EXHIBIT 2.2
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
SNAP! LLC
A DELAWARE LIMITED LIABILITY COMPANY
Dated as of June 30, 1998
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THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"AGREEMENT") is made as of the 30th day of June, 1998, by and between NBC
Multimedia, Inc., a Delaware corporation (together with its successors, "NBC
MULTIMEDIA") and a wholly-owned subsidiary of National Broadcasting Company,
Inc., a Delaware corporation (together with its successors, "NBC") and CNET,
Inc., a Delaware corporation (together with its successors, "CNET").
W I T N E S S E T H:
WHEREAS, NBC Multimedia and CNET filed a Certificate of Formation on
June 5, 1998 for this limited liability company pursuant to the provisions of
the Delaware Limited Liability Company Act;
WHEREAS, a Limited Liability Agreement for this limited liability
company was duly adopted by NBC Multimedia pursuant to and in accordance with
the Delaware Limited Liability Company Act on June 25, 1998 (the "Original
Agreement");
WHEREAS, NBC Multimedia and CNET wish to amend and restate in its
entirety the Original Agreement in accordance with the further provisions of
this Agreement;
NOW, THEREFORE, NBC Multimedia and CNET hereby duly adopt this
Agreement pursuant to and in accordance with the Delaware Limited Liability
Company Act and in consideration of the premises and of the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, NBC
Multimedia and CNET hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. (a) As used herein, the following terms
shall have the following meanings:
"ADDITIONAL CALL UNITS" means, with respect to each issuance of New
Units prior to the earlier of the termination of the NBC Call or the purchase of
the Call Units upon exercise of the NBC Call, a number of Units equal to (a) the
aggregate number of New Units purchased by the CNET Holders pursuant to the
exercise of their rights pursuant to Section 3.4 in respect of such issuance
MINUS (b) the maximum aggregate number of New Units that the CNET Holders could
have purchased pursuant to Section 3.4 in connection with such issuance of New
Units had the NBC Call been exercised (whether or not then exercisable pursuant
to Section 7.4) prior to such new issuance and the Call Units therefore been
owned by NBC Multimedia rather than CNET.
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"ADJUSTED PERCENTAGE INTEREST" means the Percentage Interests of all
NBC Holders and CNET Holders calculated as if (i) the NBC Option were fully
exercised and the Units issuable upon exercise of the NBC Option were held by
NBC Multimedia (unless the NBC Option has been fully exercised or has
terminated, in which event no adjustment will be made with respect to the NBC
Option) and (ii) the only Units outstanding were the Units owned by the NBC
Holders and the CNET Holders.
"AFFILIATE" means with respect to a specified Person, any Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the specified Person. As used
in this definition, the term "control" means the possession, directly or
indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, as trustee or executor, by contract or credit arrangement
or otherwise. Notwithstanding the foregoing, MSNBC Multimedia News, LLC and
MSNBC Cable LLC and their respective successors and assigns shall not be
considered "Affiliates" of NBC or NBC's Affiliates for purposes of this
Agreement.
"AGGREGATE ADDITIONAL CALL UNITS" means, at any time, the aggregate
number of Additional Call Units resulting from all issuances of New Securities.
"AVAILABLE CASH FLOW" means, with respect to any Fiscal Year or other
period, the sum of all cash receipts of the LLC from any and all sources, less
all cash disbursements (including loan repayments, capital improvements and
replacements) and a reasonable allowance for Reserves, contingencies and
anticipated obligations as determined by the Managers.
"BUSINESS DAY" means a day that is not a Saturday or Sunday or day on
which commercial banks are authorized by law to close in New York City or San
Francisco.
"CALL UNITS" means the sum of (a) 4,387,500 Units plus (b) the number
of Aggregate Additional Call Units.
"CAPITAL CONTRIBUTION" means the total amount of cash and the agreed
fair market value (net of liabilities) contributed to the LLC by a Member.
"CERTIFICATE OF FORMATION" means the certificate of formation filed
with the Secretary of State for the purpose of forming the LLC.
"CNET HOLDER" means (i) CNET and its Permitted Transferees and (ii)
any Member not described in clause (i) who holds Units originally issued to a
Person described in clause (i) hereof. Any Member described in clause (ii)
hereof who holds (x) Units originally issued to a Person described in clause (i)
hereof and (y) Units originally issued to any Person not described in clause (i)
hereof will be a "CNET Holder" only with respect to the Units described in
clause (x).
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"CODE" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of any succeeding law).
"CONTRIBUTION AGREEMENT" means the Contribution Agreement dated as of
June 4, 1998 between NBC and CNET.
"DEPRECIATION" means, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization or other cost recovery reduction
allowable with respect to an asset for such Fiscal Year or other period.
"DISSOLUTION" means the earlier of (a) the date upon which the LLC is
terminated under the Statute, or any similar provision enacted in lieu thereof,
or (b) the date upon which the LLC ceases to be a going concern.
"FISCAL YEAR" means (i) each 12-month period (or such shorter period
in the case of 1998) ending on December 31, or (ii) if after the date of this
Agreement the taxable year is required by the Code to be a period other than the
period described in clause (i), then each 12-month period which is the taxable
year of the LLC determined in accordance with the requirements of the Code;
(iii) the period from the day after the end of the most recently ended Fiscal
Year until the date the term of the LLC ends, and (iv) for purposes of making
allocations of Net Income and Net Loss, Fiscal Year means any portion of a
taxable year of the LLC to the extent required to comply with Section 706 of the
Code.
"GE" means the General Electric Company, a New York corporation,
together with its successors.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"INDEBTEDNESS" of any Person means all obligations of such Person for
borrowed money, including guarantees, and all reimbursement obligations in
respect of outstanding letters of credit (measured assuming such letters of
credit are drawn in full).
"INITIAL MEMBERS" means NBC Multimedia and CNET or their respective
Permitted Transferees of their Units in accordance with the provisions of
Section 7.1 hereof.
"INITIAL PUBLIC OFFERING" means the initial offer for sale of
Securities pursuant to an effective registration statement filed under the
Securities Act which results in an active trading market in such Securities (it
being understood that such an active trading market shall be deemed to exist if,
among other things, such Securities are listed on the NASDAQ Stock Market or
another national securities exchange).
"INTEREST" or "LLC INTEREST" means a limited liability company
interest in the LLC as provided in this Agreement and under the Statute and
includes any and all rights and benefits to
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which the holder of such Interest may be provided under this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. Interests shall be expressed as a number of Units.
"LLC" means Snap! LLC, a Delaware limited liability company.
"LLC MINIMUM GAIN" means the amount determined by computing with
respect to each nonrecourse liability of the LLC, the amount of gain (of
whatever character), if any, that would be realized by the LLC if it disposed
(in a taxable transaction) of the Property subject to such liability in full
satisfaction thereof, and by then aggregating the amounts so computed as set
forth in Regulations Section 1.704-2(d).
"LIENS" shall mean any claim, lien (statutory or other), pledge,
option, charge, easement, security interest, right-of-way, encroachment,
encumbrance, mortgage, or other rights of third parties.
"MAXIMUM GUARANTEED AMOUNT" means $27 million of which (x) not more
than $21 million shall consist of Indebtedness incurred to finance the
operations of the LLC (excluding amounts incurred pursuant to clauses (y) and
(z)), (y) not more than $2.75 million of which consists of working capital
financing and (z) not more than $3.25 million consists of cash deposits or
reimbursement obligations for letters of credit securing the LLC's obligations
under the One Beach Street lease, PROVIDED that the Maximum Guaranteed Amount
will be reduced by the aggregate proceeds from all exercises of the NBC Option
(with such reduction being applied first against clause (x), then against clause
(y) and last to reduce clause (z)), PROVIDED, FURTHER that the Maximum
Guaranteed Amount will be reduced to the outstanding amount of guaranteed
Indebtedness if one or more claims for indemnification are made pursuant to
Section 8.1(i) of the Contribution Agreement and NBC Multimedia believes in good
faith that the amount of Losses and Expenses, when taken together with all
Losses and Expenses in respect of all other claims pursuant to Section 8.1(i),
could reasonably be expected to exceed $10 million.
"MEMBER" means a Person (a) (i) who is an Initial Member, (ii) who is
a transferee of an Interest in accordance with the provisions of Article VII or
(iii) to whom a new Interest is issued pursuant to Section 3.3 and (b) who has
not resigned or withdrawn as a Member or been dissolved. Reference to a
"Member" shall be to any one of the Members.
"MEMBER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1704-2(b)(4).
"MEMBER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect
to each Member Nonrecourse Debt, equal to the LLC Minimum Gain that would result
if such Member Nonrecourse Debt were treated as a nonrecourse liability of the
LLC, determined in accordance with Regulations Sections 1.704-2(i)(3).
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2). The amount of Member Nonrecourse Deductions
with respect to a
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Member Nonrecourse Debt for a Fiscal Year of the LLC equals the excess (if any)
of the net increase (if any) in the amount of Member Nonrecourse Debt Minimum
Gain attributable to such Member Nonrecourse Debt during that Fiscal Year over
the aggregate amount of any distributions during that Fiscal Year to the Member
that bears (or is deemed to bear) the economic loss for such Member Nonrecourse
Debt to the extent such distributions are from the proceeds of such Member
Nonrecourse Debt and are allocable to an increase in Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(2).
"NBC HOLDER" means (i) NBC Multimedia and its Permitted Transferees
and (ii) any Member not described in clause (i) who holds Units originally
issued to a Person described in clause (i) hereof. Any Member described in
clause (ii) hereof who holds (x) Units originally issued to a Person described
in clause (i) hereof and (y) Units originally issued to any Person not described
in clause (i) hereof will be a "NBC Holder" only with respect to the Units
described in clause (x).
"NET PROFITS" and "NET LOSS" mean, for each Fiscal Year or other
period, an amount equal to the LLC's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the LLC that is exempt from Federal income tax
and not otherwise taken into account in computing Net Profits or Net Loss
shall be added to such taxable income or loss;
(ii) Any expenditures of the LLC described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into
account in computing Net Profits or Net Loss shall be subtracted from such
taxable income or loss;
(iii) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for Federal income tax purposes
shall be computed by reference to the fair market value of the Property
disposed of, notwithstanding that the adjusted tax basis of such Property
differs from its fair market value;
(iv) In lieu of depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or
other period; and
(v) Notwithstanding any other provision of this definition, any
items of income, gain, loss or deduction which are specifically allocated
shall not be taken into account in computing Net Profits or Net Loss.
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"PERCENTAGE INTERESTS" means, with respect to any Member, such
Member's Interest expressed as a percentage of all Interests of all Members,
determined by dividing the number of Units owned by such Member by the total
number of Units then outstanding. The Percentage Interests of the Members at
any time will be determined by reference to Schedule 1.1.
"PERMITTED TRANSFER" means any Transfer by a Member of a portion of or
all of its Interest, PROVIDED that such Transfer otherwise complies with the
conditions and restrictions of this Agreement.
"PERMITTED TRANSFEREE" means (a) with respect to NBC Multimedia and
its Permitted Transferees, (x) NBC, (y) any Subsidiary of NBC and (z) any
wholly-owned Subsidiary of GE and (b) with respect to CNET and its Permitted
Transferees, (i) CNET and (ii) any Subsidiary of CNET.
"PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934), trust, association or entity or government, political
subdivision, agency or instrumentality of a government.
"PROPERTY" means the assets of the LLC and its subsidiaries, both
tangible and intangible.
"REGULATIONS" means the federal income tax regulations promulgated by
the Treasury Department under the Code, as such regulations may be amended from
time to time. All references herein to a specific section of the Regulations
shall be deemed also to refer to any corresponding provisions of succeeding
Regulations.
