EXHIBIT 10.6
POINTCAST JAPAN, L.L.C.
LIMITED LIABILITY COMPANY AGREEMENT
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This LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of PointCast
Japan, L.L.C. ("LLC") is made and entered into as of May 30, 1997, by and among
PointCast Incorporated, a California corporation ("PCI"), TransCosmos,
Incorporated, a Japanese corporation ("TCI") and such other persons or entities
as may be admitted to LLC after the date hereof, whose names shall be set forth
in Schedule 1 hereto (collectively with PCI and TCI, the "Members").
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Capitalized terms not otherwise defined herein are defined in Section 1.9.
WHEREAS, the Members desire to form a Delaware limited liability company on
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the Members hereby agree as follows:
ARTICLE I
FORMATION OF LLC
1.1 Formation. The Members hereby form LLC pursuant to the Delaware
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Limited Liability Company Act (6 Del. Code (S)(S)18-101 et seq.) (the "Act"),
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which Act shall govern the rights and liabilities of the Members except as
otherwise herein expressly stated.
1.2 Name of LLC. The name of LLC is PointCast Japan, L.L.C., a Delaware
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limited liability company.
1.3 Filings, Other Actions. PCI has caused to be filed a Certificate of
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Formation (the "Certificate") with the office of the Secretary of State of
Delaware. The Board (as defined below) shall take all other actions which may
be necessary or appropriate from time to time to comply with all requirements of
law for the formation and operation of a limited liability company and to ensure
the limited liability of the Members in the State of Delaware and any
jurisdictions where LLC may conduct activities.
1.4 Place of Business. The principal place of business for LLC initially
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shall be at Sumitomoseimei ▇▇▇▇▇▇▇ ▇▇▇▇., ▇-▇-▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇, ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇; provided, however, that the Board may change the address of the
principal office by notice in writing to all the Members. In addition, LLC may
maintain such other offices and places of business as the Board may deem
advisable. Notwithstanding the foregoing, unless the Members unanimously agree
otherwise, LLC shall in no event maintain a place of business, own any assets or
have any employees in the United States.
1.5 Term. LLC shall continue in effect until May 30, 2096, subject in any
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event to earlier termination in accordance with the provisions of this
Agreement.
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1.6 Purposes and Powers.
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(a) Subject to the provisions of this Agreement, the purposes of LLC
shall be to commercially exploit, through a wholly owned subsidiary to be formed
as a Japanese corporation ("NewCo"), the localized PointCast network technology
within the country of Japan, as well as any and all activities necessary or
incidental thereto.
(b) LLC shall have all powers necessary, suitable or convenient for
the accomplishment of its purposes.
(c) Nothing set forth herein shall be construed as authorizing LLC to
possess any purpose or power, or to do any act or thing, forbidden by law to a
limited liability company organized under the laws of the State of Delaware.
1.7 Delaware Office; Agent for Service of Process. LLC's agent for
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service of process in the State of Delaware shall be c/o Corporation Service
Company, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. The name of the registered agent for service of process on LLC is
Corporation Service Company, Inc. The Board may designate a different agent for
service of process at any time, provided, however, that the Board shall give all
of the Members written notice promptly following such change.
1.8 Title to LLC Property. All property owned by LLC, whether real or
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personal, tangible or intangible, shall be owned by LLC as an entity, and no
Member individually nor any other person, partnership, corporation or other
entity shall have any ownership interest in such property.
1.9 Definitions. For purposes of this Agreement, the following terms
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shall have the meanings set forth respectively after each:
(a) "Act" shall mean the Delaware Limited Liability Company Act, 6
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Del. Code Sections 18-101 et seq.
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(b) "Administrative Services and Management Agreement" shall mean the
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agreement by and between NewCo and TCI in the form attached to this Agreement as
Exhibit A.
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(c) "Affiliate" of any party shall mean any person or entity that
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controls, is controlled by or is under common control with such party.
(d) "Agreement" shall mean this Limited Liability Company Agreement,
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as the same may be amended from time to time (including by the addition of
Counterparts).
(e) "Approval" shall mean consent by the Members to an action of LLC
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by the affirmative vote of Members holding a majority of the Percentage
Interests in LLC entitled to vote with respect to such matter, or such other
Percentage Interests as may be expressly stated herein, which vote may be
obtained either at a meeting of Members duly noticed (to the address
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of each Member shown on LLC's records at least ten (10) days prior to the date
set forth in such notice) or by a written consent executed and delivered by such
Members.
(f) "Bankruptcy" shall mean with respect to any person, being the
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subject of an order for relief under Title 11 of the United States Code, or any
successor statute in any foreign jurisdiction having like import or effect, or
that such person shall have made an assignment for the benefit of its creditors
generally or a receiver shall have been appointed for substantially all of the
property and assets of such person.
(g) "Board" shall mean the Board of Managers of LLC, designated in
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accordance with Section 3.1.
(h) "Book Value" shall mean, as of any particular date, the value at
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which LLC's assets are properly reflected on the books of LLC as of such date in
accordance with the provisions of Treasury Regulations Section 1.704-1(b). The
Book Values of all LLC assets shall, if the Board in its sole discretion deems
it appropriate, be adjusted to equal their respective gross fair market values,
as determined by the Board, at the times specified in those regulations.
(i) "Capital Account" shall mean the individual capital account of a
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Member maintained in accordance with Section 2.5 hereof.
