EXHIBIT 10.27
CONFIDENTIAL TREATMENT REQUEST SUBMITTED:
THE PORTIONS OF THIS DOCUMENT MARKED BY "***" HAVE BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
EXECUTION VERSION
AMENDED AND RESTATED OPERATING AGREEMENT
OF
LMI/SUMISHO SUPER MEDIA, LLC
NOVEMBER 26, 2004
THE UNITS IN THIS LIMITED LIABILITY COMPANY HAVE NOT BEEN REGISTERED WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION OR STATE SECURITIES AUTHORITIES AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE MANAGEMENT COMMITTEE
THAT REGISTRATION IS NOT REQUIRED. THE SALE OR OTHER TRANSFER OF THE UNITS IS
ALSO RESTRICTED BY CERTAIN PROVISIONS IN THIS AGREEMENT.
TABLE OF CONTENTS
PAGE NO.
--------
ARTICLE 1: FORMATION AND DEFINITIONS...................................................... 1
1.1 Formation..................................................................... 1
1.2 Name.......................................................................... 1
1.3 Members....................................................................... 1
1.4 Units; Percentage Interests................................................... 1
1.5 Principal Office; Registered Office and Agent................................. 1
1.6 Foreign Qualification......................................................... 2
1.7 Term.......................................................................... 2
1.8 Effective Date; Amendment and Restatement..................................... 2
1.9 Definitions................................................................... 2
ARTICLE 2: PURPOSES AND POWERS............................................................ 15
2.1 Purpose....................................................................... 15
2.2 Other Purposes................................................................ 15
2.3 Powers........................................................................ 15
ARTICLE 3: CAPITAL OF THE COMPANY......................................................... 15
3.1 Initial Contributions/JCOM Shareholder Agreements............................. 15
3.2 Additional Capital Contributions.............................................. 16
3.3 Capital Accounts.............................................................. 19
3.4 Loans by Members.............................................................. 20
3.5 Transfer...................................................................... 20
3.6 Adjustments................................................................... 20
3.7 Market Value Adjustments...................................................... 21
3.8 No Withdrawal of Capital...................................................... 21
3.9 No Interest on Capital........................................................ 21
3.10 Adjustment to Number of Units Outstanding..................................... 21
ARTICLE 4: ALLOCATION OF NET INCOME AND NET LOSSES........................................ 21
4.1 Allocation of Net Income and Net Loss......................................... 21
4.2 Qualified Income Offset....................................................... 21
4.3 Limit on Loss Allocations..................................................... 22
4.4 Compliance with Code.......................................................... 22
4.5 Tax Allocations -- Section 704(c)............................................. 22
4.6 Allocation on Transfer........................................................ 22
ARTICLE 5: DISTRIBUTIONS.................................................................. 22
5.1 Distributions Generally....................................................... 22
5.2 Payment....................................................................... 23
5.3 Withholding................................................................... 23
5.4 Distribution Limitation....................................................... 23
ARTICLE 6: MANAGEMENT..................................................................... 24
6.1 Management.................................................................... 24
6.2 Management Committee Composition; Appointment and Removal of Managers......... 24
6.3 Management Committee Decisions................................................ 25
6.4 Authorized Representatives.................................................... 25
i
6.5 JCOM Governance............................................................... 26
ARTICLE 7: PROCEDURAL REQUIREMENTS -- MEETINGS OF MEMBERS AND THE MANAGEMENT COMMITTEE.... 26
7.1 Management Committee Meetings................................................. 26
7.2 Member Voting Rights; Member Meetings......................................... 27
7.3 Place......................................................................... 27
7.4 Notice........................................................................ 27
7.5 Waiver of Notice.............................................................. 27
7.6 Record Date................................................................... 27
7.7 Quorum; Manner of Acting...................................................... 27
7.8 Proxies....................................................................... 28
7.9 Meetings by Telephone or Video................................................ 28
7.10 Action Without a Meeting...................................................... 28
7.11 Minutes of Meetings........................................................... 28
ARTICLE 8: LIABILITY OF MEMBERS AND MANAGERS.............................................. 28
8.1 Limited Liability............................................................. 28
8.2 Capital Contribution.......................................................... 29
8.3 Capital Return................................................................ 29
8.4 Reliance...................................................................... 29
ARTICLE 9: EXCULPATION AND INDEMNIFICATION OF MANAGERS AND AUTHORIZED REPRESENTATIVES..... 29
9.1 Standard of Care.............................................................. 29
9.2 Exculpation................................................................... 29
9.3 Indemnification............................................................... 29
9.4 Expense Advancement........................................................... 30
9.5 Insurance..................................................................... 30
9.6 Indemnification of Others..................................................... 30
9.7 Rights Not Exclusive.......................................................... 30
ARTICLE 10: ACCOUNTING AND REPORTING...................................................... 30
10.1 Fiscal Year................................................................... 30
10.2 Tax Accounting Method......................................................... 30
10.3 Tax Classification and Elections.............................................. 31
10.4 Returns....................................................................... 31
10.5 Reports; Annual Financial Statements; Regulatory Reporting Obligations........ 31
10.6 Books and Records............................................................. 32
10.7 Information................................................................... 33
10.8 Banking....................................................................... 33
10.9 Tax Matters Partner........................................................... 33
10.10 No Partnership................................................................ 34
ARTICLE 11: DISSOLUTION................................................................... 34
11.1 Dissolution................................................................... 34
11.2 Events of Withdrawal.......................................................... 35
11.3 Continuation.................................................................. 35
ARTICLE 12: LIQUIDATION................................................................... 36
12.1 Liquidation................................................................... 36
12.2 Tax Termination............................................................... 36
ii
12.3 Priority of Payment........................................................... 37
12.4 Liquidating Distributions..................................................... 37
12.5 No Restoration Obligation..................................................... 38
12.6 Liquidating Reports........................................................... 38
12.7 Certificate of Cancellation................................................... 38
ARTICLE 13: TRANSFER RESTRICTIONS......................................................... 38
13.1 General Restriction........................................................... 38
13.2 Permitted Transferee.......................................................... 38
13.3 General Conditions on Transfers............................................... 38
13.4 Transfer or Redemption of Units............................................... 40
13.5 Procedures for Transfer or Redemption of Units................................ 42
13.6 Rights of Transferees......................................................... 44
13.7 Security Interest............................................................. 44
ARTICLE 14: COVENANTS..................................................................... 44
14.1 Confidentiality............................................................... 44
14.2 Consolidation Cooperation..................................................... 45
14.3 Form of the Company........................................................... 45
14.4 Participation Right........................................................... 46
ARTICLE 15: DISPUTES...................................................................... 47
15.1 Resolution by the Parties..................................................... 47
15.2 Resolution by Arbitration..................................................... 47
15.3 Waiver of Immunities.......................................................... 47
ARTICLE 16: GENERAL PROVISIONS............................................................ 47
16.1 Representations............................................................... 47
16.2 Unregistered Interests........................................................ 48
16.3 Waiver of Dissolution Rights.................................................. 48
16.4 Xxxxxxx and Consents Generally................................................ 48
16.5 Equitable Relief.............................................................. 49
16.6 Remedies for Breach........................................................... 49
16.7 Limitation of Liability....................................................... 49
16.8 Amendments.................................................................... 49
16.9 Third-Party Rights............................................................ 49
16.10 Counterparts.................................................................. 49
16.11 Notice........................................................................ 49
16.12 Partial Invalidity............................................................ 50
16.13 Costs......................................................................... 50
16.14 Entire Agreement.............................................................. 50
16.15 Benefit....................................................................... 50
16.16 Binding Effect................................................................ 50
16.17 Further Assurances............................................................ 50
16.18 Headings...................................................................... 50
16.19 Terms......................................................................... 50
16.20 Governing Law................................................................. 51
16.21 English Language.............................................................. 51
16.22 LMI Guarantee................................................................. 51
16.23 Registration Rights Agreement................................................. 51
iii
AMENDED AND RESTATED OPERATING AGREEMENT
OF
LMI/SUMISHO SUPER MEDIA, LLC
This AMENDED AND RESTATED OPERATING AGREEMENT is entered into this 26th day of
November, 2004, to be effective as of the Effective Date, by and among Liberty
Japan, Inc., a corporation formed under the laws of the State of Delaware
("LJI"), Liberty Japan II, Inc., a corporation formed under the laws of the
State of Delaware ("LJII"), LMI Holdings Japan, LLC, a limited liability company
formed under the laws of the State of Delaware ("LHJ"), Liberty Kanto, Inc., a
corporation formed under the laws of the State of Delaware ("Liberty Kanto"),
Liberty Jupiter, Inc., a corporation formed under the laws of the State of
Delaware ("Liberty Jupiter"), and Sumitomo Corporation, a corporation formed
under the laws of Japan ("SC"), such parties being all of the Members as of the
Effective Date of LMI/Sumisho Super Media, LLC, a limited liability company
formed under the laws of the State of Delaware (the "Company") and, solely with
respect to 3.1(c), 3.1(d) and 16.22 hereof, Liberty Media International, Inc., a
corporation formed under the laws of the State of Delaware ("LMI").
In consideration of the mutual promises and obligations contained in this
Agreement, and with the intent of being legally bound, the parties agree as
follows:
ARTICLE 1: FORMATION AND DEFINITIONS
1.1 FORMATION. The Company was originally formed on July 16, 2002, as Liberty
Netherlands, Inc., a corporation formed under the laws of the State of Delaware
and changed its name to Liberty Japan IV, Inc. on April 2, 2003. The Company
converted from a corporation into a limited liability company formed under the
laws of the State of Delaware and called LMI Japan IV, LLC pursuant to a
Certificate of Conversion and the Certificate, each of which were filed on July
19, 2004 with the Delaware Secretary of State pursuant to the Act. The Company
changed its name to LMI/Sumisho Super Media, LLC pursuant to a Certificate of
Amendment to the Certificate which was filed on October 20, 2004 with the
Delaware Secretary of State pursuant to the Act.
1.2 NAME. The name of the Company is LMI/Sumisho Super Media, LLC in English;
provided that the Company will be referred to in Japanese as Sumisho/LMI Super
Media, LLC. The business of the Company will be conducted under such names, as
well as any other name or names as the Company may from time to time determine.
1.3 MEMBERS. The address of the Company and of each Member of the Company as of
the date of this Agreement is set forth on the attached EXHIBIT A.
1.4 UNITS; PERCENTAGE INTERESTS. The Units held by, and the Percentage Interests
of, each Member as of the Effective Date are set forth on the attached EXHIBIT
B.
1.5 PRINCIPAL OFFICE; REGISTERED OFFICE AND AGENT. The principal office of the
Company is located at 00000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxx, 00000, or at
such other place as the Management Committee may from time to time designate.
The Company may conduct business
at such additional places as the Management Committee deems advisable. The
registered office of the Company in Delaware is located at 0000 Xxxxxxxxxxx
Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx, and its registered agent is The
Xxxxxxxx-Xxxx Corporation System, Inc. The Company may change its registered
office or registered agent in Delaware in accordance with the Act. The Company
will instruct JCOM to send any information provided to the Company in its
capacity as a shareholder of JCOM to both the Company's principal office and to
the Company c/o SC Member at the address for SC Member set forth on EXHIBIT A.
1.6 FOREIGN QUALIFICATION. The Company will apply for any required certificate
of authority to do business in any other state or jurisdiction, as required or
appropriate and will file such other certificates and instruments as may be
required or appropriate from time to time in connection with its formation,
existence and operation.
1.7 TERM. The Company became effective as a limited liability company on the
date its Certificate was filed with the Delaware Secretary of State and will
continue in effect, unless and until a Dissolution occurs and the Certificate is
cancelled in accordance with the Act.
1.8 EFFECTIVE DATE; AMENDMENT AND RESTATEMENT. This Agreement will become
effective on the Effective Date and as of such date, amends and restates in its
entirety the operating agreement of the Company dated July 16, 2004, as amended.
Except with respect to the foregoing provision that this Agreement will become
effective on the Effective Date, this Agreement is of no force or effect unless
and until the Effective Date occurs.
1.9 DEFINITIONS. The following terms used in this Agreement have the
corresponding meanings set forth below.
Acquired Units: as defined in 13.4(b)(ii).
Act: the Delaware Limited Liability
Company Act, as amended from time to
time.
Additional Contribution: as defined in 3.2(a).
Additional Contribution Notice: as defined in 3.2(a).
Adjusted Capital Account Deficit: with respect to any Member, the
deficit balance, if any, in such
Member's Capital Account as of the
end of the relevant taxable year,
after crediting to such Capital
Account any amounts which such
Member is obligated to restore to
the Company upon liquidation of such
Member's interest in the Company and
debiting to such Capital Account the
items described
in Section 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
Adjustment Transaction: as defined in 3.10.
2
Affiliate: with respect to a Person, any other
Person that directly or indirectly
Controls, is Controlled by, or is
under common Control with, such
Person; provided, that for purposes
of 14.4, "Affiliate" includes only
any other Person that directly or
indirectly is Controlled by such
Person and the common stock of which
is not publicly-traded.
