Limited Liability Company Agreement - Internet Capital Group LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
Dated September 30, 1998
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
DELAWARE SECURITIES ACT OF 1972, AS AMENDED, OR SIMILAR LAWS OR ACTS OF OTHER
STATES IN RELIANCE UPON EXEMPTIONS UNDER THOSE ACTS. THE SALE OR OTHER
DISPOSITION OF THE MEMBERSHIP INTERESTS IS RESTRICTED AS STATED IN THIS AMENDED
AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, AND IN ALL EVENTS IS
PROHIBITED UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT
AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES ACTS AND LAWS. BY THE EXECUTION OF THIS AGREEMENT AND THE
ACQUISITION OF THE MEMBERSHIP INTEREST REPRESENTED HEREBY, THE MEMBER
REPRESENTS, INTER ALIA, THAT IT IS ACQUIRING ITS MEMBERSHIP INTEREST FOR
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INVESTMENT AND WITHOUT A VIEW TO DISTRIBUTION AND THAT IT WILL NOT SELL OR
OTHERWISE DISPOSE OF ITS MEMBERSHIP INTEREST WITHOUT REGISTRATION OR OTHER
COMPLIANCE WITH THE AFORESAID ACTS AND THE RULES AND REGULATIONS ISSUED
THEREUNDER.
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.............................................. 1
1.1 Definitions.............................................. 1
1.2 Construction............................................. 5
ARTICLE II ORGANIZATION............................................. 5
2.1 Formation; Effective Date................................ 5
2.2 Name..................................................... 5
2.3 Registered Office; Registered Agent; Principal Office
in the United States; Other Offices...................... 5
2.4 Purpose.................................................. 5
2.5 Foreign Qualification.................................... 5
2.6 Term..................................................... 6
2.7 No State-Law Company..................................... 6
2.8 Classification for Tax Purposes.......................... 6
2.9 Management Company....................................... 6
ARTICLE III MEMBERSHIP, DISPOSITIONS OF INTERESTS.................... 7
3.1 Current Members.......................................... 7
3.2 Representations and Warranties........................... 7
3.3 No Certification; Restrictions on the Disposition of
an Interest.............................................. 8
3.4 New Members.............................................. 10
3.5 Interests in a Member.................................... 11
3.6 Information.............................................. 11
3.7 Liability to Third Parties............................... 12
3.8 Lack of Authority........................................ 12
3.9 Withdrawal............................................... 12
3.10 Preemptive Rights........................................ 12
3.11 Right of First Refusal................................... 13
3.12 Registration Rights...................................... 15
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ARTICLE IV CAPITAL CONTRIBUTIONS.................................... 15
4.1 Contributions............................................ 15
4.2 Subsequent Contributions................................. 15
4.3 Failure to Contribute.................................... 15
4.4 Return of Contributions.................................. 16
4.5 Advances by Members...................................... 16
4.6 Capital Account.......................................... 16
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS............................ 17
5.1 Allocations.............................................. 17
5.2 Distributions............................................ 18
ARTICLE VI.. MANAGERS................................................. 19
6.1 Management by Managers................................... 19
6.2 Actions by Managers; Committees; Delegation and Duties... 19
6.3 Number and Term of Office of Managers.................... 20
6.4 Vacancies; Removal; Resignation.......................... 20
6.5 Meetings................................................. 20
6.6 Approval or Ratification of Acts or Contracts by Members. 21
6.7 Action by Written Consent or Telephone Conference........ 21
6.8 Expenses; Compensation................................... 22
6.9 Co-Investment Opportunities.............................. 22
6.10 Advisory Board........................................... 22
6.11 Conflicts of Interest.................................... 23
6.12 Related Party Transactions............................... 23
ARTICLE VII OFFICERS................................................. 23
7.1 Officers................................................. 23
7.2 Compensation............................................. 23
7.3 Term of Office; Removal; Filling of Vacancies............ 23
7.4 Chairman................................................. 23
7.5 President................................................ 24
7.6 Vice Presidents.......................................... 24
7.7 Secretary................................................ 24
7.8 Assistant Secretary...................................... 24
7.9 Treasurer................................................ 24
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7.10 Additional Powers and Duties............................. 24
ARTICLE VIII MEETINGS OF MEMBERS...................................... 24
8.1 Meetings................................................. 24
8.2 Voting List.............................................. 25
8.3 Proxies.................................................. 25
8.4 Conduct of Meetings...................................... 26
8.5 Action by Written Consent or Telephone Conference........ 26
ARTICLE IX INDEMNIFICATION.......................................... 26
9.1 Right to Indemnification................................. 26
9.2 Advance Payment.......................................... 27
9.3 Indemnification of Employees and Agents.................. 27
9.4 Appearance as a Witness.................................. 27
9.5 Nonexclusivity of Rights................................. 27
9.6 Insurance................................................ 27
9.7 Savings Clause........................................... 28
9.8 Limitation on Liability.................................. 28
ARTICLE X TAXES.................................................... 28
10.1 Tax Returns.............................................. 28
10.2 Tax Elections............................................ 28
10.3 Tax Matters Partner...................................... 29
ARTICLE XI BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS............... 29
11.1 Maintenance of Books..................................... 29
11.2 Reports.................................................. 29
11.3 Accounts................................................. 29
ARTICLE XII BANKRUPTCY OF A MEMBER................................... 30
12.1 Bankrupt Members......................................... 30
ARTICLE XIII DISSOLUTION, LIQUIDATION, AND TERMINATION................ 30
13.1 Dissolution.............................................. 30
13.2 Liquidation and Termination.............................. 31
13.3 Deficit Capital Accounts................................. 32
13.4 Certificate of Cancellation.............................. 32
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ARTICLE XIV 1940 ACT................................................. 33
14.1 Expulsion................................................ 33
14.2 Purchase of Expelled Member's Membership Interest........ 33
ARTICLE XV GENERAL PROVISIONS....................................... 33
15.1 Offset................................................... 33
15.2 Notices.................................................. 33
15.3 Entire Agreement; Supersedure............................ 34
15.4 Effect of Waiver or Consent.............................. 34
15.5 Amendment or Modification................................ 34
15.6 Binding Act.............................................. 34
15.7 Governing Law; Severability.............................. 34
15.8 Further Assurances....................................... 35
15.9 No Third Party Benefit................................... 35
15.10 Waiver of Certain Rights................................. 35
15.11 Indemnification.......................................... 35
15.12 Counterparts............................................. 35
15.13 Resolutions of Disputes.................................. 35
15.14 Estoppels................................................ 36
15.15 Reliance on Authority of Person Signing Agreement........ 37
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EXHIBIT A: NAMES, CAPITAL CONTRIBUTIONS, COMMITMENTS, COMMITMENT RATIOS,
MEMBERSHIP PROFIT INTERESTS AND TOTAL MEMBERSHIP INTERESTS OF
MEMBERS
EXHIBIT B: REQUIRED INFORMATION
EXHIBIT C: REGISTRATION RIGHTS
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
Internet Capital Group, L.L.C.
A Delaware Limited Liability Company
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") of INTERNET CAPITAL GROUP, L.L.C. (the "Company") dated as of
September 30, 1998 by and among the parties listed on Exhibit A attached hereto
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(the "Current Members") and those other persons who become Members of the
Company from time to time, as hereinafter provided.
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Act" means the Delaware Limited Liability Company Act (6 Del. C.
(S) 18-101 et. seq.), and any successor statute, as amended from time to
time.
"Agreement" has the meaning given that term in the introductory
paragraph as amended from time to time.
"Bankrupt" means, with respect to any person, a person (a) that (i)
makes an assignment for the benefit of creditors; (ii) files a voluntary
petition in bankruptcy; (iii) is adjudged a bankrupt or insolvent, or has
entered against him an order for relief, or is declared insolvent in any
bankruptcy or insolvency proceedings; (iv) files a petition or answer
seeking for the person a reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
statute, law, or regulation; (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the person in a proceeding of the type described in
subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
the person's or of all or any substantial part of the person's properties;
or (b) against whom, a proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any law has been commenced and 120 days have expired without
dismissal thereof or with respect to whom, without the person's consent or
acquiescence, a trustee, receiver, or liquidator of the person or of all or
any substantial part of the person's properties has been appointed and 90
days have expired without the appointment having been vacated or stayed, or
90 days have expired after the date of expiration of a stay, if the
appointment has not previously been vacated.
"Business Day" means any day other than a Saturday, a Sunday, or a
holiday on
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which national banking associations in the Commonwealth of Pennsylvania are
closed.
"Capital Contribution" means any contribution by a Member to the
capital of the Company; provided that, upon the admission of a new Member
after the date hereof, the Capital Contribution of each Current Member
shall be deemed to be equal to the capital account of such Current Member
as revalued pursuant to Section 4.6 hereof.
"Certificate" has the meaning given that term in Section 2.1.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Commitment" means the amount of subsequent contributions each
Member is obligated to contribute to the Company pursuant to Section 4.2 of
this Agreement. The initial Commitment of each Current Member or new
Member purchasing shares of Membership Interest pursuant to Section 3.4
shall be the Commitment established pursuant thereto. Each Member's
Commitment shall be reduced by the amount of any subsequent Capital
Contributions made by such Member and by the amount of any distribution
applied against such commitment under Section 5.2(a)(ii).
"Commitment Ratio" with respect to any Current Member or any new
Member purchasing Membership Interests pursuant to Section 3.4 hereof shall
mean a fraction (expressed as a percentage), the numerator of which is that
Member's Commitment and the denominator of which is the sum of the
Commitments of all Current Members and new Members purchasing shares of
Membership Interests pursuant to Section 3.4 hereof.
"Company" means Internet Capital Group, L.L.C., a Delaware limited
liability company.
"Default Interest Rate" means a rate per annum equal to 3% plus a
varying rate per annum that is equal to the prime rate of interest as
reported in the Wall Street Journal, with adjustments in that varying rate
to be made on the same date as any change in that rate.
"Delinquent Member" has the meaning given that term in Section 4.3.
"Dispose," "Disposing" or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or
other disposition or encumbrance (including, without limitation, by
operation of law), or the acts thereof.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, limited liability
company, limited liability partnership, cooperative or association.
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"General Interest Rate" means a rate per annum equal to a varying
rate per annum that is equal to the prime rate of interest as reported in
the Wall Street Journal, with adjustments in that varying rate to be made
on the same date as any change in that rate.
"Manager" means any Member designated as a manager of the Company in
this Agreement or hereafter appointed as a Manager as provided in this
Agreement, but does not include any person who has ceased to be a manager
of the Company. The Managers may collectively be referred to as the "Board
of Managers."
"Member" means (a) the Current Members and (b) any person executing
this Agreement as of the date of this Agreement as a member or hereafter
admitted to the Company as a member as provided in this Agreement, but does
not include any person who has ceased to be a member in the Company.
"Membership Interest" means the ownership interest of a Member in
the Company, including, without limitation, rights to distributions
(liquidating or otherwise), allocations, information, and to consent,
approve or vote upon matters upon which Members are entitled to so consent,
approve or vote upon hereunder. Each Member's Membership Interest shall be
represented by shares of Membership Interest. The number of shares of
Membership Interest owned by a Member at any time shall be equal to the sum
of (1) the quotient obtained by dividing that Member's Capital Contribution
plus then outstanding Commitment by $2.00 (provided that, solely for this
purpose, Capital Contributions attributable to Membership Profit Interests
upon a revaluation of the Company's capital accounts in accordance with
Treas. Reg. (S)1.704-1(b)(2)(iv)(f) shall be disregarded) plus (2) the
number of then outstanding shares of Membership Profit Interest owned by
such Member, if any plus (3) the number of then outstanding shares of
Membership Interests with respect to any vested and exercised Options owned
by such Member. The number of shares of Membership Interest owned on the
date hereof by the Current Members is shown on Exhibit A. As new Members
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are admitted to the Company, the Managers shall prepare and distribute to
all Members a revised Exhibit A showing the shares of Membership Interest
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then owned by all Members and their respective Capital Contributions,
Commitments, Commitment Ratios and shares of Membership Profit Interests,
if any.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Membership Profit Interest" means the 6,783,625 shares of
Membership Interest granted by the Company as performance incentives to
certain officers or employees of, or consultants or advisors to, the
Company designated by Walter W. Buckley, III and Kenneth A. Fox pursuant to
the Membership Profit Interest Plan.
"Offering" means the offering of shares of Membership Interest in
the Company made by the Company pursuant to the Private Placement
Memorandum on the terms and conditions set forth in the Private Placement
Memorandum.
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"Options" means (1) the non-qualified options to purchase 470,000
shares of Membership Interests that may be granted to non-employee Managers
of the Company pursuant to the Company's Option Plan For Non-Employee
Managers, which was adopted by the Company's Board of Managers on January
16, 1997 and (2) the non-qualified options to purchase up to 10% of the
total shares of Membership Interests of the Company on a fully-diluted
basis after giving effect to this Offering that may be granted to
employees, officers, consultants and advisors to the Company pursuant to
the Company's Option Plan For Employees and Consultants, which plan has
been adopted by the Board of Managers.
"Private Placement Memorandum" means the Company's private placement
memorandum dated May 1998, as amended, providing for the offering of shares
of Membership Interest in the amount of up to $70,000,000.
"Public Offering" has the meaning given that term in Section 3.3(g).
"Proceeding" has the meaning given that term in Section 9.1.
"Required Interest" means one or more Members having among them more
than 50% of the then outstanding Membership Interests of all Members.
"Safeguard" means Safeguard Scientifics, Inc., a Pennsylvania
corporation which owns all of the outstanding equity interests of SSI-
Delaware.
"Securities Act" has the meaning given that term in Section 3.2(h).
"SSI-Delaware" means Safeguard Scientifics (Delaware), Inc., a
Delaware Corporation and a wholly owned subsidiary of Safeguard.
"Strategic Partner" has the meaning given that term in Section 6.3.
"Subscription Agreement" has the meaning given that term in Section
3.4(a).
"Successor Corporation" means any C corporation into, or with which,
the Company merges or consolidates, or to which the Company transfers its
assets in exchange for stock of such corporation.
"TL" means collectively Technology Leaders II, L.P., a Delaware
limited partnership and Technology Leaders II Offshore C.V., a Netherlands
Antilles limited partnership, and the TL Corporations.
"TL Corporations" means any corporations wholly owned by either
Technology Leaders II, L.P. or Technology Leaders II Offshore C.V. which
acquire Membership Interests in the Company.
Other terms defined herein have the meanings so given them.