(j) "Capital Contribution" shall have the meaning set forth in
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Section 2.2 hereof.
(k) "Commercial Exploitation Rights Agreement" shall mean the
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agreement of this date between TCI and PCI in the form attached to this
Agreement as Exhibit B.
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(l) "Commercial Exploitation Rights Assignment" shall mean the
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assignment of the Commercial Exploitation Rights Agreement by TCI to LLC in the
form attached to this Agreement as Exhibit C.
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(m) "Distributable Cash" shall mean, with respect to each fiscal year
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of LLC, LLC's cash flow from operations for such fiscal year, as reflected in
financial statements audited by LLC's independent public accountants, after
providing for reserves that are determined by the Board to be required to fund
ongoing development, marketing, operations and capital expenditures of LLC, and
after deducting any amounts determined by the Board to be subject to any
contingency.
(n) "Certificate" shall have the meaning set forth in Section 1.3.
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(o) "Code" shall mean the Internal Revenue Code of 1986, as amended.
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(p) "LLC" shall have the meaning set forth in the preamble to this
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Agreement.
(q) "Counterpart" shall mean an additional document executed and
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delivered by (i) any new Member admitted to membership in LLC after the original
date of this Agreement, and (ii) such Members having the right under this
Agreement to approve the
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admission of such Member, which document shall set forth the new Member's
Percentage Interest, the resulting Percentage Interests of all other Members,
and any other terms and conditions as shall apply to such Members membership in
LLC. Each Counterpart shall be attached to, and shall become part of, this
Agreement.
(r) "Member" shall have the meaning set forth in the preamble to this
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Agreement, each of whose name, Capital Contributions and Percentage Interests
are or will be set forth on Schedule 1 hereto and all Counterparts.
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(s) "Percentage Interest" shall have the meaning set forth in Section
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2.1 hereof.
(t) "Phase I" shall mean the period from the inception of NewCo until
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completion by NewCo of three consecutive quarters in which it has earned
profits, as determined in accordance with United States generally accepted
accounting principles.
(u) "Profit" or "Loss" shall mean for each taxable year, LLC's
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taxable income or taxable loss for such taxable year, as determined under
Section 703(a) of the Code and Section 1.703-1 of the Treasury Regulations (for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or taxable loss), but with the following adjustments: (i) any
tax-exempt income or LLC expenditures described in Section 705(a)(2)(B) of the
Code shall be taken into account in computing such taxable income or taxable
loss; (ii) any item of income or gain required to be allocated specially to a
Member under Section 6.2 shall not be taken into account in computing such
taxable income or taxable loss; and (iii) in lieu of the depreciation,
amortization, gain or loss taken into account in computing such taxable income
or loss, LLC shall compute such items based on the Book Value of LLC property
rather than its tax basis, in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(g)(3).
(v) "Tax Matters Partner" has the meaning set forth in Section 5.6.
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(w) "Technology and Trademark License Agreement" shall mean the
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Technology and Trademark License Agreement of this date between PCI and LLC in
the form attached to this Agreement as Exhibit D.
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(x) "Treasury Regulations" shall mean the Income Tax Regulations
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issued by the United States Department of the Treasury.
ARTICLE II
CAPITAL CONTRIBUTIONS
2.1 Percentage Interests. Each Member shall have an initial undivided
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percentage economic interest in LLC, including, except as may otherwise be
provided in Article VI hereof, each item of income, gain, loss, deduction,
credit and distributions or dividends of LLC (a "Percentage Interest"), as
follows:
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(a) PCI -- 60%
(b) TCI -- 40%
The Percentage Interests of the Members as of any date shall be as set forth
next to such Member's name on Schedule 1 of this Agreement (or the most recently
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adopted Counterpart) and shall adjust appropriately upon admission of any new
Members and other events.
2.2 Capital Contributions.
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(a) Upon execution of this Agreement, PCI has contributed to the
capital of LLC (i) cash in the amount of $1 million, and (ii) certain rights to
PCI technology as specified in the Technology and Trademark License Agreement,
which rights have a fair market value as of the date hereof, as agreed by the
Members, of $2 million. PCI's initial Capital Account balance shall equal $3
million, subject to adjustment hereafter as provided in Section 2.5 of this
Agreement. The contributions made by PCI and TCI under this Section 2.2, and any
subsequent contributions of capital by Members to LLC under Sections 2.3 or 2.4,
are hereafter referred to as "Capital Contributions."
(b) Upon execution of this Agreement, TCI has contributed to the
capital of LLC (i) cash in the amount of $2 million, and (ii) the commercial
exploitation rights in respect of the localized PointCast network in Japan
acquired by TCI pursuant to the Commercial Exploitation Rights Agreement. TCI's
initial Capital Account balance shall equal $2 million, subject to adjustment
hereafter as provided in Section 2.5 of this Agreement.
(c) In the event that the Board from time to time hereafter
determines that LLC requires additional funding in excess of the amounts
contributed to LLC pursuant to this Section 2.2 (and Section 2.4, if applicable)
and any amounts advanced pursuant to Section 2.3, then the Members may (but
shall have no obligation to) make, and LLC shall accept, such additional Capital
Contributions on such terms as may be agreeable to the contributing Member and
LLC.