Agreement: this Amended and Restated Operating
Agreement, also known as a limited
liability company agreement under
the Act, as amended from time to
time.
Assuming Member: as defined in 12.4.
Authorized Representatives: as defined in 6.4.
Bankruptcy: a Person will be deemed bankrupt if:
(a) any proceeding is commenced
against such Person as "debtor" for
any relief under bankruptcy or
insolvency laws, or laws relating to
the relief of debtors,
reorganizations, civil
rehabilitations, arrangements,
compositions, or extensions, or such
Person becomes subject to procedures
for provisional or final attachment
in respect of all or a material
portion of its assets, and (i) such
proceeding is not dismissed or
stayed within 120 days after such
proceeding has commenced, or (ii) an
order for relief against such Person
is granted, or (b) such Person
commences any proceeding for relief
under bankruptcy or insolvency laws
or laws relating to the relief of
debtors, reorganizations, civil
rehabilitations, arrangements,
compositions, or extensions.
Book Value: with respect to any asset, the
asset's adjusted basis for U.S.
federal income tax purposes, except
as follows:
(a) the initial Book Value of any
asset contributed (or deemed
contributed under Section
1.708-1(b)(4) of the Regulations) by
a Member to the Company will be the
asset's Fair Market Value at the
time of the contribution;
(b) the Book Value of all Company
assets will be adjusted to equal
their respective Fair Market Values:
(i) as of (A) the acquisition of an
additional interest in the Company
by any new or existing Member in
exchange for more than a de minimis
Capital Contribution, or (B) the
distribution by the Company to a
Member of more than a de minimis
amount of Company property as
consideration for an interest in the
Company; and (ii) as of the
liquidation of the
3
Company within the meaning of
Regulations Section
1.704-1(b)(2)(ii)(g);
(c) the Book Value of any Company
asset distributed to any Member will
be the Fair Market Value of the
asset on the date of distribution;
and
(d) the Book Values of Company
assets will be increased or
decreased to reflect any adjustment
to the adjusted basis of the assets
under Code Sections 734(b) or
743(b), but only to the extent that
the adjustment is taken into account
in determining Capital Accounts
under Regulations Section
1.704-1(b)(2)(iv)(m), but Book
Values will not be adjusted pursuant
to this provision to the extent that
the Management Committee determines
that an adjustment under clause (b)
is necessary or appropriate in
connection with a transaction that
would otherwise result in an
adjustment under this clause (d).
After the Book Value of any asset
has been adjusted under clause (a),
clause (b) or clause (d) above, Book
Value will be adjusted by the
Depreciation taken into account with
respect to the asset for purposes of
computing Net Income and Net Loss.
Broadband Business: a business that owns, leases or
operates, or proposes to own, lease
or operate, a wireline broadband
distribution service to deliver
primarily video services.
Business Day: a day other than a Saturday or
Sunday on which banks are open for
business both in New York, New York
and Tokyo, Japan, it being agreed
that with respect to an action to be
taken by a party within a certain
number of Business Days after its
receipt of a specified Notice,
Business Days will mean Business
Days in Japan in the case of SC
Member and will mean Business Days
in the U.S. in the case of LMI
Member.
Capital Account: the capital account of a Member
established and maintained in
accordance with 3.3.
Capital Contribution: any contribution of money or
property by a Member to the Company.
Casting Vote Effective Date: the date on which JASDAQ makes a
public announcement that it has
approved JCOM's application to list
the JCOM Shares on JASDAQ, which
date is anticipated to occur on or
after January 6, 2005.
4
Certificate: the Certificate of Formation of the
Company, as amended from time to
time.
Chairman: as defined in 6.2.
Code: the U.S. Internal Revenue Code of
1986, as amended from time to time
(including corresponding provisions
of any subsequent revenue laws).
Commercially Reasonable Efforts: reasonable efforts made by any party
that will not require such party to
undertake extraordinary or
unreasonable measures to obtain any
consents, approvals or other
authorizations or to achieve other
desired results, including requiring
such party to make any material
expenditures (other than normal
filing fees or the like) or to
accept any material changes in the
terms of a contract, license or
other instrument for which a
consent, approval or authorization
is sought.
Company: as defined in the preamble.
Company Confidential
Information: as defined in 14.1.
Company's Initial JCOM Shares: the total number of JCOM Shares held
by the Company immediately following
the JCOM IPO Date.
Contribution Adjustment: as defined in 3.10.
Contribution Agreement: the Contribution Agreement dated as
of the date of this Agreement among
the initial Members, the Company and
LMI.
Control: including with correlative meanings,
the terms "controlling", "controlled
by" and "under common control with",
as used with respect to any Person:
(a) the beneficial ownership,
directly or indirectly, of voting
securities entitling the holder
thereof to cast more than 50% of the
total votes entitled to be cast
generally for the election of
directors (or Persons of a similar
position) of such Person by all the
holders of voting securities of such
Person or (b) the possession,
directly or indirectly, of the power
to control or direct the management
of such Person through a management
agreement or other contractual
arrangement that grants management
and operational control irrespective
of voting power or equity ownership.
5
Depreciation: for each taxable year or other
period, an amount equal to the
depreciation, amortization or other
cost recovery deduction allowable
with respect to an asset for the
year or other period, except that if
the Book Value of an asset differs
from its adjusted basis for U.S.
federal income tax purposes at the
beginning of the year or other
period, Depreciation will be an
amount which bears the same ratio to
the beginning Book Value as the U.S.
federal income tax depreciation,
amortization or other cost recovery
deduction for the year or other
period bears to the beginning
adjusted tax basis, but if the U.S.
federal income tax depreciation,
amortization, or other cost recovery
deduction for the year or other
period is zero, Depreciation will be
determined with reference to the
beginning Book Value using any
reasonable method selected by the
Management Committee.
Dissolution: the happening of any of the events
set forth in 11.1.
Distribution: the amount of any money or the Fair
Market Value of any property
distributed by the Company to the
Members as an operating or
liquidating distribution in
accordance with this Agreement,
reduced by the amount of any Company
liabilities assumed by the
distributee or to which the
distributed property is subject.
Effective Date: the Closing Date of the Contribution
Agreement, as defined in the
Contribution Agreement.
Fair Market Value: the cash price at
which a willing seller would sell
and a willing buyer would buy, both
having full knowledge of the
relevant facts and being under no
compulsion to buy or sell, in an
arm's-length transaction without
time constraints, all as reasonably
determined by the Management
Committee unless otherwise provided
in this Agreement.
Fiscal Year: the period commencing on January 1
of each year and ending on December
31 of such year.
Fully Diluted JCOM Shares: the sum at any given time, without
duplication, of (a) the aggregate
number of JCOM Shares that are
issued and outstanding, plus (b) the
aggregate number of JCOM Shares
issuable upon the exercise,
conversion or exchange of all
outstanding convertible securities,
convertible debt, options, warrants,
or other direct or indirect rights
to purchase or acquire JCOM Shares
(whether or not then vested or
exercisable).
6
GAAP: generally accepted accounting
principles in the U.S., consistently
applied.
Governmental Approvals: any consent, approval or
authorization of, notice to,
declaration of, or filing with, any
Governmental Authority.
Governmental Authority: any foreign, domestic, federal,
territorial, state or local
governmental authority,
quasi-governmental authority, court,
government or self-regulatory
organization, commission, tribunal,
organization or any regulatory,
administrative or other agency, or
any political or other subdivision,
department or branch of any of the
foregoing.
Holding Company: in relation to a company or
corporation, any other company or
corporation in respect of which it
is a Subsidiary.
Income: for each Fiscal Year, each item of
income and gain as determined,
recognized and classified for U.S.
federal income tax purposes, but:
(a) any income or gain that is
exempt from U.S. federal income tax
will be included as if it were an
item of taxable income, (b) any
income or gain attributable to the
taxable disposition of any Company
asset will be computed by the
Company as if the adjusted basis of
such asset as of the date of the
disposition were equal in amount to
the Company's Book Value with
respect to such asset as of such
date, (c) in the event of a
distribution of any Company asset,
whether or not in connection with a
liquidation of the Company, such
event will for Capital Account
purposes be a deemed taxable
disposition of such Company asset
immediately prior to such
distribution and income or gain will
be computed and allocated among the
Members as if such property were
actually disposed of for an amount
realized equal to the Fair Market
Value of such asset and as if the
adjusted basis of such asset was
equal to its Book Value at such
time, and (d) in the event the Book
Value of any Company asset is
adjusted upwards pursuant to the
definition of Book Value the amount
of such adjustment will be taken
into account for Capital Account
purposes as income or gain from the
disposition of such Company asset
and allocated among the Members.
Indemnified Persons: as defined in 9.3.
IPO Price: as defined in 3.2(b)(ii).
Japanese Broadband Business
7
Operator: any Person that directly owns or
operates a Broadband Business
serving residential customers in
Japan.
JASDAQ: Japanese Association of Securities
Dealers Automated Quotation System
JCOM: Jupiter Telecommunications Co.,
Ltd., a corporation organized under
the laws of Japan, and any successor
(by merger, consolidation, transfer
or otherwise, in one or a series of
transactions), to all or
substantially all of its assets.
JCOM IPO: the consummation of the first public
offering of JCOM's equity securities
and the listing of such equity
securities on JASDAQ.
JCOM IPO Date: the first day of trading of the JCOM
Shares on JASDAQ following the
consummation of the JCOM IPO, which
is anticipated to occur on or after
February 8, 2005.
JCOM Preemptive Rights: any (a) preemptive rights granted to
the Company by JCOM or under the
Japanese Commercial Code or the
Articles of Incorporation or Bylaws
of JCOM, to subscribe for new JCOM
Shares in order to maintain its
proportionate share of ownership
upon the issuance of any new JCOM
Shares (or upon the issuance of any
other securities that are directly
or indirectly convertible into or
exchangeable or exercisable for JCOM
Shares), or (b) other rights to
subscribe for new JCOM Shares (or
any other securities that are
directly or indirectly convertible
into or exchangeable or exercisable
for JCOM Shares) granted by JCOM to
its shareholders.
JCOM Share: a share of common stock of
JCOM, and any other common stock or
other securities (including
securities of another entity) into
which such a share of common stock
is exchanged, converted,
reclassified, recapitalized or
reconstituted in any transaction
involving JCOM.
JCOM Three-Party the Shareholders Agreement relating
Shareholders Agreement: to JCOM, dated as of February 1,
2003, by and among SC, LMI (as
successor in interest to Liberty
Media Corporation), Liberty Jupiter,
LJI, LJII, Microsoft Corporation and
Microsoft Holdings V, Inc., as
amended by the Deed of Adherence of
Liberty Kanto dated March 27, 2003,
the Deed of Adherence of the Company
dated May 16, 2003 and the Amendment
to Three-Party Shareholders
Agreement effective July 15, 2004.
8
JCOM Two-Party
Shareholders Agreement: the Shareholders Agreement relating
to JCOM, dated as of February 1,
2003, by and among SC, LMI (as
successor in interest to Liberty
Media Corporation), Liberty Jupiter,
LJI and LJII, as amended by the Deed
of Adherence of Liberty Kanto dated
March 27, 2003, the Deed of
Adherence of the Company dated May
16, 2003 and the Amendment to
Two-Party Shareholders Agreement
effective July 15, 2004.
LHJ: as defined in the preamble.
Liberty Jupiter: as defined in the preamble.
Liberty Kanto: as defined in the preamble.
Lien: means, with respect to any
securities, any lien, pledge,
charge, security interest, or
encumbrance of any nature whatsoever
in or on such securities, including,
without limitation, any purchase
option, call or similar right with
respect to such securities or any
limitation on the voting rights of
such securities; provided, that
prior to the JCOM IPO, a Lien will
not be created solely because of any
of the provisions of the JCOM
Two-Party Shareholders Agreement or
the JCOM Three-Party Shareholders
Agreement.
Limited Owner: as defined in 11.3(a).
Liquidation: the process of winding up and
terminating the Company after its
Dissolution.
LJI: as defined in the preamble.
LJII: as defined in the preamble.
LMI: as defined in the preamble.
LMI Assigned Rights and
Obligations: as defined in 3.1(b).
LMI Member: collectively, LJI, LJII, LHJ,
Liberty Kanto and Liberty Jupiter
and any Affiliate of any of them
subsequently admitted to the Company
as an additional or substitute
Member in accordance with the terms
of this Agreement, which
collectively will be considered as
one Member for purposes of this
Agreement.
9
LMI Requested Financial
Information: as defined in 10.5(b).
LMINT Holdings: Liberty Media
International Holdings, LLC, a
Delaware limited liability company,
and any successor (by merger,
consolidation, transfer or
otherwise, in one or a series of
transactions), to all or
substantially all of its assets.