"RESERVES" means funds set aside from Capital Contributions or gross
cash revenues as reserves. Such Reserves shall be maintained in amounts
reasonably deemed sufficient by the Managers for working capital and the payment
of taxes (other than income taxes), insurance, debt service, repairs,
replacements, renewals, or other costs or expenses incident to the Business of
the LLC, or in the alternative, the Dissolution of the LLC.
"SECRETARY OF STATE" means the Secretary of State of the State of
Delaware.
"SECURITIES" means shares of common stock or other securities other
than debt of a corporation into which the LLC is converted at a future date.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
"SNAP! BUSINESS" means the (i) design, creation, operation,
maintenance and marketing of the Snap! Site, including customized versions of
the Snap! Site developed for third party distribution partners, (ii) marketing
and sale of advertising or other promotional content for
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transmission on the Snap! Site, (iii) the provision of Snap!-branded search
services and directory listings to third parties for display on third party web
sites; and (iv) all business activities incidental to or required in connection
with the foregoing.
"SNAP! SITE" means the Internet site currently accessible from the
World Wide Web at http://www.snap.com and any co-branded edition of such site
developed for Snap! distribution partners.
"STATUTE" means the Delaware Limited Liability Company Act (6 DEL.C.
Section 18-101, ET SEQ.), as amended from time to time, (or any corresponding
provision or provisions of any succeeding law).
"SUBSIDIARY" of any Person means any corporation, partnership, limited
liability company, joint venture or other legal entity of which such Person
(either alone or through or together with any other Subsidiary) owns or has the
right to acquire, directly or indirectly, 50% or more of the stock or other
equity interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"UNIT" means a fractional, undivided share of the Interests of all
Members. The number of Units outstanding and the holders thereof are set forth
on Exhibit 1.1, as such Exhibit may be amended from time to time pursuant to
Sections 3.3 and 7.1(a). If determined by the Board of Managers, the ownership
of Units shall be evidenced by a certificate in a form approved by the Board of
Managers.
(b) As used in this Agreement, each of the following capitalized
terms shall have the meaning ascribed to them in the Section set forth opposite
such term:
Term Section
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Adjusted Aggregate CNET Valuation 7.5(b)(ii)
Adjusted Aggregate NBC Valuation 7.5(b)(ii)
Aggregate CNET Valuation 7.5(b)(i)
Aggregate NBC Valuation 7.5(b)(i)
Budget 6.4(a)
Business of the LLC 2.5
Buy/Sell Valuation 7.5(b)
Call Exercise Period 7.4
Capital Account 3.5(c)
CNET Buy/Sell Valuation Price 7.5(b)(v)
CNET Exercise Notice 7.5(a)
CNET Exercise Period 7.5(a)
CNET Veto 7.5(a)
Fair Market Value 7.4(b)
First NBC Notice 7.5(a)
First Valuation Right 7.5(a)
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5% Member 8.1(b)
Indemnitee 10.1
Independent Firm 7.4(b)
Initial Budget 6.4(a)
NBC Buy/Sell Valuation Price 7.5(b)(iv)
NBC Call 7.4(a)
NBC Option 7.3
NBC Valuation Notice 7.5(a)
New Units 3.4(c)
Majority Members 7.7
Managers 6.1
Officers 6.2
Option Exercise Period 7.3
Option Price 7.3
Option Units 7.3
Option Revised Buy/Sell Valuation 7.5(b)(ii)
Option Revised Buy/Sell Per Unit Valuation 7.5(b)(ii)
Other Members 7.7
Preliminary Buy/Sell for Unit Valuation 7.5(b)(i)
Proposed FMV 7.4(b)
Tax Matters Partner 8.4
Third-Party Sale 7.7
Transfer 7.1
Transferee 7.1
Transferring Members 7.7
Trigger Date 7.5(c)
ARTICLE II.
ORGANIZATIONAL MATTERS
2.1 FORMATION OF LLC; NAME. The Initial Members have formed the LLC
pursuant to the provisions of the Statute by filing the Certificate of Formation
with the Secretary of State. The name of the LLC is "Snap! LLC", a Delaware
limited liability company. The LLC may conduct business under such names(s) as
may be selected by the Managers.
2.2 PRINCIPAL OFFICE. The LLC shall maintain its principal place of
business at One Beach Street, San Francisco, California, or any other location
as may be selected by the Managers.
2.3 AGENT FOR SERVICE OF PROCESS. The LLC shall continuously maintain a
registered office and a designated and duly qualified agent for service of
process on the LLC in the State of Delaware. The name and address of the LLC's
agent for service of process is The Corporation
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Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware or such other agent as the Managers designate in accordance with the
Statute.
2.4 DURATION. The existence of the LLC shall be perpetual after the date
of the filing of the Certificate of Formation with the Secretary of State,
unless the LLC is terminated or dissolved sooner in accordance with the
provisions of this Agreement.
2.5 BUSINESS AND PURPOSE OF THE LLC. The purpose of the LLC is to operate
and pursue the Snap! Business, directly or indirectly through Subsidiaries, and
to expand its activities as management and the Board of Managers deem necessary
or appropriate to advance its business or value as a General Internet Portal
Service (as defined in the Preferred Carriage Agreement (as defined in the
Contribution Agreement)), including without limitation by (i) adding additional
product features such as web page hosting, HTML mail, instant messaging,
specialized searching, etc.; (ii) expanding into international markets; (iii)
expanding into alternate platforms and delivery technologies (e.g., WebTV,
consumer devices, etc.); and (iv) forming alliances with or pursuing
acquisitions of content providers, distributions, technology providers,
competitors and others, and related businesses (collectively, the "BUSINESS OF
THE LLC"). In connection with the foregoing, the LLC will seek to maximize its
value to its equity owners by capitalizing on the resources of NBC and CNET, but
without sacrificing the interests of the LLC to the interests of NBC or CNET.
2.6 EFFECTIVE DATE OF AGREEMENT. This Agreement shall be effective as of
the date of formation of the LLC.
ARTICLE III.
CAPITAL CONTRIBUTIONS AND ISSUANCES OF UNITS
3.1 INITIAL CONTRIBUTIONS. Subject to the terms and conditions of the
Contribution Agreement, on the Closing Date (as defined in the Contribution
Agreement) the Initial Members shall make initial contributions in accordance
with the provisions of the Contribution Agreement.
3.2 ADDITIONAL CONTRIBUTIONS. Except as expressly set forth herein or as
otherwise required by law, no Member shall be required to (a) make any
additional Capital Contributions, (b) make any loan, (c) cause to be loaned any
money or other assets to the LLC or (d) guarantee any obligations of the LLC.
3.3 ISSUANCE OF ADDITIONAL UNITS. Subject to Section 3.4 and Section 6.3,
the Board of Managers is hereby authorized to cause the LLC to issue to Members
or other Persons (including, without limitation, in connection with the
contribution of property to the LLC) on such terms as the Board of Managers
shall determine, additional Units representing additional LLC Interests. Any
issuance of additional Units to a Person who is not a Member shall be
conditioned on such Person executing and delivering to the LLC a written
agreement in form and substance satisfactory to the Board of Managers whereby
such Person agrees to be bound by the terms of
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this Agreement. Upon the issuance of any additional Units pursuant to this
Section 7.3, Schedule 1.1 will be amended to reflect such issuance.
3.4 RIGHT OF FIRST REFUSAL FOR NEW UNITS. (a) The LLC hereby grants to
each NBC Holder and each CNET Holder a pro rata right of first refusal to
purchase any New Units which the LLC may, from time to time, propose to sell.
Such pro rata right of first refusal shall allow each NBC Holder and each CNET
Holder to purchase in accordance with this Section 3.4 a number of the New Units
equal to the product of (x) the number of New Units proposed to be sold
multiplied by (y) such Member's Adjusted Percentage Interest. Notwithstanding
the foregoing, with respect to each issuance of New Securities prior to the
earlier of the termination of the NBC Call or the purchase of the Call Units
upon exercise of the NBC Call, the number of New Units that may be purchased by
NBC Multimedia pursuant to this Section 3.4 in respect of any issuance of New
Units shall be increased by the aggregate amount of any New Units which the CNET
Holders determine not to purchase pursuant to this Section 3.4, PROVIDED that
the maximum number of additional New Units that NBC Multimedia will have the
right to purchase as a result of this sentence in respect of each issuance of
New Units shall equal the product of (x) the Adjusted Percentage Interest
represented by the Call Units at the time of such issuance multiplied by (y) the
number of New Units proposed to be sold.
(b) In the event the LLC proposes to issue New Units, it shall give
each NBC Holder and each CNET Holder written notice of its intention to issue
New Units, the purchase price therefor (which shall be payable solely in cash)
and the terms upon which the LLC proposes to issue the same. Each NBC Holder
and each CNET Holder shall have 30 days from the date such notice is received to
determine whether to purchase all or any portion of such New Units (up to the
maximum number such NBC Holder or CNET Holder has the right to acquire pursuant
to Section 3.4(a)) for the purchase price and upon the terms specified in the
LLC's notice by giving written notice to the LLC and stating therein the
quantity of New Units to be purchased. The right of first refusal granted
hereunder shall terminate with respect to any NBC Holder or CNET Holder if not
exercised by such NBC Holder or CNET Holder within thirty (30) days after
receipt of such notice from the LLC.
(c) "NEW UNITS" shall mean any additional Units proposed to be sold
by the LLC; PROVIDED, HOWEVER, that the term "New Units" shall not include (i)
Units issued upon the exercise of the NBC Option, (ii) Units issued in
connection with any distribution to Members or recapitalization among the
Members of the LLC, (iii) Units issued by the LLC pursuant to a bona fide
acquisition of another corporation, partnership or other business or entity or a
material portion of the assets thereof, by merger, purchase of assets or
otherwise, (iv) Units issued for compensation-related purposes to employees,
officers or directors of the LLC or (v) Units issued in connection with an
Initial Public Offering.
(d) The obligations of the LLC under this Section shall terminate
immediately upon the closing of an Initial Public Offering.
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3.5 RIGHTS WITH RESPECT TO CAPITAL. (a) No Member shall have the right
to withdraw, or receive any return of, its Capital Contribution, and no Capital
Contribution may be returned in the form of property other than cash except as
specifically provided herein.
(b) Except as expressly provided in this Agreement, no Capital
Contribution of any Member shall bear any interest or otherwise entitle the
contributing Member to any compensation for use of the contributed capital.
(c) A separate capital account ("CAPITAL ACCOUNT") shall be
maintained for each Member. For book purposes, each Member's Capital Account
will be separated into a contribution account and an income (loss) account and
will be maintained according to generally accepted accounting principles.
Section 3.7 below describes the appropriate accounting treatment of the Capital
Accounts maintained for tax purposes.
(d) In the event an Member transfers an Interest in accordance
with the terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred Interest.
3.6 RULES OF ADJUSTMENT OF CAPITAL ACCOUNTS. The Capital Account of
each Member shall be increased by:
(i) such Member's cash contributions to the LLC;
(ii) the agreed fair market value of property contributed by such
Member (net of liabilities secured by such contributed property that the
LLC is considered to assume or take subject to under Code Section 752); and
(iii) all items of Net Profits allocated to such Member pursuant to
Article IV or other provisions of this Agreement.
(b) The Capital Account of each Member shall be decreased by:
(i) the amount of cash distributed to such Member;
(ii) the agreed fair market value of all actual and deemed
distributions of property made to such Member pursuant to this Agreement
(net of liabilities secured by such distributed property that the Member is
considered to assume or take subject to under Code Section 752); and
(iii) Net Loss allocated to such Member pursuant to Article IV or
other provisions of this Agreement.