2.3 Member Advances. In addition to the Capital Contributions provided
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for under Section 2.2, the Members may, if the Board in its discretion deems it
appropriate, make cash advances in such amounts and upon such repayment,
interest and other terms as the Board and the Member providing such advance
shall agree. Any such cash advances shall be treated as loans to LLC rather
than Capital Contributions and shall therefore not affect a Member's Capital
Account.
2.4 Additional Members. Subject to Section 3.3 hereof, the Board may
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admit additional Members and accept additional Capital Contributions from such
additional Members from time to time and on such terms as the Board deems
appropriate in its sole discretion, and (other than such approval of the Board
and, if applicable under Section 3.3, TCI) no approval from the Members shall be
required for such actions. Notwithstanding the preceding sentence, no
additional Member shall be admitted (a) which is a direct competitor of PCI or
TCI unless such Member consents to such admission, or (b) upon terms which would
disproportionately
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reduce either PCI's or TCI's Percentage Interest relative to the interests of
other Member(s). Any additional Members who may hereafter be admitted to LLC
shall make such Capital Contributions for such interests in LLC as the Board and
such additional Member shall mutually agree. No Member shall be obligated or
permitted to make any other Capital Contributions except as otherwise provided
in this Article II.
2.5 Capital Accounts.
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(a) A separate capital account (a "Capital Account") shall be
maintained for each Member strictly in accordance with the rules set forth in
Treasury Regulations Section 1.704-1(b)(2)(iv). Subject to the preceding
sentence, each Member's Capital Account shall be (i) increased by the amount of
Capital Contributions made by such Member to LLC and allocations to such Member
of Company Profits and other items of book income and gain; and (ii) decreased
by the amount of money and fair market value of property (net of liabilities
secured by such distributed property that such Member is considered to assume or
take subject to under Section 752 of the Code) distributed to it by LLC and
allocations to such Member of LLC Loss and other items of book loss and
deductions; and (iii) otherwise adjusted in accordance with the additional rules
set forth in Treasury Regulations Section 1.704-1(b)(2)(iv).
(b) In the event the Book Values of LLC assets are adjusted pursuant
to Treasury Regulations Section 1.704-1(b) and Section 1.9(u), the Capital
Accounts of all Members shall be adjusted simultaneously to reflect the
allocations of income, gain, loss or deduction that would be made to the Members
if there were a taxable disposition of LLC's property for its fair market value.
If any assets of LLC are to be distributed in kind, such assets shall be
distributed on the basis of their fair market values after the Members' Capital
Accounts have been adjusted to reflect the manner in which any unrealized income
gain, loss or deduction with respect to such assets (that have not been
reflected in the Capital Accounts previously) would be allocated between the
Members if there were a taxable disposition of the property for its fair market
value.
(c) If any interest in LLC is transferred in accordance with the
provisions of this Agreement, the transferee Member shall succeed to that
portion of the Capital Account of the transferring Member as relates to such
transferred interest.
(d) It is the intent of LLC that the Capital Accounts of all Members
be determined and maintained in accordance with the principles of Treasury
Regulations Section 1.704-1 at all times throughout the full term of LLC and the
foregoing provisions of this Section 2.5 shall be interpreted in accordance with
such intention.
2.6 Return of Capital; Partition. Except as otherwise provided herein, no
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Member shall have any right to (a) withdraw from LLC, (b) demand the return of
all or any part of such Member's capital during the term of LLC or (c) receive a
return of such Member's capital from any specific assets of LLC. Each Member
irrevocably waives any right which such Member may have to cause a partition of
all or any part of LLC's assets. No Member shall be entitled to receive any
interest with respect to a Capital Contribution.
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2.7 Liability of Members. Notwithstanding anything to the contrary herein
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contained, no Member shall be liable for any debts, expenses, liabilities or
obligations of LLC in excess of such Member's Capital Contribution except as may
be provided in the Act. To the extent required by law, any capital distributed
to a Member shall be restored to LLC as necessary to meet such Member's share of
any liability or loss of LLC.
ARTICLE III
MANAGEMENT OF LLC
3.1 Board of Managers. The Board shall consist of five members, three of
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whom shall be appointed by PCI and two of whom shall be appointed by TCI.
Meetings of the Board shall be held upon such prior notice and in accordance
with such other procedures as the Board may adopt.