LMINT Holdings Affiliate: a Subsidiary of LMINT Holdings or a
Holding Company of LMINT Holdings or
any other Subsidiary of a Holding
Company of LMINT Holdings and also
includes any company or corporation
of which at the time of initial
determination of whether such entity
is an LMINT Holdings Affiliate,
securities or other ownership
interests representing more than 25%
of the equity or more than 25% of
the Ordinary Voting Power or, in the
case of a partnership, more than 25%
of the general partnership interests
are, as of such date, owned,
controlled or held by Xxxx X. Xxxxxx
and such ownership interests or
general partnership interests, as
the case may be, owned, controlled
or held by Xxxx X. Xxxxxx, as of
such date, represent the largest
single percentage of equity or
Ordinary Voting Power or general
partnership interests, as
applicable, owned, controlled or
held by any Person (or any company
or corporation that is a Subsidiary
of such a company or corporation).
Loss: for each Fiscal Year, each item of
loss or deduction as determined,
recognized and classified for U.S.
federal income tax purposes,
provided, that: (a) any
Codess.705(a)(2)(B) expenditure will
be included as if it were a
deductible expenditure, (b) any loss
attributable to the taxable
disposition of any Company asset
will be computed by the Company as
if the adjusted basis of such asset
as of the date of the disposition
were equal to the Company's Book
Value with respect to such asset as
of such date, (c) in the event of a
distribution of any Company asset,
whether or not in connection with a
liquidation of the Company, such
event will be a deemed taxable
disposition of such asset
immediately prior to such
distribution and any loss will be
computed and allocated among the
Members as if such property were
actually disposed of for an amount
realized equal to the Fair Market
Value of such asset and as if the
adjusted basis of such asset were
equal to its Book
10
Value at such time, (d) in the
event the Book Value of any Company
asset is adjusted downward pursuant
to the definition of Book Value,
the amount of such adjustment will
be taken into account as a loss
from the disposition of such asset
and allocated among the Members,
and (e) any deductions for
Depreciation with respect to a
Company asset will be determined as
if the adjusted basis of such asset
were equal to the Book Value of
such asset pursuant to the
methodology described in
Regulations Section
1.704-1(b)(2)(iv)(g)(3).
Management Committee: the governing body of the Company
that has the power and authority set
forth in 6.1, comprised of all of
the Managers, as and when acting in
their capacity as the Management
Committee of the Company as provided
in this Agreement.
Manager: an individual appointed to serve on
the Management Committee in
accordance with 6.2.
Member: a Member as listed on the attached
EXHIBIT A, and any other Person
subsequently admitted to the Company
as an additional or substitute
member in accordance with the terms
of this Agreement.
Net Income and Net Loss: for each Fiscal Year: (a) the excess
of the Income for such period over
the Loss for such period, or (b) the
excess of the Loss for such period
over the Income for such period,
respectively, but Net Income and Net
Loss for a Fiscal Year will be
computed by excluding from such
computation any Income or Loss
specially allocated under 4.2
through 4.6, any nonrecourse
deductions, and any member
nonrecourse deductions.
Net Proceeds: the total amount of cash proceeds
received by the Company in
connection with any sale of JCOM
Shares made pursuant to 13.4, less
the amount of any transfer taxes,
stamp duties, stamp duty reserve
taxes and other similar changes or
taxes, and any other costs or
expenses, incurred by the Company in
connection with such a sale,
including without limitation, costs
and expenses incurred by the Company
pursuant to its obligations under
13.4(c).
Non-Purchasing Member: as defined in 14.4.
Notice: written notice actually delivered or
deemed delivered under 16.11.
Offer: as defined in 13.4(b)(i).
11
Offered Units: as defined in 13.4(b)(i).
Offeree: as defined in 13.4(b)(i).
Offer Price: as defined in 13.4(b)(i).
Operating Agreement Year: the one-year period commencing on
the JCOM IPO Date and each one-year
period thereafter.
Ordinary Market Transaction: any sale of JCOM Shares effected in
an ordinary market transaction
through the JASDAQ without the
payment to any securities
intermediaries such as underwriters
or placement agents of any
commissions or other fees relating
to the solicitation of offers to buy
the JCOM Shares, other than the
payment of a usual and customary
broker's commission to the broker
who executes the order to sell the
JCOM Shares.
Ordinary Voting Power: voting power with
respect to the general election of
directors (or Persons of a similar
position), excluding voting power
that arises solely upon the
occurrence of a contingency.
Parent: (a) in relation to any Member which
is, or is an Affiliate of SC, SC,
and (b) in relation to any Member
which is, or is an Affiliate of LMI
Member, LMINT Holdings; provided,
that LMI Member or LMINT Holdings
may hereafter, by written notice to
the other Member, designate as the
Parent of LMI Member for purposes of
this Agreement, any LMINT Holdings
Affiliate that (i) has a net worth
of at least US$500,000,000 at the
time of designation, (ii)
beneficially owns, directly or
indirectly, all of the Units
beneficially owned, directly or
indirectly, by LMINT Holdings
immediately prior to such
designation and (iii) agrees to the
guarantee set forth in 16.22 for the
benefit of the Members other than
LMI Member (provided that LMI will
also continue to be bound by the
guarantee set forth in 16.22).
Participation Right: as defined in 14.4.
Percentage Interest: in relation to any Member, the
percentage (rounded to three places
after the decimal) equal to (a) the
number of Units held by such Member,
divided by (b) the total number of
Units held by all Members,
calculated at the time of
measurement.
Permitted Transferee: as defined in 13.2.
12
Person: an individual, corporation,
partnership, limited liability
company, trust, unincorporated
organization, association,
Governmental Authority or other
entity.
Principal Shareholders
Agreement: the Principal Shareholders
Agreement, dated as of February 1,
2003, by and among Liberty Media
Corporation, SC, Microsoft
Corporation, LJI, LJII, Liberty
Jupiter, Liberty Jupiter Finance,
Inc., J-COM Finance Co., Ltd., JCOM,
Sumitomo Mitsui Banking Corporation
and Citibank, N.A., Tokyo Branch,
and other financial institutions
identified therein, as amended.
Proceeding: any claim, dispute, demand or
threatened, pending or completed
action, suit or proceeding, whether
formal or informal, and whether
civil, administrative, investigative
or criminal.
Purchasing Member: as defined in 14.4.
Registration Rights Agreement: as defined in 16.23.
Regulations: the U.S. Treasury Regulations
(including temporary or proposed
regulations) promulgated under the
Code, as amended from time to time
(including corresponding provisions
of succeeding regulations).
Requesting Member: as defined in 10.5(b).
Retained IPO Shares: as defined in 3.2(b)(ii).
Sale Period: as defined in 13.4(c)(i)(B).
SC: as defined in the preamble.
SC Additional Information: as defined in 10.5(b).
SC Assigned Rights and
Obligations: as defined in 3.1(b).
SC Member: SC and any Affiliate of SC
subsequently admitted to the Company
as an additional or substitute
Member in accordance with the terms
of this Agreement, which
collectively will be considered as
one Member for purposes of this
Agreement.
SC Permitted Number: if a positive number (taking into
account any adjustments that have
been made in accordance with this
definition as of
13
the time of determination), the
number of XXXX Xxxxxx obtained by
***. [THE REDACTED PORTION OF THIS
DEFINITION CONTAINS A FORMULA FOR
CALCULATING THE MAXIMUM NUMBER OF
JCOM SHARES THAT SC MEMBER CAN
REQUEST THE COMPANY TO SELL ON ITS
BEHALF PURSUANT TO SECTION 13.4 OF
THIS AGREEMENT AND LIMITS THE
ABILITY OF SC MEMBER TO UNILATERALLY
CAUSE THE COMPANY TO SELL ENOUGH
JCOM SHARES THAT IT WOULD IMPACT THE
COMPANY'S ABILITY TO CONSOLIDATE
JCOM.].
Selling Member: as defined in 13.4(b)(i).
Standard of Care: as defined in 9.1.
Subsidiary: with respect to any company, any
other company (a) of which
securities or other ownership
interests representing more than 50%
of the equity or more than 50% of
the Ordinary Voting Power or, in the
case of a partnership, more than 50%
of the general partnership interests
are, as of such date, owned,
controlled or held, by such company,
or (b) which is a Subsidiary of
another Subsidiary of such company.
Tax Matters Partner: as defined in 10.9.
Third Party Buyer: as defined in 13.4(b)(i).
Third Party Offer: as defined in 13.4(b)(i).
TOB Rules: the takeover bid procedures provided
in Chapter 2-2 of the Securities and
Exchange Law of Japan (Law No. 25 of
1948, as amended).
Transfer: a sale, exchange, assignment,
transfer or other disposition of a
Unit (whether voluntary, involuntary
or by operation of law).
Transferee: a Person to whom one or more Units
are Transferred in compliance with
this Agreement.
Transferor: a Person who Transfers one or more
Units in accordance with this
Agreement.
2004 DES Shares: as defined in 3.2(b)(i).
2003 DES Shares: as defined in 3.2(b)(i).
14
Unacquired Units: as defined in 13.4(c)(i).
Unit: a unit of ownership in the Company,
each representing a right, in
accordance with the provisions of
this Agreement, to participate as a
Member in the management of the
Company and to receive distributions
and allocations of Net Income and
Net Losses.
Unit Fair Market Value: for each Unit,
the average of the closing prices of
a JCOM Share, as reported by the
JASDAQ, for the five consecutive
trading days ending on the trading
day immediately preceding the date
as of which Unit Fair Market Value
is to be determined.
Withdrawal: the occurrence of an event which
terminates membership in the
Company, as provided in 11.2.
ARTICLE 2: PURPOSES AND POWERS
2.1 PURPOSE. Subject to the provisions of this Agreement, the purpose of the
Company is, directly or through Affiliates (a) to own, acquire, hold, sell or
otherwise dispose of JCOM Shares and to take all actions incidental to or
related to such activities, including actions relating to the exercise of the
Company's rights as a holder of JCOM Shares (e.g., voting the JCOM Shares) and
any actions to be taken and decisions to be made pursuant to any agreements
related to the JCOM Shares; (b) to enter into, amend or terminate any agreements
related to the JCOM Shares; and (c) to do any and all other acts or things that
may be incidental, advisable or necessary to carry on the business of the
Company as contemplated by this Agreement. Unless otherwise agreed to by the
written consent of all Members, unless otherwise provided for in this Agreement
or unless necessary to satisfy any liabilities of the Company, the Company will
not sell or otherwise Transfer any of its JCOM Shares.
2.2 OTHER PURPOSES. The Company may engage in any other business or other
activities agreed to with the written consent of all Members, but subject to any
restrictions on activities of limited liability companies under the Act.
2.3 POWERS. The Company has all of the powers granted to a limited liability
company under the Act, as well as all powers necessary or convenient to achieve
its purposes and to further its business that are not expressly prohibited to
the Company by applicable law.
ARTICLE 3: CAPITAL OF THE COMPANY
3.1 INITIAL CONTRIBUTIONS/JCOM SHAREHOLDER AGREEMENTS.
(a) Pursuant to the Contribution Agreement, each initial Member (other than
LHJ) will assign and transfer to the Company on the Effective Date, the
number of JCOM Shares equal to its number of Units as set forth in EXHIBIT
B, which will constitute the initial Capital Contribution made by such
Member to the Company with respect to its Units. Immediately prior to
closing of the Contribution Agreement, LHJ will be the sole
15
member of the Company and the Company will own 591,507 JCOM Shares, which
shares constitute the initial Capital Contribution of LHJ with respect to
its Units as set forth on EXHIBIT B. The agreed Fair Market Value of such
contributions are the amounts set forth in EXHIBIT B under "Initial
Capital Account" and such amounts will be credited as of the Effective
Date to the applicable Member's Capital Account with respect to such Units
and will be deemed to be the amount of such Member's initial Capital
Contribution.
(b) SC hereby assigns to the Company effective as of the Effective Date, its
rights and obligations under Clauses 4.1, 4.2 and 4.4 of the JCOM
Three-Party Shareholders Agreement to the extent such rights and
obligations relate to the period after the Effective Date (the "SC
Assigned Rights and Obligations") and each of LJI, LJII, Liberty Kanto and
Liberty Jupiter hereby assigns to the Company all of its rights and
obligations under the JCOM Three-Party Shareholders Agreement to the
extent such rights and obligations relate to the period after the
Effective Date (the "LMI Assigned Rights and Obligations"). If the Event
of Dissolution set forth in 11.1(e) occurs, the Company will promptly
re-assign the SC Assigned Rights and Obligations to SC and, unless LMI
Member exercises its option under 11.3(b) to continue the Company, will
promptly re-assign to LJI, LJII, Liberty Kanto and Liberty Jupiter their
respective LMI Assigned Rights and Obligations.
(c) The Members on their own behalf and on behalf of the Company and LMI agree
that effective as of the Effective Date and without further action
required on any of their behalf, the JCOM Two-Party Shareholders Agreement
is terminated and of no further force or effect.
