arrangements between TWE
and Paragon, provided such amendments or modifications do not adversely affect
Advance/Xxxxxxxx.
15.5 WAIVERS AND FURTHER ASSURANCES; ENTIRE AGREEMENT. Any waiver
of any terms or conditions of this Agreement shall be in writing and shall not
operate as a waiver of any other breach of such terms or conditions or any other
term or condition, nor shall any failure to enforce any provision of this
Agreement operate as a waiver of such provision or of any other provision of
this Agreement. Each of the Partners agrees to execute all such further
instruments and documents and to take all such further action as the other
Partners may reasonably require in order to effectuate the terms and purposes of
this Agreement. The Partners agree that this Agreement, and the other
Restructuring Transaction Agreements, and the other agreements expressly
contemplated hereby or thereby constitutes the entire agreement between them
with respect to the subject matter of the Partnership and supersedes all prior
agreements and understandings between them as to such subject matter, and there
are no restrictions, agreements, arrangements, or undertakings, oral or written,
between the Partners relating to the Partnership which are not fully expressed
or referred to herein or therein.
15.6 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the parties to this Agreement shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
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15.7 SPECIFIC ENFORCEMENT; ATTORNEY'S FEES. The Partners agree that
the remedy at law for damages upon violation of the terms of this Agreement
would be inadequate because the Partnership Interests and the business of the
Partnership are unique. Therefore, the Partners agree that the provisions of
this Agreement may be specifically enforced by any court of competent
jurisdiction, and each Partner and its respective transferees agree to submit to
the jurisdiction of the court where any such action for specific performance is
brought. If any Partner defaults in its performance of any of the terms and
conditions of this Agreement and if, as a result of such default, a lawsuit
seeking damages, specific performance, or any other remedy is filed by the other
Partner, then, in that event, the prevailing party in such a lawsuit shall be
entitled to obtain attorney's fees from the losing party in such amount as shall
be determined by the court to be reasonable under the circumstances.
15.8 COUNTERPARTS. This Agreement may be executed in counterparts
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument, and in pleading or proving any provision
of this Agreement, it shall not be necessary to produce more than one complete
set of such counterparts.
15.9 CAPTIONS; GENDER. Section headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. Whenever used herein the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall include all genders.
15.10 GOVERNING LAW; VENUE; DISPUTES. This Agreement shall be
governed by the internal laws of the State of New York. Any action, suit or
proceeding shall be prosecuted as to any party hereto in the County of New York,
State of New York.
15.11 INTERPRETATION. In this Agreement, unless otherwise specified
or where the context otherwise requires:
(a) a reference to a Recital is to the relevant Recital
to this Agreement, to a Section is to the relevant Section of this Agreement and
to an Exhibit is to the relevant Exhibit to this Agreement;
(b) words importing any gender shall include other
genders;
(c) words importing the singular only shall include the
plural and vice versa;
(d) the words "include", "includes" or "including" shall
be deemed to be followed by the words "without limitation";
(e) the words "hereof", "herein", "hereunder" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Schedule, clause and Exhibit
references are to the Articles, Schedules, clauses and Exhibits to this
Agreement unless otherwise specified;
75
(f) references to any Person or any other agreement or
document shall include such Person's successors and permitted assigns;
15.12 BINDING EFFECT. This Agreement shall bind and inure to the
benefit of each of the Partners and their successors and permitted assigns.
15.13 THIRD PARTIES. None of the provisions of this Agreement shall
be for the benefit of, or enforceable by, any creditor of the Partnership or any
Person other than a Partner.
15.14 CONFIDENTIALITY. Each Partner agrees that it shall not,
directly or indirectly, without the prior written consent of any other Partner,
use for its own benefit (except as a Partner of the Partnership) or disclose to
any Person any information, trade secrets, confidential customer information,
patents, patent rights, technical data, or know-how relating to the products,
processes, methods, equipment, or business practices of the Partnership, except
(a) to the extent any of the foregoing is or becomes available to the public
other than as a result of disclosure by such Partner or any of its Affiliates or
the directors, officers, employees, agents, advisors, and controlling persons of
it or any of its Affiliates, (b) subject to the terms of an appropriate
confidentiality agreement, as necessary to effect a transaction under Section 6,
(c) as may be required by law (including without limitation the federal and
state securities laws and the rules and regulations of applicable stock
exchanges or comparable market systems), and (d) as any Partner may disclose to
its lenders, rating agencies, and business and financial advisors. If any
Partner is required by applicable law or regulation or by legal process to
disclose any of the foregoing, it will provide any other Partner with prompt
notice thereof, to the extent practicable under the circumstances, to enable it
to seek an appropriate protective order.
15.15 LIABILITY OF PARTNERS. Except as set forth in any other
Restructuring Transaction Agreement, no Partner shall have any liability for the
debts or obligations of the Partnership owed to any other Partner or its
Affiliates arising under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ADVANCE/XXXXXXXX PARTNERSHIP
0000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxx 00000
By: Advance Cable Holdings Corp.,
General Partner
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
By: Xxxxxxxx Cable Holdings LLC,
General Partner
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
TIME WARNER ENTERTAINMENT COMPANY, L.P.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
PARAGON COMMUNICATIONS
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
By: KBL COMMUNICATIONS, INC., as
General Manager
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President