3.2 Control by Board. Subject to the provisions of Section 3.3, and
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except as may be otherwise expressly stated in this Agreement, the Board shall
have full and exclusive responsibility and authority for the management,
supervision and conduct of the business and affairs of LLC, and the Board is
hereby granted the right, power and authority to do on behalf of LLC all things
determined thereby to be necessary or desirable to carry out such duties and
responsibilities, including (without limitation) the right, power and authority
from time to time to do the following:
(a) to borrow money in the name and on behalf of LLC, and to secure
any such loans by a mortgage, pledge or other encumbrance upon any assets of
LLC;
(b) to cause to be paid all amounts due and payable by LLC to any
person or entity;
(c) to employ such agents, employees, managers, accountants,
attorneys, consultants and other persons necessary or appropriate to carry out
the business and affairs of LLC, to delegate by express Board action any powers
of the Board enumerated herein, and to pay to such persons such fees, expenses,
salaries, wages and other compensation as it shall in its sole discretion
determine;
(d) to pay, extend, renew, modify, adjust, subject to arbitration,
prosecute, defend or compromise, upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation, suit, liability, cause
of action or claim, including taxes, either in favor of or against LLC;
(e) to pay any and all fees and to make any and all expenditures
which it deems necessary or appropriate in connection with the organization of
LLC, the management of the affairs of LLC and the carrying out of its
obligations and responsibilities under this Agreement;
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(f) to the extent that funds of LLC are, in the Board's judgment, not
immediately required for the conduct of LLC's business, temporarily to deposit
the excess funds in such bank account or accounts, or invest such funds in such
interest-bearing taxable or nontaxable investments, as the Board shall deem
appropriate;
(g) to acquire, prosecute, maintain, protect and defend or cause to
be protected and defended all patents, patent rights, trade names, trademarks,
copyrights and service marks, all applications with respect thereto and all
proprietary information which may be held by LLC;
(h) to enter into, execute, acknowledge and deliver any and all
contracts, agreements or other instruments necessary or appropriate to carry on
the business of LLC as set forth herein, including without limitation the
Commercial Exploitation Rights Assignment, the Technology and Trademark License
Agreement, a license agreement with NewCo, and such other agreements and
documents as are entered into in connection with the formation of LLC;
(i) to form NewCo as a wholly owned subsidiary of LLC, to cause NewCo
to enter into the Administrative Services and Management Agreement, and to
acquire interests in such other entities as the Board may deem appropriate to
conduct the planned business activities of LLC on such terms as the Board deems
to be in LLC's interests;
(j) to cause to be paid any and all taxes, charges and assessments
that may be levied, assessed or imposed upon any of the assets of LLC, unless
the same are contested by LLC;
(k) to make all elections and decisions of a tax and accounting
nature required or permitted on behalf of LLC, including without limitation the
election provided for by Section 754 of the Code and tax elections and decisions
of the "Tax Matters Partner" in accordance with Section 5.6; and
(l) to exercise all other powers conferred by the Act or other
applicable law on, or not prohibited to, a "Manager" of LLC from time to time
(as such term is defined in the Act).
3.3 TCI Approval Rights. Notwithstanding anything to the contrary in
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Section 3.2, the following actions shall be subject to Approval by TCI during
Phase I:
(a) The removal from office of any Board member appointed by TCI or
the statutory auditor of NewCo;
(b) The amendment or repeal of any provisions of this Agreement or of
the charter documents of NewCo;
(c) The sale, sublicense, encumbrance or other transfer of any of the
intellectual property rights of LLC or NewCo in a manner inconsistent with the
provisions of this Agreement or the exhibits hereto;
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(d) The filing of a petition for liquidation or dissolution of LLC or
NewCo in Bankruptcy;
(e) The declaration or payment of any distribution to the Members,
other than distributions in respect of taxes attributable to Profits of LLC in
accordance with Section 6.4(a) of this Agreement, and the declaration or payment
of any dividend or other distribution with respect to the equity interests of
NewCo;
(f) The issuance of any additional Percentage Interests (or options,
warrants or other rights to acquire Percentage Interests) to existing or
additional Members, excluding issuances to employees or other persons providing
services to LLC, and the issuance of any securities of NewCo (or options,
warrants or other rights to acquire such securities, or any securities
convertible into or exchangeable for such securities or such options, warrants
or other rights), excluding issuances to employees or other persons providing
services to NewCo;
(g) The sale, transfer or disposal of assets of LLC or NewCo in
excess of Y75 Million and any merger of LLC or NewCo with or into any other
entity;
(h) The organization, acquisition or disposition by LLC or NewCo of
any interest in another entity, other than the organization by LLC of NewCo;
(i) The borrowing of funds by LLC or NewCo in excess of Y75 Million;
(j) Hiring, firing and setting compensation of senior management of
LLC or NewCo; and
(k) Approval of the annual operating and capital budgets of LLC or
NewCo.
In addition, after Phase I, the actions set forth in subsections (a) - (d) of
this Section 3.3 shall continue to be subject to Approval by TCI.
3.4 Extent of Board Members' Obligations. Each Board member shall devote
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such time and attention to the activities of LLC as are reasonably necessary and
appropriate to carry out the Board member's duties hereunder. It is expressly
acknowledged and understood that the Board members may also devote time to the
affairs of other entities and to other business activities.
3.5 Standard of Care; Indemnification. No Board member shall be liable,
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in damages or otherwise, to LLC or to any of the Members for any act or omission
performed or omitted by such Board member pursuant to the authority granted by
this Agreement, except if such act or omission results from gross negligence,
willful misconduct or bad faith. LLC shall save, indemnify, defend and hold
harmless each Board member to the fullest extent permitted by the Act, including
without limitation, from and against any and all claims or liabilities of any
nature whatsoever, including, but not limited to, reasonable attorneys' fees,
arising out of or in connection with any action taken or omitted by such Board
member pursuant to the authority granted by this Agreement, except where
attributable to the gross negligence, willful misconduct
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or bad faith of such Board member or such Board member's agents. Each Board
member shall be entitled to rely on the advice of counsel, public accountants or
other independent experts experienced in the matter at issue, and any act or
omission of such Board member in reliance on such advice shall in no event
subject such Board member to liability to LLC or any Member. Each Member
expressly acknowledges and agrees that, except as otherwise expressly set forth
herein, other Members (and Board members who may be related to such Members) may
engage in activities competitive with those of LLC, and may pursue business
opportunities that may also be available to LLC; and except as otherwise
provided herein or in any other agreement among Members, and except for any
liability relating to the misuse or improper disclosure of LLC confidential or
proprietary information, no Member shall have any liability as a fiduciary or
otherwise in connection with the pursuit of such activities. During the term of
the LLC (as set forth in Section 1.5), TCI shall not engage directly or
indirectly in any business activities in Japan that would reasonably be deemed
to be competitive with the business activities of LLC or NewCo.