(d) If the event of Dissolution set forth in 11.1(e) occurs, the Members and
LMI will enter into a new shareholders agreement with respect to their
ownership interests in JCOM on the same substantive terms and conditions
as the JCOM Two-Party Shareholders Agreement, taking into account such
changes as may be required to reflect the then-current ownership of JCOM
Shares by the Members and other factual changes resulting from this
Agreement.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) (i) The Management Committee will have the right from time to time to
make calls for optional additional Capital Contributions in order to
enable the Company to purchase additional JCOM Shares pursuant to
the exercise of its JCOM Preemptive Rights, if any (each, an
"Additional Contribution") by giving Notice to each Member of any
such optional capital call (an "Additional Contribution Notice").
Each Additional Contribution Notice will specify each Member's
Percentage Interest of such Additional Contribution and the date by
which such Additional Contribution must be received by the Company
if the Member desires to participate, which date will be a
reasonable period of time prior to the date when the Company must
exercise its JCOM Preemptive Rights. If the Management Committee
makes a call for Additional Contributions, each Member will have the
option to contribute all or any portion of its Percentage Interest
of such Additional Contributions, which contributions will be in
cash. Additional
16
Units will be issued to the Members in respect of such Additional
Contributions (including Additional Contributions made pursuant to
3.2(a)(ii)) on the basis of one Unit for each JCOM Share acquired
with such Member's Additional Contributions; provided, that if
application of the foregoing would require the issuance of
fractional Units, the Additional Contributions to be made by each
Member will be equitably adjusted as determined by the Management
Committee so that no fractional Units will be issued. No Member will
be required to make an Additional Contribution.
(ii) If either LMI Member or SC Member does not elect to fund any portion
of its Percentage Interest of a call for Additional Contributions
made pursuant to 3.2(a)(i), which election will be deemed to have
been made by LMI Member or SC Member with respect to any portion of
its Percentage Interest of such Additional Contributions that it
does not contribute by the date specified in the Additional
Contribution Notice, then at any time prior to the exercise by the
Company of its JCOM Preemptive Rights to which the Additional
Contribution relates, a Member that has elected to fund its entire
Percentage Interest of a call for Additional Contributions may elect
to increase its Additional Contribution by all or any portion of the
amount of the non-contributing Member's share that is not funded by
such Member without further Notice to the non-contributing Member.
(b) (i) Immediately following the six month anniversary of the JCOM IPO
Date, SC Member will contribute to the Company the 375,125 JCOM
Shares that SC acquired on May 16, 2003 pursuant to a debt for
equity swap with JCOM (as adjusted, including with respect to type
of shares, to take into account any common stock dividend, stock
split, reverse stock split, recapitalization, reclassification,
conversion, reconstitution, exchange or other transaction affecting
all of the JCOM Shares that occurs after the date of this Agreement,
the "2003 DES Shares"), together with any dividends or distributions
paid, and the right to receive any dividends or distributions
declared, in respect of the 2003 DES Shares on or after the
Effective Date but prior to the date the Company becomes the holder
of record of such shares, in each case other than common stock
dividends already included in the 2003 DES Shares. On the later to
occur of August 6, 2005 or the six month anniversary of the JCOM IPO
Date, SC Member will contribute to the Company the 152,505 JCOM
Shares that SC acquired from JCOM on August 6, 2004 (as adjusted,
including with respect to type of shares, to take into account any
common stock dividend, stock split, reverse stock split,
recapitalization, reclassification, conversion, reconstitution,
exchange or other transaction affecting all of the JCOM Shares that
occurs after the date of this Agreement, the "2004 DES Shares"),
together with any dividends or distributions paid, and the right to
receive any dividends or distributions declared, in respect of the
2004 DES Shares on or after the Effective Date but prior to the date
the Company becomes the holder of record of such shares, in each
case other than common stock dividends already included in the 2004
DES Shares. In each case, the Company will issue additional Units to
SC Member simultaneously upon such contributions on the basis of one
Unit for each JCOM Share contributed to the
17
Company and the issuance of such additional Units will be promptly
reflected on the books and records of the Company.
(ii) In addition to the JCOM Shares to be contributed by SC Member to the
Company pursuant to 3.2(b)(i), SC Member has retained 102,921 JCOM
Shares (as adjusted, including with respect to type of shares, to
take into account any common stock dividend, stock split, reverse
stock split, recapitalization, reclassification, conversion,
reconstitution, exchange or other transaction affecting all of the
JCOM Shares that occurs after the date of this Agreement, the
"Retained IPO Shares") ***. If the IPO Price is *** or greater per
share, then immediately following the JCOM IPO Date, SC Member will
contribute all of the Retained IPO Shares to the Company, together
with any dividends or distributions paid, and the right to receive
any dividends or distributions declared, in respect of the Retained
IPO Shares after the Effective Date but prior to the date the
Company becomes the holder of record of such shares, in each case
other than common stock dividends already included in the Retained
IPO Shares. If the IPO Price is less than *** per share, SC Member
will promptly contribute to the Company that number, if any, of
Retained IPO Shares that SC Member has not sold to a non-Affiliate
within five Business Days of the JCOM IPO Date, together with any
dividends or distributions paid, and the right to receive any
dividends or distributions declared, in respect of such Retained IPO
Shares being contributed after the Effective Date but prior to the
date the Company becomes the holder of record of such shares, in
each case other than common stock dividends already included in the
Retained IPO Shares. In each case, the Company will issue additional
Units to SC Member simultaneously upon such contributions on the
basis of one Unit for each JCOM Share contributed to the Company and
the issuance of such additional Units will be promptly reflected on
the books and records of the Company.
(iii) Any additional JCOM Shares acquired by LMI Member, SC Member or
either of their respective Affiliates after the date of this
Agreement, including any JCOM Shares acquired pursuant to a debt for
equity swap or similar transaction or pursuant to 14.4, will also be
contributed by LMI Member or SC Member to the Company within 10 days
after the acquisition of such JCOM Shares in exchange for one Unit
per JCOM Share contributed to the Company. Notwithstanding the
foregoing, LMI Member may require that SC Member hold outside of the
Company, that portion of any additional JCOM Shares acquired by SC
Member or its Affiliates which, if such portion were contributed by
SC Member to the Company, would cause LMI Member's Percentage
Interest to be less than 55%. To the extent that any JCOM Shares are
held by SC Member or its Affiliates outside of the Company pursuant
to this clause (iii), if SC Member or its Affiliates desires to sell
any of such JCOM Shares to any Person other than one of its
Affiliates, then it will first offer LMI Member a right of first
refusal to acquire such JCOM Shares on the terms and conditions set
forth in 13.4(b) (read as if all
18
references to Units were instead references to the JCOM Shares that
SC Member or its Affiliates desire to sell).
(iv) Any Member contributing JCOM Shares to the Company pursuant to this
3.2(b) will be deemed to have (1) agreed to all of the covenants in
Sections 2(c), 3 and 4 of the Contribution Agreement, and (2) made
all of the representations and warranties set forth in Section 6(a)
of the Contribution Agreement as of the date of such contribution,
as if such provisions applied to the Capital Contributions made
pursuant to this 3.2(b) instead of the initial Capital Contribution.
(c) Except as provided in this 3.2 and in 3.10, the Company will not be
authorized to issue any additional Units, except upon the written consent
of all of its Members.
(d) If the Company desires to purchase any additional JCOM Shares not already
provided for above in this 3.2, the Company will purchase such JCOM Shares
and issue additional Units in respect thereof in accordance with the
procedures set forth in 3.2(a).
3.3 CAPITAL ACCOUNTS. A Capital Account will be maintained for each Member and
credited, charged and otherwise adjusted as required by Section 704(b) of the
Code and the Section 704(b) Regulations. Each Member as of the Effective Date
will make or will be deemed to have made the Capital Contributions giving rise
to such Member's Capital Account as set forth in EXHIBIT B. Each Member's
Capital Account will thereafter be:
(a) credited with: (i) the amount of money contributed by a Member to the
capital of the Company as an Additional Contribution, (ii) the Fair Market
Value of property contributed by the Member as an Additional Contribution
(net of liabilities that the Company assumes or takes property subject
to), (iii) the Member's allocable share of Income and Net Income and (iv)
all other items properly credited to the Capital Account;
(b) charged with: (i) the amount of money distributed to the Member by the
Company, (ii) the Fair Market Value of property distributed to the Member
by the Company (net of liabilities that the Member assumes or takes
subject to), (iii) the Member's allocable share of Losses and Net Losses
and (iv) all other items properly charged to Capital Account; and
(c) otherwise adjusted as required by the Section 704(b) Regulations.
Any unrealized appreciation or Depreciation with respect to any asset
distributed in-kind will be allocated among the Members in accordance with the
provisions of Article 4 as though such asset had been sold for its Fair Market
Value on the date of Distribution, and the Members' Capital Accounts will be
adjusted to reflect both the deemed realization of such appreciation or
Depreciation and the Distribution of such property.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of the Capital Accounts are intended to comply with the Section
704(b) Regulations and will be interpreted and applied in a manner consistent
with such Regulations and any amendment or successor provision thereto. The
Management Committee also will make any appropriate modifications if
unanticipated events might otherwise cause this Agreement not to comply with
19
the Regulations, so long as such changes would not cause a material change in
the relative economic benefits of the Members under this Agreement.
3.4 LOANS BY MEMBERS.
(a) With the consent of the Management Committee, any Member or an Affiliate
of a Member may loan money to, act as surety for, or transact other
business with the Company provided that any and all transactions between a
Member or any of its Affiliates and the Company will be conducted on an
arm's length basis and, subject to other applicable law, will have the
same rights and obligations with respect thereto as a person who is not a
Member, but no such transaction will be deemed to constitute a Capital
Contribution to the Company and will not increase the Capital Account of
any person engaging in any such transaction.
(b) The Members will minimize the operating expenses of the Company. Without
limiting the generality of the foregoing, the Company will not pay any
salary or other remuneration to any Manager, Authorized Representative or
Member and the Company will not have any officers or employees. Any fees
(including, without limitation fees and expenses of attorneys, financial
accountants and brokers) arising out of, or incurred in connection with, a
sale or purchase of, JCOM Shares by the Company, will be borne by each
Member in proportion to the number of JCOM Shares sold or purchased on
behalf of such Member. If the Management Committee determines that funds
are needed for operating expenses, the Members will loan the necessary
funds to the Company in proportion to their respective Percentage
Interests or will pay such operating expenses directly in proportion to
their respective Percentage Interests; provided, that if a Member defaults
in its obligation to loan or pay its Percentage Interest of any operating
expenses, the other Member may loan the defaulting Member's share of such
expenses to the Company, in which case the defaulting Member will be
deemed to have guaranteed the repayment by the Company of such amount, or
pay the defaulting Member's share directly, in which case the defaulting
Member will be obligated to reimburse the other Member for such amount.
3.5 TRANSFER. If any Units are Transferred in accordance with this Agreement,
the Capital Account of the Transferor that is attributable to the Transferred
Units will carry over to the Transferee.
3.6 ADJUSTMENTS. The Members intend to comply with the Section 704(b)
Regulations in all respects, and the Management Committee is authorized and
directed to adjust the Capital Accounts of the Members to the full extent that
the Section 704(b) Regulations may apply (including, without limitation,
applying the concepts of qualified income offsets and minimum gain chargebacks).
To this end, the Management Committee may make any Capital Account adjustment
that it determines to be necessary or appropriate to maintain equality between
the aggregate Capital Accounts of the Members and the amount of Company capital
reflected on the Company's balance sheet (as computed for book purposes); as
long as such adjustments are consistent with the underlying economic arrangement
of the Members and are based, wherever practicable, on U.S. federal tax
accounting principles.
20
3.7 MARKET VALUE ADJUSTMENTS. The Management Committee is authorized and
directed to make appropriate Capital Account adjustments upon any Transfer of a
Unit, including those that apply upon the constructive Liquidation of the
Company under Section 708(b) of the Code, all in accordance with the Section
704(b) Regulations. Similarly, if optional basis adjustments are made under
Section 734 or Section 743 of the Code, the Management Committee is authorized
to make appropriate Capital Account adjustments as required by the Section
704(b) Regulations.
3.8 NO WITHDRAWAL OF CAPITAL. Except as specifically provided in this Agreement,
no Member will be entitled to withdraw all or any part of such Person's Capital
Account or Capital Contribution from the Company prior to the Company's
Dissolution and Liquidation, or, when such withdrawal of capital is permitted,
to demand a distribution of property other than money or as otherwise provided
in this Agreement.
3.9 NO INTEREST ON CAPITAL. No Member will be entitled to receive interest on
such Person's Capital Account or Capital Contribution.