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1.2 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter. All
references to Articles and sections refer to articles and Sections of this
Agreement, and all references to Exhibits are to Exhibits attached hereto, each
of which is made a part hereof for all purposes.
ARTICLE II
ORGANIZATION
2.1 Formation; Effective Date. The Company was organized as a Delaware
limited liability company on March 4, 1996 by the filing of a certificate of
formation (the "Certificate") with the Office of the Secretary of the State of
Delaware under and pursuant to the Act signed by Walter W. Buckley, III as an
"authorized person" within the meaning of the Act, and this Agreement shall be
effective as of the time of the filing of the Certificate. This Agreement amends
and restates in its entirety the Limited Liability Company Agreement entered
into on May 9, 1996 by and among SSI-Delaware and the original Members (the
"Original Agreement"), as amended and restated by the Amended and Restated
Limited Company Agreement dated May 13, 1998 (the "May Agreement").
2.2 Name. The name of the Company is "Internet Capital Group, L.L.C." and
all Company business must be conducted in that name or such other names that
comply with applicable law as the Managers may select from time to time.
2.3 Registered Office; Registered Agent; Principal Office in the United
States; Other Offices. The registered agent and office of the Company required
by the Act to be maintained in the State of Delaware shall be Corporation
Service Company, 1013 Centre Road, Wilmington, Delaware 19805 or such other
agent or office (which need not be a place of business of the Company) as the
Managers may designate from time to time in the manner provided by law. The
principal office of the Company shall be at such place as the Managers may
designate from time to time and the Company shall maintain such records as are
set forth on Exhibit B attached hereto. The Company may have such other offices
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as the Managers may designate from time to time.
2.4 Purpose. The purpose of the Company is to (a) acquire equity interests
in companies engaged in businesses related to the Internet, to actively
participate in the management and operations of those companies, and to hold,
manage and sell its investments, as described in the Private Placement
Memorandum; (b) engage in any such other activities permitted under Delaware law
as the Members holding a Required Interest shall determine; and (c) engage in
all other activities incidental or related thereto. Incident to such purposes
and as part of its business, the Company is authorized to do all things
necessary or appropriate to carry out the foregoing purposes or purposes related
or incidental thereto.
2.5 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than the State of Delaware, the Managers shall cause
the Company to comply with all requirements necessary to qualify the Company as
a foreign limited liability company in that jurisdiction if the nature of its
business makes such qualification necessary. At the request of the Managers,
each Member shall execute, acknowledge, swear to, and deliver all certificates
and other
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instruments conforming with this Agreement that are necessary or appropriate to
qualify, continue, and terminate the Company as a foreign limited liability
company in all such jurisdictions in which the Company may conduct business.
2.6 Term. The Company commenced on the date the Certificate was filed with
the Secretary of State of the State of Delaware and shall continue in existence
until April 30, 2008, unless the Board of Managers shall, in its sole
discretion, approve extension(s) of time for the orderly liquidation of the
Company, such extension(s) not to exceed two periods of one year each, or such
earlier time as this Agreement may specify.
2.7 No State-Law Partnership. The Members intend that the Company not be a
partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member or Manager be a partner or joint venturer of any
other Member or Manager, for any purposes other than Federal and, to the extent
permitted, state and local tax purposes, and this Agreement shall not be
construed to produce a contrary result.
2.8 Classification for Tax Purposes. It is the express intention of the
Members that the Company lack the corporate characteristics of continuity of
life, centralized management and free transferability of interests (as those
terms are defined and utilized in Treas. Reg. (S) 301.7701-2) and, therefore, be
classified as a partnership for purposes of Federal income taxation and not as
an association taxable as a corporation. It is the further intention of the
Members that this Agreement be interpreted and applied accordingly.
2.9 Management Company. (a) The Company is authorized to enter into an
agreement with a management company selected by the Managers (such company, the
"Management Company"), in a form acceptable to the Managers (such agreement, the
"Management Agreement") pursuant to which the Management Company may provide
certain management and administrative services to the Company.
(b) The Managers shall be responsible for supervising the activities of the
Management Company and for enforcing the rights of the Company under the
Management Agreement. The Managers shall have final authority with respect to
the management, operations and policies of the Company and shall be solely
responsible for making all decisions with respect to the investment of the
Company's assets.
(c) In exchange for its services, the Management Company may be entitled to
receive from the Company a fee in such amount and payable at such times as
provided in the Management Agreement.
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ARTICLE III
MEMBERSHIP, DISPOSITIONS OF INTERESTS
3.1 Current Members. The Current Members of the Company are set forth
on the attached Exhibit A, which Exhibit A designates the Current Members as
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such and shall be amended from time to time to reflect the withdrawal of Members
and the admission of new Members pursuant to this Agreement.
3.2 Representations and Warranties. The Current Members hereby
acknowledge that the representations and warranties they made in the May
Agreement were true and correct at the time they were made and that such
representations and warranties remain true and correct as of the date hereof.
Each new Member hereby represents and warrants to the Company and each other
Member that:
(a) if that Member is a corporation, it is duly organized, validly
existing, and in good standing under the law of the state of its incorporation
and is duly qualified and in good standing as a foreign corporation in the
jurisdiction of its principal place of business (if not incorporated therein);
(b) if that Member is a limited liability company, it is duly organized,
validly existing, and (if applicable) in good standing under the law of the
state of its organization and is duly qualified and (if applicable) in good
standing as a foreign limited liability company in the jurisdiction of its
principal place of business (if not organized therein);
(c) if that Member is a partnership, trust, or other entity, it is duly
formed, validly existing, and (if applicable) in good standing under the law of
the state of its formation, and if required by law is duly qualified to do
business and (if applicable) is in good standing in the jurisdiction of its
principal place of business (if not formed therein), and the representations and
warranties in clauses (a), (b) or (c) above, if applicable, are true and correct
with respect to each partner (other than limited partners), trustee, or other
member thereof;
(d) if that Member is an Entity, it has full corporate, limited liability
company, partnership, trust, or other applicable power and authority to execute
and agree to this Agreement and to perform its obligations hereunder and all
necessary actions by the board of directors, shareholders, managers, members,
partners, trustees, beneficiaries, or other persons necessary for the due
authorization, execution, delivery, and performance of this Agreement and the
Subscription Agreement by that Member have been duly taken;
(e) such Member has duly executed and delivered this Agreement and/or the
Subscription Agreement;
(f) such Member's authorization, execution, delivery, and performance of
this Agreement and the Subscription Agreement do not conflict with any other
agreement or arrangement to which that Member is a party or by which it is
bound;
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(g) such Member is acquiring its Membership Interest for its own account,
for investment only and not with a view to the distribution thereof, except to
the extent provided in or contemplated by this Agreement;
(h) such Member recognizes that (i) the Membership Interests have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an exemption from such registration, and agrees that it will
not sell, offer for sale, transfer, pledge or hypothecate its Membership
Interests, in whole or in part, (A) in the absence of an effective registration
statement covering such Membership Interests under the Securities Act, unless
such sale, offer of sale, transfer, pledge or hypothecation is exempt from
registration for any proposed sale, as confirmed in the opinions of counsel
required under Section 3.3(e) and (B) except in compliance with all applicable
provisions of this Agreement, and (ii) the restrictions on transfer imposed by
this Agreement may severely affect the liquidity of an investment in the
Membership Interests;
(i) the Company has made available to that Member the opportunity to ask
questions of and receive answers from the Company's Managers and officers
concerning the terms and conditions of the Offering and the business and
financial condition of the Company, and to acquire, and each Member has received
to its satisfaction, such additional information, in addition to that set forth
herein, about the business and financial condition of the Company and the terms
and conditions of the Member's investment in the Company as it has requested;
(j) such Member (i) is an "accredited investor" as such term is defined in
Rule 501 promulgated under the Securities Act, (ii) its financial situation is
such that it can afford to bear the economic risk of holding the Membership
Interests for an indefinite period of time and suffer complete loss of its
investment in the Membership Interests, and (iii) its knowledge and experience
in financial and business matters are such that it is capable of evaluating the
merits and risks of its purchase of the Membership Interests as contemplated by
this Agreement; and
(k) if that Member is an investment company, or would be an investment
company but for the exemption provided for by Section 3(c)(1) or Section 3(c)(7)
of the 1940 Act, the Member recognizes that it may acquire no more than 9% of
the Membership Interests, and that such Member's acquisition of more than 9% of
the Membership Interests will subject the Member to expulsion from the Company
under the terms and conditions of Article 14.
3.3 No Certification; Restrictions on the Disposition of an Interest.
(a) No Membership Interest in the Company shall be represented by a
separate certificate.
(b) Except as specifically provided in this Section 3.3 or in Section 3.11,
a Disposition of an interest in the Company may not be effected without the
consent of a majority of the non-transferring Managers (which consent may be
granted or withheld in each Manager's sole discretion). No consent shall be
required for the Disposition of a Membership Interest (i) by will or operation
of the intestacy laws upon the death of a Member who is a natural person, or
(ii) by a Strategic Partner (or Comcast Corporation ("Comcast")), or any direct
or indirect subsidiary of a Strategic Partner (or Comcast), to a direct or
indirect subsidiary of a Strategic Partner (or Comcast), or by any such
subsidiary to a Strategic Partner (or Comcast). Any attempted
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Disposition by a person of an interest or right, or any part thereof, in or in
respect of the Company other than in accordance with this Section 3.3 shall be,
and is hereby declared, null and void ab initio.
(c) Subject to the provisions of Section 3.3(d), (e), and (f), and Section
3.11 (i) a person to whom an interest in the Company is transferred has the
right to be admitted to the Company as a Member with the Membership Interest and
the Commitment so transferred to such person, if (A) the Member making such
transfer grants the transferee the right to be so admitted, and (B) such
transfer is consented to in accordance with Section 3.3(b) or is made in
accordance with Section 3.11.
(d) The Company shall not recognize for any purpose any purported
Disposition of all or part of a Membership Interest unless and until the other
applicable provisions of this Section 3.3 have been satisfied and the Managers
have received, on behalf of the Company, a document (i) executed by both the
Member effecting the Disposition (or if the transfer is on account of the death,
incapacity, or liquidation of the transferor, its representative) and the person
to whom the Membership Interest or part thereof is Disposed, (ii) including the
notice address of any person to be admitted to the Company as a Member and its
agreement to be bound by this Agreement in respect of the Membership Interest or
part thereof being obtained, (iii) setting forth the Membership Interests and
the Commitments after the Disposition of the Member effecting the Disposition
and the person to whom the Membership Interest or part thereof is Disposed
(which together must total the Membership Interest and the Commitment of the
Member effecting the Disposition before the Disposition), and (iv) containing a
representation and warranty that the Disposition was made in accordance with all
applicable laws and regulations (including securities laws) and, if the person
to whom Membership Interest or part thereof is Disposed is to be admitted to the
Company, its representation and warranty that the representations and warranties
in Section 3.2 are true and correct with respect to that person. Each
Disposition and, if applicable, admission complying with the provisions of this
Section 3.3(d) shall be effective as of the first day of the calendar month
immediately succeeding the month in which the Managers receive the notification
of Disposition and the other requirements of this Section 3.3 have been met.
(e) Prior to the exercise of the right of a Member to Dispose of a
Membership Interest or any part thereof or of any person to be admitted to the
Company in connection therewith (i) either (A) the Membership Interest or part
thereof subject to the Disposition or admission must be registered under the
Securities Act, and any applicable state securities laws or (B) the Company must
receive a favorable opinion of the Company's legal counsel or of other legal
counsel reasonably acceptable to the Managers to the effect that the Disposition
or admission is exempt from registration under those laws, and (ii) the Company
must receive a favorable opinion of the Company's legal counsel or of other
legal counsel reasonably acceptable to the Managers to the effect that (C) the
Disposition or admission, when added to the total of all other sales,
assignments, or other Dispositions within the preceding 12 months, would not
result in the Company's being considered to have terminated within the meaning
of Section 708(b)(1)(B) of the Code and (D) the Disposition or admission would
not result in the Company having to register as an investment company under the
1940 Act. The Managers, however, may waive the requirements of this Section
3.3(e), in whole or in part, in such circumstances as they deem appropriate.
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(f) The Member effecting a Disposition and any person admitted to the
Company as a Member in connection therewith shall pay, or reimburse the Company
for, all costs incurred by the Company in connection with such Disposition or
admission (including, without limitation, the legal fees incurred in connection
with the legal opinions referred to in Section 3.3(e)) on or before the tenth
day after the receipt by that person of the Company's invoice for the amount
due. If payment is not made by the date due, the person owing that amount shall
pay interest on the unpaid amount from the date due until paid at a rate per
annum equal to the Default Interest Rate.
(g) The restrictions in this Section 3.3 shall terminate upon consummation
of a Successor Corporation's initial underwritten public offering of stock
registered under the Securities Act (the "Public Offering").
3.4 New Members. (a) Pursuant to the Offering, the Company is offering
to sell up to $70,000,000 of shares of Membership Interest in the Company to
certain investors. Subject to the discretion of the Managers to terminate,
alter or amend the Offering at any time, the Company shall offer to sell
Membership Interests to investors in accordance with the terms of the Private
Placement Memorandum used in the Offering. A person subscribing for shares of
Membership Interest after the date hereof pursuant to the Offering shall be
admitted as a Member of the Company and shall become bound by this Agreement on
the date on which the Company accepts such person's executed subscription
agreement in a form acceptable to the Company (the "Subscription Agreement") and
receives payment of 50% of the subscription price as a Capital Contribution.
Each Member admitted pursuant to this 3.4(a) shall be obligated to pay an
initial Capital Contribution on the date of his or its admission as a Member of
the Company equal to 50% of the subscription price and the Membership Interest
subscribed for by him or it in the Offering shall have a Commitment equal to 50%
of such subscription price. The execution and delivery by any person of a
Subscription Agreement and payment of 50% of the subscription price shall
constitute a request by such person that the Company's records reflect his or
its admission as a Member. The Managers may not extend the Offering period in
which Membership Interests are offered to investors beyond October 31, 1998
without the consent of a Required Interest and each Strategic Partner, or
materially modify the terms on which the Membership Interests are being offered
and sold in the Offering from the terms disclosed in the Private Placement
Memorandum without the consent of a Required Interest and each Strategic
Partner.