ARTICLE IV
RIGHTS OF MEMBERS
4.1 No Authority to Manage. Except as expressly set forth in any
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provision of this Agreement, it is expressly understood that no Member, in such
Member's capacity as such (as opposed to the capacity of its representatives as
members of the Board), shall take part in the management or control of the
business, transact any business for LLC, have the right to vote on any LLC
matter, or have the power to sign for or bind LLC to any agreement or document.
Notwithstanding the foregoing, Members (or their representatives) may
participate in the management of LLC if and to the extent so contemplated by the
terms of any employment relationship with LLC.
4.2 Records of LLC. LLC shall make available for inspection at its
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principal place of business, upon reasonable request for purposes reasonably
related to the interest of a person as a Member, any of the following records of
LLC: (a) a current list of the full name, last known business or residence
address, Capital Contribution and Percentage Interests owned by each Member; and
(b) such other books and records as may be required to be provided to the
Members pursuant to the Act or other applicable law. The Members acknowledge
that the records of LLC constitute valuable trade secrets, and any information
or records so obtained or copied shall be kept and maintained in strictest
confidence and shall in no event be disclosed to any other parties without the
written consent of LLC.
ARTICLE V
ACCOUNTING, RECORDS, REPORTS AND MEETINGS
5.1 Books of Accounts and Records. LLC's books and records and the
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Certificate shall be maintained at the principal office of LLC and the Members
and their designated representatives shall each have access thereto at all
reasonable times to the extent set forth in Section 4.2. The books and records
shall be kept in accordance with sound accounting practices
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and principles applied in a consistent manner by LLC and shall reflect all
transactions and be appropriate and adequate for the business of LLC.
5.2 Financial Statements and Reports. LLC will provide to the Members
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financial statements of LLC annually, which shall be audited by independent
auditors of national standing (which may also be the independent auditors to any
Member). LLC also will provide within ninety (90) days after the end of each
fiscal year of LLC a copy of LLC's income tax or information returns for such
fiscal year and any other information reasonably necessary for the preparation
of the Members' income tax returns under each applicable taxing jurisdiction.
5.3 Bank Account. LLC moneys shall be deposited in the name of LLC in one
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or more financial institutions to be designated by the Board and may be
withdrawn on the signatures of such officers of LLC as the Board may designate
from time to time.
5.4 Fiscal Year. The fiscal year of LLC shall be from January 1 to
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December 31, or such other period as may be required by law or determined by the
Board.
5.5 Tax Elections. The Board, in its sole discretion, shall determine
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LLC's accounting methods and conventions under applicable tax laws of the United
States, Japan and other relevant jurisdictions as to the treatment of income,
gain, loss, deduction and credit of LLC or any other method or procedure related
to the preparation of such tax returns. The Board, in its sole discretion, may
cause LLC to make or refrain from making any and all elections permitted by such
tax laws (including, without limitation, an election under Section 754 of the
Code).
5.6 Tax Matters Partner. Pursuant to Section 6231(a)(7)(A) of the Code,
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the Members hereby designate PCI as LLC's "Tax Matters Partner." As such, for
any fiscal year in which LLC is subject to the provisions of Section 6221, et
seq. of the Code, PCI is authorized, at the expense of LLC, to represent LLC and
each Member in connection with any examinations of LLC's affairs by United
States tax authorities, including resulting administrative and judicial
proceedings, and to expend the funds of LLC for professional services and costs
in connection therewith. The other Members hereby agree to cooperate with the
Tax Matters Partner and to do or refrain from doing any and all acts reasonably
required by the Tax Matters Partner in connection with any such proceedings.
The Tax Matters Partner will at all times act in accordance with the direction
of the Board with respect to its decisions and actions.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations of LLC Profits and Losses. LLC Profits and Losses for
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each fiscal year shall be allocated in proportion to the Members' Percentage
Interests, provided that, if the Members' Capital Accounts are not in proportion
to their Percentage Interests, then Profits or Losses shall first be allocated
to cause the Members' Capital Accounts to be in such proportion.
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6.2 Special Allocations for U.S. Tax Purposes.
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(a) If LLC ever has "partnership minimum gain" or "partner minimum
gain" (as defined by Treasury Regulations Section 1.704-2), then the rules of
such Regulations regarding allocation and chargebacks of such items shall apply.
(b) All deductions, losses, and Code Section 705(a)(2)(B) expenditures
of LLC, as the case may be, that are treated under Treasury Regulations Section
1.704-2(b) as attributable to "partner nonrecourse debt" of LLC shall be
allocated to the Members bearing the risk of loss with respect to such
liabilities in accordance with such Treasury Regulations.