(c) The provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Regulations Section
1.704-1(b)(2)(iv), and shall be interpreted and applied in a manner consistent
with such Regulations Section. To the extent such
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provisions are inconsistent with such Regulations Section or are incomplete with
respect thereto, Capital Accounts shall be maintained in accordance with such
Regulations Section.
3.7 ADMISSION OF ADDITIONAL MEMBERS. The Board of Managers may admit one
or more Persons as additional Members ("Additional Members"). Each Additional
Member shall: (i) agree to be bound by the provisions of this Agreement; (ii)
execute and deliver such documents as the Board of Managers deems appropriate in
connection therewith; and (iii) contribute to the LLC the agreed upon Capital
Contribution in exchange for Units.
3.8 REVALUATION. Upon the admission of Additional Members, the Capital
Accounts of the Members shall be increased or decreased, as the case may be, to
reflect the gross asset values of the LLC's assets pursuant to Regulation
Section 1.704-1(b)(2)(iv)(g). The amount of any such increase or decrease shall
be allocated among the Members as if such increase or decrease constituted
income or loss, respectively, in accordance with the allocation provisions set
forth in Article IV.
ARTICLE IV.
ALLOCATION AND DISTRIBUTIONS
4.1 ALLOCATION OF NET PROFITS AND LOSSES. Except as otherwise provided in
this Article IV, Net Profits and Net Loss of the LLC in each Fiscal Year shall
be allocated among the Members in accordance with the following:
(a) Net Profits shall be allocated among the Members as follows:
(i) first, to each of the Members until the cumulative Net Profits
allocated to such Member pursuant to this Section 4.1(a) is equal to the
cumulative Net Loss allocated to the Member pursuant to Section 4.1(b) for
any prior period;
(ii) thereafter, to the Members in accordance with their respective
Percentage Interests.
(b) Except as otherwise provided in this Article IV, Net Loss
shall be allocated among the Members as follows:
(i) first, to offset any Net Profits allocated pursuant to Section
4.1(a) hereof not otherwise reduced by a prior allocation of Net Losses
(pro rata in proportion to their shares of Net Profits being offset); and
(ii) thereafter to the Members in accordance with their respective
Percentage Interests.
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(c) If a Member would at any time receive, but for this Section
4.1(c), an allocation of deduction, loss, or expenditure that would cause or
increase a deficit balance in such Member's Capital Account in excess of any
amount of such deficit balance that the Member is obligated to restore or deemed
obligated to restore (as determined in accordance with Treasury Regulations
Section 1.704-1(b)(2)(ii)(c)), then the portion of such allocation that would
cause or increase such deficit Capital Account balance shall be specially
allocated to the other Members, if any, with positive Capital Account balances
in proportion to such balances. The loss limitation under this Section 4.1(c)
is intended to comply with Treasury Regulation Section 1.704-1(b)(2)(ii)(d),
including the reductions described in subparagraphs (4), (5) and (6) therein.
Any special allocation of items of deduction, loss, or expenditure pursuant to
this Section 4.1(c) shall be taken into account in computing subsequent
allocations pursuant to this Article IV, so that the net amount of any items so
allocated and all other items of income, gain, loss and deduction allocated to
each Member pursuant to this Article IV shall, to the extent possible, and as
soon as possible, be equal to the net amount that would have been allocated to
each Member pursuant to the provisions of this Article IV as if special
allocations pursuant to this Section 4.1(c) had not been made.
4.2 QUALIFIED INCOME OFFSET. If in any Fiscal Year an Member receives an
adjustment, allocation or distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of LLC income and gain shall be
specially allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Capital
Account deficit of such Member as quickly as possible provided that an
allocation pursuant to this Section 4.2 shall be made only if and to the extent
that such Member would have a Capital Account deficit after all other
allocations provided for in this Article IV have been tentatively made as if
this Section 4.2 were not in the Agreement. This Section 4.2 is intended to
qualify and be construed as a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
4.3 MINIMUM GAIN CHARGEBACK. If there is a net decrease in LLC Minimum
Gain during a Fiscal Year, each Member will be allocated, before any other
allocation under this Article IV, items of income and gain for such Fiscal Year
(and if necessary, subsequent years) in proportion to and to the extent of an
amount equal to such Member's share of the net decrease in LLC Minimum Gain
determined in accordance with Regulations Section 1.704-2(g)(2). This Section
4.3 is intended to comply with, and shall be interpreted consistently with, the
"minimum gain chargeback" provisions of Regulations Section 1.704-2(f).
4.4 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. Notwithstanding any
other provision of this Article IV, but except Section 4.3, if there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to an Member
Nonrecourse Debt during any Fiscal Year of the LLC, each Member who has a share
of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of LLC income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations
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pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Section
1.704-2(i)(4). This Section 4.4 is intended to comply with a minimum gain
chargeback requirement of that Section of the Regulations and shall be
interpreted consistently therewith.
4.5 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions for
any Fiscal Year or other period shall be specially allocated to the Member who
bears (or is deemed to bear) the economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(2).
4.6 SPECIAL ALLOCATIONS. Any special allocations of items of Net Profits
pursuant to Sections 4.3, 4.4 and 4.5 shall be taken into account in computing
subsequent allocations of Net Profits pursuant to Section 4.1, so that the net
amount of any items so allocated and the gain, loss and any other item allocated
to each Member pursuant to Section 4.1 shall, to the extent possible, be equal
to the net amount that would have been allocated to each such Member pursuant to
the provisions of this Article if such special allocations had not occurred.
4.7 FEES TO MEMBERS OR AFFILIATES. Notwithstanding the provisions of
Section 4.1, in the event that any fees, interest, or other amounts paid to any
Member or any Affiliate thereof pursuant to this Agreement or any other
agreement between the LLC and any Member or Affiliate thereof providing for the
payment of such amount, and deducted by the LLC in reliance on Section 707(a)
and/or 707(c) of the Code, are disallowed as deductions to the LLC on its
federal income tax return and are treated as LLC distributions, then:
(a) the Net Profits or Net Loss, as the case may be, for the
Fiscal Year in which such fees, interest, or other amounts were paid shall be
increased or decreased, as the case may be, by the amount of such fees,
interest, or other amounts that are treated as LLC distributions; and
(b) there shall be allocated to the Member to which (or to whose
Affiliate) such fees, interest, or other amounts were paid, prior to the
allocations pursuant to Section 4.1, an amount of gross income for the Fiscal
Year equal to the amount of such fees, interest, or other amounts that are
treated as LLC distributions.
4.8 SECTION 704(C) ALLOCATION. Any item of income, gain, loss, and
deduction with respect to any property (other than cash) that has been
contributed by an Member to the capital of the LLC and which is required or
permitted to be allocated to such Member for income tax purposes under Section
704(c) of the Code so as to take into account the variation between the tax
basis of such property and its fair market value at the time of its contribution
shall be allocated to such Member solely for income tax purposes in the manner
so required or permitted.
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ARTICLE V.
DISTRIBUTIONS OF AVAILABLE CASH FLOW
5.1 AVAILABLE CASH FLOW. The timing and amount of all distributions of
Available Cash Flow of the LLC shall be determined by the Managers. Except as
provided in Sections 9.2 and 9.3, all distributions of Available Cash Flow shall
be made to the Members pro rata in accordance with their respective Percentage
Interests at the time of the distribution.
ARTICLE VI.
MANAGEMENT
6.1 MANAGERS. (a) The LLC shall be managed by a Board of Managers
consisting of seven (7) Managers (individually a "MANAGER" or collectively, the
"MANAGERS") or such other number (but in no event fewer than five) as may be
established by (x) agreement of Members holding Units representing an aggregate
Percentage Interest in excess of 50%, which Members must include both CNET and
NBC Multimedia, (y) NBC Multimedia in its discretion after the exercise of the
NBC Option in an amount that results in the NBC Holders owning more Units than
the CNET Holders or (z) CNET in its discretion if the NBC Option terminates
without being exercised in an amount that results in the NBC Holders owning more
Units than the CNET Holders. Two Managers shall be appointed by CNET as long as
CNET and its Permitted Transferees own in the aggregate Units representing a
Percentage Interest of at least 10% and the remainder of the Managers shall be
appointed by NBC Multimedia and/or its assignees (which may include transferees
of its Units); PROVIDED that in the event the number of Managers is adjusted,
NBC Multimedia shall in all cases have the right to appoint a majority of the
Managers and, PROVIDED FURTHER that in the event NBC Multimedia assigns its
right to designate any Manager to any Person other than a Permitted Transferee
of NBC Multimedia, CNET will thereafter have the right to designate a number of
Managers equal to the product of the aggregate Percentage Interest of CNET and
its Permitted Transferees multiplied by the total number of Managers (rounded to
the nearest whole number, but in no event less than one or, if the aggregate
Percentage Interest of CNET and its Permitted Transferees is at least 10%, two).
Anything in this Section 6.1(a) to the contrary notwithstanding, in the event
that the NBC Option terminates without being exercised in full, each of CNET and
NBC Multimedia will thereafter have the right to designate a number of Managers
equal to the product of the aggregate Adjusted Percentage Interest of such
Member and its Permitted Transferees multiplied by the total number of Managers
(in each case rounded to the nearest whole number, but in no event less than
one). Each of CNET and NBC Multimedia shall have the right to designate
replacements of those Managers appointed by it, and each Member agrees to vote
its Interest and any Interests which it controls in favor of the designees of
CNET and NBC Multimedia. The initial Managers shall be Tom Rogers, Marty
Yudkovitz, Scott Sassa, Neil Braun and Mark Begor as NBC's appointees and Halsey
Minor, Shelby Bonnie, Tom Melcher and Douglas Woodrum as CNET's appointees. The
Managers shall appoint by majority vote one of the Managers to preside at
meetings of the Board of Managers.
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(b) The Board of Managers has, subject to the control of the
Members, general supervision, direction and control of the business of the LLC.
The Board of Managers shall have the general powers and duties typically vested
in the board of directors of a corporation and all other powers and duties over
the LLC and its business except as expressly provided elsewhere in this
Agreement. The Managers shall comply with applicable law and their fiduciary
obligations to the LLC and the Members (which fiduciary obligations will not be
affected by any expiration of CNET's rights under Section 6.3). Pursuant to
their discretion to do so under this Section 6.1, the Members hereby delegate to
each of the Managers the nonexclusive power and authority to act as an agent of
the LLC and, in such capacity, to bind the LLC in the ordinary course of the
LLC's business and to execute any and all documents to be signed by the LLC.
(c) Except as otherwise set forth in this Agreement, an action or
decision of the Board of Managers shall require the consent or vote of a
majority of the Managers. A majority of the total number of incumbent Managers
shall be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Managers, and except as otherwise provided in this
Agreement or by the Statute, the action of a majority of the Managers present at
any meeting at which there is a quorum, when duly assembled, is valid. A
meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of Managers, if any action taken is
approved by a majority of the required quorum for such meeting. No Member,
acting solely in its capacity as a Member, shall have the power and authority to
act for and bind the LLC unless such matter has been approved by the Managers as
set forth herein.
(d) Meetings of the Board of Managers shall be held at the
principal office of NBC, CNET or the LLC, unless some other place is designated
in the notice of the meeting. Any Manager may participate in a meeting through
use of a conference telephone, video conference or similar communication
equipment so long as all Managers participating in such a meeting can hear one
another. Accurate minutes of any meeting of the Board of Managers shall be
maintained by the Officer designated by the Board of Managers for that purpose.