(b) The Company is authorized to enter into agreements with the
individuals to whom it grants Membership Profit Interests and Options
providing for the vesting of such Membership Profit Interests and Options
and granting the Company the right and option to reacquire such Membership
Profit Interests and Options under certain circumstances on such terms and
conditions as the Managers shall determine. Any Membership Profit Interest
or Option reacquired by the Company pursuant to such agreements or
otherwise may be regranted by the Company to other officers and employees
of the Company or other eligible persons from time to time for such
consideration, if any, as they shall deem appropriate, and on such other
terms and conditions as they shall deem appropriate, provided that the
purpose of such issuance is to provide incentives for performance of
services to the Company, and not as part of a capital raising transaction.
A person receiving Membership Profit Interests or Options shall be admitted
as a Member and become bound by this Agreement on the date on which the
Company receives an executed agreement from
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such person, in form acceptable to the Company, containing such terms and
conditions as are determined by the Managers. The execution of such
agreement by any such person shall constitute a request by such person that
the Company reflect his or her admission as a Member.
(c) After the Offering has been completed or terminated, additional
persons may be admitted to the Company as Members and Membership Interests
may be created and issued to those persons and to existing Members with the
approval of a Required Interest on such terms and conditions as the
Managers may determine. The terms of admission or issuance must specify
the Membership Interests, Commitment Ratios and the Commitments applicable
thereto and may provide for the creation of different classes or groups of
Members having different rights, powers, and duties. The Managers shall
reflect the creation of any new class or group in an amendment to this
Agreement indicating the different rights, powers, and duties, and such an
amendment need be executed only by the Managers. Any such admission shall
be effective only after the new Member has executed and delivered to the
Managers a document including the new Member's notice address, its
agreement to be bound by this Agreement, and its representation and
warranty that the representations and warranties in Section 3.2 are true
and correct with respect to the new Member. The provisions of this Section
3.4 shall not apply to Dispositions of Membership Interests.
3.5 Interests in a Member. A Member that is not a natural person may
not cause or permit an interest, direct or indirect, in itself to be Disposed of
such that, after the Disposition, (a) the Company would be considered to have
terminated within the meaning of Section 708(b)(1)(B) of the Code or (b) without
the consent of the Managers, that Member shall cease to be controlled by
substantially the same persons who control it as of the date of its admission to
the Company; provided, however, that the provisions of this Section 3.5(b) shall
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not apply to a transfer of an interest in a Strategic Partner (or Comcast), or
to a transfer of an interest in any direct or indirect subsidiary of a Strategic
Partner (or Comcast) as long as such Member remains a subsidiary of such
Strategic Partner (or Comcast). On any breach of the provisions of clause (b)
of the immediately preceding sentence, the Company shall have the option to buy,
and on exercise of that option the breaching Member shall sell, the breaching
Member's Membership Interest, all in accordance with Section 12.1 as if the
breaching Member were a Bankrupt Member.
3.6 Information. (a) Each Member shall have the right to access all
information to which that Member is entitled to have access pursuant to Section
18-305 of the Act, provided that such Member provides five days prior written
notice to the Company of the materials such Member requests be made available
and the purpose for inspecting such materials. Such materials shall be provided
at the executive headquarters of the Company during its regular business hours.
All expenses of providing the materials requested pursuant to this Section 3.6,
including, without limitation, duplication fees, shall be paid by the Member
requesting the information. Anything in this Section to the contrary
notwithstanding, the Managers shall have the right to keep confidential from the
Members, for such period of time as the Managers deem reasonable, any
information which the Managers reasonably believe to be in the nature of trade
secrets or other information the disclosure of which the Managers in good faith
believe is not in the best interest of the Company or
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could damage the Company or its business or the Company is required by law or by
agreement with a third party to keep confidential.
(b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is confidential, the release of which may be damaging to the Company
or persons with which it does business. Each Member shall hold in strict
confidence any information it receives regarding the Company that is identified
as being confidential (and if that information is provided in writing, that is
so marked) and may not disclose it to any person other than another Member or a
Manager, except for disclosures (i) compelled by law (but the Member must notify
the Managers promptly of any request for that information before disclosing it,
if practicable), (ii) to advisers or representatives of the Member or persons to
which that Member's Membership Interest may be Disposed as permitted by this
Agreement, but only if the recipients have agreed to be bound by the provisions
of this Section 3.6(b), or (iii) of information that Member also has received
from a source independent of the Company that the Member reasonably believes
obtained that information without breach of any obligation of confidentiality.
The Members acknowledge that breach of the provisions of this Section 3.6(b) may
cause irreparable injury to the Company for which monetary damages are
inadequate, difficult to compute, or both. Accordingly, the Members agree that
the provisions of this Section 3.6(b) may be enforced by specific performance.
3.7 Liability to Third Parties. Except as to any obligation it may have
under the Act to repay funds that may have been wrongfully distributed to it, no
Member or Manager shall be liable for the debts, obligations or liabilities of
the Company, including under a judgment decree or order of a court.
3.8 Lack of Authority. No Member (other than a Member who is, and who
is acting in the capacity of, a Manager) has the authority or power to act for
or on behalf of the Company, to do any act that would be binding on the Company,
or to incur any expenditures on behalf of the Company.
3.9 Withdrawal. A Member does not have the right to withdraw from the
Company as a Member (except in connection with a transfer of its entire
Membership Interest in accordance with this Agreement) and any attempt to
violate the provisions hereof shall be legally ineffective.
3.10 Preemptive Rights. (a) If at any time the Company proposes to
issue any equity securities, other than equity securities described in Section
3.10(d) below, the Company shall first offer in writing to sell to each
Strategic Partner its pro rata share of the proposed issue of such equity
securities, at the same price and on the same terms at which the Company
proposes to sell such issue to others. For purposes hereof, each Strategic
Partner's "pro rata share" of an issue of equity securities shall be that amount
of such equity securities which would result in such Strategic Partner owning
the same percentage of the Company's issued and outstanding Membership Interests
after the issuance of the equity securities as such Strategic Partner owned
immediately prior to the issuance (assuming the issuance of all Membership
Interests, if any, issuable upon conversion of such equity securities). The
term "equity security" when used in this Section 3.10 shall mean any shares of
Membership Interest of the Company, or any security convertible, with or without
consideration, into shares of Membership Interest, or any security carrying any
warrant,
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option, or right to subscribe to, or to purchase any shares of Membership
Interest, or any such warrant, option, or right.
(b) The Company's offer shall describe the equity securities proposed to be
issued by the Company, specifying the quantity, the price and payment terms.
Each Strategic Partner shall have thirty (30) days from receipt of such offer to
accept the offer in writing, which acceptance may be as to all or any part of
its pro rata share of such issue. Sale of the portion of the equity securities
subscribed for hereunder shall be held on a date acceptable to the Company and
each Strategic Partner, but in no event more than sixty (60) days after the date
of the Company's offer to the Strategic Partners.
(c) In the event the Strategic Partners do not subscribe for all of the
issue of equity securities offered to them pursuant to this Section 3.10, the
Company may sell the portion of the securities not subscribed for, together with
the portion of such issue of securities, if any, not subject to preemptive
rights under this Section 3.10, at a price no less favorable to the Company than
that specified in such offer and on payment terms no less favorable to the
Company than those specified in such offer; provided, however, that if such sale
-------- -------
is not consummated within one hundred twenty (120) days after the date the offer
pursuant to this Section 3.10 was made to the Strategic Partners, the Company
shall not sell such securities without again complying with this Section 3.10.
(d) The rights of Strategic Partners under this Section 3.10 shall not
apply to the following securities:
(i) the shares of Membership Interest issued with respect to the
Options;
(ii) the shares of Membership Profit Interest issued in
accordance with this Agreement; and
(iii) any securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination.
(e) Notwithstanding the foregoing provisions of this Section 3.10, the
rights of Strategic Partners and the obligations of the Company under this
Section 3.10 shall be inapplicable to the Public Offering and the provisions of
this Section 3.10 shall terminate upon the consummation of such Public Offering.
3.11 Right of First Refusal. (a) Any Strategic Partner (other than TL
or SSI-Delaware) (each, a "Transferring Member") may at any time offer to sell
to the Company any or all of the shares of Membership Interest then owned by it
upon written notice to the Company (the "Notice") which Notice shall set forth
(i) the number of shares of Membership Interest the Transferring Member desires
to sell (the "Offered Shares") and the price per share, (ii) the proposed date
of the transfer, and (iii) the percentage which the number of Offered Shares
constitutes with respect to the aggregate number of Shares of Membership
Interest then held by the Transferring Member.
(b) Company's Option. The Company shall have the option, but not the
----------------
obligation, to purchase all or any part of the Offered Shares on the same terms
as specified in the Notice. Within
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thirty (30) days after the giving of the Notice, the Company shall give written
notice to the Transferring Member stating the number of Offered Shares it
desires to purchase and a date and time for consummation of the purchase not
less than sixty (60) or more than ninety (90) days after the giving of the
Notice. Failure by the Company to give such notice within such time period shall
be deemed an election by it not to purchase any Offered Shares. The Transferring
Member shall not be entitled to vote as a Manager in connection with the
decision of the Company whether to exercise its option to purchase its Offered
Shares, provided that if the Transferring Member's vote is required for valid
--------
legal action it shall vote in accordance with the decision of the majority of
the other Managers.
(c) If the Company elects not to exercise its option with respect to all of
the Offered Shares (the Offered Shares which the Company elects not to purchase
being referred to as the "Refused Shares"), it may offer such Refused Shares to
one or more Members, or to another person or entity selected by it that is
reasonably acceptable to the Transferring Member (collectively, the "Permitted
Offerees"), by delivering written notice to such Permitted Offerees concurrently
with the delivery of its notice to the Transferring Member under subsection (b)
above. The number of Refused Shares offered to any Permitted Offeree shall be
determined by the Company in its sole discretion. Each such Permitted Offeree
shall thereupon have the option, but not the obligation, to purchase the number
of Refused Shares offered to it or him on the same terms as specified in the
Notice. After the expiration of the thirty (30)-day period described in Section
3.11(b), but within forty-five (45) days after the giving of the Notice, each
such Permitted Offeree shall give written notice to the Transferring Member and
the Company stating whether or not he or it elects to exercise his or its
option, and a date and time for consummation of the purchase not more than
ninety (90) days after the giving of the Notice by the Transferring Member.
Failure by a Permitted Offeree to give such notice within such time period shall
be deemed an election by him or it not to exercise his or its option. If the
Permitted Offerees and the Company do not purchase all of the Offered Shares,
the Transferring Member may sell all of the Offered Shares (and therefore the
rights of the Company and the Permitted Offerees under this Section 3.11 shall
be terminated) at any time within 180 days after the date the Notice was
delivered to the Company, to a person or Entity selected by the Transferring
Member who is reasonably acceptable to the Company (the "Proposed Transferee").
Any such sale shall be to the Proposed Transferee at the price and upon the
other terms and conditions set forth in the Notice, or at least terms no less
favorable to the Transferring Member or more favorable to the Proposed
Transferee, as the terms contained in the Notice. The Transferring Member shall
provide at least 20 days' prior written notice of such sale to the Company. Any
Offered Shares not sold within the 180 day period shall again be subject to the
requirements of a prior offer pursuant to this Section 3.11. If the
Transferring Member at any time proposes to sell the Offered Share at a price,
or on terms and conditions, less favorable to the Transferring Member or more
favorable to the Proposed Transferee than those set forth in the Notice, then
the Offered Shares shall again be subject to the requirements of a prior offer
pursuant to this Section 3.11. Any transfer pursuant to this Section 3.11 shall
be subject to the provisions of Sections 3.3(d), (e) and (f). The preemptive
rights granted under Section 3.10 shall not apply to any offering by the
Company of Refused Shares under this Section 3.11(c).
(d) The provisions of this Section 3.11 shall terminate upon the
consummation of the Public Offering.
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3.12 Registration Rights. The Company hereby grants to each Strategic
Partner the registration rights described on Exhibit C hereto (which Exhibit is
---------
hereby incorporated by reference in its entirety) which registration rights will
become effective after completion of the Public Offering. Upon the merger or
consolidation of the Company with or into, or the sale of the Company's assets
to, a Successor Corporation, the Successor Corporation will assume the
obligation to register each Strategic Partner's equity interests as provided in
Exhibit C, and the agreements providing for such merger, consolidation or sale
---------
will contain a provision expressly requiring the Successor Corporation to assume
such obligations. The Company hereby grants to each Member who has made (or
makes) and maintains a Capital Contribution equal to or greater than one million
dollars ($1,000,000) the piggyback registration rights set forth in Section 1.1
of the attached Exhibit C. Notwithstanding the definition of "Holder" contained
---------
in Section 1.1, each such Member shall be deemed a "Holder" for purposes of
Exhibit C.
---------
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Contributions. (a) The Capital Contributions of the Current Members
is as set forth on Exhibit A attached hereto, which Exhibit A designates the
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Current Members as such and shall be revised from time to time to reflect the
withdrawal of Members and the admission of new Members.
(b) Current Members and the persons admitted as new Members of the Company
after the date hereof pursuant to their subscription for Membership Interests in
the Private Placement Memorandum, shall make their Capital Contribution, in
cash, representing 50% of the subscription price of the total shares of
Membership Interest being subscribed for pursuant to the Private Placement
Memorandum, on the date of admission as a Member of the Company. Exhibit A
---------
shall be amended from time to time to reflect the Capital Contributions,
Commitments, Membership Interests and Membership Profit Interests, if any, of
each Member.
4.2 Subsequent Contributions. Each Member shall contribute to the
Company, in cash, on or before the date specified as hereinafter described, from
time to time that Member's Commitment Ratio of all monies that in the judgment
of the Managers, are necessary to make portfolio investments or to otherwise
conduct the business of the Company; provided, however, that a Member is not
obligated to contribute an amount that exceeds that Member's Commitment. The
Managers shall notify each Member of the need for Capital Contributions pursuant
to this Section 4.2 from time to time as and when appropriate, which notice
shall specify a date (which date may be no earlier than thirty (30) days
following each Member's receipt of its notice) before which the Capital
Contributions must be made. Notices for Capital Contributions must be made to
all Members in accordance with their Commitment Ratios. Member's Commitments
will expire on April 30, 2000 if not fully taken down prior to that time.
4.3 Failure to Contribute. Unless the Managers shall otherwise
determine by agreement with the delinquent Member, if a Member (a "Delinquent
Member") does not contribute by the time required all or any portion of a
Capital Contribution which that member is required to make as provided in this
Agreement, unless payment of such Capital Contribution would be unlawful, 100%
of such Member's Membership Interest will be forfeited to the Company, a
corresponding
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reduction will be made to such Member's Capital Account, such Delinquent Member
shall no longer be a Member of the Company, and its forfeited Membership
Interest shall no longer be outstanding.
