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