3.10 ADJUSTMENT TO NUMBER OF UNITS OUTSTANDING. It is the intent of the Members
that the number of Units outstanding at any given time be equal to the number of
JCOM Shares held by the Company at such time. Therefore, if after the Effective
Date, (a) JCOM effects any common stock dividend, stock split, or reverse stock
split of JCOM Shares, or (b) the JCOM Shares are recapitalized, reclassified or
exchanged for other securities (including securities of another entity) on any
basis other than one for one (collectively, an "Adjustment Transaction"), then
the Management Committee will cause the number of outstanding Units to be
appropriately and equitably adjusted on a pro rata basis among the Members so
that the number of Units outstanding immediately following the Adjustment
Transaction will be equal to the number of JCOM Shares held by the Company
immediately following the Adjustment Transaction. In addition, if the number of
JCOM Shares contributed by the Members to the Company on the Effective Date is
adjusted pursuant to the Contribution Agreement after the date of this Agreement
(a "Contribution Adjustment"), the number of Units to be issued to the Members
on the Effective Date will also be adjusted to equal the number of JCOM Shares
so contributed. Each time an Adjustment Transaction occurs or if a Contribution
Adjustment occurs, the Company will attach a revised EXHIBIT B to this Agreement
reflecting the number of Units held by each Member immediately following the
Adjustment Transaction and will send a copy thereof to all Members.
ARTICLE 4: ALLOCATION OF NET INCOME AND NET LOSSES
4.1 ALLOCATION OF NET INCOME AND NET LOSS.(a) Except as provided in 4.2 through
4.6, the Company's Net Income or Net Loss, as the case may be, and each item of
income, loss and deduction entering into the computation thereof, for each
Fiscal Year will be allocated to the Members in proportion to their Percentage
Interests.
4.2 QUALIFIED INCOME OFFSET. Notwithstanding any other provision of this
Agreement to the contrary, this Agreement includes a "qualified income offset"
as defined in the Regulations under Section 704 of the Code.
21
4.3 LIMIT ON LOSS ALLOCATIONS. Notwithstanding the provisions of 4.1, or any
other provision of this Agreement to the contrary, Net Loss (or items thereof)
will not be allocated to a Member if such allocation would cause or increase
such Member's Adjusted Capital Account Deficit and will be reallocated to the
other Members, subject to the limitations of this 4.3.
4.4 COMPLIANCE WITH CODE. The foregoing provisions of this Agreement relating to
the allocation of Net Income and Net Loss are intended to comply with
Regulations under Section 704(b) of the Code and will be interpreted and applied
in a manner consistent with such Regulations.
4.5 TAX ALLOCATIONS -- Section 704(c). In accordance with Section 704(c) of the
Code and the related Regulations, income, gain, loss and deduction with respect
to any property contributed to the capital of the Company, solely for tax
purposes, will be allocated among the Members so as to take account of any
variation between the adjusted basis to the Company of the property for U.S.
federal income tax purposes and the initial Book Value of the property. If the
Book Value of any Company asset is adjusted as described in the definition of
Book Value, subsequent allocations of income, gain, loss and deduction with
respect to that asset will take account of any variation between the adjusted
basis of the asset for U.S. federal income tax purposes and its Book Value in
the same manner as under Section 704(c) and the related Regulations. Any
elections or other decisions relating to allocations under this 4.5 will be made
in any manner that the Management Committee determines reasonably reflects the
purpose and intention of this Agreement. Allocations under this 4.5 are solely
for purposes of U.S. federal, state and local taxes and will not affect, or in
any way be taken into account in computing, any Member's Capital Account or
share of Income, Loss, Net Income, Net Loss or other items or distributions
under any provision of this Agreement.
4.6 ALLOCATION ON TRANSFER. If any interest in the Company is transferred, or is
increased or decreased by reason of the admission of a new Member or otherwise,
during any Fiscal Year, the Company will allocate Net Income or Net Loss or
items thereof to the Persons who were the holders of such interest during such
Fiscal Year in proportion to the number of days that each such holder was
recognized as the owner of such interest during such Fiscal Year or, if the
Members agree otherwise, in any other proportion permitted by the Code and in
accordance with this Agreement, but in any event without regard to the results
of Company operations during the period in which each such holder was recognized
as the owner of such interest during such Fiscal Year, and without regard to the
date, amount or recipient of any distributions which may have been made with
respect to such interest.
ARTICLE 5: DISTRIBUTIONS
5.1 DISTRIBUTIONS GENERALLY. No Distributions will be made by the Company to its
Members unless approved by the Management Committee, except for (a)
Distributions incident to the Company's redemption of Unacquired Units as
provided for in 13.4 (which do not require any further approvals), (b)
Distributions incident to the Company's Liquidation and Dissolution (which will
be governed by Article 12), and (c) Distributions made in connection with a
reorganization of the Company pursuant to 14.3 (which do not require further
approvals once the Distributions are approved pursuant to 14.3). Except for
Distributions provided in (a), (b) or (c) above which will be governed by the
specified Sections, any Distributions so approved will be applied, in the
following order and priority:
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(i) First, to the retirement of any debt the Company owes to Members or
their Affiliates (according to the relative priority of repayment of
such loans and pro rata among loans of equal priority if the amount
available for repayment is insufficient for payment in full); and
(ii) Thereafter, to the Members pro rata in proportion to their
Percentage Interests.
5.2 PAYMENT. All Distributions will be made to Members owning Units on the date
of record, such date being the Business Day immediately preceding the date of
Distribution, as reflected on the books of the Company. Distributions in-kind
may be made with the unanimous written consent of the Members. If in-kind
Distributions are made, the assets distributed will be deemed to have been sold
immediately preceding the date of Distribution for a purchase price equal to
their Fair Market Value, and the Net Income or Net Loss arising from such deemed
sale will be allocated to the Members in accordance with Article 4 and credited
to their Capital Accounts in accordance with Article 3.
5.3 WITHHOLDING. If required by the Code or by state, local or foreign law, the
Company will withhold any required amount from Distributions to a Member for
payment to the appropriate taxing authority. Any amount so withheld from a
Member will be treated as a Distribution by the Company to such Member. Each
Member agrees to file timely any agreement that is required by any taxing
authority in order to avoid any withholding obligation that would otherwise be
imposed on the Company.
5.4 DISTRIBUTION LIMITATION. Notwithstanding any other provision of this
Agreement, the Company will not make any Distribution to the Members if, after
the Distribution, the liabilities of the Company (other than liabilities to
Members on account of their Units) would exceed the Fair Market Value of the
Company's assets, as initially determined by the Management Committee.
(a) If the Management Committee determines on a less-than unanimous
basis that a Distribution otherwise required to be made pursuant to
this Agreement can not be made because of the operation of this 5.4,
SC Member may elect to require an independent determination of
whether the liabilities of the Company (other than liabilities to
Members on account of their Units) would exceed the Fair Market
Value of the Company's assets after the Distribution in question,
such election to be made by sending Notice to LMI Member within five
Business Days following the Management Committee's determination. If
such election is made by SC Member, each of LMI Member and SC Member
will retain within ten Business Days following SC Member's election,
an internationally recognized investment bank to determine whether
the liabilities of the Company (other than liabilities to Members on
account of their Units) would exceed the Fair Market Value of the
Company if the Distribution in question were made, it being agreed
that the Fair Market Value of any assets that are JCOM Shares will
be the Unit Fair Market Value for this purpose.
(b) Each investment banker will be instructed to determine the net
valuation of the Company (Fair Market Value of the Company's assets
minus its liabilities, other than liabilities to Members on account
of their Units) and to deliver a copy of its net valuation to each
of
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LMI Member and SC Member. The average of the two net valuations will
be deemed to be the net valuation, unless the amount by which the
higher net valuation exceeds the lower net valuation is greater than
10% of the lower net valuation, in which event the investment
bankers will jointly select a third investment bank within ten
Business Days following delivery of the last of their net
valuations, to determine the net valuation of the Company and the
net valuation will be deemed to be equal to the average of the third
net valuation and the other net valuation closest to it. If either
Member fails to retain an internationally recognized investment
banker within the required time period, the net valuation of the
investment banker retained by the other Member will control for
purposes of determining whether a Distribution can be made in
accordance with this 5.4. The valuation process will in no event
last more than 45 days. Each of SC Member and LMI Member will be
responsible for its own fees and expenses related to the valuation
process, and any fees and expenses related to a third valuation will
be borne one half by SC Member and one half by LMI Member. The
Company and the Members will provide all information reasonably
requested in connection with the determination of the net valuation
of the Company. With respect to any property subject to a liability
for which the recourse of creditors is limited to the specific
property, such property will be included in assets only to the
extent the property's Fair Market Value, as determined in accordance
with the foregoing, exceeds its associated liability, and such
liability will be excluded from the Company's liabilities.
ARTICLE 6: MANAGEMENT
6.1 MANAGEMENT. Management of the Company will be vested exclusively in the
Management Committee. Except as otherwise provided in this Agreement: (a) the
Management Committee has complete and unrestricted power and authority to manage
the business, properties and activities of the Company in its sole and exclusive
discretion, (b) no Person dealing with the Company will be required to inquire
into the authority of the Management Committee (or any designee of the
Management Committee) to take any action or make any decision, (c)
notwithstanding any powers granted to members of a limited liability company
under the Act, no Member will take part in the operations, management or control
of the Company's business, transact any business in the Company's name, or have
the power to sign documents for or otherwise bind the Company except for such
actions that are specifically authorized by the Management Committee or as
otherwise provided by this Agreement, and (d) the Management Committee has the
rights, authority and powers of a "manager" under the Act with respect to the
Company business and assets as provided in the Act as in effect on the Effective
Date. Without limiting the foregoing, the Management Committee has all of the
responsibilities and authority of the board of directors of a Delaware business
corporation, subject to the express provisions of this Agreement; provided, that
the reference to Delaware business corporations is not intended and will not be
construed to subject the Company to any restriction or limitation or to subject
the Managers to any duty or liability applicable to Delaware corporations or
their directors that is not otherwise applicable to a Delaware limited liability
company or its managers or agents.
6.2 MANAGEMENT COMMITTEE COMPOSITION; APPOINTMENT AND REMOVAL OF MANAGERS. The
Management Committee will consist of two Managers, with LMI Member having the
sole right to appoint and remove one Manager, and SC Member having the sole
right to appoint and remove one Manager. Neither LMI Member nor SC Member may
appoint as a Manager, any
24
Person who serves on the board of directors or comparable governing body of a
Japanese Broadband Operator that competes with JCOM. The Manager appointed by
LMI Member will serve as the Chairman of the Management Committee (the
"Chairman"). The name of the initial Manager appointed by LMI Member (and
Chairman) will be Xxxxxx Xxxxxx and the name of the initial Manager appointed by
SC Member will be Xxxxxxxx Xxxxxxxx. Each Manager is entitled to appoint an
alternate to serve in his or her absence at any meeting of the Management
Committee. Each Manager will serve on the Management Committee until his or her
resignation or removal by the Member that appointed such Manager. Either Member
may, at any time, remove a Manager appointed by such Member and appoint a
substitute Manager by delivering Notice of such removal and appointment to the
other Member. Any vacancy on the Management Committee resulting from the death,
disability or resignation of a Manager will be filled by the Member that
appointed such Manager. The Management Committee will permit any individuals
designated by any Member to be observers at any meetings of the Management
Committee. The Management Committee may also permit individuals to meet apart
from the Management Committee to discuss issues affecting the Company and to
make recommendations to the Management Committee with respect to such issues;
provided, that any such group formed by the Management Committee will not have
any decision-making power. Any such group will be comprised of at least one
individual designated by LMI Member and one individual designated by SC Member.
For the avoidance of doubt, the Management Committee will not have the power to
appoint sub-committees having the power to exercise any authority on the
Management Committee's behalf.
6.3 MANAGEMENT COMMITTEE DECISIONS. All decisions with respect to the Company
will be made by the Management Committee using the procedures specified in this
Section. The Manager appointed by LMI Member pursuant to 6.2 will have one vote
with respect to any Management Committee decision, and the Manager appointed by
SC Member pursuant to 6.2 will have one vote with respect to any Management
Committee decision. It is the intent of LMI Member and SC Member that they will
enjoy the same management style as they have historically exercised with respect
to their JCOM Shares, namely, that they will use commercially reasonable best
efforts to cause the Manager appointed by each of them pursuant to 6.2 to reach
agreement on all decisions to be made by the Management Committee on behalf of
the Company. During the period from the Effective Date through the date that
falls immediately prior to the Casting Vote Effective Date, all decisions with
respect to the Company, including any decision that is listed in Sections 2.1.1
through 2.1.15 of the JCOM Two-Party Shareholders Agreement with respect to
which the Company has voting rights as a shareholder of the Company, will
require unanimous agreement among the Members. From and after the Casting Vote
Effective Date, however, if the Manager appointed by LMI Member and the Manager
appointed by SC Member cannot reach agreement on any decision to be made by the
Management Committee, the Chairman will be entitled to a second or casting vote
in order to break the deadlock, which vote will control and be the decision of
the Management Committee.
6.4 AUTHORIZED REPRESENTATIVES. The Company will not have any officers, except
that the Chairman and his or her designees and any other person hereafter
designated by the Management Committee ("Authorized Representatives") are
authorized to act on behalf of the Company and the Management Committee on
specified matters that have been approved by the Management Committee (e.g. the
voting of JCOM Shares held by the Company).
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6.5 JCOM GOVERNANCE.