(c) If any Member unexpectedly receives an adjustment, allocation, or
distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4),
(5) or (6) which creates or increases a deficit in such Member's Capital Account
in excess of such Member's share of partnership minimum gain and partner minimum
gain (as determined under Treasury Regulations Section 1.704-2), if any, such
Member shall be allocated items of book income and gain in an amount and manner
sufficient to eliminate or to reduce, as quickly as possible, such deficit. For
purposes of this Section 6.2(c), Capital Accounts shall be adjusted
hypothetically as provided for in Treasury Regulations Section 1.704-
(b)(2)(ii)(d). The Members intend that the provision set forth in this Section
6.2(c) shall constitute a "qualified income offset" as described in such section
of the Treasury Regulations and this Section 6.2(c) shall be interpreted
consistent with such intention.
6.3 Time of Allocations. The Profit, Loss and other items of LLC for each
-------------------
fiscal year shall be allocated to the Members' Capital Accounts at the end of
such fiscal year in accordance with the provisions of Sections 6.1 and 6.2.
6.4 Distributions. Subject to Section 3.3, LLC shall distribute its
-------------
Distributable Cash for any fiscal year as follows:
(a) First, to the Members in amounts equal to (i) the higher of the
combined effective federal and California maximum corporate income tax rates
(taking into account the deductibility of state taxes against federal income,
currently 41%) or the effective Japanese tax corporate income tax rate in effect
for such fiscal year, multiplied by (ii) the amount by which LLC's Profit
allocated to such Member for such fiscal year, if any, exceeds the cumulative
net Loss, if any, allocated to such Member since the inception of LLC, with any
such distribution made no later than 90 days after the end of each fiscal year
of LLC.
(b) Thereafter, if the Board deems it appropriate in its sole
discretion, any remaining Distributable Cash shall be distributed to the Members
in proportion to their respective Percentage Interests, as determined by the
Board, in its discretion, within ninety (90) days following the end of such
fiscal year. Any distributions made to the Members under subsection (a) shall
be credited against and reduce by a corresponding amount the distributions to
which such Members are entitled under this subsection (b).
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(c) LLC shall withhold all such amounts as may be required by
applicable law and any amounts so withheld shall be deemed to have been
distributed under this Section 6.4 to the Member with respect to whom such
withholding obligation arose and, to the extent such amounts exceed the amount
such Member would have otherwise received, shall be counted towards and reduce
by a corresponding amount future distributions to such Member.
(d) Notwithstanding any other provision herein, no distribution shall
be made to the Members which would render LLC insolvent.
6.5 Tax Return. LLC shall, within 90 days after the end of each calendar
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year, file a federal income tax information return and transmit to each Member a
copy of such return and a schedule (Schedule K-1 or successor schedule) showing
such Member's distributive share of LLC's income, deductions and credits.
6.6 Allocation of Certain Tax Items for U.S. Income Tax Purposes. If any
------------------------------------------------------------
property of LLC is reflected in the Capital Accounts of the Members and on the
books of LLC at a Book Value that differs from the adjusted tax basis of such
property, then the tax items with respect to that property shall, in accordance
with Treasury Regulations Section 1.704-1(b)(4)(i), be shared among the Members
in a manner that takes account of the variation between the adjusted tax basis
of the applicable property and its Book Value in the same manner as variations
between the adjusted tax basis and fair market value of property contributed to
LLC are taken into account in determining the Members' share of tax items under
Code Section 704(c).
6.7 Allocation Between Transferor and Transferee. The proportion of the
--------------------------------------------
income, gain, loss, deductions and credits of LLC for any fiscal year of LLC
during which any Percentage Interest in LLC is transferred by a Member to
another party pursuant to the terms hereof that is allocable in respect of such
Percentage Interest shall be apportioned between the transferor and the
transferee of the Percentage Interest on the basis of the number of days during
such fiscal year that each is the owner thereof, without regard to (a) the
results of LLC's operations before or after the effective date of the transfer,
or (b) any distributions made to the Members before or after the date of the
transfer.
6.8 Tax Allocations Binding. The Members are aware of the income tax
-----------------------
consequences of the allocations made by this Article VI and hereby agree to be
bound by the provisions of this Article VI in reporting their shares of LLC
allocations for income tax purposes.
ARTICLE VII
TRANSFER OF INTERESTS
7.1 Limitations on Transfers. No Percentage Interest shall be assigned or
------------------------
transferred by any Member, directly or indirectly, without the approval of
Members holding a majority of the Percentage Interests of LLC then outstanding.
7.2 Rights of First Refusal. Without limiting the provisions of Section
-----------------------
7.1, in the event of any proposed assignment or transfer permitted under this
Agreement, the party
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proposing such transfer (the "transferring Member") shall provide the other
Members (the "non-transferring Members") with notice of such proposed transfer,
which notice shall include a description of all terms of such transfer
(including the amount to be transferred, the price to be paid and the date of
the proposed transfer), and the name, address and telephone number of the
proposed transferee. Each non-transferring Member shall have the right,
exercisable by notice to the transferring Member within 30 days following
receipt of such notice, to purchase all or any part of the Percentage Interest
to be transferred upon the terms and conditions set forth in the transferring
Member's notice, up to that portion of such Percentage Interest as equals the
ratio of such non-transferring Member's Percentage Interest to the aggregate
Percentage Interests of all of the non-transferring Members. In the event that
any non-transferring Member elects not to exercise all or any part of its
purchase right as set forth in the preceding sentence, the transferring Member
shall be entitled to complete such transaction (on terms no more favorable to
the transferee in any respect) with respect to the unpurchased remainder of such
Percentage Interest within 15 days following the end of such 30-day period (and
any transfer proposed thereafter shall again comply with the foregoing notice
and right of first refusal provisions).