4.4 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is
not required to contribute or to lend any cash or property to the Company to
enable the Company to return any Member's Capital Contributions.
4.5 Advances by Members. With the Managers' consent, any Member may
advance funds to or on behalf of the Company on terms approved by the Managers.
An advance described in this Section 4.5 constitutes a loan from the Member to
the Company, and is not a Capital Contribution.
4.6 Capital Account. A capital account shall be established and
maintained for each Member. The capital accounts of the Members were revalued
as of May 29, 1998 on the Company's books in accordance with Treas. Reg.
(S)1.704-1(b)(2)(iv)(f), and the property of the Company was adjusted and
reflected on a Schedule 4.6 to this Agreement to reflect the fair market value
------------
of such property as of the date of such revaluation. Such capital accounts
shall be subject to further revaluation in accordance with Treas. Reg. (S)1.704-
1(b)(2)(iv)(f) at such time as the Board of Managers shall determine. Each
Member's capital account (a) shall be increased by (i) the amount of money
contributed by that Member to the Company, (ii) the fair market value of
property contributed by that Member to the Company (net of liabilities secured
by the contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code), and (iii) allocations to that Member
of Company income and gain (or items thereof), including income and gain exempt
from tax and income and gain described in Treas. Reg. (S) 1.704-1(b)(2)(iv)(g),
but excluding income and gain described in Treas. Reg. (S) 1.704-1(b)(4)(i), and
(b) shall be decreased by (i) the amount of money distributed to that Member by
the Company, (ii) the fair market value of property distributed to that Member
by the Company (net of liabilities secured by the distributed property that the
Member is considered to assume or take subject to under Section 752.of the
Code), (iii) allocations to that Member of expenditures of the Company described
in Section 705(a)(2)(B) of the Code, and (iv) allocations of Company loss and
deduction (or items thereof), including loss and deduction described in Treas.
Reg. (S) 1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii)
above and loss or deduction described in Treas. Reg. (S) 1.704-1(b)(4)(i) or (S)
1.704-1(b)(4)(iii). The Members' capital accounts also shall be maintained and
adjusted as permitted by the provisions of Treas. Reg. (S) 1.704-1(b)(2)(iv)(f)
and as required by the other provisions of Treas. Reg. (S)(S) 1.704-1(b)(2)(iv)
and 1.704-1(b)(4), including adjustments to reflect the allocations to the
Members of depreciation, depletion, amortization, and gain or loss as computed
for book purposes rather than the allocation of the corresponding items as
computed for tax purposes, as required by Treas. Reg. (S) 1.704-l(b)(2)(iv)(g).
A Member that has more than one Membership Interest shall have a single capital
account that reflects all its Membership Interests, regardless of the class of
Membership Interests owned by that Member and regardless of the time or manner
in which those Membership Interests were acquired. On the transfer of all or
part of a Membership Interest, the capital account of the transferor that is
attributable to the transferred Membership Interest or part thereof shall carry
over to the transferee Member in accordance with the provisions of Treas. Reg.
(S) 1.704-1(b)(2)(iv)(1).
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ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations. (a) All items of income and gain of the Company shall
be allocated:
(i) first, to each Member, if any, with a negative capital
account balance, in proportion to such negative balances, until any
such negative balances have been eliminated;
(ii) second, if any Member's Capital Contributions (less any
amounts previously distributed to such Member) exceed his capital
account balance, to such Members in proportion to such excesses until
any such excesses have been eliminated;
(iii) third, if the excesses, if any, of (x) the sum of (A) the
capital account balance of each Member and (B) the cumulative
distributions made to such Member over (y) such Member's Capital
Contributions are not in proportion to their Membership Interests, to
the Members in such manner as will, as quickly as possible, cause such
excesses to be in such proportion; and
(iv) fourth, to all Members in proportion to their Membership
Interests.
And all items of loss and deduction of the Company shall be allocated:
(v) first, if the excesses, if any, of (x) the sum of (A) the
capital account balances of each Member and (B) the cumulative
distributions made to such Member over (y) such Member's Capital
Contributions are not in proportion to their Membership Interests, to
the Members in such manner as will, as quickly as possible, cause such
excesses to be in such proportion;
(vi) second, if the sum of (A) the capital account balance of any
Member and (B) the cumulative distributions made to such Member
exceeds the Capital Contributions of such Member, to such Member in
proportion to such excesses until such excesses have been eliminated;
and
(vii) third, to the Members in proportion to Capital
Contributions.
(b) All items of income, gain, loss, deduction, and credit allocable to any
Membership Interest that may have been transferred shall be allocated between
the transferor and the transferee based on the portion of the calendar year
during which each was recognized as owning that Membership Interest, without
regard to the results of Company operations during any particular portion of
that calendar year and without regard to whether cash distributions were made to
the transferor or the transferee during that calendar year; provided, however,
that this allocation must be made in accordance with a method permissible under
section 706 of the Code and the regulations thereunder.
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(c) Solely for tax purposes, income, gain, loss and deduction with respect
to any property contributed to the capital of the Company or for which the
adjusted tax basis and book value differ shall be allocated among the Members so
as to take account of any variation between adjusted tax basis and book value.
The allocations provided in this Section 5.1 are intended to comply with the
requirements of section 704 of the Code and Treasury Regulations thereunder and
shall be interpreted (or modified, to the extent necessary) in such manner as is
consistent with such requirements, as determined by the "tax matters partner" of
the Company. For purposes of allocations under section 704(c) of the Code, the
Partnership shall use the remedial allocation method, as described in Treas.
Reg. (S) 1.704-3(d).
5.2 Distributions. (a) The Managers shall have the authority to reinvest
the Company's cash from operations and dispositions of its assets, including the
sale or other disposition of equity interests in a related company in which the
Company invests. Consequently, distributions to Members of the Company's cash or
other assets shall be made only at such times and in such amounts as authorized
by the Managers and the Managers shall have no obligation or duty to distribute
cash or other assets to the Members prior to the dissolution and liquidation of
the Company, except as otherwise provided in paragraph (b) below. Distributions,
if any, shall be made as follows:
(i) first, to all Members in proportion to their Capital
Contributions up to the amount of their Capital Contribution; and
(ii) then, to all Members in proportion to their Membership
Interests, provided that, if any Commitments remain outstanding, a
distribution payable to a Member with an outstanding Commitment shall
be retained by the Company and applied to reduce its outstanding
Commitment up to the amount of its remaining outstanding Commitment.
(b) Notwithstanding anything to the contrary, on or before March 15
following each taxable year of the Company, the Company shall distribute to each
Member, to the extent of available cash, an amount of cash equal to the excess
of (x) 40% of the excess of (A) such Member's cumulative share of income and
gain of the Company as of the end of such taxable year over (B) such Member's
cumulative share of loss and deduction of the Company as of the end of such
taxable year over (y) all prior distributions to such Member. Any amounts
distributed to a Member pursuant to this Section 5.2(b) shall be credited toward
the amounts that would otherwise be required to be distributed to such Member
pursuant to Section 5.1(a).
(c) From time to time the Managers also may cause property of the Company
other than cash to be distributed to the Members, which distribution must be
made in accordance with Section 5.2(a) and may be made subject to existing
liabilities and obligations.
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ARTICLE VI
MANAGERS
6.1 Management by Managers. (a) Except for any matters for which the
approval of the Members is required by this Agreement or by nonwaivable
provisions of applicable law, (i) the powers of the Company shall be exercised
by or under the authority of, and the business and affairs of the Company shall
be managed under the direction of, the Board of Managers; and (ii) the Board of
Managers may make all decisions and take all actions for the Company.
(b) The powers of the Company which may be exercised by the Managers
without the approval of the Members shall include, without limitation, the power
to purchase, hold and sell investments; to borrow and loan funds and provide
guarantees of the obligations of others; to acquire other companies; and to
dissolve and liquidate.
(c) Notwithstanding the provisions of Section 6.1(a) and 6.1(b), the Board
of Managers may not cause the Company to do any of the following without the
consent of a Required Interest:
(i) amend the Certificate (except for amendments described in
Section 18-202(b) of the Act);
(ii) amend this Agreement (except as otherwise provided in
Section 15.5 hereof);
(iii) remove a Manager from the Board of Managers for cause
pursuant to Section 6.4; and
(iv) issue the Membership Interests described in Section 3.4(c).
(d) The Managers shall have the power and authority to approve and
authorize the Company to merge with or into, or transfer its assets to, another
limited liability company or "other business entity," as such term is defined in
Section 18-209 of the Act, with the consent of a Required Interest. No
appraisal rights with respect to Membership Interests in the Company shall be
available for any class or group of Members in connection with any amendment of
this Agreement, any merger or consolidation in which this Company is a
constituent party to the merger or consolidation, or in the sale of all or
substantially all of the Company's assets.
6.2 Actions by Managers; Committees; Delegation and Duties. (a) In
managing the business and affairs of the Company and exercising its powers, the
Board of Managers shall act (i) collectively through meetings and written
consents pursuant to Sections 6.5 and 6.7; and (ii) through committees pursuant
to Section 6.2(b).
(b) The Board of Managers may, from time to time, designate one or more
committees, each of which shall be comprised of one or more Managers. Any such
committee, to the extent provided in such resolution or in the Certificate or
this Agreement, shall have and may exercise all of the authority of the Board of
Managers, subject to the limitations set forth in the Act. At every meeting of
any such committee, the presence of a majority of all the members thereof shall
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constitute a quorum, and the affirmative vote of a majority of the members
present shall be necessary for the adoption of any resolution. The Board of
Managers may dissolve any committee at any time, unless otherwise provided in
the Certificate or this Agreement.
6.3 Number and Term of Office of Managers. The number of Managers on
the Board of Managers of the Company shall be five or such greater number as to
provide each Strategic Partner with a seat on the Board of Managers; provided
that the number of Managers on the Board of Managers shall not exceed nine. For
so long as (i) any of SSI-Delaware, TL, Comcast ICG, Inc. (an indirect wholly
owned subsidiary of Comcast Corporation) and CPQ Holdings, Inc. (a wholly owned
subsidiary of Compaq Computer Corp.) maintains a Capital Contribution equal to
or greater than three million dollars ($3,000,000) in the Company, (ii) GE
Capital maintains a Capital Contribution and Commitment that aggregate equal to
or greater than seven million dollars ($7,000,000) in the Company, and (iii) any
Entity subsequent to the date hereof that makes or has made and maintains a
Capital Contribution and Commitment that aggregate ten million dollars
($10,000,000) or greater, such Entity described in clauses (i), (ii) or (iii)
shall be a Manager of the Company (each, a "Strategic Partner").
Notwithstanding anything to the contrary herein, for purposes of calculating the
amounts set forth in clauses (i), (ii) or (iii) in the immediately preceding
sentence, distributions by the Company to any Manager described in such clauses
shall be disregarded. In addition, the number of Managers may also be amended
by action of the then incumbent Managers. Each Manager shall hold office as
long as he is a Member, or until his earlier death, insanity, Bankruptcy,
retirement, resignation or removal. Managers must be Members but need not be
residents of the State of Delaware. Any Entity that is a Manager shall
designate an officer or other employee of such Entity as a nominee to represent
it as Manager and such Entity will act through its nominee. Such Entity may
change its nominee, or appoint an alternate nominee to attend meetings of the
Managers and vote on its behalf when its primary nominee is unavailable, at any
time upon written notice to the Company. Except as expressly provided in this
Section 6.3 and Section 6.4, the Members shall not have the authority to
increase or decrease the number of Managers and neither the Members nor the
Managers shall have the authority to remove or replace any Managers.
6.4 Vacancies; Removal; Resignation. Any vacancy occurring pursuant to
Sections 6.3 and 6.4 may be filled, at the sole discretion of the Board of
Managers, by the affirmative vote of a majority of the remaining Managers though
less than a quorum. If the Board of Managers determines that there is cause to
remove a Manager, such Manager can be removed by the affirmative vote of a
Required Interest at any meeting of Members called expressly for that purpose
and at which a quorum of Members is present. Any Manager may resign at any
time. Such resignation shall be made in writing and shall take effect at the
time specified therein, or if no time be specified, at the time of its receipt
by the remaining Managers. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the resignation.
6.5 Meetings. (a) Unless otherwise required by law or provided in the
Certificate or this Agreement, a majority of the total number of Managers fixed
by, or in the manner provided in, the Certificate or this Agreement shall
constitute a quorum for the transaction of business of the Managers, and the act
of a majority of the Managers present at a meeting at which a quorum is present
shall be the act of the Managers unless otherwise provided herein. A Manager
who is
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present at a meeting of the Managers at which action on any Company matter is
taken shall be presumed to have assented to the action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as secretary of the meeting before
the adjournment thereof or shall deliver such dissent to the Company immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
Manager who voted in favor of such action.
(b) Meetings of the Managers may be held at such place or places as shall
be determined from time to time by resolution of the Managers. At all meetings
of the Managers, business shall be transacted in such order as shall from time
to time be determined by resolution of the Managers. Attendance of a Manager at
a meeting shall constitute a waiver of notice of such meeting, except where a
Manager attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
(c) Regular meetings of the Managers shall be held at such times and places
as shall be designated from time to time by resolution of the Managers, provided
that such meetings shall be held no less frequently than quarterly. Notice of
such regular meetings shall not be required.
(d) Special meetings of the Managers may be called by any Manager on at
least 48 hours notice to each other Manager. Such notice need not state the
purpose or purposes of, nor the business to be transacted at, such meeting,
except as may otherwise be required by law or provided for by the Certificate or
this Agreement.
6.6 Approval or Ratification of Acts or Contracts by Members. The
Managers, in their sole discretion, may submit any act or contract for approval
or ratification at any meeting of the Members called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by a Required Interest shall be as valid and as binding
upon the Company and upon all the Members as if it shall have been approved or
ratified by every Member of the Company.
6.7 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the Certificate or this Agreement to be taken
at a meeting of the Managers or of any committee designated by the Managers may
be taken without a meeting if a consent in writing, setting forth the action to
be taken, is signed by all the Managers or members of such committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote at a meeting and may be stated as such in any document or instrument filed
with the Secretary of State of Delaware, and the execution of such consent shall
constitute attendance or presence in person at a meeting of the Managers or any
such committee, as the case may be. Subject to the requirements of the Act, the
Certificate or this Agreement for notice of meetings, Managers, or members of
any committee designated by the Managers, may participate in and hold a meeting
of the Managers or any committee of Managers, as the case may be, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
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6.8 Expenses; Compensation. (a) Except as otherwise provided herein,
the Company shall pay or cause to be paid (i) all costs and expenses incurred in
connection with the formation and organization of the Company, and (ii) all
costs and expenses of the Company incurred in pursuing and conducting, or
otherwise related to, the business of the Company. The Managers shall be
entitled to reimbursement of their reasonable expenses incurred on behalf of the
Company as and to the extent provided in paragraph (b) below. Subject to the
Act, no amount so paid to the Manager shall be deemed to be a distribution of
Company assets for purposes of this Agreement. Except for reimbursement of such
expenses as provided for in this Section 6.8 and its right to distributions as
provided in this Agreement, the Manager shall not receive any compensation for
its services as such.