(a) The Management Committee will cause the Company in its capacity as a
shareholder of JCOM to vote the Company's JCOM Shares in favor of, and to
take all other actions within its power to cause: (a) the election to the
JCOM Board of Directors of three non-executive directors designated by LMI
Member and three non-executive directors designated by SC Member (in each
case who need not be Japanese nationals or resident in Japan), (b) the
removal of a non-executive JCOM director designated by LMI Member or SC
Member at the request of the designating Member and the election of a
substitute JCOM director designated by such Member and (c) the filling of
any vacancy on the JCOM Board of Directors resulting from the death,
disability or resignation of a non-executive JCOM director designated by
LMI Member or SC Member with a non-executive director designated by the
Member that originally designated such non-executive director. All members
of the JCOM Board of Directors will be nominated and elected in accordance
with the Japanese Commercial Code.
(b) SC Member agrees to indemnify, defend and hold the Company harmless from
and against, any claim by Microsoft Corporation or MS Holdings V, Inc. or
their Affiliates that any non-executive JCOM director designated by SC
Member pursuant to this 6.5 voted in its capacity as a director of JCOM in
a manner that caused the Company or its Affiliates to violate Clause 4.6
of the JCOM Three-Party Shareholders Agreement. LMI Member agrees to
indemnify, defend and hold the Company harmless from and against, any
claim by Microsoft Corporation or MS Holdings V, Inc. or their Affiliates
that any non-executive JCOM director designated by LMI Member pursuant to
this 6.5 voted in its capacity as a director of JCOM in a manner that
caused the Company or its Affiliates to violate Clause 4.6 of the JCOM
Three-Party Shareholders Agreement.
(c) Until the Casting Vote Effective Date, the Members agree that JCOM may not
take any action of the type described in Sections 2.1.1 through 2.1.15 of
the JCOM Two-Party Shareholders Agreement without the approval of at least
one JCOM director designated or nominated by LMI Member and one JCOM
director designated or nominated by SC Member. Until the JCOM IPO Date,
the Members agree that JCOM may not take action of the type described in
Section 2.1.1 of the JCOM Two-Party Shareholders Agreement without the
approval of at least one JCOM director designated or nominated by LMI
Member and one JCOM director designated or nominated by SC Member.
ARTICLE 7: PROCEDURAL REQUIREMENTS -- MEETINGS OF MEMBERS AND
THE MANAGEMENT COMMITTEE
7.1 MANAGEMENT COMMITTEE MEETINGS. The Management Committee will meet from time
to time at the request of any Manager, such meetings to be conducted in the
English language. All meetings of the Management Committee will be presided over
by the Chairman or, in his or her absence, an alternate Manager appointed prior
to the meeting by the Chairman. Any individual appointed to serve as an
alternate in the absence of a Manager will have all of the same rights and
powers of the appointing Manager at such meeting, including in the case of an
individual appointed by LMI Member, the right to a second or casting vote under
6.3 from and after the Casting Vote Effective Date (except as otherwise provided
in 6.5(c)).
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7.2 MEMBER VOTING RIGHTS; MEMBER MEETINGS. The vote of the Members will not be
required with respect to any action to be taken by the Company except as
specifically set forth in this Agreement. Meetings of the Members will be held
at such times, if any, as the Management Committee reasonably determines and
sets forth in the Notice of meeting.
7.3 PLACE. The Management Committee may designate any place as the place of
meeting for any meeting of the Members or the Management Committee. If no
designation is made, the place of meeting will be the Company's principal place
of business.
7.4 NOTICE. Notice of any Management Committee or Members meeting must be given
not fewer than five days and not more than 30 days before the date of the
meeting. Such Notice must state the place, day and hour of the meeting and the
purpose for which the meeting is called. Each Notice will be accompanied by a
written agenda (in Japanese and English) specifying the business of such meeting
and will include dial-in instructions for any Manager or Member desiring to
participate in such meeting by telephone rather than in person (provided that
such five day period may be shortened with the consent of all Managers or
Members, as applicable).
7.5 WAIVER OF NOTICE. Any Member or Manager may waive, in writing, any Notice
required to be given to such Member or such Manager, whether before or after the
time stated in such Notice. Any Member or Manager who signs minutes of action
(or written consent or agreement) will be deemed to have waived any required
Notice with respect to such action.
7.6 RECORD DATE. For the purpose of determining Members entitled to Notice of or
to vote at any meeting of Members, the date on which Notice of the meeting is
first given will be the record date for the determination of Members. Any such
determination of Members entitled to vote at any meeting of Members will apply
to any adjournment of a meeting.
7.7 QUORUM; MANNER OF ACTING.
(a) A quorum at any meeting of Members will consist of all Members (which
Members may be in attendance in person, by proxy, by telephone or by video
conference). Except as otherwise provided in this Agreement, if a quorum
is present at any meeting of the Members, the affirmative vote of Members
holding a majority of the Percentage Interests present at such meeting
will be the act of the Members.
(b) A quorum at any meeting of the Management Committee will consist of both
Managers (which Managers may be in attendance in person, by proxy, by
telephone or video conference). In the event that the appropriate number
and/or composition of Managers necessary for a quorum of the Management
Committee is not satisfied on a first call of a meeting as prescribed in
this 7.7(b), including as a result of one Member not having a validly
appointed Manager at such time, the meeting will be reconvened on the day
that is two Business Days thereafter (which may be shortened by the
written consent of all Managers on the Management Committee). In the event
that, on a second call of such meeting, the appropriate number and/or
composition of Managers necessary for a quorum is not satisfied, including
as a result of one Member not having a validly appointed Manager at such
time, the meeting will be reconvened on the date that is two Business
27
Days thereafter (which may be shortened by the written consent of all
Managers on the Management Committee); provided that, at the third call of
such meeting, the absence of any Manager not in attendance on both
previous calls of the meeting, including as a result of one Member not
having a validly appointed Manager at such time, will not prevent the
transaction of business at any such meeting, and the vote of the Manager
in attendance at such meeting will be the decision of the Management
Committee with respect to all matters voted upon at the meeting for
purposes of 6.3. Notice of any such reconvened meeting will be given to
all Managers not in attendance at the prior inquorate meeting or to any
Member that does not have a validly appointed Manager at such time.
7.8 PROXIES. At any meeting of Members or the Management Committee, a Member or
a Manager may vote in person or by written proxy given to another Member or
Manager. Such proxy must be signed by the Member or Manager, or by a duly
authorized attorney-in-fact, and must be filed with the Company before or at the
time of the meeting. No proxy will be valid after eleven months from the date of
its signing unless otherwise provided in the proxy. Attendance at the meeting by
the Member or Manager giving the proxy will revoke the proxy during the period
of attendance.
7.9 MEETINGS BY TELEPHONE OR VIDEO. The Members and the Managers may participate
in a meeting by means of conference telephone or video or similar communications
equipment by which all Members or Managers participating in the meeting can hear
each other at the same time. Such participation will constitute presence in
person at the meeting and waiver of any required Notice. The Company will take
all reasonable steps to ensure that Members and Managers are able to participate
by telephone or video conference in meetings of Members and meetings of the
Management Committee, respectively.
7.10 ACTION WITHOUT A MEETING. Any action required or permitted to be taken at a
meeting of Members or Managers may be taken without a meeting if, and will be
effective when, the action is evidenced by one or more written consents
describing the action taken, signed by all Members, or in the case of Managers,
signed by at least one Manager appointed by LMI Member and at least one Manager
appointed by SC Member.
7.11 MINUTES OF MEETINGS. Minutes of each Management Committee or Members
meeting will be prepared in both Japanese and English and will be promptly
distributed by the Company to each Member.
ARTICLE 8: LIABILITY OF MEMBERS AND MANAGERS
8.1 LIMITED LIABILITY. Except as otherwise provided in the Act, the debts,
obligations and liabilities of the Company (whether arising in contract, tort or
otherwise) will be solely the debts, obligations and liabilities of the Company,
and neither the Managers, any Authorized Representative nor any Member of the
Company (including any Person who formerly held such status) is liable or will
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of such status. No individual trustee, officer,
director, manager, employee, or agent of any Member, in its individual capacity
as such, will have any personal liability for the performance of any obligation
of such Member under this Agreement.
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8.2 CAPITAL CONTRIBUTION. Each Member is liable to the Company for any Capital
Contribution or Distribution that has been wrongfully or erroneously returned or
made to such Member in violation of the Act, the Certificate or this Agreement.
8.3 CAPITAL RETURN. Any Member who has received the return of all or any part of
such Member's Capital Contribution will have no liability to return such
Distribution to the Company after the expiration of three years from the date of
such Distribution unless Notice of an obligation to return is given to such
Person within such three-year period; provided that if such return of capital
has occurred without violation of the Act, the Certificate or this Agreement,
the three-year obligation to return capital will apply only to the extent
necessary to discharge the Company's liability to its creditors who reasonably
relied on such obligation in extending credit prior to such return of capital.
8.4 RELIANCE. Any Member and the Managers will be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements by: (a) any of the Company's other Members, employees or
committees, or (b) any other Person who has been selected with reasonable care
as to matters such Member reasonably believes are within such other person's
professional or expert competence. Matters as to which such reliance may be made
include the value and amount of assets, liabilities, Income and Losses of the
Company, as well as other facts pertinent to the existence and amount of assets
from which distributions to Members might properly be made.
ARTICLE 9: EXCULPATION AND INDEMNIFICATION OF MANAGERS AND AUTHORIZED
REPRESENTATIVES
9.1 STANDARD OF CARE. The only fiduciary duty owed by the Managers to the
Company and its Members is to discharge their duties as Managers in good faith,
in such manner as they reasonably believe to be in the best interests of the
Company, consistent with the Delaware corporate director fiduciary duty of care,
not to engage in willful misconduct or gross negligence in the discharge of such
duties and not to breach the express terms of this Agreement or any express
directive of the Management Committee (the "Standard of Care"). The Managers do
not have any other express or implied fiduciary duties to the Company or its
Members. Notwithstanding the foregoing, the Managers owe no fiduciary duty of
any nature to any Limited Owner or to any Transferee that is not admitted as a
Member.
9.2 EXCULPATION. The Managers will not be liable to the Company or to any Member
or Transferee for any losses, damages, expenses or liabilities arising out of or
related to any act or omission of the Managers to the extent that, in such act
or omission, such Manager has not breached the Standard of Care. The liability
of Authorized Representatives to the Company or to any Member is akin to the
liability, if any, of officers of a Delaware corporation.
9.3 INDEMNIFICATION. The Company will indemnify, defend and hold harmless each
of the Managers and any Authorized Representatives of the Company (collectively,
the "Indemnified Persons") from and against any and each loss, damage, expense
(including, without limitation, fees and expenses of attorneys and other
advisors and any court costs incurred by any Indemnified Person) or liability
incurred in any Proceeding to which any Indemnified Person is made a party
because such Person was a Manager or Authorized Representative and by reason of
29
any act or omission with respect to the business or affairs of the Company
performed or omitted to be performed in good faith, not in breach of the express
terms of this Agreement or any express directive of the Management Committee and
reasonably believed by the Indemnified Person to be in or not opposed to the
best interests of the Company.
9.4 EXPENSE ADVANCEMENT. With respect to the reasonable expenses incurred by an
Indemnified Person when such Indemnified Person is a party to a Proceeding, the
Company will provide funds to such Indemnified Person in advance of the final
disposition of the Proceeding if: (a) such Indemnified Person furnishes the
Company with such Person's written affirmation of a good faith belief that it is
entitled to indemnification under the standards set forth in this Article, and
(b) such Indemnified Person agrees in writing to repay the advance if it is
determined by the Management Committee that such Indemnified Person was not
entitled to indemnification under the standards set forth in this Article. If
the decision of the Management Committee regarding whether an Indemnified Person
is entitled to indemnification under the standards set forth in this Article is
not unanimous, the Manager that voted against such indemnification will have the
option, exercisable by written notice to the other Manager within 10 Business
Days following the decision of the Management Committee, to elect that such
dispute be resolved in accordance with Article 15. If the parties are unable to
resolve the dispute pursuant to 15.1 and the dispute is resolved by arbitration,
the decision of the arbitrators regarding whether the Indemnified Person is
entitled to indemnification under the standards set forth in this Article will
control over the decision of the Management Committee.
9.5 INSURANCE. The indemnification provisions of this Article do not limit any
Indemnified Person's right to recover under any insurance policy maintained by
the Company. If, with respect to any loss, damage, expense or liability
described in 9.3, any Manager or Authorized Representative receives an insurance
policy indemnification payment, which, together with any indemnification payment
made by the Company, exceeds the amount of such loss, damage, expense or
liability, then such Manager or Authorized Representative will immediately repay
such excess to the Company.
9.6 INDEMNIFICATION OF OTHERS. The Management Committee may cause the Company to
indemnify and advance expenses to any Member, officer, employee or agent of the
Company to the same extent (or to a greater or lesser extent than) the Company
is obligated to indemnify and advance expenses to any Manager or Authorized
Representative.
9.7 RIGHTS NOT EXCLUSIVE. The rights accruing to each Person entitled to
indemnification under this Article 9 will not exclude any other right to which
such Person may be lawfully entitled.
