This excerpt taken from the VRSN 10-Q filed Jul 16, 2007.
INITIAL CAPITAL CONTRIBUTIONS, ADDITIONAL CAPITAL AND CAPITAL ACCOUNTS
4.1 Initial Capital Contributions. Contemporaneously with the execution of this Agreement, and pursuant to the terms and conditions of the Formation Agreement, the Members have made the Capital Contributions to the Company (collectively, the Initial Capital Contributions) set forth in Section 2.5 of the Formation Agreement. The respective Gross Asset Values of such Initial Capital Contributions are acknowledged and agreed by the Members and the Board as set forth in Schedule A hereto and will be credited to the applicable Members respective Capital Accounts pursuant to this Agreement.
4.2 Units and Percentage Interests. The Members in the aggregate shall own all of the Units in the Company. In connection with the Initial Capital Contributions, the Company shall issue to each Member the number of initial Units set forth on Schedule A hereto. Such Units shall represent, subject to adjustment pursuant to Section 4.5, the following initial Percentage Interest of each Member in the Company:
4.3 Additional Capital.
(a) In the event the Board approves a request for additional capital from the Members, either in the form of a Capital Loan or Capital Contribution (a Capital Call), in accordance with Section 6.7(b) or Section 6.8(a), as the case may be, the Company shall request by written notice that the Members contribute to the Company such additional capital, in proportion to their respective Percentage Interests, as authorized by the Board on not less than five (5) Business Days prior notice to the Members or such lesser period as the Members may agree. The notice (the Capital Call Notice) shall be sent to all Members and (A) in the case of a Capital Contribution, shall specify (i) the amount of funds to be contributed by each Member, which shall be in proportion to the respective Percentage Interests of the Members determined, in each case, as of the date immediately prior to the Capital Call (each, an Additional Capital Contribution), (ii) the date on which funds are to be provided (the Capital Call Date) and (iii) the account of the Company to which such funds are to be transmitted, and (B) in the case of a Capital Loan, shall specify (i) the amount of funds to be lent by each Member, which shall be in proportion to the respective Percentage Interests of the Members determined, in each case, as
of the date immediately prior to the Capital Call (each, an Additional Capital Loan), (ii) the Capital Call Date, (iii) the terms and conditions of such Additional Capital Loan, including the interest rate and maturity date thereof, which shall be identical (other than with respect to amount) for each Member and (iv) the account of the Company to which such funds are to be transmitted. Unless otherwise agreed by the Members, all Additional Capital shall be in cash or immediately available funds. Additional Capital Loans shall be deemed to have been made on the same date if a Member shall have funded such Additional Capital Loan on or before the Capital Call Date.
(b) For so long as any Capital Loans remain outstanding, and after payment in full of all principal of, and accrued but unpaid interest on, any Cash Shortfall Loan, all amounts otherwise available for distribution from the Company to the Members (whether before or after the Liquidation of the Company) shall be paid to the Members, if at all, first to repay such Capital Loans until the principal amount thereof and all interest accrued thereon have been paid in full to the lending Members. Payments in respect of any Capital Loans will be applied in the order that such Capital Loans were made, and all payments will be applied first to accrued but unpaid interest and then to reduce the outstanding principal amount of such Capital Loan. Any Capital Loans shall become automatically and immediately due and payable by the Company upon the sale of the VeriSign Members Units pursuant to Article VIII or Article IX hereof. Any Capital Loan shall be prepayable, together with accrued but unpaid interest, in whole or in part at any time without premium or penalty.
(c) No Capital Calls may be made by the Company after the delivery of a First Call Exercise Notice, a First Put Option Exercise Notice or a Second Put Option Exercise Notice without Unanimous Board Consent.
(d) Notwithstanding anything in this Agreement to the contrary, a Capital Contribution or Capital Loan shall not count towards the computation of the Agreed Upon Capital Contribution Amount or the Agreed Upon Debt Financing Amount if such Capital Contribution or Capital Loan (or the Capital Call Notice therefor) occurs substantially concurrently with a distribution by the Company or the Netherlands Joint Venture of an amount in cash that corresponds with the amount of the Capital Call in question.