(b) Unless otherwise approved by a Required Interest, the Managers shall
not receive compensation for their services as Managers. However, the Managers
shall be entitled to be reimbursed for reasonable out-of-pocket costs and
expenses incurred in the course of their service as Managers hereunder.
6.9 Co-Investment Opportunities. The Company, Safeguard and TL will
each present to each other and to each other Strategic Partner, in writing, any
Internet-related investment opportunity that it receives, and each of the
Company, TL, Safeguard (or Safeguard 98 L.P.) and such other Strategic Partner
will have the right on all Internet-related investments to invest equally in the
opportunity regardless of the origin of the deal, provided it gives written
notice of its election to invest to the party originating the deal within thirty
(30) days after receipt of the offer. No Strategic Partner (other than TL or
Safeguard) will be required to offer to the Company, TL or Safeguard any
Internet-related investment opportunity received by it. Notwithstanding the
above, Safeguard will not be required to offer to the Company, TL or any other
Strategic Partner any Internet-related investment originated by it in which it
intends to acquire a majority interest, or to offer to the Company or any
Strategic Partner (other than TL) any Internet-related investment to the extent
such offer would cause Safeguard to be in breach of its obligations or
commitments to TL or any future TL funds.
The Company has an understanding and acknowledgment from the other
parties that, for strategic reasons, it will have the right to take majority
ownership in four to six core portfolio companies, and that any such investment
will not be subject to the co-investment rules described above. This right will
be negotiated on a deal by deal basis. Notwithstanding anything in this
Agreement to the contrary, if the exercise by a Strategic Partner of any right
under this Section 6.9 shall cause the Company, in the written opinion of
outside counsel, to be an investment company subject to registration under the
1940 Act, such Strategic Partner will not be permitted to exercise any such
right. As soon as reasonably practicable after the date hereof, each of the
Strategic Partners and the Company agree to discuss and negotiate in good faith
the modification or termination of this Section 6.9 in the context of the
Company's goal of effecting a Public Offering in the future.
6.10 Advisory Board. The Managers may, in their sole discretion, form
and appoint persons to an advisory board of the Company (the "Advisory Board")
and pay compensation to persons serving on the Advisory Board. The sole purpose
of the Advisory Board shall be to advise the Board of Managers and the Advisory
Board shall have no other powers.
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6.11 Conflicts of Interest. The parties hereto acknowledge that there
may be conflicts of interest that arise from time to time due to existing
investments of the Strategic Partners and prospective investments by the
Company. The Company shall notify each Strategic Partner in writing before
acquiring the securities of any portfolio company, which notice shall identify
the portfolio company and contain a brief description of the terms of the
acquisition and the portfolio company's business. The Company will not invest
in a portfolio company if within ten (10) days after receipt of the Company's
notice, a Strategic Partner notifies the Company in writing that such investment
would cause such Strategic Partner to be in breach of its contractual
obligations, or be subject to penalties, arising from its existing investments,
and the Strategic Partner provides evidence reasonably satisfactory to the
Company of such contractual obligations or penalties. The Company also intends
to use outside independent financial advisors to value investments in companies
where a Member already has an existing investment.
6.12 Related Party Transactions. The Company may transact business with any
Manager or Member or affiliate thereof, provided the terms of those transactions
are no less favorable than those the Company could obtain from unrelated third
parties.
ARTICLE VII
OFFICERS
7.1 Officers. The Managers may designate one or more individuals (who
may or may not be Managers) to serve as officers of the Company. The Company
shall have such officers as the Managers may from time to time determine, which
officers may (but need not) include a Chairman, a President, one or more Vice
Presidents (and in case of each such Vice President, with such descriptive
title, if any, as the Managers shall deem appropriate), a Secretary, an
Assistant Secretary and a Treasurer. Any two or more offices may be held by the
same person.
7.2 Compensation. The Company shall have the authority to pay and
provide compensation and other benefits to its officers and employees. The
compensation and benefits of all officers of the Company shall be fixed from
time to time by the Managers, unless otherwise delegated by the Managers to a
particular officer.
7.3 Term of Office; Removal; Filling of Vacancies. Each officer of the
Company shall hold office at the pleasure of the Managers until his successor is
chosen and qualified in his stead or until his earlier death, resignation,
retirement, disqualification or removal from office. Any officer designated by
the Managers may be removed at any time by the Managers for any reason, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Designation of an officer shall not of itself create contract
rights. If the office of any officer becomes vacant for any reason, the vacancy
may be filled by the Managers. The Managers may abolish any office at any time.
7.4 Chairman. The Chairman, if one is designated by the Managers, shall
preside at meetings of the Managers and the Members. He shall assist the
Managers in the formulation of policies of the Company, and shall be available
to other officers for consultation and advice.
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7.5 President. The President, if one is designated by the Managers,
shall be the chief executive officer of the Company and shall have day-to-day
supervision of the affairs of the Company, subject at all times to the authority
of the Managers.
7.6 Vice Presidents. Each Vice President that is designated by the
Managers shall generally assist the President and shall have such powers and
perform such duties and services as shall from time to time be prescribed or
delegated to him by the President or the Managers.
7.7 Secretary. The Secretary, if one is designated by the Managers,
shall keep and account for the records of the Company.
7.8 Assistant Secretary. The Assistant Secretary, if one is designated
by the Managers, shall generally assist the Secretary.
7.9 Treasurer. The Treasurer, if one is designated by the Managers,
shall be the chief accounting and financial officer of the Company and shall
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Company.
7.10 Additional Powers and Duties. In addition to the foregoing
especially enumerated duties, services and powers, the several officers of the
Company shall perform such other duties and services and exercise such further
powers as may be provided by statute, the Certificate or this Agreement, or as
the Managers may from time to time determine or as may be assigned to them by
any competent superior officer. The Managers may also at any time limit or
circumvent the enumerated duties, services and powers of any officer. In
addition to the designation of officers and the enumeration of their respective
duties, services and powers, the Managers may grant powers of attorneys to
individuals to act as agent for or on behalf of the Company, to do any act which
would be binding on the Company, to incur any expenditures on behalf of or for
the Company, or to execute, deliver and perform any agreements, acts,
transactions or other matters on behalf of the Company. Such powers of attorney
may be revoked or modified as deemed necessary by the Managers.
ARTICLE VIII
MEETINGS OF MEMBERS
8.1 Meetings. (a) A quorum shall be present at a meeting of Members if
the holders of a Required Interest are represented at the meeting in person or
by proxy. With respect to any matter, the affirmative vote of a Required
Interest at a meeting of Members at which a quorum is present shall be the act
of the Members.
(b) All meetings of the Members shall be held at the principal place of
business of the Company or at such other place within or without the State of
Delaware as shall be specified or fixed in the notices or waivers of notice
thereof; provided that any or all Members may participate in any such meeting by
means of conference telephone or similar communications equipment pursuant to
Section 8.5.
(c) The chairman of the meeting or the holders of a Required Interest shall
have the power to adjourn such meeting from time to time, without any notice
other than announcement at the
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meeting of the time and place of the holding of the adjourned meeting. If such
meeting is adjourned by the Members, such time and place shall be determined by
a vote of the holders of a Required Interest. Upon the resumption of such
adjourned meeting, any business may be transacted that might have been
transacted at the meeting as originally called.
(d) An annual meeting of the Members, for the purpose of the delivery of an
annual report of the Managers, may be held, but no meeting of Members need be
held. Any meeting of Members shall be held at such place, within or without the
State of Delaware, on such date and at such time as the Managers shall fix and
set forth in the notice of the meeting.
(e) Special meetings of the Members for any proper purpose or purposes may
be called at any time by the Managers. Only business within the purpose or
purposes described in the notice (or waiver thereof) required by this Agreement
may be conducted at a special meeting of the Members. No Member shall have the
power to require that a meeting of the Members be held or that any matter be
voted upon by the Members.
(f) Written or printed notice stating the place, day and hour of the
meeting and the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the Managers or
person calling the meeting, to each Member entitled to vote at such meeting. If
mailed, any such notice shall be deemed to be delivered on the third day after
it is deposited in the United States mail, addressed to the Member at such
Member's address provided for in Section 15.2, with postage thereon prepaid.
(g) The date on which notice of a meeting of Members is mailed or the date
on which the resolution of the Managers declaring a distribution is adopted, as
the case may be, shall be the record date for the determination of the Members
entitled to notice of or vote at such meeting, including any adjournment
thereof, or the Members entitled to receive such distribution.
8.2 Voting List. At the request of any Member, the Managers shall make
available, at least ten days before a meeting of Members, a complete list of the
Members entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the Membership Interest held by
each, which list, for a period of ten days prior to such meeting, shall be kept
on file at the registered office or principal place of business of the Company
and shall be subject to inspection by any Member at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any Member during
the whole time of the meeting. The original membership records shall be prima-
facie evidence as to who are the Members entitled to examine such list or
transfer records or to vote at any meeting of Members. Failure to comply with
the requirements of this Section shall not affect the validity of any action
taken at the meeting.
8.3 Proxies. A Member may vote either in person or by proxy executed in
writing by the Member. A telegram, telex, cablegram or similar transmission by
the Member, or a photographic, photostatic, facsimile or similar reproduction of
a writing executed by the Member shall be treated as an execution in writing for
purposes of this Section. A proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable.
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8.4 Conduct of Meetings. All meetings of the Members shall be presided
over by the chairman of the meeting, who shall be a Manager (or representative
thereof) designated by a majority of the Managers. The chairman of any meeting
of Members shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
8.5 Action by Written Consent or Telephone Conference.
(a) Any action which is submitted by the Managers to the Members and which
could be taken by the Members at a meeting of Members may be taken by the
Members by unanimous written consent.
(b) Subject to Section 8.1(f), Members may participate in and hold a
meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in person
at such meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE IX
INDEMNIFICATION
9.1 Right to Indemnification. Subject to the limitations and conditions
as provided in this Article IX, each person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (hereinafter a "Proceeding"), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a person of whom he or she
is the legal representative, is or was a Manager or officer of the Company or
while a Manager or officer of the Company is or was serving at the request of
the Company as a Manager, director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise shall be
indemnified by the Company, against judgments, penalties (including excise and
similar taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, attorneys' fees) actually incurred by such
person in connection with such Proceeding, and indemnification under this
Article IX shall continue as to a person who has ceased to serve in the capacity
which initially entitled such person to indemnity hereunder. The rights granted
pursuant to this Article IX shall be deemed contract rights, and no amendment,
modification or repeal of this Article IX shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal. The indemnification
provided in this Article IX could involve indemnification for negligence or
under theories of strict liability but shall not extend to any matter for which
the final disposition of the Proceeding determines that the conduct of such
Manager constituted recklessness, self-dealing or willful misconduct.
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9.2 Advance Payment. The right to indemnification conferred in this
Article IX shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a person of the type entitled to be indemnified
under Section 9.1 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such person in advance of the final disposition of a Proceeding shall be
made only upon delivery to the Company of a written affirmation by such Manager
or officer of his or her good faith belief that he has met the standard of
conduct necessary for indemnification under this Article IX and a written
undertaking, by or on behalf of such person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified person is not entitled
to be indemnified under this Article IX or otherwise.
9.3 Indemnification of Employees and Agents. The Company, by adoption
of a resolution of the Managers, may indemnify and advance expenses to an
employee or agent of the Company to the same extent and subject to the same
conditions under which it may indemnify and advance expenses to Managers and
officers under this Article IX; and, the Company may indemnify and advance
expenses to persons who are not or were not Managers, officers, employees or
agents of the Company but who are or were serving at the request of the Company
as a Manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in such a capacity or arising out of his status
as such a person to the same extent that it may indemnity and advance expenses
to Managers and officers under this Article IX.
9.4 Appearance as a Witness. Notwithstanding any other provision of
this Article IX, the Company shall pay or reimburse expenses incurred by a
Manager or officer in connection with his appearance as a witness or other
participation in a Proceeding at a time when he is not a named defendant or
respondent in the Proceeding.
9.5 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Article IX shall not be
exclusive of any other right which a Manager, officer or other person
indemnified pursuant to Section 9.3 may have or hereafter acquire under any law
(common or statutory), provision of the Certificate or this Agreement,
agreement, vote of Members or disinterested Managers or otherwise.
9.6 Insurance. The Company shall purchase and maintain insurance, at
its expense, to protect itself and any person who is or was serving as a
Manager, officer, employee or agent of the Company or is or was serving at the
request of the Company as a Manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic limited liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any expense, liability or loss, whether or not the Company would have the power
to indemnify such person against such expense, liability or loss under this
Article IX.
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9.7 Savings Clause. If this Article IX or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Manager or officer
or any other person indemnified pursuant to this Article IX as to costs, charges
and expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article IX that shall not have been
invalidated and to the fullest extent permitted by applicable law.
9.8 Limitation on Liability. No Manager or officer shall be personally
liable, as such, for any action taken or omitted from being taken unless: (i)
such Manager or officer breached or failed to perform the duties of his office;
and (ii) the breach or failure to perform constituted recklessness, self-dealing
or willful misconduct. The foregoing shall not apply to any responsibility or
liability under a criminal statute or liability for the payment of taxes under
Federal, state, or local law.
ARTICLE X
TAXES
10.1 Tax Returns. The Managers shall cause to be prepared and filed all
necessary Federal, state and local tax returns for the Company including making
the elections described in Section 10.2. Each Member shall furnish to the
Managers all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's tax returns to be prepared
and filed.