7.3 Special Buy-Out Rights Upon Irreconcilable Dispute. If the Board
--------------------------------------------------
approves any action subject to the special approval rights of TCI as set forth
in Section 3.3 and TCI refuses to grant its Approval to such action, then PCI
and TCI shall negotiate in good faith the purchase by either of them of the
Percentage Interest of the other or shall, subject to the provisions of this
Agreement, attempt to negotiate a sale of either of their Percentage Interests
to a third party. If such negotiations fail to result in a mutually acceptable
resolution within a reasonable period of time (as mutually agreed by PCI and
TCI), then LLC shall be dissolved in accordance with the provisions of Article X
of this Agreement.
ARTICLE VIII
DEATH, INCOMPETENCE OR DISSOLUTION OF A MEMBER
8.1 Effect on LLC. The death, incompetence, dissolution or Bankruptcy of
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a Member shall not entitle any Member to a return of capital other than to the
extent such Member normally would be entitled to a distribution under the
provisions of this Agreement. Such event shall not cause a dissolution of LLC
except as otherwise provided in Section 10.1.
8.2 Rights of Personal Representative. On the death, incompetence,
---------------------------------
dissolution or Bankruptcy of a Member, his or her personal representative,
executor, administrator, guardian or conservator shall have all the rights of a
Member for the purpose of settling such Member's estate, or administering such
Member's property, including the power of assignment.
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ARTICLE IX
WITHDRAWAL
9.1 Withdrawal of Members.
---------------------
(a) No Member may withdraw from LLC and receive a distribution with
respect to such Member's Capital Account unless such withdrawal has received the
Approval of Members holding a majority of all Percentage Interests (disregarding
for such purpose the Percentage Interest of the withdrawing Member).
(b) In the event of a withdrawal permitted hereunder, the Percentage
Interest in LLC of such Member shall terminate as of such date and, subject to
the provisions hereof, the former Member's Capital Account (together with such
Member's allocable share of LLC Profits or less such Member's allocable share of
LLC Losses through the date of effectiveness of such withdrawal) shall be paid,
subject to the provisions of this Agreement, in cash or in kind, to such former
Member within thirty (30) days after the effective date of withdrawal.
ARTICLE X
DISSOLUTION, MERGER AND LIQUIDATION
10.1 Events of Dissolution. Upon the determination of the Board (without
---------------------
any requirement of approval by the other Members, except as otherwise expressly
provided herein), or the expiration of the term of LLC as provided in Section
1.5, LLC will be dissolved and the assets shall either be liquidated forthwith
or the property shall be distributed in kind to the Members after payment of the
debts of LLC as determined by agreement of the Members. LLC shall also dissolve
(a) upon the death, insanity, Bankruptcy, retirement, resignation or expulsion
of any Member unless Approval is provided by the remaining Members within ninety
(90) days after such event to continue LLC, or (b) under the circumstances set
forth in Section 7.3.
10.2 Merger. LLC shall be merged with another entity under applicable
------
provisions of the Act if (and on such terms as) the Board in its sole discretion
deems appropriate.
10.3 Liquidation Proceeds. In settling accounts after liquidation, the
--------------------
moneys of LLC shall be applied in the following manner:
(a) The liabilities of LLC to creditors, including Members who are
creditors to the extent permitted by law, shall be paid or otherwise adequately
provided for except for liabilities of LLC for distributions to Members; and
(b) The remaining assets shall be distributed to the Members in
accordance with their positive Capital Account balances. If any assets are to
be distributed in kind, each Member's Capital Account shall first be adjusted to
reflect the Profits or Losses that would have been allocated to such Member if
such assets had been sold for cash at their fair market value at the time of the
distribution.
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(c) In the event that any Member withdraws from LLC in accordance
with the provisions of this Agreement, such Member shall be distributed an
amount equal to such Member's Capital Account balance as of the date of such
withdrawal (taking into account all adjustments to such Capital Account through
the date of such withdrawal).
ARTICLE XI
CERTAIN SECURITIES RELATED MATTERS
11.1 Investment Intent. Each Member hereby represents and warrants to LLC
-----------------
and to the other Members that such Member's Percentage Interest will be acquired
for such Member's own account, for investment, and not with a view to or for
sale in connection with any distribution thereof, nor with any present intention
of reselling or distributing such Percentage Interest. Each Member fully
understands that LLC is relying upon the truth and accuracy of the foregoing
representations, and the representations that follow, to establish exemptions
from registration under the Securities Act of 1933 (the "1933 Act"), and from
registration or qualification under the California Corporate Securities Law of
1968 and other applicable securities laws.
11.2 Absence of Registration. Each Member also hereby represents that
-----------------------
such Member understands that such Member must bear the economic risk of such
Member's investment in such LLC for an indefinite period of time because such
Percentage Interest has not been registered under the 1933 Act or
registered/qualified under applicable laws and therefore cannot be sold unless
they are subsequently so registered and qualified or exemptions from such
registration and qualification are available, and LLC is under no obligation to
so register or qualify any Percentage Interest or to comply with any exemption
and has no current intention of so doing.