(e) Special meetings of the Board of Managers for any purpose may
be called at any time by the person selected to preside at meetings of the Board
of Managers. Unless waived by the Board of Managers, at least three business
days notice of the time and place of any meeting of the Board of Managers shall
be delivered personally to each of the Managers or personally communicated to
them by an officer of the LLC by telephone, and confirmed in writing by
facsimile, or communicated by Federal Express or other comparable overnight
courier service (receipt requested). Notice shall be transmitted to the last
known facsimile number or address of the Manager as shown on the records of the
LLC. Such notice as above provided shall be considered due, legal and personal
notice to such Manager. With respect to a special meeting which has not been
duly called or noticed pursuant to the foregoing provisions, all transactions
carried out at the meeting are as valid as if had at a meeting regularly called
and noticed if: (i) all Managers are present at the meeting, and sign a written
consent to the holding of such meeting, (ii) if a majority of the Managers are
present and if those not present sign a waiver of notice of such meeting or a
consent to holding the meeting or an approval of the minutes thereof, whether
prior to or after the holding of such meeting, which waiver, consent or approval
shall be filed with
16
the other records of the LLC or (iii) if a Manager attends a meeting without
notice and does not protest prior to the meeting or at its commencement that
notice was not given to him or her.
(f) Any action required or permitted to be taken by the Managers
may be taken without a meeting and will have the same force and effect as if
taken by a vote of Managers at a meeting properly called and notice, if
authorized by a writing signed individually or collectively by all, but not less
than all, the Managers. Such consent shall be filed with the records of the
LLC.
6.2 OFFICERS. (a) The officers of the LLC (the "OFFICERS") shall include
a chief executive officer, chief operating officer, chief financial officer and
a controller. The LLC may also have such other officers as the Board of
Managers in its discretion appoint or whom may be appointed by the other
Officers if specifically authorized to do so by the Board of Managers, all of
whom shall be considered "Officers" for all purposes of this Agreement.
(b) The chief executive officer of the LLC shall, subject to the
general direction and control of the Board of Managers, have overall
responsibility for the management of the day-to-day operations of the LLC and
will be empowered to and will engage in all appropriate and necessary activities
to accomplish the purposes of the LLC as set forth herein. At NBC's request,
CNET will make available (at no cost to the LLC) its chief executive officer,
Halsey Minor, or another senior executive officer of CNET nominated by CNET, to
serve as the initial chief executive officer of the LLC until the Board of
Managers selects a regular full-time chief executive officer, which is expected
to occur within one year after the date hereof. The initial chief executive
officer may continue to serve as an officer of CNET and to perform services for
CNET with a portion of his business time, provided that he or she devotes the
necessary time and attention to the business of the LLC. Prior to an Initial
Public Offering, the regular full-time chief executive officer and the chief
operating office, chief financial officer and controller of the LLC will be
appointed by NBC (subject to the reasonable approval of CNET). Unless otherwise
determined by the Board of Managers, among the powers and duties of the chief
financial officer will be to have final authority (not subject to the direction
or control of the chief executive officer or chief operating officer) and
control with respect to all matters relating to the LLC's rights and obligations
relating to CNET under the Transition and Technology Sharing Agreement (as
defined in the Contribution Agreement).
(c) Each of the Officers are hereby each designated as an
authorized person, within the meaning of the Act, to execute, deliver and file
the certificate of formation of the LLC (and any amendments and/or restatements
thereof) and any other certificates (and any amendments and/or restatements
thereof) necessary for the LLC to qualify to do business in a jurisdiction in
which the LLC may wish to conduct business. Pursuant to their discretion to do
so, the Members hereby delegate to each of the Officers the nonexclusive power
and authority to act as an agent of the LLC and, in such capacity, to bind the
LLC in the ordinary course of the LLC's business and to execute any and all
documents to be signed by the LLC.
6.3 CNET VETO RIGHTS. The LLC will not take any of the following action
without (i) the approval of the Board of Managers pursuant to Section 6.1(c) and
(ii) prior to the earlier of
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(x) an Initial Public Offering, (y) NBC's exercise of the NBC Call or (z) the
fifth anniversary of the Closing, subject to Section 7.5(a), the approval of at
least one Manager appointed by CNET (which approval may be given as part of the
approval of the Board of Managers pursuant to Section 6.1(c)):
(a) directly or indirectly or through any Subsidiary conduct any
business other than the Business of the LLC;
(b) amend this Agreement;
(c) merge or consolidate with or into any other Person;
(d) sell, transfer or otherwise dispose of all or substantially
all of the Property; PROVIDED that a pledge of such Property (and foreclosure
thereon) may be made without any such approval to secure any Indebtedness
permitted under the exception contained in Section 6.3(h) below to any Person
not an Affiliate of the LLC;
(e) authorize or issue any new Interests except (i) pursuant to
the NBC Option, (ii) pursuant to any employee "stock" plan, "phantom stock" plan
or option plan or (iii) "stock", "phantom stock" or option to individual
employees of the LLC;
(f) effect the termination, winding-up, liquidation, dissolution
or voluntary bankruptcy of the LLC;
(g) convert the LLC to corporate form pursuant to Section 7.9
hereof;
(h) incur any Indebtedness, including without limitation in the
ordinary course of business; or
(i) commit or agree to do any of the foregoing.
The approval of any of the matters set forth in this Section 6.3 by the
Board of Managers in accordance with Section 6.1(c) and this Section 6.3 shall
constitute all action necessary for the LLC to take such action and, subject to
Section 6.5(b), no vote or other action of the Members will be required to
authorize such matter, PROVIDED that prior to the earlier of (A) expiration of
the time period set forth in clause (i) of the first sentence of this Section
and (B) termination of the NBC Option without the NBC Option being exercised in
full, none of the actions set forth in clauses (a) through (g) will be taken
without NBC Multimedia's prior written consent. Subject to Section 6.5(b) each
of the Members will take any action with respect to their Units that may be
required to effect any matter approved pursuant to this Section 6.3.
6.4 BUDGET. (a) The Initial Members have agreed upon an initial
business plan for the LLC and a budget for the LLC (a "BUDGET") for the period
commencing July 1, 1998, copies of which are attached hereto as Exhibit 6.4 (the
"INITIAL BUDGET"). All future Budgets shall be substantially in the form of
Exhibit 6.4 unless otherwise agreed by the Board of Managers. Not
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less than 60 days prior to the end of each fiscal year, the Officers shall
submit to the Board of Managers a proposed Budget for the next fiscal year.
(b) The Members acknowledge that they currently anticipate that,
subject to the terms and conditions of this Section 6.4(b), additional financing
required by the LLC may be funded by Indebtedness having the terms set forth on
Schedule 6.4(b) hereto and, to the extent not inconsistent with SCHEDULE 6.4(b),
such additional terms as may be approved by the Board of Managers. NBC agrees
that, pursuant to a guarantee in form and substance reasonably satisfactory to
NBC, NBC or one of its Affiliates will guarantee up to the Maximum Guaranteed
Amount of such Indebtedness to the extent (and only to the extent) such
guaranteed Indebtedness is (i) necessary to cover operating cash requirements of
the LLC or obligations described in clause (z) of the definition of Maximum
Guaranteed Amount, (ii) provided for in the Initial Budget or a subsequent
Budget approved by the Board of Managers and (iii) on the terms set forth on
SCHEDULE 6.4(b) hereto and such other terms as are reasonably acceptable to NBC;
PROVIDED that the Members acknowledge and agree that, unless otherwise agreed to
by NBC in its sole discretion, any such guarantees shall terminate (and NBC
shall have no further obligations or liabilities thereunder) upon the closing of
(A) a purchase of NBC's Interests in the LLC pursuant to Section 7.5 hereof or
(B) an Initial Public Offering. The provisions of this Section 6.4(b) are
solely for the benefit of the LLC and no creditor of the LLC shall have any
rights arising out of NBC's obligations to the LLC hereunder. In addition, the
LLC and each Member acknowledges and agrees that NBC and its Affiliates will not
have any obligations or liabilities arising out of or relating to any
Indebtedness of the LLC except as expressly provided herein.
6.5 RELATIONSHIP WITH MEMBERS. (a) Except as provided in this
Agreement or any other written agreement, the LLC shall pay no compensation to
any Member for their services to the LLC except services provided by Members who
are individuals in their capacities as bona fide employees of the LLC.
(b) Except as provided in the Implementing Agreements (as defined
in the Contribution Agreement), the LLC will not enter into any transaction with
NBC or any Affiliate of NBC unless (i) such transaction is on terms no less
favorable to the LLC than it would obtain in a comparable arm's length
transaction with a third party that is not NBC or an Affiliate of NBC or (ii)
such transaction is approved by CNET, such approval to not be unreasonably
withheld. Except as provided in the Implementing Agreements, the LLC will not
enter into any transaction with CNET or any Affiliate of CNET unless (A) such
transaction is on terms no less favorable to the LLC than it would obtain in a
comparable arm's length transaction with a third party that is not CNET or an
Affiliate of CNET or (B) such transaction is approved by NBC Multimedia, such
approval to not be unreasonably withheld.
6.6 EXPENSE REIMBURSEMENT. The LLC shall reimburse the Members for all
expenses paid by them on behalf of the LLC as approved from time to time by the
Managers, including all costs and expenses of operating and conducting the
Business of the LLC including without limitation payments to the LLC's
attorneys, auditors, consultants and other outside advisors; expenses associated
with the LLC's financial statements and reports and any required tax returns,
statements and filings; premiums in connection with liability insurance for the
LLC and any other
19
Persons managing the LLC; and costs and expenses associated with the Dissolution
of the LLC. The LLC shall promptly reimburse the Members, the Tax Matters
Partner and any of their respective Affiliates to the extent that any such
expenses have been paid by such entities. Anything in this Section 6.6 to the
contrary notwithstanding, this Section 6.6 will not apply to expenses incurred
by Members in their capacities as employees of the LLC, which expenses will be
reimbursed to the extent provided by, and in accordance with, the LLC's policies
with respect to employees.
6.7 MEMBERS MEETINGS. Meetings of the Members may be called at any time
by any Member or Members with an aggregate Percentage Interest of not less than
fifteen percent (15%). Each Member shall have a number of votes equal to the
number of Units held by such Member, provided that if, pursuant to the Statute
or the terms of this Agreement, a Member is not entitled to vote on a specific
matter, then such Member's number of votes and Units shall not be considered for
purposes of determining whether approval of the Members has been obtained, in
respect of such specific matter. A vote of a majority of the outstanding Units
is required to approve any matter unless another vote is expressly provided for
in this Agreement or by Statute, PROVIDED that (a) for as long as CNET and its
Permitted Transferees hold in the aggregate at lest 5% of the outstanding Units,
the approval of CNET will also be required and (b) for as long as NBC Multimedia
and its Permitted Transferees hold in the aggregate at least 5% of the
outstanding Units the approval of NBC Interactive will also be required. Any
action which may be taken at any meeting of Members may be taken without a
meeting and without prior notice if a consent in writing, setting forth the
action so taken shall be signed by Members holding in the aggregate the number
of Units equal to or greater than the number required to approve such actions.
6.8 OBJECTIVE OF MANAGEMENT. The objective of management of the LLC will
be to maximize the value of the LLC's equity.
6.9 CONDUCT OF BUSINESS. The LLC shall adopt and maintain at all times
policies that correspond to GE's integrity policies as notified in writing to
the LLC from time to time.
ARTICLE VII.
TRANSFERS OF INTEREST AND CONVERSION
7.1 GENERAL; RESTRICTIONS ON TRANSFERS. (a) All Transfers of
Interests shall be effected by a Transfer of the Unit(s) evidencing such
Interests. The transferring Member will provide written notice of such Transfer
to the LLC and upon receipt of such notice Schedule 1.1 shall be amended to
reflect any Transfer effected in accordance with this Agreement.