10.2 Tax Elections. To the extent permitted by applicable tax law, the
Company shall make the following elections on the appropriate tax returns:
(a) to adopt the calendar year as the Company's taxable year;
(b) to adopt the accrual method of accounting and to keep the
Company's books and records on the income-tax method;
(c) if a transfer of a Membership Interest as described in section 743
of the Code occurs, on written request of any transferee Member, or if a
distribution of Company property is made on which gain described in section
734(b)(1)(A) of the Code is recognized or there is an excess of adjusted
basis as described in section 734(b)(1)(B) of the Code, to elect, pursuant
to section 754 of the Code, to adjust the basis of Company properties;
(d) to elect to amortize the organizational expenses of the Company
and the start-up expenditures of the Company ratably over a period of 60
months as permitted by Sections 195 and 709(b) of the Code; and
(e) any other election the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Manager or Member may make an election for the
Company to be excluded from the application of the provisions of subchapter K of
chapter 1 of subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this Agreement
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(including, without limitation, Section 2.8) shall be construed to sanction or
approve such an election.
10.3 Tax Matters Partner. SSI-Delaware shall be the "tax matters partner"
of the Company pursuant to section 6231(a)(7) of the Code. The tax matters
partner shall take such action as may be necessary to cause each other Member to
become a "notice partner" within the meaning of section 6223 of the Code. The
tax matters partner shall inform each other Member of all significant matters
that may come to its attention in its capacity as tax matters partner by giving
notice thereof on or before the fifth Business Day after becoming aware thereof
and, within that time, shall forward to each other Member copies of all
significant written communications it may receive in that capacity. The tax
matters partner may not take any action contemplated by sections 6222 through
6232 of the Code without the consent of a Required Interest, but this sentence
does not authorize the tax matters partner to take any action left to the
determination of an individual Member under sections 6222 through 6232 of the
Code.
ARTICLE XI
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
11.1 Maintenance of Books. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members, its Managers
and each committee of the Managers. The Company shall also maintain the books
and records on Exhibit B. The books of account for the Company shall be
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maintained on the accrual method of accounting in accordance with generally
accepted accounting principles and the terms of this Agreement, except that the
capital accounts, of the Members shall be maintained in accordance with Section
4.6. The accounting year of the Company shall be the same as its taxable year.
11.2 Reports. On or before the 90th day following the end of each
fiscal year during the term of the Company, the Managers shall cause each Member
to be furnished with (i) an Internal Revenue Service Form K-1 and similar forms
required for the filing of such Member's state and local income tax returns and
(ii) a balance sheet, a statement of operations and cash flows, a statement of
changes in Members, capital of the Company and a statement of value of the
Company's portfolio securities for, or as of the end of, that year certified by
a recognized firm of certified public accountants. These financial statements
shall be prepared in accordance with generally accepted accounting principles
for accrual-basis records consistently applied (except as therein noted) and be
accompanied by a report of the certified public accountants. In addition, the
Company shall provide each Member with quarterly unaudited financial statements
within forty-five (45) days after the end of each of the first three quarters in
each fiscal year. The Managers also may cause to be prepared or delivered such
other reports as they may deem appropriate. The Company shall bear the costs of
all of these reports.
11.3 Accounts. The Managers shall establish and maintain one or more
separate bank and investment accounts and arrangements for Company funds in the
Company name with financial institutions and firms that the Managers determine.
The Managers may not commingle the Company's funds with the funds of any Member.
The Company's funds may be invested in such manner as the Managers determine.
-29-
<PAGE>
ARTICLE XII
BANKRUPTCY OF A MEMBER
12.1 Bankrupt Members. Subject to Section 13.1 (c), if any Member becomes a
Bankrupt Member, the Company shall have the option, exercisable by notice from
the Managers to the Bankrupt Member (or its representative) at any time prior to
the 180th day after receipt of notice of the occurrence of the event causing it
to become a Bankrupt Member, to buy, and on the exercise of this option the
Bankrupt Member or its representative shall sell, its Membership Interest. The
purchase price shall be an amount equal to the fair market value thereof
determined by agreement by the Bankrupt Member (or its representative) and the
Managers; however, if those persons do not agree on the fair market value on or
before the 30th day following the exercise of the option, either such person, by
notice to the other, may require the determination of fair market value to be
made by an independent appraiser. The independent appraiser shall be selected in
good faith by the Managers and reasonably acceptable to the Bankrupt Member. The
determination of the independent appraiser is final and binding on all parties.
The Bankrupt Member and the Company each shall pay one-half of the costs of the
appraisal. The Company shall pay the fair market value as so determined in four
equal cash installments, the first due on closing and the remainder (together
with accumulated interest on the amount unpaid at the General Interest Rate) due
on each of the first three anniversaries thereof. The payment to be made to the
Bankrupt Member or its representative pursuant to this Section 12.1 is in
complete liquidation and satisfaction of all the rights and interest of the
Bankrupt Member and its representative (and of all persons claiming by, through,
or under the Bankrupt Member and its representative) in and in respect of the
Company, including, without limitation, any Membership Interest, any rights in
specific Company property, and any rights against the Company and (insofar as
the affairs of the Company are concerned) against the Members.
ARTICLE XIII
DISSOLUTION, LIQUIDATION, AND TERMINATION
13.1 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the decision of the Managers to dissolve and liquidate the
Company;
(b) the written consent of all the Members;
(c) the expiration of the period fixed for the duration of the Company
in this Agreement;
(d) any Member that is a Manager shall die, become insane, retire,
resign, be expelled, become a Bankrupt Member (with or without the consent
of a Required Interest) or dissolve, or there shall occur any other event
that terminates the continued membership in the Company of any such Member,
unless, in any such case, within 90 days of such event, Members owning a
majority of the remaining Membership Interests elect to continue the
business of the Company; and
-30-
<PAGE>
(e) entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Act.
The Company shall not be dissolved by the admission of Members in
accordance with the terms of this Agreement. Except as provided in Section
13.1(d), the death, insanity, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of an event that terminates the
continued membership of a Member in the Company, shall not cause the Company to
be dissolved and its affairs wound up so long as the Company at all times has at
least two Members. Upon the occurrence of any such event, the business of the
Company shall be continued without dissolution.
13.2 Liquidation and Termination. (a) On dissolution of the Company,
the Managers who have not wrongfully dissolved the Company shall act as
liquidator or may appoint one or more Members as liquidator. The liquidator
shall wind up the affairs of the Company as provided in the Act and shall have
all the powers set forth in the Act. The costs of liquidation shall be a
Company expense.
(b) Upon the winding up of the Company, the assets of the Company shall
first be distributed to creditors, including Members and Managers who are
creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof) other than liabilities for which reasonable
provision for payment has been made.
(c) Any assets remaining after the Company's liabilities and obligations
have been paid or reasonable provision for the payment thereof has been made,
shall be distributed to the Members in accordance with the positive capital
account balances of the Members, as determined after taking into account all
capital account adjustments for the Company's taxable year during which such
liquidation occurs (other than those made as a result of this Section), by the
end of such taxable year or, if later, within 90 days after the date of such
liquidation, except as permitted by Treas. Reg. (S) 1.704-1(b)(2)(ii)(b).
(d) If, at the discretion of the Managers, any assets of the Company are
distributed to the Members in-kind, such assets shall be valued on the basis of
the fair market value thereof as determined by the Managers in their reasonable
discretion on the date of distribution. Without limiting the managers,
discretion to make such a valuation or requiring that any such appraisal be
made, the valuation of any asset by the Managers on the basis of the
determination of its fair market value by an independent appraiser shall be
deemed to be a reasonable value for such asset and a reasonable exercise of such
discretion. Upon any such in-kind distribution to a Member, the Capital Account
of the Members shall be adjusted to reflect the manner in which the unrealized
income, gain, loss or deduction inherent in such property (that has not
previously been reflected in the Members' Capital Accounts) would be allocated
among the Members if there had been a taxable disposition of such property at
its fair market value on the date of distribution. The Capital Accounts of the
Members receiving a distribution in-kind shall then be reduced by the fair
market value of the property distribution.
-31-
<PAGE>
(e) Nothing in this Article 13 shall be construed to extend the time period
prescribed under Section 13.2(c) above and Treas. Reg. (S) 1.704-1(b)(2)(ii)(b)
for making liquidating distributions of the Company's assets. If the Liquidator
deems it impracticable to cause the Company to make distributions of the
liquidating proceeds to the Members within the time period described under
Treas. Reg. (S) 1.704-l(b)(2)(ii)(b), the Liquidator may make any arrangement
that is considered for federal income tax purposes to effectuate liquidating
distributions of all of the Company's assets to the Members within the time
period prescribed in such regulation and that will permit the sale of the non-
cash assets considered so distributed in a manner that gives effect, to the
extent possible, to the intent of the preceding provisions of this Article 13.
(f) Notwithstanding anything contained herein to the contrary, upon the
merger or consolidation of the Company into, or transfer of its assets to, a
Successor Corporation in connection with a public offering of shares of such
Successor Corporation, shares in such Successor Corporation will be allocated
among the Members in the following proportions, based upon the price at which
such shares are initially offered to the public:
(i) first, to all Members in proportion to their Capital
Contributions, up to the amount of the excess, if any, of (x) their
Capital Contributions over (y) prior distributions to them;
(ii) second, to the Members in proportion to their Membership
Profit Interests until the aggregate shares distributed to all Members
are in proportion to their Membership Interests; and
(iii) third, to the Members in proportion to their Membership
Interests.
In addition, upon such merger, consolidation or sale of the Company in
connection with a public offering, the Successor Corporation shall acquire the
TL Corporations in exchange for stock of the Successor Corporation in a tax-free
transaction.
13.3 Deficit Capital Accounts. Notwithstanding anything to the contrary
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, to the extent that the deficit, if any, in the Capital Account of
any Member results from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or distributions of
assets pursuant to this Agreement to all Members, upon dissolution of the
Company such deficit shall not be an asset of the Company and such Members shall
not be obligated to contribute such amount to the Company to bring the balance
of such Member's capital account to zero.
13.4 Certificate of Cancellation. On the completion of the winding up of
the Company following its dissolution, the Company is terminated, and the
Managers (or such other person or persons as the Act may require or permit)
shall file a Certificate of Cancellation with the Office of the Secretary of
State of the State of Delaware, and cancel any other filings made pursuant to
Section 2.5.
-32-
<PAGE>
ARTICLE XIV
1940 ACT
14.1 Expulsion. Anything herein to the contrary notwithstanding, no Member
that is an investment company, or would be an investment company but for the
exception provided by Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, may at
any time own more than nine percent of the aggregate shares of Membership
Interests then outstanding. If, at any time, the Company is informed that any
such Member has acquired more than nine percent of the shares of Membership
Interests (an "Investment Company Violation"), such Member shall be deemed to
have given notice of withdrawal pursuant to this Article 14, effective as of the
last day of the fiscal quarter Preceding such Investment Company Violation (the
"Investment Company Withdrawal Date"), of such portion or all of the Capital
Accounts of such Member as the Manager may determine is necessary or advisable
to cure such Investment Company Violation, and such withdrawal shall be
consummated as provided in this Article 14 to the maximum feasible extent. The
Company may expel such Member's Membership Interest at any time while such
Investment Company Violation continues by notice to such Member and such
expulsion shall be effective as of the Investment Company Withdrawal Date. On
advice of counsel for the Company, the Manager may waive the restrictions in
this Section with respect to a new or existing Member if the number of holders
of such securities would not prevent the Company from relying on the exclusion
from the definition of "investment company" under Section 3(c)(1) of the 1940
Act. Such a waiver may only be granted if such Member makes a written
representation to the Company as to the number of holders of such securities and
such waiver shall only be effective so long as the number of holders of such
securities does not exceed the number so represented to the Member.
14.2 Purchase of Expelled Member's Membership Interest. Upon the
occurrence of an Investment Company Violation, the Managers shall redeem such
portion of such Member's Membership Interest as the Managers determine is
necessary or advisable to cure such violation, all in accordance with Section
12.1 as if the breaching Member were a Bankrupt Member.
ARTICLE XV
GENERAL PROVISIONS
15.1 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment.
15.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under this Agreement is
effective on receipt by the person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the addresses given
for that Member on Exhibit A or in the instrument described in 3.3(d) or 3.4, or
---------
such other address as that Member may specify by notice to the other Members.
Any notice, request, or consent to the Company or the Managers must be given to
the Managers at the following address: 103 Springer Building, 1st Floor Concord
Plaza, 3411 Silverside Road, Wilmington, DE 19810.
-33-
<PAGE>
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
15.3 Entire Agreement; Supersedure. This Agreement constitutes the
entire agreement of the Members and their affiliates relating to the Company and
supersedes all prior contracts or agreements with respect to the Company,
whether oral or written.
15.4 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any person in the performance by that
person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that person of the
same or any other obligations of that person with respect to the Company.
Failure on the part of a person to complain of any act of any person or to
declare any person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.
15.5 Amendment or Modification. This Agreement may be amended or
modified from time to time only by a written instrument adopted by the Managers
and executed and agreed to by a Required Interest and each Strategic Partner;
provided, however, that (a) an amendment or modification reducing a Member's
-------- -------
Membership Interest or increasing its Commitment (other than to reflect changes
otherwise provided by this Agreement) or reducing a Member's distributions under
Section 5.2 is effective only with that Member's consent, (b) an amendment or
modification reducing the required Membership Interest or other measure for any
consent or vote in this Agreement is effective only with the consent or vote of
Members having the Membership Interest or other measure theretofore required,
(c) amendments of the type described in Section 3.4 may be adopted as therein
provided, (d) an amendment to Section 6.9 is effective only with the consent of
Members' holding at least 66 2/3% of all Membership Interests and (e) amendments
to this Agreement that (i) the Managers have reasonably determined do not
adversely affect the Members, (ii) are required or contemplated by this
Agreement, (iii) are reasonable and necessary or appropriate in the sole
discretion of the Managers to qualify or continue the qualification of the
Company as a limited liability company under the laws of any state, (iv) are
advisable in the opinion of the Managers to cure any ambiguity in any provision
herein, or (v) are required to effect a change in the name of the Company, in
the registered office or registered agent of the Company or in the location of
the principal place of business of the Company or the admission, substitution or
termination of Members in accordance with this Agreement, may be made by the
Managers without the consent of the Members.
15.6 Binding Act. Subject to the restrictions on Dispositions set forth
in this Agreement, this Agreement is binding on and inures to the benefit of the
Members and their respective heirs, legal representatives, successors, and
assigns.
15.7 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AGREEMENT
-34-
<PAGE>
TO THE LAW OF ANOTHER JURISDICTION. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other persons or circumstances is not affected thereby and
that provision shall be enforced to the greatest extent permitted by law.
15.8 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
15.9 No Third Party Benefit. The provisions hereof are solely for the
benefit of the Company and its Members and Managers and are not intended to, and
shall not be construed to, confer a right or benefit on any creditor of the
Company or any other person.