ARTICLE 10: ACCOUNTING AND REPORTING
10.1 FISCAL YEAR. For income tax and accounting purposes, the fiscal year of the
Company will be the calendar year.
10.2 TAX ACCOUNTING METHOD. For income tax purposes, the Company will use the
accrual method of accounting (unless otherwise required by the Code). The Tax
Matters Partner will have the authority to adopt all other accounting methods
for tax purposes.
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10.3 TAX CLASSIFICATION AND ELECTIONS. Notwithstanding any other provision of
this Agreement, no Member or employee of the Company may take any action
(including, but not limited to, the filing of a U.S. Treasury Form 8832 Entity
Classification Election) which would cause the Company to be characterized as an
entity other than a partnership for U.S. federal income tax purposes without the
consent of LMI Member.
10.4 RETURNS. The Company will use reasonable efforts to cause the preparation
and timely filing of all tax returns required to be filed by the Company
pursuant to the Code, as well as all other tax returns required in each
jurisdiction in which the Company does business.
10.5 REPORTS; ANNUAL FINANCIAL STATEMENTS; REGULATORY REPORTING OBLIGATIONS.
(a) The Company will prepare or will cause the preparation of reasonably
detailed unaudited quarterly and annual financial statements consisting of
balance sheets and statements of income (but not cash flows) for the
Company, reflecting JCOM's financial results and prepared on a historical
basis in accordance with GAAP (excluding footnotes). The Company will
furnish to the Members unaudited (a) quarterly statements within 60 days
after the end of each calendar quarter and (b) annual statements within
120 days after the end of each calendar year. Upon SC Member's request,
such financial statements will also be prepared on a Japanese yen basis,
but still in accordance with GAAP. The Company will permit SC Member's
auditors or auditors appointed by SC Member in cooperation with the
Company's and JCOM's auditors to perform audit procedures with respect to
the financial statements of the Company and JCOM as of and for the periods
ending March 31 and September 30 of each year.
(b) SC Member and LMI Member agree to use Commercially Reasonable Efforts to
cause JCOM to produce within the time frames requested by LMI Member from
time to time, such JCOM financial statements and other financial
information prepared in accordance with GAAP as LMI may require (the "LMI
Requested Financial Information"), as reasonably determined by LMI, to
enable it to consolidate JCOM's results of operations with LMI's results
of operations for purposes of U.S. financial accounting reporting rules
and regulations and to meet on a timely basis, LMI's reporting or other
obligations under applicable law, the rules and regulations promulgated
thereunder and interpretations thereof by the applicable regulatory
authority or its staff, including, without limitation, the U.S. Securities
Act of 1933 and the U.S. Securities Act of 1934. SC Member and LMI Member
agree to use Commercially Reasonable Efforts to cause JCOM to provide such
LMI Requested Financial Information to each of LMI and SC within 10 to 13
days of each fiscal year or quarter end, as applicable, or such shorter
time period as may be required by LMI pursuant to the preceding sentence.
Following receipt by SC and LMI of such LMI Requested Financial
Information for any fiscal year or quarter, LMI Member and SC Member agree
to use Commercially Reasonable Efforts to cause JCOM to produce, within
the time frames requested by SC and its auditors, such audit work papers,
clearance reports and other related information (the "SC Additional
Information") as SC's auditors determine is necessary for SC to include
JCOM's results of operations into SC's results of operations using the
equity accounting method. SC Member and LMI Member also agree to use
Commercially Reasonable Efforts to cause JCOM, within the time frames
requested by SC Member or LMI Member from time to time, to take
31
such action or to produce such other information, statements and reports,
as may be required by applicable stock exchange or stock associations
rules or by applicable law, the rules and regulations promulgated
thereunder or interpretations thereof by the applicable regulatory
authority or its staff, as reasonably determined by LMI Member or SC
Member, as the case may be, to timely meet its or its Affiliates'
disclosure, reporting or other obligations under the rules of any stock
exchange or stock association on which its shares are listed and under any
applicable law and the rules and regulations promulgated thereunder or
interpretations thereof by the applicable regulatory authority or its
staff, including, without limitation, the U.S. Securities Act of 1933, the
U.S. Securities Act of 1934 and the Xxxxxxxx-Xxxxx Act of 2002.
Notwithstanding the foregoing, neither Member shall be required to use
Commercially Reasonable Efforts to cause JCOM to produce any information
or take any action at the request of the other Member (the "Requesting
Member") that would be reasonably likely to constitute a violation by
JCOM, SC Member or LMI Member of applicable Japanese law based on an
opinion, which may be a reasoned or qualified opinion, of Japanese counsel
reasonably acceptable to the Requesting Member. Notwithstanding anything
to the contrary herein, any requests that SC Member desires to make
pursuant to this 10.5(b) will first be given to LMI Member by SC Member
and LMI Member will then promptly initiate any such requests with JCOM,
except for any requests for SC Additional Information, which may be made
by SC Member or its auditors to JCOM or its auditors directly, with a copy
of any such request to be delivered to LMI Member.
10.6 BOOKS AND RECORDS.
(a) The following books and records of the Company will be kept at its
principal office: (i) a current list of the full name and last known
business, residence or mailing address of each Member, (ii) the original
of the Certificate and of this Agreement, as amended (as well as any
signed powers of attorney pursuant to which any such document was
executed), (iii) a copy of the Company's U.S. federal, state and local
income tax returns and reports, and annual financial statements of the
Company, for the ten most recent years, and (iv) minutes, or minutes of
action or written consent, of every meeting of the Members and the
Management Committee.
(b) The Company will keep at the Company's principal office separate books of
account for the Company which will show a true and accurate record of all
costs and expenses incurred, all credits made and received, and all income
derived in connection with the operation of the Company in accordance with
GAAP consistently applied as to the Company's financial position and
results of operations.
(c) Each Member will have the right, at any time with reasonable Notice to the
Managers and the Company and at such Member's sole expense, to examine,
copy and audit the Company's books and records during normal business
hours.
(d) All books, records (including bills and invoices), reports and returns of
the Company required by this Article will be maintained in a commercially
reasonable manner as reasonably determined by the Management Committee.
32
10.7 INFORMATION. Each Member has the right, from time to time and upon
reasonable demand for any purpose reasonably related to such Member's ownership
of Units, to obtain from the Company: (a) a current list of the full name and
last known business, residence or mailing address of each Member, (b) a copy of
the Certificate and of this Agreement, as amended (as well as any signed powers
of attorney pursuant to which any such document was executed), (c) a copy of the
Company's U.S. federal, state and local income tax returns and reports and
annual financial statements of the Company, for the ten most recent years, (d)
minutes, or minutes of action or written consent, of every meeting of the
Members and the Management Committee, (e) true and full information regarding
the amount of money and a description and statement of the agreed value of any
other property or services contributed or to be contributed by each Member, and
the date on which each became a Member, (f) true and full information regarding
the status of the business and financial condition of the Company, (g) copies of
any materials that JCOM distributes to the Company that were not also received
by any JCOM director designated by such Member pursuant to 6.5, or as the
Company may otherwise reasonably request from JCOM upon the reasonable request
of a Member and (h) other information regarding the affairs of the Company as is
just and reasonable. Any demand by a Member under this 10.7 must be by Notice to
the Company, and must state the purpose of the demand. Any inspection or copying
of the Company's books and records under this 10.7 will be during normal
business hours, and at the expense of the Member making the demand.
10.8 BANKING. The Management Committee will cause to be established and
maintained one or more bank or financial or security accounts and safe deposit
boxes for the Company. Without limiting the foregoing, within six months
following the JCOM IPO Date, the Company will open a non-resident bank account
in Japan and will maintain such account for so long as SC Member has the ability
to request a redemption of Units pursuant to 13.4, in each case provided that
such bank account can be opened and maintained without the Company having an
address in Japan and without the necessity of having a Japanese resident be
signatory on such account. The Management Committee may authorize one or more
individuals to sign checks on and withdraw funds from such bank or financial
accounts and to have access to such safe deposit boxes, and may place such
limitations and restrictions on such authority as the Management Committee deems
advisable.
10.9 TAX MATTERS PARTNER. Until further action by the Company, LJI is designated
as the tax matters partner under Section 6231(a)(7) of the Code ("Tax Matters
Partner"). The Tax Matters Partner will be responsible for notifying all Members
of ongoing proceedings, both administrative and judicial, and will represent the
Company throughout any such proceeding. The Members will furnish the Tax Matters
Partner with such information as it may reasonably request to provide the
Internal Revenue Service with sufficient information to allow proper notice to
the Members. If an administrative proceeding with respect to a partnership item
under the Code has begun, and the Tax Matters Partner so requests, each Member
will notify the Tax Matters Partner of its treatment of any partnership item on
its U.S. federal income tax return, if any, which is inconsistent with the
treatment of that item on the partnership return for the Company. Any settlement
agreement with the Internal Revenue Service will be binding upon the Members
only as provided in the Code. The Tax Matters Partner will not bind any other
Member to any extension of the statute of limitations or to a settlement
agreement without such Member's written consent. Any Member who enters into a
settlement agreement with respect to any partnership item will notify the other
Members and the Management Committee of such
33
settlement agreement and its terms within 30 days from the date of settlement.
If the Tax Matters Partner does not file a petition for readjustment of the
partnership items in the Tax Court, U.S. federal District Court or Claims Court
within the 90-day period following a notice of a final partnership
administrative adjustment, any notice partner or 5-percent group (as such terms
are defined in the Code) may institute such action within the following 60 days.
The Tax Matters Partner will timely notify the other Members in writing of its
decision. Any notice partner or 5-percent group will notify any other Member and
the Management Committee of its filing of any petition for readjustment.
10.10 NO PARTNERSHIP. The classification of the Company as a partnership will
apply only for U.S. federal (and, as appropriate, state, local and foreign)
income tax purposes. This characterization, solely for tax purposes, does not
create or imply a general partnership between the Members for state law or any
other purpose. Instead, the Members acknowledge the status of the Company as a
limited liability company formed under the Act, and the Members elect
pass-through treatment for tax accounting purposes. All duties and obligations
of the Members to each other are expressly set forth in this Agreement. Without
limiting the foregoing, the Members do not owe to each other or to the Company
the duties that a general partner xxxx to a partnership and its other partners
nor do the Managers or the Authorized Representatives owe such duties to each
other, the Company or its Members, it being acknowledged that the duties owed by
the Managers and the Authorized Representatives to each other and the Company
are as set forth in Article 9. The Members do not have any express or implied
fiduciary duties to the Company or each other except the fiduciary duties, if
any, that shareholders in a Delaware corporation might have to each other or the
corporation.
ARTICLE 11: DISSOLUTION
11.1 DISSOLUTION. Dissolution of the Company will occur upon the earliest to
occur of any of the following events:
(a) the unanimous vote of the Members to dissolve the Company;
(b) an event of Withdrawal (as defined in 11.2) of a Member and the election
of the remaining Members to dissolve in accordance with 11.3;
(c) without limiting SC Member's obligations under 14.2, at such time as LMI
is not able to, or LMI Member provides SC Member with Notice that LMI no
longer desires to, consolidate the financial results of JCOM with LMI for
purposes of applicable U.S. financial reporting rules and regulations;
(d) the entry of a decree of judicial dissolution under the Act;
(e) the nonoccurrence of the Casting Vote Effective Date on or before March
31, 2005;
(f) the five year anniversary of the Casting Vote Effective Date;
(g) any of LJI, LJII, LHJ, Liberty Japan or Liberty Kanto while a Member,
ceases to be an Affiliate of its Parent;
34
(h) such time as the sum of the number of Units and JCOM Shares owned directly
by SC Member and its Affiliates who are subject to 14.4 exceeds the sum of
the number of Units and JCOM Shares owned directly by LMI Member and its
Affiliates, provided that SC Member is not in breach of its obligations
hereunder; or
(i) if either LMI Member or SC Member has materially breached a material
provision of this Agreement and such breach has not been cured within 30
days after receipt of a Notice from the non-breaching Member providing
reasonable detail concerning the nature of the breach, then upon the
election of the non-breaching Member;
provided that, with respect to an event of Dissolution pursuant to clauses (c)
or (f) above, the Members will, no later than 60 days prior to such date of
Dissolution, discuss whether to extend and amend the terms of this Agreement.
11.2 EVENTS OF WITHDRAWAL. An event of Withdrawal of a Member occurs when any of
the following occurs:
(a) with respect to any Member, upon the Transfer of all of such Member's
Units (which may only be done as otherwise permitted under this Agreement
and which Transfer is treated as a resignation);
(b) with respect to any Member, upon the voluntary withdrawal, retirement or
resignation of the Member by Xxxxxx to the Company;
(c) with respect to any Member that is a corporation, upon filing of articles
of dissolution of the corporation;
(d) with respect to any Member that is a partnership, a limited liability
company or a similar entity, upon dissolution and liquidation of such
entity (but not solely by reason of a technical termination under Section
708(b)(1)(B) of the Code); or
(e) with respect to any Member, the Bankruptcy of the Member.