(b) No Member shall sell, transfer, hypothecate, encumber or
assign ("TRANSFER"), directly or indirectly, all or any of its Units to any
Person (a "TRANSFEREE") (i) without delivering to the LLC a written agreement in
form and substance reasonably satisfactory to the Board of Managers executed by
the Transferee (including any Permitted Transferee that is
20
not already bound by the terms of this Agreement) to be bound by the terms of
this Agreement, provided that this clause shall not apply to a pledge pursuant
to SECTION 7.1(c)(ii) or SECTION 7.1(d)(ii), (ii) except in compliance with all
applicable federal and state securities laws, (iii) if such Transfer would
terminate the LLC for federal income tax purposes and (iv) to the extent
prohibited under this Section 7.1.
(c) Prior to the earlier of (x) the closing of an Initial Public
Offering and (y) the five year anniversary of the Closing Date, no NBC Holder
will Transfer all or any of its Units (or related Interests) except as follows:
(i) any Transfer to a Permitted Transferee; (ii) the bona fide pledge of any
Unit to a financial institution securing bona fide indebtedness for money
borrowed advanced by such financial institution in the ordinary course of
business; (iii) at any time after exercise of the NBC Option in an amount that
results in the NBC Holders owning more Units than the CNET Holders, any Transfer
of Units to any Person, PROVIDED that immediately following such Transfer either
(x) NBC Multimedia and its Permitted Transferees own in the aggregate at least
30% of the outstanding Units and have the right to designate a majority of the
Board of Managers or (y) NBC Multimedia and its Permitted Transferees own in the
aggregate at least 40% of the outstanding Units; or (iv) at any time after
termination of the NBC Option without exercise in an amount that results in the
NBC Holders owning more Units than the CNET Holders, any Transfer of Units to
any Person, PROVIDED that immediately following such Transfer NBC Multimedia and
its Permitted Transferees own in the aggregate at least 3,656,250 Units. Any
Transfer pursuant to clause (iii) or clause (iv) prior to the completion of an
Initial Public Offering will be subject to Section 7.6.
(d) Prior to the earlier of (x) the completion of an Initial
Public Offering and (y) the five year anniversary of the Closing Date, no CNET
Holder will Transfer all or any of its Units (or related Interests) except as
follows: (i) any Transfer to a Permitted Transferee; (ii) the bona fide pledge
of any Unit to a financial institution securing bona fide indebtedness for money
borrowed advanced by such financial institution in the ordinary course of
business; and (iii) Transfers to any Person, PROVIDED that following such
Transfer CNET and its Permitted Transferees own in the aggregate at least 12.5%
of the outstanding Units at Closing (assuming exercise of the NBC Option, unless
the Transfer occurs after the termination of the NBC Option without exercise in
full, in which event you assume exercise of the NBC Option only to the extent
actually exercised prior to its termination). Anything in the immediately
preceding sentence to the contrary notwithstanding, prior to the exercise or
termination of the NBC Call, CNET will at all times hold (and CNET may not
Transfer) a number of Units equal to the number of Call Units at such time. Any
Transfer pursuant to clause (iii) prior to the completion of an Initial Public
Offering will be subject to Section 7.6. In addition, CNET may not Transfer any
of its rights under Sections 6.1 and 6.3 hereof.
(e) Any Transfer or attempted Transfer by a Member in violation of
this Section 7.1 shall be null and void and of no force or effect whatever.
Each Member hereby further agrees to hold the LLC and each Member wholly and
completely harmless from any cost, liability, or damage (including liabilities
for income taxes and costs of enforcing this indemnity) incurred by any of such
indemnified Persons as a result of a Transfer or an attempted Transfer in
violation of this Agreement.
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(f) For the avoidance of doubt, it is understood and agreed that
the LLC may impose additional transfer restrictions with respect to newly-issued
Units in connection with the issuance of such Units (or options or other rights
to acquire Units).
7.2 DISTRIBUTION AMONG MEMBERS. Upon the occurrence of a Permitted
Transfer of an Interest during any Fiscal Year, Profits, Losses, each item
thereof, and all other items attributable to such Interest for such Fiscal Year
shall be divided and allocated between the transferor and the transferee by
taking into account their varying interests during the Fiscal Year in accordance
with Code Section 706(d), using any conventions permitted by law and selected by
the Chief Financial Officer of the LLC. All distributions on or before the date
of a Permitted Transfer shall be made to the transferor, and all distributions
thereafter shall be made to the transferee. Solely for purposes of making such
allocations and distributions, the LLC shall recognize a Permitted Transfer upon
the Chief Financial Officer's receipt of (i) written notice stating the date
such Interest was transferred and such other information as the Chief Financial
Officer may reasonably require and (ii) the written agreement to be executed by
the Transferee agreeing to be bound by the terms of this Agreement pursuant to
the requirements of Section 7.1 hereof. The Chief Financial Officer and the LLC
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Section 7.2 whether or not the Chief Financial
Officer or the LLC has knowledge of any Transfer of ownership of any Interest.
7.3 NBC OPTION. (a) At any time prior to the third anniversary of the
date hereof (the "OPTION EXERCISE PERIOD") (provided that if on such third
anniversary a Buy/Sell process is pending pursuant to Section 7.5 (i.e. NBC
Multimedia has delivered a First NBC Notice and the applicable CNET Veto has not
been rescinded nor has a purchase and sale of Interests occurred under Section
7.5), the Option Exercise Period will be extended until 20 days after a valid
rescission of the CNET Veto or 20 days after the closing of the relevant
purchase and sale (as applicable)) NBC Multimedia shall have the option (the
"NBC OPTION") to purchase from the LLC 14,805,556 newly issued Units (the
"OPTION UNITS") for an aggregate purchase price of $31,635,802 (the "OPTION
PRICE"). In the event the LLC has been converted to corporate form pursuant to
Section 7.9 hereof prior to the exercise by NBC Multimedia of the NBC Option,
the corporate successor to the LLC will, in exchange for the NBC Option
hereunder, issue an option to NBC Multimedia to purchase a number of shares of
capital stock of such corporate successor as would have been issued in exchange
for the Option Units had they been issued prior to such conversion to corporate
form for an aggregate exercise price of $31,655,802, such option to be
exercisable during the Option Exercise Period and otherwise on terms reasonably
acceptable to NBC Multimedia and CNET.
(b) If NBC Multimedia wishes to exercise the NBC Option, NBC
Multimedia shall provide five (5) days prior written notice to the LLC. The
closing with respect to any exercise of the NBC Option shall take place at the
principal office of the LLC on the fifth day after exercise by NBC Multimedia of
the NBC Option, PROVIDED that all orders, consents and approvals of Governmental
Authorities legally required for the closing of such sale shall have been
obtained and be in effect. Payment of the Option Price to the LLC shall be by
certified check or immediately available funds against the delivery of a duly
executed assignment of the Units so
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purchased, and such Units shall be delivered to NBC free and clear of all Liens
of any nature whatsoever. The NBC Option may be exercised by NBC at any time
and from time to time during the Option Exercise Period in whole or in part, in
which event the Option Price for such partial exercise will be determined on a
pro rata basis. The proceeds from any exercise of the NBC Option will be used
solely to repay Indebtedness guaranteed by NBC in accordance with Section 6.4(b)
until such Indebtedness is reduced to zero.
7.4 NBC CALL. (a) At any time during the period commencing on the
fourth anniversary of the date hereof and ending on the fifth anniversary of the
date hereof (the "CALL EXERCISE PERIOD") (provided that if on such fifth
anniversary a Buy/Sell process is pending pursuant to Section 7.5 (i.e. NBC
Multimedia has delivered a First NBC Notice and the applicable CNET Veto has not
been rescinded nor has a purchase and sale of Interests occurred under Section
7.5), the Call Exercise Period will be extended until 20 days after a valid
rescission of the CNET Veto or 20 days after the closing of the relevant
purchase and sale (as applicable)), NBC Multimedia shall have the right (the
"NBC CALL") to purchase a number of Units equal to the number of Call Units at
the time of the closing of the purchase of Units pursuant to the NBC Call;
PROVIDED that in the event the LLC has been converted to corporate form pursuant
to Section 7.9 hereof prior to the exercise by NBC Multimedia of the NBC Call,
NBC Multimedia shall have the right to purchase from CNET all the corresponding
amount of equity security or securities of the newly-formed corporation into
which such Units were converted (including any additional securities issued as a
result of subsequent stock splits or other similar adjustments to such
corresponding amount of equity security or securities) and the "Call Units"
shall refer thereto and CNET will at all times continue to own (and not
Transfer) a sufficient number of such securities to satisfy its obligations
hereunder. If NBC Multimedia wishes to exercise the NBC Call, NBC shall provide
thirty (30) days prior written notice to CNET. The purchase price for the Call
Units shall equal eighty percent (80%) of the Fair Market Value of the Call
Units as of the date of NBC's notice of exercise of the NBC Call, payable as set
forth in Section 7.4(c). The NBC Call may be exercised by NBC Multimedia only
once, and only in whole and not in part.
(b) For purposes of Section 7.4(a), "FAIR MARKET VALUE" of the
Call Units as of any exercise date shall be determined as follows:
(i) Following an Initial Public Offering, the "Fair Market Value"
shall be based on the average closing prices of the Securities subject to
the NBC Call quoted on the Nasdaq Stock Market or other principal
securities exchange on which such Securities are listed, for the sixty (60)
trading days prior to such exercise date.
(ii) prior to an Initial Public Offering, the "Fair Market Value"
shall be equal to the fair market value of the Call Units as determined in
good faith by NBC Multimedia and CNET, subject to Section 7.4(b)(iii)
below. For purpose of this Section 7.4(b)(ii) and Section 7.4(b)(iii), the
fair market value of the Call Units shall be determined as if all of the
outstanding Units were being sold in a single transaction and the proceeds
of such sale distributed to the Members in accordance with their respective
Percentage Interests.
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(iii) In the event that NBC Multimedia and CNET fail to agree on the
"Fair Market Value" within sixty (60) days of such exercise date pursuant
to Section 7.4(b)(ii) above, then each Member shall, within fifteen (15)
days of the expiration of such 60-day period, submit in writing to a
nationally recognized investment banking firm not having any substantial
relation with either Member and reasonably acceptable to each Member (an
"INDEPENDENT FIRM"), a proposed "Fair Market Value" together with
documentation supporting such Fair Market Value (each such submission, a
"PROPOSED FMV"). If the difference between the two Proposed FMVs is less
than or equal to ten percent (10%) of the higher Proposed FMV, the "Fair
Market Value" shall be the average of the two Proposed FMVs. In all other
cases, the Independent Firm shall determine, within fifteen (15) days of
receipt of the Proposed FMVs and supporting documentation, a fair market
value for the Call Units, and the Proposed FMV closest to such the fair
market value determined by the Independent Firm shall be the "Fair Market
Value" and shall be final and binding on the parties for all purposes
hereof. In the event that the Members fail to agree on an Independent Firm
within fifteen (15) days of the expiration of such 60-day period, each of
the Members shall select a nationally-recognized investment banking firm,
and the two investment banking firms proposed by the Members shall select a
third nationally-recognized investment banking firm to serve as the
Independent Firm, and the Members shall be required to submit their
Proposed FMV's to such Independent Firm within fifteen (15) days
thereafter. Failure by either Member to submit a Proposed FMV to the
Independent Firm (or failure to propose an investment banking firm as the
Independent Firm) shall, following receipt of written notice by the failing
Member and a 15-day cure period thereafter, be deemed to result in the
selection of the Proposed FMV or the proposed Independent Firm, as the case
may be, of the non-defaulting Member.