15.10 Waiver of Certain Rights. Each Member irrevocably waives any right it
may have to maintain any action for dissolution of the Company or for partition
of the property of the Company.
15.11 Indemnification. To the fullest extent permitted by law, each Member
shall indemnify the Company, each Manager and each other Member and hold them
harmless from and against all losses, costs, liabilities, damages, and expenses
(including, without limitation, costs of suit and attorney's fees) they may
incur on account of any breach by that Member of this Agreement.
15.12 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
15.13 Resolutions of Disputes.
(a) If any dispute arises under this Agreement that is not settled promptly
in the ordinary course of business, the parties shall seek to resolve any such
dispute between them, first, by negotiating promptly with each other in good
faith in face-to-face negotiations. These face-to-face negotiations shall be
conducted by the respective designated senior management representative of each
party. If the parties are unable to resolve the dispute between them within 20
business days (or such period as the parties shall otherwise agree) through
these face-to-face negotiations, then any such disputes shall be resolved in the
manner set forth in subsections (b) through (d) below.
(b) Any action, suit or proceeding where the amount in controversy as to at
least one party, exclusive of interest and costs, exceeds $1,000,000 Dollars (a
"Summary Proceeding"), arising out of or relating to this Agreement or the
breach, termination or validity thereof, shall be litigated exclusively in the
Superior Court of the State of Delaware (the "Delaware Superior Court") as a
summary proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or
any successor rules (the "Summary Proceeding Rules") for as long as such rules
are in effect. Each of the parties hereto hereby irrevocably and
unconditionally (i) submits to the jurisdiction of the Delaware Superior Court
for any Summary Proceeding, (ii) agrees not to commence any Summary
-35-
<PAGE>
Proceeding except in the Delaware Superior Court, (iii) waives, and agrees not
to plead or to make, any objection to the venue of any Summary Proceeding in the
Delaware Superior Court, (iv) waives, and agrees not to plead or to make, any
claim that any Summary Proceeding brought in the Delaware Superior Court has
been brought in an improper or otherwise inconvenient forum, (v) waives, and
agrees not to plead or to make, any claim that the Delaware Superior Court lacks
personal jurisdiction over it, (vi) waives its right to remove any Summary
Proceeding to the federal courts except where such courts are vested with sole
and exclusive jurisdiction by statute and (vii) understands and agrees that it
shall not seek a jury trial or punitive damages in any Summary Proceeding based
upon or arising out of or otherwise related to this Agreement or any other
agreement executed in connection herewith or the breach, termination or validity
thereof, and waives any and all rights to any such jury trial or to seek
punitive damages.
(c) In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $1,000,000 Dollars (a "Proceeding"), arising out of or relating to this
Agreement or any other agreement executed in connection herewith or the breach,
termination or validity thereof is brought, the parties to such Proceeding agree
to make application to the Delaware Superior Court to proceed under the Summary
Proceeding Rules. Until such time as such application is rejected, such
Proceeding shall be treated as a Summary Proceeding and all of the foregoing
provisions of this Section relating to Summary Proceedings shall apply to such
Proceeding.
(d) If a Summary Proceeding is not available to resolve any dispute
hereunder, the controversy or claim shall be settled by arbitration conducted on
a confidential basis, under the U.S. Arbitration Act, if applicable, and the
then current Commercial Arbitration Rules of the American Arbitration
Association (the "Association") strictly in accordance with the terms of the
Agreement and the substantive law of the State of Delaware. The arbitration
shall be conducted at the Association's regional office located closest to the
Company's principal place of business by three arbitrators, at least one of whom
shall be knowledgeable in general business practices, one of whom shall be an
attorney and one of whom shall be a member of a "Big Five" accounting firm
familiar with businesses engaged in asset management. Judgment upon the
arbitrators, award may be entered and enforced in any court of competent
jurisdiction. Neither party shall institute a proceeding hereunder unless at
least 60 days prior thereto such party shall have given written notice to the
other party of its intent to do so.
(e) Neither party shall be precluded hereby from securing equitable
remedies in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but shall not be sought as a means to avoid or stay arbitration or
Summary Proceeding.
15.14 Estoppels. Each Member shall, upon not less than fifteen (15)
days written notice from any Member, execute and deliver to such other Member a
statement certifying that this Agreement is unmodified and in full force and
effect (or, if modified, the nature of the modification) and whether or not
there are, to such Member's knowledge, any uncured defaults on the part of the
other Member, specifying such defaults if any are claimed. Any such statement
may be relied upon by third parties.
-36-
<PAGE>
15.15 Reliance on Authority of Person Signing Agreement. If a Member is
an Entity, the Company and the Members shall:
(a) not be required to determine the authority of the person signing this
Agreement to make any commitment or undertaking on behalf of such Entity or to
determine any fact or circumstance bearing upon the existence of the authority
of such Entity or to determine any fact or circumstance bearing upon the
existence of the authority of such person;
(b) not be required to see to the application or distribution of proceeds
paid or credited to persons signing this Agreement on behalf of such Entity;
(c) be entitled to rely on the authority of the person signing this
Agreement or the Subscription Agreement with respect to the voting of the
Membership Interest of such Entity and with respect to the giving of consent on
behalf of such Entity in connection with any matter for which consent is
permitted or required under this Agreement; and
(d) be entitled to rely upon the authority of any general partner, joint
venturer, trustee, or president or vice president, as the case may be, of any
such Entity the same as if such person were the person originally signing this
Agreement on behalf of such Entity.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as
of the date first set forth above.
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
/s/ Michael W. Miles
--------------------------------------
By: Michael W. Miles
Title: Vice President
COMCAST ICG, INC.
/s/ Julian A. Brodsky
--------------------------------------
By: Julian A. Brodsky
Title: Vice Chairman
CPQ HOLDINGS, INC.
/s/ Linda S. Auwers
--------------------------------------
By: Linda S. Auwers
Title: Secretary
-37-
<PAGE>
TL VENTURES (DELAWARE) INC.
/s/ Jordan B. Savitch
-------------------------------------
By: Jordan B. Savich
Title: Assistant Secretary
TL VENTURES SECOND CORPORATION
/s/ Jordan B. Savitch
-------------------------------------
By: Jordan B. Savitch
Title: Assistant Secretary
INTERNET ASSETS, INC.
/s/ Bader F. Al-Rezaiham
-------------------------------------
By: Bader F. Al-Rezaiham
Title: President/Director
/s/ Julian Brodsky
--------------------------------------
JULIAN BRODSKY, Manager
/s/ Michael Forgash
--------------------------------------
E. MICHAEL FORGASH, Manager
/s/ Robert E. Keith
--------------------------------------
ROBERT E. KEITH, Manager
/s/ Walter W. Buckley, III
--------------------------------------
WALTER W. BUCKLEY, III, Manager
/s/ Walter W. Buckley, III,
--------------------------------------
WALTER W. BUCKLEY, III, individually
/s/ Kenneth A. Fox
--------------------------------------
KENNETH A. FOX, individually
/s/ Douglas A. Alexander
--------------------------------------
DOUGLAS A. ALEXANDER, individually
-38-
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Safeguard Scientifics (Delaware), Inc. $34,125,00 $8,125,000 N/A 21,125,000
------------------------------------------------------------------------------------------------------------------------------------
Comcast ICG, Inc. $16,100,000 $6,100,000 N/A 10,600,000
------------------------------------------------------------------------------------------------------------------------------------
CPQ Holdings, Inc. $10,000,000 0 N/A 5,000,000
------------------------------------------------------------------------------------------------------------------------------------
BancBoston Investments Inc. $6,000,000 0 N/A 3,000,000
------------------------------------------------------------------------------------------------------------------------------------
TL Ventures (Delaware), Inc. $6,557,300 $557,300 N/A 3,557,300
(TL II LP)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TL Ventures Second Corp. $442,700 $442,700 N/A 442,700
(TL II CV)
------------------------------------------------------------------------------------------------------------------------------------
R.A.F. Ventures VII. L.P. $5,000,000 $1,000,000 N/A 3,000,000
------------------------------------------------------------------------------------------------------------------------------------
Walter W. Buckley, Jr. $2,000,000 0 N/A 1,000,000
------------------------------------------------------------------------------------------------------------------------------------
Walter W. Buckley, III $4,692,999.67 $125,000 2,567,999.67 3,692,999.67
------------------------------------------------------------------------------------------------------------------------------------
J. Christopher Burch $2,750,000 $750,000 N/A 1,750,000
------------------------------------------------------------------------------------------------------------------------------------
Robert L. Burch $2,750,000 $750,000 N/A 1,750,000
------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. Fox $4,286,549.69 $1,000,000 1,286,549.69 3,286,549.69
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Graham Family Growth Partnership, L.P. $1,500,000 0 N/A 750,000
$500,000 0 250,000
Steven C. Graham
------------------------------------------------------------------------------------------------------------------------------------
Herbert Lotman $800,000 0 N/A 400,000
Karen Lotman
F.E.A. Trust F/B/O Shelly Lotman Fisher $300,000 0 150,000
John Pelin & George Ginader Trustees
F.E.A. Trust F/B/O Jeffrey Lotman $300,000 0 150,000
John Pelin & George Ginader Trustees
------------------------------------------------------------------------------------------------------------------------------------
Poduska Family Limited Partnership $1,250,000 $250,000 N/A 750,000
John William Poduska, Sr. $250,000 $250,000 250,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SMM Internet $1,225,000 $525,000 N/A 875,000
Robert A. Sargent
John C. Marshall
Doug Marzone
Hall Vetterlein
------------------------------------------------------------------------------------------------------------------------------------
M. Reid & Company $1,000,000 $350,000 N/A 675,000
Michael M. Reid
------------------------------------------------------------------------------------------------------------------------------------
The HRG Corporation $450,000 $150,000 N/A 300,000
Robert S. Adelson $150,000 $50,000 N/A 100,000
------------------------------------------------------------------------------------------------------------------------------------
Douglas A. Alexander $1,416,374.26 0 1,216,374.26 1,316,374.26
------------------------------------------------------------------------------------------------------------------------------------
Warren V. Musser $400,000 0 N/A 200,000
------------------------------------------------------------------------------------------------------------------------------------
Jean C. Tempel $650,000 $250,000 N/A 450,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Electronics, L.L.C. $100,000 0 N/A 50,000
John C. Maxwell, III
------------------------------------------------------------------------------------------------------------------------------------
Tom Kippola Pension Plan $123,333 0 $23,333 73,333
------------------------------------------------------------------------------------------------------------------------------------
Robert E. Keith $150,000 $50,000 N/A 100,000
Margot Keith
------------------------------------------------------------------------------------------------------------------------------------
James I. Cash, Jr., Ph.D-PSRP $100,000 0 N/A 50,000
------------------------------------------------------------------------------------------------------------------------------------
Peter and Patricia Solvik $295,035.09 $75,000 70,035.09 220,035.09
------------------------------------------------------------------------------------------------------------------------------------
Esther Dyson $170,175.44 0 70,175.44 120,175.44
------------------------------------------------------------------------------------------------------------------------------------
Britton H. Murdoch $250,000 $150,000 150,000 350,000
------------------------------------------------------------------------------------------------------------------------------------
Ann B. Alexander $50,000 0 N/A 25,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 5 -
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Don E. Bonazzo $50,000 0 N/A 25,000
------------------------------------------------------------------------------------------------------------------------------------
Internet Assets, Inc. $5,000,000 $5,000,000 N/A 5,000,000
------------------------------------------------------------------------------------------------------------------------------------
River Light, LLC $1,100,000 $1,100,000 N/A 1,100,000
------------------------------------------------------------------------------------------------------------------------------------
Austin Hearst $500,000 $500,000 N/A 500,000
------------------------------------------------------------------------------------------------------------------------------------
Keystone Foods Corporation $500,000 $500,000 N/A 500,000
------------------------------------------------------------------------------------------------------------------------------------
Christopher Greendale $416,959.06 $300,000 116,959.06 416,959.06
------------------------------------------------------------------------------------------------------------------------------------
Douglas M. Marzonie $200,000 $200,000 N/A 200,000
------------------------------------------------------------------------------------------------------------------------------------
Crockett Family, L.P. $200,000 $200,000 N/A 200,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 6 -
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Silicon Valley Bancshares $125,000 $125,000 N/A 125,000
------------------------------------------------------------------------------------------------------------------------------------
William L. Powar $125,000 $125,000 N/A 125,000
------------------------------------------------------------------------------------------------------------------------------------
RMDG Investors, L.L.C. $125,000 $125,000 N/A 125,000
------------------------------------------------------------------------------------------------------------------------------------
David Chu $125,000 $125,000 N/A 125,000
------------------------------------------------------------------------------------------------------------------------------------
Ira Lubert $125,000 $125,000 N/A 125,000
------------------------------------------------------------------------------------------------------------------------------------
Susan R. Buckley $125,000 $125,000 N/A 125,000
------------------------------------------------------------------------------------------------------------------------------------
Ramsey Beirne Partners, LLC $100,000 $100,000 N/A 100,000
------------------------------------------------------------------------------------------------------------------------------------
David Solomont $50,000 $50,000 N/A 50,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 7 -
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John S. Scott $50,000 $50,000 N/A 50,000
------------------------------------------------------------------------------------------------------------------------------------
Larry Murphy $50,000 $50,000 N/A 50,000
------------------------------------------------------------------------------------------------------------------------------------
Edward Sickles $50,000 $50,000 N/A 50,000
------------------------------------------------------------------------------------------------------------------------------------
Lou Ryan $50,000 $50,000 N/A 50,000
------------------------------------------------------------------------------------------------------------------------------------
James Patterson $40,000 $40,000 N/A 40,000
------------------------------------------------------------------------------------------------------------------------------------
Blair La Corte $25,000 $25,000 N/A 25,000
------------------------------------------------------------------------------------------------------------------------------------
John A. Loftus, Jr. $12,500 $12,500 N/A 12,500
------------------------------------------------------------------------------------------------------------------------------------
William C. Loftus $12,500 $12,500 N/A 12,500
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 8-
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INTERNET CAPITAL GROUP
------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP INTERESTS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Capital Shares of Membership Total Shares of
-------------- -------------------- -----------------
Name Contribution Commitment Profit Interests Membership Interest
---- -------------- ---------- -------------------- -------------------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henry N. Nassau $12,500 $12,500 N/A 12,500
------------------------------------------------------------------------------------------------------------------------------------
James J. Lawless, Jr. $12,500 $12,500 N/A 12,500
------------------------------------------------------------------------------------------------------------------------------------
GE Capital $7,000,000 0 N/A 3,500,000
------------------------------------------------------------------------------------------------------------------------------------
John Burch $100,000 $100,000 N/A 100,000
------------------------------------------------------------------------------------------------------------------------------------
Robert Pollan $100,000 $100,000 N/A 100,000
------------------------------------------------------------------------------------------------------------------------------------
Karl I. Peterson $75,000 $75,000 N/A 75,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 9 -
<PAGE>
EXHIBIT B
REQUIRED INFORMATION
(1) A current and a past list, setting forth the full name and last known
mailing address of each Member and Manager, set forth in alphabetical order;
(2) A copy of the Certificate of Formation and all amendments thereto;
(3) Copies of the Company's Federal, state and local income tax returns and
financial statements for the three most recent years or, if those returns and
statements were not prepared for any reason, copies of the information and
statements provided to, or which should have been provided to, the Members to
enable them to prepare their Federal, state and local tax returns for the
period; and
(4) Copies of the Company's written Amended and Restated Limited Liability
Company Agreement, and all amendments thereto, and copies of any operating
agreements no longer in effect.