11.3 Restricted Securities; Absence of Trading Market. Each Member
------------------------------------------------
further hereby represents that such member understands that (a) such member's
Percentage Interest constitute "restricted securities" under the 1933 Act and
that Rule 144 promulgated under the 1933 Act is not now available with respect
to the transfer of such Member's Percentage Interest and that there is no
present likelihood that it will be available in the future, (b) that there is no
public market for such Percentage Interest and there is no present likelihood
that any such market will develop, and (c) LLC is newly formed and has no
earnings or operating history.
11.4 Preexisting Relationship; Investment Experience. Each Member
-----------------------------------------------
represents and warrants (a) that such Member has a preexisting personal or
business relationship with the other, such that such Member is aware of the
character, business acumen and general business and financial circumstances of
such party, or (b) that either alone or with a purchaser representative, such
Member can bear the economic risk of the investment in LLC and has such
knowledge and experience in financial or business matters that such Member is
capable of evaluating the merits and risks of an investment in LLC.
11.5 Accredited Investor. Each Member represents that such Member is an
-------------------
"accredited investor" for purposes of Rule 501(a) promulgated under the 1933
Act.
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11.6 Economic Risk. Each Member hereby represents that such Member has
-------------
adequate net worth and means for providing for such Member's current needs and
personal contingencies to sustain a complete loss of such Member's investment,
is able to bear such a loss, and that such Member has no need of liquidity of
such Member's investment.
11.7 Resale. Each Member hereby represents such Member's awareness that
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such Member's rights to transfer such Member's Percentage Interest will be
restricted by the 1933 Act, the applicable laws, and this Agreement; that any
certificates or other documents evidencing such Member's Percentage Interest may
bear the legends relating to those restrictions which are set forth below; and
that corresponding notations will be made by LLC in its appropriate records.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. Any notice, payment, demand or communication required or
-------
permitted to be given by any provisions of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered personally
to the party or to an officer of the party to whom the same is directed or if
sent by registered or certified mail, postage and charges prepaid addressed as
set forth on Schedule 1.
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12.2 Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts with the same effect as if all parties hereto had all
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
12.3 Assignability. Without limiting the restrictions upon assignment and
-------------
transfer set forth herein, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors and assigns of the respective parties hereto.
12.4 Gender and Number. Whenever required by the context hereof, the
-----------------
singular shall include the plural and the plural shall include the singular.
The masculine gender shall include the feminine and neuter genders, and the
neuter shall include the masculine and feminine.
12.5 Captions. Sections, titles or captions in no way define, limit,
--------
extend or describe the scope of this Agreement nor the intent of any of its
provisions.
12.6 Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
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12.7 Integration. This Agreement, together with the exhibits hereto and
-----------
all Counterparts, contains the entire agreement of the parties with respect to
the subject matter hereof, and supersedes all other agreements or understandings
of any kind.
12.8 Amendments.
----------
(a) Except as otherwise provided in Section 3.3 or elsewhere in this
Agreement, this Agreement may be amended by the Board without the consent of any
Member for the purpose of adding provisions hereto or changing in any manner or
eliminating any of the provisions hereof or of modifying in any manner the
rights and obligations of the Members hereunder, in each case without the
consent of any other Member.
(b) Each of the Members does hereby constitute and appoint the
Secretary of LLC (as directed by the Board) as such Member's true and lawful
representative and attorney-in-fact, in his name, place and ▇▇▇▇▇ to make,
execute, sign and file, the Certificate and any amendments thereto in the office
of the Secretary of State of the State of Delaware which may be required because
of this Agreement or the making of any amendments or supplements thereto as
provided in this Section 12.8 and to make, execute, sign and file this Agreement
and all amendments thereto and all such other instruments, documents and
Certificate which, from time to time, in the opinion of LLC's legal counsel, may
be required, by the laws of any applicable jurisdiction, or by this Agreement,
or which such legal counsel may deem necessary or appropriate to effectuate,
implement and continue the valid and subsisting existence and business of LLC.
12.9 Confidential Information. Each Member acknowledges that as a result
------------------------
of its status as a Member, it may have access to information concerning the
LLC's or another Member's business, products, proposed new products, customers
and related information (collectively, "Confidential Information"). Each Member
agrees to treat such Confidential Information with at least the degree of care
and protection with which it treats its own confidential information, but in any
event with no less than reasonable care and protection. Each Member agrees not
to use or disclose such Confidential Information except as explicitly authorized
in writing by the LLC or such other Member, as applicable.
12.10 Governing Law. This Agreement shall in all respects be governed by
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the laws of the State of Delaware without reference to its principles of
conflicts of laws. Each Member and LLC hereby agrees that all disputes arising
out of this Agreement shall be subject to the exclusive jurisdiction of and
venue in the federal and state courts within Santa ▇▇▇▇▇ County, California.
Each Member and LLC hereby consents to the personal and exclusive jurisdiction
and venue of these courts.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the date first written above.
POINTCAST INCORPORATED, A CALIFORNIA CORPORATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
Title: Sr. V.P.
-----------------------------------------
TRANSCOSMOS, INCORPORATED, A JAPANESE CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
Title: President
-----------------------------------------
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Schedule 1
----------
Member Initial Capital Percentage
------ Contribution Interest
------------ --------
PointCast Incorporated $3 million 60.0%
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇, SVP
TransCosmos, Incorporated $2 million 40.0%
Sumitomoseimei Akasaka ▇▇▇▇.
▇-▇-▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
--------------- ---------------
$5,000,000 100%
=============== ===============
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