(c) The closing with respect to any exercise of the NBC Call shall
take place at the principal office of the LLC on the tenth business day after
final determination of Fair Market Value as provided in Section 7.4(b) hereof,
PROVIDED that all orders, consents and approvals of Governmental Authorities
legally required for the closing of such sale shall have been obtained and be in
effect. At such closing, NBC shall deliver (i) cash or a certified check or
checks in the appropriate amount or (ii) at its option, common stock of NBC or a
parent of NBC, against the delivery of a duly executed assignment of the Call
Units so purchased; PROVIDED that (1) such common stock is listed on the Nasdaq
Stock Market or another national securities exchange at the time of the closing
under this Section 7.4(c), (2) the value of such common stock shall be based on
the average closing prices of such common stock on the principal exchange on
which such common stock is listed during the thirty (30) days prior to the
closing under this Section 7.4(c) and (3) promptly (but in any event no later
than 10 days) following the closing under this Section 7.4(c), NBC or NBC's
parent (as applicable) shall file a shelf registration statement with the
Securities and Exchange Commission to register such shares for resale, shall use
its best efforts to have such registration statement declared effective as soon
as practicable thereafter and shall enter into a registration rights agreement
with the CNET with respect to such common stock in the form of Exhibit 7.4(c)
hereto. The Call Units shall be delivered to NBC free and clear of all Liens of
any nature whatsoever.
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7.5 SALE IN THE EVENT OF A VETO. (a) In the event that the Manager
designees of CNET fail to approve any action approved by a majority of the Board
of Managers and the LLC is prohibited from taking such action (a "CNET VETO")
either (i) pursuant to Section 6.3(c), 6.3(d) or 6.3(e) at any time prior to the
first anniversary of the date hereof unless such CNET Veto concerned an action
proposed to be taken with NBC or any Affiliate of NBC, (ii) pursuant to Section
6.3(h) hereof at any time prior to the first anniversary of the date hereof or
(iii) pursuant to any subsection of Section 6.3 at any time after the first
anniversary of the date hereof, NBC Multimedia shall have the right to propose
the sale of all of the NBC Holders' or the CNET Holders' Interests and the NBC
Option and NBC Call (in each case if not previously exercised or terminated) as
set forth in this Section 7.5(a) (the "FIRST VALUATION RIGHT"). If NBC
Multimedia wishes to exercise its First Valuation Right upon the exercise of a
CNET Veto, NBC Multimedia shall provide written notice to CNET of such exercise
(a "FIRST NBC NOTICE") within fifty (50) days of the relevant CNET Veto. If NBC
Multimedia exercises its First Valuation Right, CNET may retract the CNET Veto
and terminate NBC's First Valuation Right with respect to such CNET Veto
(provided that such termination shall not in any way affect and NBC Multimedia
shall retain all rights pursuant to this Section 7.5 with respect to any future
CNET Veto) by providing NBC Multimedia written notice thereof no later than five
(5) days after receipt of a First NBC Notice, PROVIDED that CNET may only
retract a maximum of two CNET Vetoes in any calendar year. In the event that
CNET retracts a CNET Veto in accordance with the immediately preceding sentence,
the matter that was the subject of the CNET Veto shall be deemed approved for
all purposes of Section 6.3. No later than ten (10) days after the delivery of
a First NBC Notice, NBC Multimedia shall deliver a written notice to CNET (an
"NBC VALUATION NOTICE") setting forth the Buy/Sell Valuation. If NBC Multimedia
does not provide CNET with a First Valuation Notice in a timely manner in
accordance with this Section 7.5(a), all rights of NBC Multimedia pursuant to
this Section 7.5 with respect to such CNET Veto shall terminate, PROVIDED that
such termination shall not in any way affect and NBC Multimedia shall retain all
rights pursuant to this Section 7.5 with respect to any future CNET Veto. The
First Valuation Notice shall constitute (A) an irrevocable offer by each of the
NBC Holders to sell to CNET (x) all the NBC Holders' Interests, at a purchase
price per Unit equal to the NBC Buy/Sell Valuation Price, (y) the NBC Option (if
not previously exercised in full or terminated) for a cash purchase price equal
to the NBC Option Valuation and (z) the NBC Call (if not previously exercised or
terminated) for a cash purchase price equal to the NBC Call Valuation and (B) an
irrevocable offer by NBC Multimedia to purchase all the CNET Holders' Interests
at a cash purchase price per Unit equal to the CNET Buy/Sell Valuation Price.
CNET shall have 30 days from receipt of the NBC Valuation Notice (the "CNET
EXERCISE PERIOD") to provide irrevocable written notice to NBC Multimedia (a
"CNET EXERCISE NOTICE") that it exercises either CNET's right to purchase or the
CNET Holders right to sell as described in (A) or (B) above, as the case may be,
of the preceding sentence and any determination by CNET will be final and
binding on all CNET Holders. If CNET delivers a CNET Exercise Notice, then such
CNET Exercise Notice will, subject to the terms of this Section 7.5, constitute
a binding agreement among the CNET Holders and the NBC Holders to effect the
purchases and sales provided in this Section 7.5. If CNET fails to deliver a
CNET Exercise Notice, then CNET shall be irrevocably deemed to have elected for
each of the CNET Holders to sell their Interests to NBC Multimedia in accordance
with this Section 7.5 and, subject to the terms of this Section 7.5, a binding
agreement will exist among the CNET Holders and the NBC Holders to effect such
purchase and sale.
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(b) For purposes hereof, "BUY/SELL VALUATION" means an aggregate
value for all outstanding Units of the LLC. Based upon the Buy/Sell Valuation,
the NBC Buy/Sell Valuation Price and CNET Buy/Sell Valuation Price will be
determined as follows:
(i) The Buy/Sell Valuation is divided by the number of outstanding
Units to get the "PRELIMINARY BUY/SELL PER UNIT VALUATION." The
Preliminary Buy/Sell Per Unit Valuation is then multiplied (A) by the
number of outstanding Units held by CNET Holders to get the "AGGREGATE CNET
VALUATION" and (B) by the number of outstanding Units held by NBC Holders
to get the "AGGREGATE NBC VALUATION", in each case subject to adjustment in
clauses (ii) and (iii) below."
(ii) If the NBC Option has been previously exercised in full or has
terminated without exercise, then no adjustments are made to account for
the NBC Option. If the NBC Option has not been previously exercised in
full or terminated and the Preliminary Buy/Sell Per Unit Valuation is equal
to or less than the NBC Option exercise price per Unit, then no adjustments
are made to account for the NBC Option. If the NBC Option has not been
previously exercised in full or terminated and the Buy/Sell Per Unit
Valuation determined pursuant to clause (i) above is greater than the NBC
Option exercise price per Unit, then the following adjustments are made:
The Buy/Sell Valuation is increased by an amount equal to the aggregate
exercise price of the unexercised NBC Option (the "OPTION REVISED BUY/SELL
VALUATION"). The Option Revised Buy/Sell Valuation is then divided by the
sum of (x) the number of outstanding Units plus (y) the Units issuable upon
exercise of the NBC Option to get the "OPTION REVISED BUY/SELL PER UNIT
VALUATION." The Option Revised Buy/Sell Per Unit Valuation is then
multiplied (A) by the number of outstanding Units held by CNET Holders to
get the "ADJUSTED AGGREGATE CNET VALUATION" and (B) by the number of
outstanding Units held by the NBC Holders to get the "ADJUSTED AGGREGATE
NBC VALUATION."
(iii) If the NBC Call has been exercised or terminated without
exercise, then no adjustments are made to account for the NBC Call. If the
NBC Call has not been previously exercised or terminated, then the
Aggregate CNET Valuation as determined by clause (i) and adjusted pursuant
to clause (ii) (if applicable) is reduced by an amount equal to the product
of (x) 0.20 multiplied by (y) the Preliminary Buy/Sell Per Unit Valuation
or the Preliminary Option Revised Buy/Sell Per Unit Valuation (as
applicable) multiplied by (z) the number of Call Units.
(iv) For purposes of Section 7.5(a), the "NBC BUY/SELL VALUATION
PRICE" equals the amount obtained by dividing (x) the Aggregate NBC
Valuation (determined in accordance with clause (i) above and as adjusted
pursuant to clause (ii) above (if applicable)) by (y) the number of
outstanding Units held by the NBC Holders.
(v) For purposes of Section 7.5(a), the "CNET BUY/SELL VALUATION
PRICE" equals the amount obtained by dividing (x) the Aggregate CNET
Valuation (determined in
26
accordance with clause (i) above and as adjusted pursuant to clause (ii)
and/or clause (iii) above (if applicable)) by (y) the number of outstanding
Units held by the CNET Holders.
(vi) For purposes of Section 7.5(a), the NBC Option Valuation
equals the sum of (x) the number of Units for which the NBC Option is then
exercisable multiplied by (y) the Option Revised Buy/Sell Per Unit
Valuation MINUS the exercise price per Unit pursuant to the NBC Option.
(vii) For purposes of Section 7.5(a), the NBC Call Valuation equals
the amount, if any, by which the Aggregate CNET Valuation is reduced
pursuant to clause (iii) above.
(c) The closing of any sale of Units and other rights pursuant to
this Section 7.5 shall take place at the principal office of the LLC on the 60th
day after NBC Multimedia's receipt of the CNET Exercise Notice (or, if no CNET
Exercise Notice is delivered, the expiration of the 30 day period for delivering
such CNET Exercise Notice) (the "TRIGGER DATE"), PROVIDED, that all material
orders, consents and approvals of Governmental Authorities legally required for
the closing of such sale shall have been obtained and be in effect. At such
closing, the purchasing Member shall deliver, at its option, either (A) cash or
a certified check or checks in the appropriate amount (unless other
consideration has been mutually agreed upon by the CNET Holders and the NBC
Holders) or (B) common stock as provided below, to the selling Members against
the delivery of a duly executed assignment of the Interest (and, if applicable,
other rights) so purchased. The selling Members shall deliver the Interests
(and, if applicable, the NBC Option and NBC Call) to the purchasing Member free
and clear of all Liens of any nature whatsoever. In lieu of paying cash, NBC
Multimedia or CNET (as applicable) may deliver common stock of such Member or a
parent of such purchasing Member having a value (determined as provided below)
equal to the purchase price, PROVIDED that (1) such common stock is listed on
the Nasdaq Stock Market or another securities exchange at the time of closing
under this Section 7.5(c), (2) the value of such common stock shall be based on
the average closing price of such common stock on the principal exchange on
which such common stock is listed during the forty (40) trading days ending on
the 20th trading day after receipt of the NBC Valuation Notice, (3) promptly
following (but in no event later than 10 days) the closing under this Section
7.5(c), the purchasing Member shall file a shelf registration statement with the
Securities and Exchange Commission to register such shares for resale, shall use
its best efforts to have such registration statement declared effective as soon
as practicable thereafter and at the closing shall enter into a registration
rights agreement with the selling Members with respect to such common stock in
the form of Exhibit 7.4(c) hereto and (4) the party electing to pay in stock
notifies the other in the CNET Exercise Notice (in the case of CNET) or within
five days of the Trigger Date (in the case of NBC Multimedia). Notwithstanding
the foregoing, if the purchase price is going to be paid in common stock and the
issuance of such common stock requires stockholder approval under applicable law
or the rules of the principal stock exchange on which such stock is listed then
(x) provided that the provisions in clause (y) below are satisfied, the closing
of the purchase will be conditioned on obtaining the required stockholder
approval and the closing will not occur until the latter of the date specified
in the first sentence of this Section 7.5(c) or the second Business day after
such stockholder approval is obtained, (y) prior to electing to pay in common
stock the Person issuing the common stock and its Affiliates must obtain
irrevocable proxies approving such issuance from
27
any stockholder that together with his or its Affiliates beneficially owns 10%
or more of the common stock (other than institutional holders who are Schedule
13G filers with respect to the relevant common stock) and at all times the
issuer of the common stock and its Affiliates must use their best efforts to
obtain the required stockholder approval and (z) if such stockholder approval is
not obtained, the other Member (CNET or NBC Multimedia, as applicable) shall
have an option, exercisable by delivering written notice with 30 days of the
relevant stockholder vote, to purchase the Units and any related rights of the
CNET Holders (in the case of NBC Multimedia) or the NBC Holders (in the case of
CNET) based on the initial Buy/Sell Valuation and otherwise on the terms of this
Section 7.5. If CNET is the purchasing entity under this Section 7.5, then at
the closing of the purchase CNET will cause either (A) all outstanding
indebtedness of the LLC that is guaranteed by NBC or its Affiliate to be repaid
and NBC or such Affiliate to be released from all obligations and liabilities
relating thereto or (B) NBC or its Affiliate to otherwise be released from all
obligations and liabilities relating to such guarantees and Indebtedness (and in
either case, NBC will be released from all obligations and liabilities under
Section 6.4(b)).