- 1 -
<PAGE>
EXHIBIT C
---------
REGISTRATION RIGHTS
-------------------
1.1 Piggyback Registration.
----------------------
(a) If the Company at any time after the consummation of its
initial public offering proposes for any reason, whether for its own account or
the account of others, to register any of its securities under the Securities
Act, other than pursuant to a Special Registration Statement (as hereinafter
defined), it shall each such time promptly give written notice to the registered
Holders of the Eligible Securities (as defined in Section 1.2(c)) of its
intention to do so, and, upon the written request, given within twenty (20) days
after receipt of any such notice, of a Holder to register any of its Eligible
Securities, the Company shall (subject to Section 1.1(b) hereof) use its best
efforts to cause all Eligible Securities with respect to which Holders shall
have so requested registration to be registered under the Securities Act
promptly upon receipt of the written request of such Holders for such
registration, all to the extent required to permit the sale or other disposition
by the Holders of the Eligible Securities so registered in the manner
contemplated by such registration statement. "Special Registration Statement"
means a registration statement on Forms S-8 or S-4 or any successor form or
other registration statement relating to shares of Common Stock issued in
connection with an acquisition of an entity or business or other business
combination, or shares of Common Stock issued in connection with stock option or
other employee benefit plans.
(b) In connection with any exercise by a Holder of its
"piggyback" registration rights pursuant to this Section 1.1 in connection with
any underwritten offering of securities of the Company, if the Company is
advised in writing (with a copy to the Holders requesting registration) by the
lead underwriter for the offering that, in such firm's opinion, a registration
of Eligible Securities at that time would interfere with the orderly sale and
distribution of the securities being sold by the Company for its own account,
then the number of shares that may be included in the underwriting shall be
allocated, first, to the Company, second, to each of the Holders requesting
inclusion of their Eligible Securities in such registration statement on a pro
rata basis based on the total number of Eligible Securities held by each such
Holder and, third, to any other shareholders requesting registration.
(c) For purposes of this Exhibit C, the following terms shall
have the following meanings: (i) "Common Stock" shall mean the shares of common
stock of any Successor Corporation; (ii) "Company" shall mean and include
Internet Capital and any Successor Corporation; (iii) "Holders" shall mean each
Strategic Partner for so long as (and to the extent that) it owns any Eligible
Securities, and each of their respective successors, assigns, and transferees
who become registered owners of Eligible Securities; and (iv) "Internet Capital"
shall mean Internet Capital Group, L.L.C., a Delaware limited liability company.
Any capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in this Amended and Restated Limited Liability Company
Agreement of Internet Capital, as amended, to which this Exhibit C is attached.
- 1 -
<PAGE>
1.2 Demand Registration.
-------------------
(a) Any Holder may, at any time after consummation of the
Company's initial public offering of equity securities, request in writing that
the Company cause a registration statement to be filed under the Securities Act
(on any Form then available to the Company) with respect to such of its Eligible
Securities as it shall specify in such request, provided that (i) the gross
proceeds from such offering will be or are reasonably expected to be not less
than $5 million and (ii) such Holder includes at least 25% of its Eligible
Securities in its request. The Company shall promptly give written notice of
such request to the other Holders of Eligible Securities and afford them the
opportunity of including in the requested registration statement such of their
Eligible Securities as they shall specify in a written notice given to the
Company within thirty (30) days after their receipt of the Company's notice of
the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which Holders shall have so requested
registration to be registered under the Securities Act, all to the extent
required to permit the sale or other disposition by the Holders of the Eligible
Securities so registered in the manner specified by such Holders in their
notices and pursuant to this Section.
(b) The Company shall not be required to file and cause to become
effective more than two (2) registration statements at the demand of any Holder
made under this Section 1.2.
(c) The term "Eligible Securities" shall mean, on any date, (i)
the shares of Common Stock issued and issuable in exchange for a Holder's shares
of Memberships Interests upon the merger or consolidation of Internet Capital
into a Successor Corporation (the "Merger Shares"), (ii) plus all shares of
Common Stock or other securities of the Company issued in respect of such Merger
Shares (and such other securities of the Company) by way of a stock split, stock
dividend, recapitalization, merger or consolidation, (iii) but exclusive of any
Merger Shares or other securities described in clause (i) or (ii) which have
been (A) sold in a public offering registered under Securities Act or (B) sold
pursuant to Rule 144 under the Securities Act.
(d) If the Holders of the Eligible Securities making such demand
propose to sell their Eligible Securities in a firm commitment underwriting and
the managing underwriter advises such Holders that not all Eligible Securities
of such Holders can be included in such offering, then the requisite number of
Eligible Securities shall be excluded from registration on a basis pro rata
among the Holders of the Eligible Securities requesting such registration on the
basis of the number of Eligible Securities held by each of them. If by virtue of
this Section 1.2(d), more than 50% of the Eligible Securities which a Holder has
demanded be registered are excluded from the registration statements then such
Holder shall not be deemed to have exercised a demand registration right under
this Section 1.2.
(e) Provided the Company has honored its obligations under
Section 1.1, no demand registration right granted in this Section may be
exercised by any Holder during any period of time beginning on the date the
Company (i) files a registration statement with the
- 2 -
<PAGE>
Securities and Exchange Commission registering any of its securities for sale to
the public or (ii) files a registration statement upon the demand of any other
Holder pursuant to this Section 1.2, and ending on the earlier to occur of (A)
90 days after the date on which such registration statement is declared
effective by the Securities and Exchange Commission or otherwise becomes
effective, and (B) the 180th day after the date of such filing.
(f) The demand registration rights granted in this Section 1.2
shall expire, if not exercised prior thereto, on the date on which more than 90%
of the Eligible Securities (as of the date of this Agreement) shall have been
publicly sold by the Holders thereof in a public offering registered under the
Securities Act of 1933 or pursuant to Rule 144 thereunder.
1.3 Form S-3 Registrations. In addition to the rights provided the
----------------------
Holders of registrable securities in Sections 1.1 and 1.2 above, if the
registration of Eligible Securities under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Commission), then upon the
written request of one or more Holders of Eligible Securities, the Company will
so notify each Holder of Eligible Securities, including each Holder who has a
right to acquire Eligible Securities, and then will, as expeditiously as
possible, use its best efforts to effect qualification and registration under
the Securities Act on Form S-3 of all or such portion of the Eligible Securities
as the Holder or Holders shall specify pursuant to this Section 1.3, provided
that the Company shall have no obligation to file a registration statement under
this Section 1.3 unless the gross proceeds from the offering will be or are
reasonably expected to be not less than $500,000.
1.4 Registration Procedures. If and whenever the Company is under an
-----------------------
obligation pursuant to the provisions of this Exhibit C to use its best efforts
to effect the registration of any Eligible Securities the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission
a registration statement with respect to such Eligible Securities and use its
best efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective under the Securities Act until the earlier of
such time as all securities covered thereby have been sold or one hundred and
eighty (180) days after such registration statement becomes effective, as such
period may be extended pursuant to Section 1.5, and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Eligible Securities covered by such registration statement for such
period;
(c) furnish to each selling stockholder such numbers of copies of
each prospectus (including each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of such Eligible Securities;
- 3 -
<PAGE>
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter, if any, or if there
is no managing underwriter, the Holders of at least 25% of the Eligible
Securities, shall request, (provided that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
reasonably necessary or advisable to enable such seller to consummate the public
sale or other disposition in such jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in clause (b) of this Section 1.4, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish on the date that such Eligible Securities are
delivered to the underwriters for sale pursuant to such registration or, if such
Eligible Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Eligible Securities becomes
effective, (i) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and at the request of any Holder or Holders of Eligible
Securities requesting registration pursuant to this Exhibit C, to the Holder or
Holders making such request, stating that such registration statement has become
effective under the Securities Act and that (i) no stop order suspending the
effectiveness thereof has been issued and, to the best knowledge of such
counsel, no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (2) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein); (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no
opinion as to financial statements contained therein); (4) the description in
the registration statement or the prospectus, or any amendment or supplement
thereto, of all legal and governmental matters and all contracts and other legal
documents or instruments are accurate and fairly present the information
required to be shown; (5) such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required to be described in
the registration statement or prospectus, or any
- 4 -
<PAGE>
amendment or supplement thereto, which are not described as required, nor of any
contracts or documents or instruments of a character required to be described in
the registration statement or prospectus, or any amendment or supplement
thereto, or to be filed as exhibits to the registration statement which are not
described and filed as required, and (6) such other legal matters with respect
to such registration as the underwriters, if any, and any such Holder or Holders
requesting such opinion may reasonably request; and (ii) in the case of an
underwritten offering a comfort letter, dated such date, from the independent
certified public accountants of the Company, addressed to the underwriters and
the Company's Board of Directors in the customary form.
1.5 Delay in Registration. Notwithstanding anything contained in
---------------------
this Agreement to the contrary, the Company reserves the right to delay any such
registration pursuant to this Exhibit C for a period of not more than one
hundred and twenty (120) days, or to withhold efforts to cause such registration
statement to become effective for a period of not more than one hundred twenty
(120) days, if the Board of Directors of the Company determines in good faith
that such registration might (A) interfere with or affect the negotiation or
completion of any material transaction that is being contemplated by the
Company, or (B) involve initial or continuing disclosure obligations materially
adverse to the best interests of the Company's shareholders. If, after a
registration statement becomes effective, the Company advises the Holders of the
registrable securities covered by such registration statement that the Company
considers it appropriate for the registration statement to be amended, the
Holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
amended. The time periods referred to this Exhibit C shall be extended for an
additional number of business days during which the rights to sell shares was
suspended.
1.6 Information to be Furnished by Holders of Eligible Securities.
-------------------------------------------------------------
Each prospective seller of Eligible Securities, registered or to be registered
under any registration statement shall furnish to the Company such information
and execute such documents regarding the Eligible Securities held by such seller
and the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company.
1.7 Expenses of Registration.
------------------------
(a) All expenses incurred by the Company in complying with this
Exhibit C (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (iv) printing expenses; (v) fees and
disbursements of Company counsel and of one counsel for the participating
Holders together, which counsel is reasonably acceptable to the Holders; and
(vi) the fees and expenses of the independent public accountants (including the
expense of any special audits in connection with any such registration), are
hereinafter called "Registration Expenses." All underwriting discounts and
commissions applicable to the Eligible Securities covered by any such
registration, are herein called "Selling Expenses."
- 5 -
<PAGE>
(b) The Company shall pay all Registration Expenses in connection
with all piggyback registrations under Section 1.1 and all demand registrations
under Section 1.2 plus up to one (1) S-3 registration per year pursuant to
Section 1.3. All Selling Expenses in connection with each registration pursuant
to this Exhibit C and any legal fees and expenses of additional special counsel
for the sellers shall be borne by the seller or sellers therein in proportion to
the number of Eligible Securities included by each in such registration, or in
such other proportions as they may agree upon.
1.8 Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each Holder of
Eligible Securities, its executive officers, directors and controlling persons
(within the meaning of the Securities Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the Securities Act) with respect to a registration statement pursuant to this
Exhibit C against any loss, claims, damages or liabilities to which any of them
may become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in a
registration statement including Eligible Securities owned by such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any of them for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable hereunder to a
particular Holder in any such case if any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or omission made in such
registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company for such purpose by such Holder or by its representative or by any
underwriter on behalf of such Holder or if the untrue statement or omission is
corrected in a supplement or amendment to the prospectus provided by the Company
to such Holder in a timely fashion in accordance with this Exhibit C which was
not used by such Holder.
(b) Each Holder of Eligible Securities joining in any
registration statement of the Company pursuant to Exhibit C of this Agreement
shall indemnify and hold harmless the Company, its executive officers,
directors, and controlling persons (within the meaning of the Securities Act)
and each person who participates as an underwriter or controlling person of an
underwriter (within the meaning of the Securities Act) with respect to a
registration statement pursuant to Exhibit C against any losses, claims,
damages, or liabilities to which any of them may become subject under the
Securities Act or otherwise insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in such registration statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, made in reliance upon and in
conformity
- 6 -
<PAGE>
with written information furnished to the Company by such Holder or by its
representative or by any underwriter on behalf of such Holder for such purpose,
and will reimburse any of them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending, any such loss,
claim, damage, liability or action provided, however, that the total amount
-------- -------
payable by a Holder under this Section 1.8(b) shall not exceed the net proceeds
received by such Holder in such registered offering.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
unavailable to or insufficient to hold harmless an amount in excess of the
proceeds received by such Holder in the offering.
1.9 Underwriting Agreement. If Eligible Securities are sold pursuant
----------------------
to a registration statement in an underwritten offering pursuant to this Exhibit
C, the Company and the Holders participating therein agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of, or, as the case may be,
the seller of the securities being registered and customary covenants and
agreements to be performed by such issuer or seller, including, without limiting
the generality of the foregoing, customary provisions with respect to
indemnification by the Company of the underwriter(s) of such offering.
1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
----------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any Eligible
Securities for up to that period of time following the effective date of a
registration statement of the Company filed under the Securities Act as is
requested by the managing underwriters of such offering, not to exceed one
hundred and eighty (180) days.
1.11 Subsequent Registration Rights. The Company shall not grant any
------------------------------
registration rights to any other person that are more favorable to such person
than the registration rights granted to the Holders hereunder without the
consent of the Holders.
- 7 -
<PAGE>
1.12 Assignment. The registration rights granted hereunder may be
----------
assigned by a Holder to any person who acquires such Holder's Eligible
Securities in accordance with the Company's Amended and Restated Limited
Liability Company Agreement.
- 8 -