4.4 Additional Capital Defaults.
(a) If any Member (the Defaulting Member) fails to contribute all or any portion of its Additional Capital within three (3) Business Days of the applicable Capital Call Date, the Company shall promptly notify the Members of such failure to contribute and provide the Defaulting Member with ten (10) Business Days following such notice to cure such default. If the Defaulting Member fails to cure such default within such ten (10) Business Day period, the other Member, provided that it has contributed its full share of the applicable Additional Capital (the Non-Defaulting Member), may, at its option, with written notice within three (3) Business Days following the failure to cure during the aforementioned ten (10) Business Day period the default of the Defaulting Member, contribute all or any portion of the Additional Capital to have been funded by the Defaulting Member as Additional Capital of such Non-Defaulting Member in the form, at its option, of (i) an Additional Capital Contribution or (ii) a loan between such Non-Defaulting Member and the Company (Default Loan), and, in the case of a Default Loan, having a principal amount equal to the portion of such Additional Capital being funded by such
Non-Defaulting Member and on such other terms as the Board and such Non-Defaulting Member shall agree, including with respect to interest rate and maturity (in each case, such Non-Defaulting Member that funds pursuant to (i) or (ii) above, a Non-Defaulting Funding Member).
(b) For so long as any Default Loan remains unpaid, all distributions from the Company that otherwise would be made to the Defaulting Member (whether before or after the Liquidation of the Company) instead shall be paid to the Non-Defaulting Funding Member (and applied against the Default Loan) until the Default Loan and all interest accrued thereon have been paid in full to the Non-Defaulting Funding Member. For the avoidance of doubt, no payment to the Non-Defaulting Funding Member in accordance with the preceding sentence shall be deemed to be a distribution to the Non-Defaulting Funding Member under Section 7.1 hereof. Payments in respect of any Default Loan will be applied in the order that such loans were made, and all payments will be applied first to accrued but unpaid interest and then to reduce the outstanding principal amount of the Default Loan. A Default Loan shall become automatically and immediately due and payable by the Defaulting Member, and any amounts remaining unpaid under such Default Loan shall constitute a general obligation of the Defaulting Member, upon the earliest of: (i) the sale of the Defaulting Members Units pursuant to Article VIII or Article IX hereof, however, the amount of any outstanding principal and interest of any Default Loan shall not be taken into account in determining the Fair Market Value of the VeriSign Members Units; (ii) the Liquidation of the Company; (iii) the filing for bankruptcy or insolvency proceedings by or against the Defaulting Member; and (iv) the two (2) year anniversary of the date on which such Default Loan was made. Any Default Loan shall be prepayable, together with accrued but unpaid interest, by the Defaulting Member in whole or in part at any time without premium or penalty.
4.5 Adjusted Percentage Interests. Following each Additional Capital Contribution and Additional Capital Loan, the respective Units and Percentage Interests of the Members shall be calculated as follows: (i) additional Units shall be issued to each Member (including, if applicable, to a Non-Defaulting Funding Member) equal in number to the amount of each Members respective Additional Capital (if any, in the case of a Defaulting Member) divided by the Initial Funding Price, and (ii) each Members Percentage Interest shall be adjusted based on the aggregate number of Units held by each such Member relative to the total number of Units outstanding, in each case after giving effect to any issuances pursuant to this Section 4.5(a) (it being understood that if no Member is a Defaulting Member in respect of such Additional Capital, each Members Percentage Interest shall remain the same as prior to the making of such Additional Capital); provided, however, that no additional Units shall be issued in respect of any Additional Capital made by a Non-Defaulting Funding Member in the form of a Default Loan pursuant to Section 4.4(a)(ii) above. The parties agree that Schedule A shall be amended to reflect any such issuances of Units and/or any adjustments to the Members respective Percentage Interests.
4.6 Member Debt.
(a) If the capital requirements of the Company cannot be satisfied in accordance with the provisions of Section 4.3 hereof, any Member may provide funding to the Company in the form of unconvertible loans (including secured or unsecured and subordinated or unsubordinated debt), on such terms as the Board and such Member may agree, including
without limitation with respect to interest rate and maturity, provided, that all Members are allowed to participate in extending such indebtedness pro rata in proportion to their respective Percentage Interests and upon equal terms, provided, further, that (i) any such debt shall not result in the issuance of additional Units or be taken into account in any adjustment of Percentage Interests and (ii) any such debt shall be subordinated in all respects to any Default Loans, Cash Shortfall Loan and Additional Capital Loans. Notwithstanding the foregoing, in the event that the Board determines the Company is in need of additional capital, the Board shall seek to obtain such capital for the Company through Capital Calls prior to causing the Company to incur any indebtedness from third parties.