(d) NBC Multimedia (or its designees on the LLC Board of Managers)
will notify the CNET designees on the Board of Managers at least five days prior
to any vote of the Board of Managers if NBC Multimedia believes a CNET Veto will
cause it to deliver a First NBC Notice, PROVIDED that such notice will not
obligate NBC Multimedia to actually deliver a First NBC Notice.
7.6 TAG-ALONG RIGHTS. (a) With respect to any proposed Transfer of LLC
Interests by a CNET Holder or a NBC Holder pursuant to clause (iii) or (iv) of
Section 7.1(c) or clause (iii) of Section 7.1(d) prior to an Initial Public
Offering, the Member proposing such Transfer (the "TRANSFERRING MEMBER") shall
have the obligation, and each CNET Holder, if the Transferring Member is a NBC
Holder, or each NBC Holder if the Transferring Member is a CNET Holder (the
"OTHER MEMBERS"), who is not then in breach of this Agreement, shall have the
right, to require the proposed transferee to purchase from each such Other
Members number of Units equal to the product (rounded to the nearest whole
number) of (x) the Adjusted Percentage Interest of such Other Member and (y) the
number of Units proposed to be sold in the contemplated sale, and at the same
price per Unit and upon the same terms and conditions as to be paid and given to
the Transferring Members, PROVIDED that in order to be entitled to exercise
their right to sell Unit to the proposed transferee pursuant to this Section
7.6, the Other Members must agree to make substantially the same
representations, warranties, covenants and indemnities and other similar
agreements as the Transferring Members agree to make in connection with the
proposed transfer of Units of the Transferring Members. Each Transferring
Member shall give notice to the Other Members of each proposed Transfer giving
rise to the rights of the Other Members set forth in the first sentence of this
Section 7.6 at least 20 days prior to the proposed consummation of such
Transfer, setting forth the name of the Transferring Member, the number of Units
proposed to be so transferred, the name and address of the proposed transferee,
the proposed amount of consideration therefor and terms and conditions agreed to
by the proposed transferee, the number of Units each Other Member may sell to
such proposed transferee (in accordance with the first sentence of this Section
7.6), and a representation that the proposed transferee has been informed of the
"tag-along" rights provided for in this Section 7.6 and has agreed to purchase
Units in accordance with the terms hereof. The tag-along rights provided by
28
this Section 7.6 must be exercised by an Other Member within 15 days following
receipt of the notice required by the preceding sentence, by delivery of a
written irrevocable notice to the Transferring Members indicating such other
Member's exercise of its rights and specifying the amount of Units (up to the
maximum amount of Units owned by such Other Member required to be purchased by
the proposed transferee pursuant to the first sentence of this Section 7.6) it
desires to sell. The Transferring Members shall be entitled under this Section
7.6 to transfer to the proposed transferee the amount of Units equal to the
difference between the number referred to in clause (b) above and the aggregate
amount of Units set forth in the written notices, if any, delivered by the Other
Members pursuant to the preceding sentence. If the proposed transferee fails to
purchase Units from any Other Member that has properly exercised its tag-along
rights, then the Transferring Members shall not be permitted to make the
proposed Transfer, and any such attempted Transfer shall be void and of no
effect.
(b) If the Other Members exercise their rights under Section
7.7(a), the closing of the purchase of the Units with respect to which such
rights have been exercised shall take place concurrently with the closing of the
sale of the Transferring Member's LLC Interests.
7.7 DRAG ALONG RIGHTS. If at any time (x) after the exercise in full or
termination of the NBC Option and (y) prior to an Initial Public Offering, one
or more Members (the "MAJORITY MEMBERS") enter into an agreement to consummate a
transaction constituting a sale of all of their Units to a Person other than
CNET, NBC or any of their respective Affiliates and the Units to be sold by such
Majority Members constitute a majority of the outstanding Units (a "THIRD-PARTY
SALE"), then upon the written demand of the Majority Members, the remaining
Members shall agree to sell their Units in the Third Party Sale on the same
terms and conditions as agreed to by the Majority Members, and each Member shall
consent to and raise no objections to the proposed transaction and will take all
other actions necessary or desirable to cause the consummation of such
Third-Party Sale on the terms proposed by the Majority Members. Such actions
shall include voting all LLC Interests in favor of any action of the LLC
relating to such Third-Party Sale.
7.8 CONVERSION TO CORPORATE FORM. (a) In the event that the Board of
Managers shall determine, subject to Section 6.3, that the business of the LLC
should be conducted in the form of a corporation rather than a limited liability
company so that an Initial Public Offering can occur, the Managers shall have
the power, subject to Section 6.3, to incorporate the LLC or take such other
action as it may deem advisable in light of such changed conditions, including,
without limitation, creating one or more subsidiaries of the LLC and
contributing to such subsidiaries any or all of the assets and liabilities of
the LLC and distributing the capital stock of such subsidiary or subsidiaries
pro rata to the Members. In connection with any such incorporation of the LLC,
the Members shall receive, in exchange for their Interests and related Units,
shares of capital stock of such corporation or its subsidiaries having the same
relative economic interest in such corporation or subsidiaries as is set forth
in this Agreement as among the holders of Interests in such LLC, subject in each
case to modifications to the provisions of Section 6.1 to conform to the
provisions relating to actions of shareholders and a board of directors set
forth in the Delaware General Corporation Law, and which shares of capital stock
will be subject to the NBC Option and NBC Call as provided in Sections 7.3 and
7.4 hereof. At the time of such conversion, the Members
29
shall enter into a mutually acceptable shareholders agreement providing for (i)
rights of approval over actions by the board of directors substantially
equivalent to the rights of approval over actions of the Managers set forth in
Sections 6.1, 6.2 and 6.3 hereof and (ii) restrictions on transfer and rights
with respect to the NBC Option, NBC Call, sale in the event of exercise of a
CNET Veto, right of first refusal, tag-along and drag-along rights set forth in
Sections 7.1 through 7.8 hereof; provided that such restrictions shall not apply
to sales in broadly disseminated public offerings subject to registration rights
pursuant to the registration rights agreement referred to in Section 7.9(b)
hereof.
(b) Prior to taking such action to incorporate the LLC, the
Managers shall submit to the Members, and the Members agree to approve in the
form approved by the Board of Managers, subject to Section 6.3, the proposed
forms of a certificate or articles of incorporation, by-laws, stockholders'
agreement and any other governing documents proposed to be established for such
corporation and its subsidiaries, if any. In addition, each of the Members
agrees to take all action necessary with respect to their Units and Interests in
order to approve any conversion to corporate form in accordance with this
Section 7.8. Upon conversion to corporate form, the corporate successor to the
LLC shall enter into a registration rights agreement with each of the Members
with respect to the equity securities of such corporate successor substantially
in the form of Exhibit 7.9(b).
ARTICLE VIII.
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
8.1 BOOKS AND RECORDS; AUDIT. (a) The LLC shall cause books and
records of the LLC to be maintained in accordance with generally accepted
accounting principles, and shall give reports to the Members in accordance with
prudent business practices and the Statute. There shall be kept at the
principal office of the LLC, as well as at the office of record of the LLC, if
different, all information required to be maintained by the LLC pursuant to the
Statute.
(b) Each Member that, together with its Affiliates, owns at least
5% of the outstanding Units (a "5% MEMBER") shall have the right upon reasonable
request, for purposes reasonably related to the interest of that 5% Member, to
inspect and copy during normal business hours any of the LLC books, records and
reports required to be maintained in accordance with Section 8.1(a). Such right
may be exercised by the 5% Member, or by that 5% Member's agent or attorney.
The determination of the Managers as to adjustments to the financial reports,
books, records and returns of the LLC, in the absence of fraud or negligence,
shall be final and binding upon the LLC and all of the Members.
8.2 ACCOUNTING. (a) Within 60 days after the end of each fiscal
quarter and within 120 days after the close of each Fiscal Year of the LLC, the
LLC shall cause to be prepared and submitted to each Member (i) the balance
sheet as of the end of such period and a statement of income or loss and a
statement of cash flows for such period and (ii) in the case of any Fiscal Year,
an opinion of a nationally recognized accounting firm based upon their audit of
the financial
30
statements referred to in the preceding clause (i). Within 120 days after the
end of each Fiscal Year, the LLC shall provide to the Members all information
necessary for them to complete federal and state income tax returns.
(b) For financial reporting purposes, the books and records of the
LLC shall be kept on the accrual method of accounting applied in a consistent
manner and shall reflect all transactions of the LLC and be appropriate and
adequate for the purposes of the LLC.
(c) To the extent permitted by the Code, the Regulations or other
applicable law and regulations, the LLC may elect to use a method of accounting
that permits accelerated deductions.
(d) In case of a Transfer of all or part of the Interest of any
Member, the LLC may elect, pursuant to Section 734, 743 and 754 of the Code to
adjust the basis of the assets of the LLC.
8.3 BANK ACCOUNTS. The bank accounts of the LLC shall be maintained in
such banking institutions as the Managers or the authorized Officers shall
determine.
8.4 TAX MATTERS. (a) NBC Multimedia shall be designated as "Tax
Matters Partner" (as defined in Code section 6231) (the "TAX MATTERS PARTNER"),
to represent the LLC (at the LLC's expense) in connection with all examination
of the LLC's affairs by tax authorities, including resulting judicial and
administrative proceedings, and to expend LLC funds for professional services
and costs associated therewith. In its capacity as Tax Matters Partner, the
designated Person shall oversee the LLC tax affairs in the overall best
interests of the LLC as he may reasonably determine.
(b) The Tax Matters Partner on behalf of the LLC may make all
elections for federal income tax purposes.
(c) The Members are aware of the income tax consequences of the
allocations made by this Agreement and hereby agrees to be bound by the
provisions of this Section 8.4 in reporting their shares of the LLC income and
loss for income tax purposes.
ARTICLE IX.
TERMINATION AND DISSOLUTION
9.1 DISSOLUTION. (a) The LLC shall be dissolved upon the occurrence
of:
(i) the determination of the Board of Managers, to dissolve the
LLC; or
(ii) the written approval to dissolve the LLC by Members holding a
majority of the outstanding Units, PROVIDED that (a) for as long as CNET
and its Permitted Transferees
31
hold in the aggregate at least 5% of the outstanding Units the approval of
CNET will also be required and (b) for as long as NBC Multimedia and its
Permitted Transferees hold in the aggregate at least 5% of the outstanding
Units the approval of NBC Interactive will also be required, in each case
subject to Section 6.3.
(b) The withdrawal, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of any other event which terminated
the Member's continued membership in the LLC shall not result in the dissolution
of the LLC.
(c) As soon as possible after the occurrence of any of the events
specified in Section 9.1(a) above, the LLC shall make any filings required by
the Statute and shall cease to carry on its business, except insofar as may be
necessary for the winding-up of its business, but the LLC's separate existence
shall continue until the certificate of cancellation of the Certificate of
Formation has been filed with the Secretary of State or until a decree
dissolving the LLC has been entered by a court of competent jurisdiction.
9.2 DISTRIBUTION OF NET PROCEEDS. During the winding-up period, the
Members shall continue to divide Net Profits and Losses and Available Cash Flow
in the same manner and the same priorities as provided for in Articles IV and V
hereof. The proceeds from the liquidation of Property shall be applied in the
following order:
(a) To the payment of creditors (including expenses of winding up
and payments to any present or former Members who have made loans or advances to
the LLC) in the order of priority as provided by law;
(b) To the Members in accordance with the positive balance in
their respective Capital Accounts after adjustments for all allocations of Net
Profits and Net Loss during the Fiscal Year in which dissolution of the LLC
occurs. Notwithstanding the provisions of Section 4.1 of the Agreement, Net
Profits and Net Loss of the LLC resulting from the sale or other disposition of
all or substantially all of the LLC assets or otherwise associated with the
liquidation of the LLC shall be allocated in a manner designed, to the extent
possible, to cause the Capital Account balance of each Member to equal the
amount that would be distributed to such Member if all of the LLC Assets were
distributed to the Members in accordance with their respective Percentage
Interests at the time of the distribution.
9.3 DISTRIBUTION OF PROPERTY. Distributions of LLC assets other than cash
pursuant to Section 9.2 shall be treated as a distribution of cash equal to the
fair market value of the Property as of the date of distribution, less any
liabilities to which the Property is subject or which the distributee Member
assumes upon distribution. Capital Accounts will be credited with a deemed
allocable share of gain or loss upon distribution pursuant to Section 4.1
hereof. The amount of the deemed gain shall equal the difference between the
fair market value of the Property distributed and the adjusted tax basis of the
Property as determined for federal income tax purposes.
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ARTICLE X.
INDEMNIFICATION
10.1 INDEMNIFICATION OF THE MEMBERS. The LLC shall indemnify and hold
harmless the Managers, the Officers, the Members, their Affiliates and their
respective officers, directors, employees and agents and the heirs, executors,
successors and assigns of each of the foregoing (individually, an "INDEMNITEE")
from and against any and all losses, claims, demands, costs, damages,
liabilities, joint and several, expenses of any nature (including reasonable
attorneys' fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which the
Indemnitee was involved or may be involved, or threatened to be involved, as a
party or otherwise, arising out of or in connection with the business of the
LLC, regardless of whether the Indemnitee continues to be an Officer, a Member,
an Affiliate, or an officer, director, employee or agent of the Member at the
time any such liability or expense is paid or incurred, to the fullest extent
permitted by the Statute and all other applicable laws; PROVIDED, that an
Indemnitee shall be entitled to indemnification hereunder only to the extent
that such Indemnitee's conduct did not constitute bad faith, willful misconduct,
gross negligence or a material breach of this Agreement. The termination of any
proceeding by settlement, judgment, order, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent shall not, of itself, create a presumption that
such Indemnitee's conduct constituted bad faith, willful misconduct, gross
negligence or a material breach of this Agreement. The right of any Indemnitee
to the indemnification provided herein shall be cumulative of, and in addition
to, any and all rights to which such Indemnitee may otherwise be entitled by
contract or as a matter of law or equity and shall extend to such Indemnitee's
successors, assigns and legal representatives. The provisions of this Article X
shall in no way alter, amend or limit the indemnification obligations of the
Members under the Contribution Agreement, including without limitation the
obligations of CNET with respect to "Retained Liabilities" as defined in the
Contribution Agreement, and to the extent that a Member is obligated under the
Contribution Agreement to provide any indemnification for any "Losses and
Expenses" (as defined in the Contribution Agreement), any indemnity of such
Member under this Article X with respect to such "Losses and Expenses" shall not
apply.
10.2 EXPENSES. Expenses incurred by an Indemnitee in defending any
claim, demand, action, suit or proceeding subject to Section 10.1 shall, from
time to time, be advanced by the LLC prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the LLC of an
undertaking reasonably acceptable in form and substance to the Board of Managers
by or on behalf of the Indemnitee to repay such amount if it shall be determined
that such Person is not entitled to be indemnified as authorized in Section
10.1.
10.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE. The Indemnification provided
by Section 10.1 shall be in addition to any other rights to which those
indemnified may be entitled under any agreement, vote of the Members holding
Interests, as a matter of law or equity or otherwise, both as to action in the
Indemnitee's capacity as a Member, as an Affiliate or as an officer, director,
employee or agent of a Member and as to any action in another capacity, and
shall continue as to
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an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
10.4 ERRORS AND OMISSIONS INSURANCE. The LLC may purchase and maintain
insurance, at the LLC's expenses, on behalf of the Members and such other
Persons as the Managers or the authorized Officers shall determine, against any
liability that may be asserted against, or any expense that may be incurred by,
such Person in connection with the activities of the LLC and/or the Members'
acts or omissions as the Members of the LLC regardless of whether the LLC would
have the power to indemnify such Person against such liability under the
provisions of this Agreement.
10.5 ASSETS OF THE LLC. Any indemnification under Section 10.1 shall be
satisfied solely out of the assets of the LLC. No Member shall be subject to
personal liability or required to fund or cause to be funded any obligation by
reason of these indemnification provisions.
ARTICLE XI.
[RESERVED]
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1 INTEGRATION; AMENDMENTS. This Agreement contains the entire
agreement of the Members, and supersedes all prior written and oral agreement's
understandings and negotiations, with regard to the matters contained herein.
12.2 AMENDMENTS. Subject to Section 6.3 (b), this Agreement may be
adopted, altered, amended or repealed and a new limited liability company
agreement may be adopted by the Members who hold, in the aggregate, a majority
of the outstanding Units, provided that the last sentence of Section 5.1 and
Sections 3.4, 6.5(b), 7.3, 7.4, 7.5, 7.7, and 7.8 and this Section 12.2 cannot
be altered, amended or repealed without the written consent of both NBC
Multimedia and CNET and PROVIDED FURTHER that (a) for as long as CNET and its
Permitted Transferees hold in the aggregate at least 5% of the outstanding Units
the approval of CNET will also be required for the amendment of any other
Section and (b) for as long as NBC Multimedia and its Permitted Transferees hold
in the aggregate at least 5% of the outstanding Units the approval of NBC
Multimedia will also be required for the amendment of any other Section.
12.3 SURVIVAL; BINDING EFFECT. Each Member's respective rights and
obligations hereunder may not be assigned, transferred, pledged, or encumbered,
in any manner, direct or indirect, contingent or otherwise, in whole or in part,
voluntarily, without the prior written consent of the other Members, except to
their Affiliates, PROVIDED that no such assignment will relieve the assigning
party of any of its obligations hereunder, and PROVIDED FURTHER that the
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foregoing restriction shall not apply to any assignment by operation of law to
any successor Person in any merger or consolidation. This Agreement shall be
binding upon, and inure to the benefit of, all the parties and their respective
successors, legal representatives and assigns permitted in accordance with this
Section 12.3.
12.4 SEVERABILITY. In the event any Section, or any sentence within any
Section, is declared by a court of competent jurisdiction to be void or
unenforceable, such sentence or Section shall be deemed severed from the
remainder of this Agreement and the balance of this Agreement shall remain in
full force and effect.
12.5 NOTIFICATION OR NOTICES. Except for notices to be given under
Article VI for purposes of meetings of Members, any notice in connection with
this Agreement shall be in writing and shall be delivered by air courier or by
facsimile at the addresses or facsimile numbers given below. If notice is given
by: (a) air courier, notice shall be deemed given when recorded on the records
on the air courier as received by the receiving party; or (b) facsimile, notice
shall be deemed given upon transmission, if on a business day and during
business hours in the country of receipt; otherwise, notice shall be deemed to
have been given at 9:00 A.M. on the next Business Day in the country of receipt.
If to NBC:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn.: Marty Yudkovitz, President Interactive Media
Facsimile: (212) 664-5561
with a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn.: Richard Cotton, Executive Vice President & General Counsel
Facsimile: (212) 664-2648
If to CNET:
CNET, Inc.
150 Chestnut Street
San Francisco, CA 94111
Attention: President
Facsimile: 415-395-9330
With a copy to:
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Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: Jon L. Mosle, III
Facsimile: 214-939-5849
If to any other Member, to the address set forth for such Member on the
books and records of the LLC.
12.6 SECTION HEADINGS. The captions of the Articles or Sections in this
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any of the provisions hereof, shall not be
deemed part of this Agreement and shall not be used in construing or
interpreting this Agreement.
12.7 GOVERNING LAW; SUBMISSION TO JURISDICTION: WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND ALL COLLATERAL MATTERS RELATING HERETO SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(b) Each of the parties hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this agreement, to the non-exclusive general
jurisdiction of the Courts of the State of New York in New York County, the
Courts of the United States of America for the Southern District of New
York in New York County, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same to the extent permitted by applicable law;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the party, as the case may be, at its address set forth in
Section 9.1 or at such other address of which the other party shall have
been notified pursuant thereto;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction for recognition and enforcement of
any judgment or if jurisdiction in the courts referenced in paragraph (i)
hereof is not available despite the intentions of the parties hereto; and
36
(v) waives trial by jury in any litigation in any court with
respect to, in connection with, or arising out of this Agreement, or any
Implementing Agreement, or any other instrument or document delivered
pursuant hereto, or any other claim or dispute howsoever arising, to which
the parties are party. This waiver is informed and freely made.
12.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
12.9 FURTHER ACTIONS. Each of the Members agrees to execute,
acknowledge and deliver such additional documents, and take such further
actions, as may reasonably be required from time to time to carry out each of
the provisions, and the intent, of this Agreement, and every agreement or
document relating hereto, or entered into in connection herewith.
12.10 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
12.11 PARTITION. The Members agree that the Property that the LLC may
own or have an interest in is not suitable for partition. Each of the Members
hereby irrevocably waives any and all rights that it may have to maintain any
action for partition of any Property the LLC may at any time have an interest
in.
12.12 THIRD PARTY BENEFICIARIES. There are no third party beneficiaries
of this Agreement except any Persons as may be entitled to the benefits of
Section 10.1 hereof.
12.13 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one Agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
are not signatories to the original or the same counterpart.
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IN WITNESS WHEREOF, the parties hereto have hereunto executed this
Agreement as of the date first written above.
NBC MULTIMEDIA, INC.
By /s/ Martin Yudkovitz
----------------------------
Name: Martin Yudkovitz
Title: President
CNET, INC.
By /s/ Shelby Bonnie
----------------------------
Name: Shelby Bonnie
Title: Chief Operating Officer and
Executive Vice President
EXHIBITS
Exhibit 1.1 Outstanding Units
Exhibit 6.4(a) Initial Budget
Exhibit 7.4(c) Registration Rights Agreement
Exhibit 7.9(b) Registration Rights Agreement
SCHEDULES
Schedule 6.4(b) Terms of Guaranteed Indebtedness
1