Within 10 days following the happening of any event of Withdrawal with respect
to a Member, such Member must give Notice of the date and the nature of such
event to the Company.
11.3 CONTINUATION.
(a) In the event of Withdrawal of a Member, the Company will be continued
unless the remaining Members (including the Permitted Transferee of a
withdrawing Member, if applicable) unanimously elect to dissolve. If the
Company is so continued, any Member as to which an event of Withdrawal
specified in 11.2(b) through 11.2(e) has occurred, or such Member's
Transferee or other successor-in-interest (as the case may be) if a Member
has made a Transfer in violation of this Agreement and such Transfer is
found not to be null and void, will, without further act, become a
"Limited Owner" of its own Units or the Units of the withdrawn Member. A
Limited Owner has no right: (i) to participate or interfere in the
management or administration of the Company's business or affairs,
including by virtue of appointment of one or more Managers, (ii) to vote
or
35
agree on any matter affecting the Company or any Member, (iii) to require
any information on account of Company transactions or (iv) except as
provided in the next succeeding sentence, to inspect the Company's books
and records. The only rights of a Limited Owner are: (x) to obtain the
information specified in 10.7 if it executes a confidentiality agreement
(in form and substance satisfactory to the Board) concerning such
information if not already bound by 10.7, (y) to receive the allocations
and Distributions to which the Units of the Limited Owner are entitled and
(z) to receive all necessary tax reporting information. Neither the
Company, the Managers nor the Members will owe any fiduciary duty of any
nature to a Limited Owner. However, each Limited Owner will be subject to
all of the obligations, restrictions and other terms contained in this
Agreement as if it were a Member.
(b) Upon the occurrence of any event of Dissolution, LMI Member will have the
option to continue the Company, as long as it first makes all liquidating
Distributions to SC Member that it would have been required to make under
Article 12 if the Company had completely wound up its affairs and
liquidated. Any such Distribution to SC Member will be made in complete
redemption of all Units then owned by SC Member.
ARTICLE 12: LIQUIDATION
12.1 LIQUIDATION. Subject to 11.3(b), upon Dissolution of the Company, the
Company will immediately proceed to wind up its affairs and liquidate pursuant
to this 12.1. The Management Committee or, if the Management Committee fails to
act, any Person appointed by Members owning a majority of Units held by all
Members other than the Members whose Manager-appointees failed to act, will act
as the liquidating trustee. The winding up and Liquidation of the Company will
be accomplished in a businesslike manner as determined by the liquidating
trustee. A reasonable time will be allowed for the orderly Liquidation of the
Company and the discharge of liabilities to creditors so as to enable the
Company to minimize any losses attendant upon Liquidation. Any gain or loss on
disposition of any Company assets in Liquidation will be allocated to Members in
accordance with Article 4. Any liquidating trustee is entitled to reasonable
compensation for services actually performed, and may contract for such
assistance in the liquidating process as such Person deems necessary or
desirable. Until the filing of a certificate of cancellation under 12.7, and
without affecting the liability of the Members and without imposing liability on
the liquidating trustee, the liquidating trustee may settle and close the
Company's business, prosecute and defend suits, dispose of its property,
discharge or make provision for its liabilities, and make Distributions in
accordance with the priorities set forth in this Article.
12.2 TAX TERMINATION. In addition to termination of the Company following its
Dissolution, a termination of the Company will occur, for U.S. federal income
tax purposes only, on the date the Company is terminated under Section 708(b)(1)
of the Code. Under current law, events causing such a termination include the
sale or exchange of 50% or more of the total interest in the capital and profits
of the Company within a twelve-month period. Upon the occurrence of a
termination under Section 708(b)(1) of the Code, the Company will be deemed to
contribute all of its assets and liabilities to a new partnership for tax
purposes in exchange for an interest in such partnership and, immediately
thereafter, to distribute interests in the new partnership to the Members in
complete liquidation of the Company. All adjustments and computations will be
made under this
36
Agreement as if the constructive transactions had actually occurred, and the
Capital Accounts of the Members in such new tax partnership will be determined
and maintained in accordance with the Section 704(b) Regulations.
12.3 PRIORITY OF PAYMENT. The assets of the Company will be distributed in
Liquidation in the following order:
(a) First, to creditors by the payment or provision for payment of the debts
and liabilities of the Company (other than any loans or advances that may
have been made by any Member or any Affiliate of a Member) and the
expenses of Liquidation;
(b) Second, to the setting up of any reserves that are reasonably necessary
for any contingent, conditional or unmatured liabilities or obligations of
the Company;
(c) Third, to the repayment of any loans or advances to the Company that were
made by any Member or any Affiliate of a Member (according to the relative
priority of repayment of such loans and proportionally among loans of
equal priority if the amount available for repayment is insufficient for
payment in full); and
(d) Fourth, to the Members pro rata in proportion to their Percentage
Interests.
12.4 LIQUIDATING DISTRIBUTIONS. Liquidating Distributions due to the Members
will be made by selling the assets of the Company and distributing the net
proceeds. Notwithstanding the preceding sentence, unless otherwise agreed by the
Members, liquidating Distributions will be made to the extent possible by
distributing the assets of the Company in-kind to the Members in proportion to
the amounts distributable to them pursuant to 12.3, valuing such assets at their
Fair Market Value (net of liabilities secured by such property that the Member
takes subject to or assumes), as reasonably agreed by the Members, on the date
of Distribution. If the Members are unable to agree on net Fair Market Value
within 30 days following an event of Dissolution, each Member will retain within
45 days following an event of Dissolution, an internationally recognized
investment bank to determine net Fair Market Value in accordance with the
valuation process specified in 5.4(b); provided, that if the assets to be
distributed are JCOM Shares, Fair Market Value will be the Unit Fair Market
Value and provided that if either Member fails to retain an internationally
recognized investment bank within the required time period, net Fair Market
Value as determined by the investment banker retained by the other Member will
control for purposes of this 12.4. In connection with any in-kind Distributions,
the assets distributed will be deemed to have been sold immediately preceding
the date of Distribution for a purchase price equal to their Fair Market Value,
and the Net Income or Net Loss arising from such deemed sale will be allocated
to the Members in accordance with Article 4 and credited to their Capital
Accounts in accordance with Article 3. Each Member (the "Assuming Member")
agrees to save and hold harmless the other Member from any and all liabilities
that are taken subject to or assumed by the Assuming Member. Appropriate and
customary prorations and adjustments will be made incident to any Distribution
in-kind. Each Member will look solely to the assets of the Company for the
return of its Capital Contributions, and if the assets of the Company remaining
after the payment or discharge of the debts and liabilities of the Company are
insufficient to return such contributions, such Member will have no recourse
against the other Member. The Members acknowledge that 12.3 may establish
Distribution priorities on Liquidation different
37
from those set forth in the Act, as in effect at the time of any Distribution;
and, in such event, it is the Members' intention that the provisions of 12.3
will control, to the extent possible. If any in-kind liquidating Distributions
of JCOM Shares are to be made, the Members will use Commercially Reasonable
Efforts to complete the liquidating Distributions in such a manner so that the
TOB Rules do not apply to the Distributions.
12.5 NO RESTORATION OBLIGATION. Except as otherwise specifically provided in
this Agreement, nothing contained in this Agreement imposes on any Member an
obligation to make an Additional Contribution in order to restore a deficit
Capital Account upon Liquidation of the Company.
12.6 LIQUIDATING REPORTS. A report will be submitted with each liquidating
Distribution to Members made pursuant to 12.3 and 12.4, showing the collections,
disbursements and distributions during the period, which is subsequent to any
previous report. A final report, showing cumulative collections, disbursements
and distributions, will be submitted upon completion of the Liquidation process.
12.7 CERTIFICATE OF CANCELLATION. Upon Dissolution of the Company and the
completion of the winding up of its business, the Company will file a
certificate of cancellation (to cancel the Certificate) with the Delaware
Secretary of State pursuant to the Act. At such time, the Company will also file
an application for withdrawal of its certificate of authority in any
jurisdiction where it is then qualified to do business.
ARTICLE 13: TRANSFER RESTRICTIONS
13.1 GENERAL RESTRICTION. No Person may Transfer all or any part of such
Person's Units in any manner whatsoever except: (a) a Transfer to a Permitted
Transferee as specified in 13.2; or (b) as provided in 13.4, but in any case
with respect to a Transfer described in either (a) or (b), only if the
requirements of 13.3 have also been satisfied. Any other Transfer of Units is
null and void, and of no effect. Any Member who makes a Transfer of all of its
Units in accordance with the requirements of this Agreement will cease to be a
Member on the date of such Transfer and will cease on such date to have any
rights or future obligations as a Member pursuant to this Agreement; provided
that such Member will not be released from any obligations or liabilities that
arose prior to the date of Transfer or, in the case of SC Member, from any
obligations or liabilities pursuant to 13.3(e). Any Member who makes a Transfer
of part (but not all) of such Person's Units will continue as a Member (with
respect to the interest retained), and such partial Transfer will not constitute
an event of Withdrawal of such Member. The rights and obligations of any
Transferee of a Unit will be governed by the other provisions of this Agreement.
13.2 PERMITTED TRANSFEREE. Subject to the requirements set forth in 13.3, a
Person may Transfer all or any part of such Person's Units to any Affiliate of
the Person (each, a "Permitted Transferee").
13.3 GENERAL CONDITIONS ON TRANSFERS. Except to the extent that one or more of
such conditions is waived by the Management Committee, no Transfer of a Unit
will be effective unless all of the conditions set forth below are satisfied:
38
(a) The Transferor delivers to the Company (i) an opinion of counsel for the
Transferor reasonably satisfactory in form and substance to the Company to
the effect that, assuming the accuracy of the statement of the Transferee
described in (ii) below, the Transfer of the Units as proposed does not
violate requirements for registration under applicable U.S. federal and
state securities laws; provided that the requirement of an opinion of
counsel will be waived in circumstances where it is not reasonably
necessary, and (ii) a statement of the Transferee in form and substance
reasonably satisfactory to the Company making appropriate representations
and warranties with respect to compliance with the applicable U.S. federal
and state securities laws and as to any other matter reasonably required
by the Company;
(b) The Transferor signs and delivers to the Company a copy of the assignment
of the Units to the Transferee (substantially in the form of the attached
EXHIBIT C);
(c) Unless the Transferee is already a Member, the Transferee signs and
delivers to the Company an agreement (substantially in the form of the
attached EXHIBIT C) to be bound by this Agreement;
(d) The Transfer is in compliance with the other provisions of this Article;
and
(e) In the case of any Transfer by SC to an Affiliate, except as the parties
may other reasonably agree, SC signs and delivers to LMI Member an
agreement pursuant to which SC agrees for the benefit of LMI Member that
it will cause the Transferee to perform its obligations under this
Agreement and guarantees to LMI Member (as a primary obligor and not as a
surety only) the performance by the Transferee or any Affiliate of SC to
which the Transferee may hereafter Transfer Units, of all SC Member's
obligations from time to time in force under the terms of this Agreement
for so long as any of them is a Member. Notwithstanding the foregoing,
SC's obligations under any guarantee delivered pursuant to this paragraph
will terminate with respect to an SC Member at such time that the Member
ceases to be an Affiliate of SC pursuant to a transaction permitted by
this Agreement.
(f) In the case of any Transfer by LJ, LJII, LHJ, Liberty Kanto or Liberty
Jupiter to an Affiliate, except as the parties may other reasonably agree,
LMI signs and delivers to SC Member an agreement pursuant to which LMI
agrees for the benefit of SC Member that it will cause the Transferee to
perform its obligations under this Agreement and guarantees to SC Member
(as a primary obligor and not as a surety only) the performance by the
Transferee or any Affiliate of LMI to which the Transferee may hereafter
Transfer Units, of all LMI Member's obligations from time to time in force
under the terms of this Agreement for so long as any of them is a Member.
Notwithstanding the foregoing, LMI's obligations under any guarantee
delivered pursuant to this paragraph will terminate with respect to an LMI
Member at such time that the Member ceases to be an Affiliate of LMI
pursuant to a transaction permitted by this Agreement.
39
13.4 TRANSFER OR REDEMPTION OF UNITS.
(a) The provisions of this 13.4 do not apply to any Transfer of Units that is
otherwise permitted under 13.2. In accordance with the procedures set
forth in this 13.4, after the JCOM IPO Date, LMI Member or SC Member may
Transfer to the other Member or have the Company redeem, as applicable,
all or any part of its Units (subject in all cases to the limits on the
number of Units eligible for redemption set forth in 13.4(c)); provided,
that the procedures set forth in this 13.4 for the Transfer or redemption
of Units will not be initiated by either LMI Member or SC Member (i) more
frequently than once in any rolling 90 day period, or (ii) with respect to
a Transfer or redemption of Units with a Unit Fair Market Value of less
than(Y)1 billion, measured as of the date the Offer is made.
(b) (i) If LMI Member or SC Member (a "Selling Member") desires to have
the Company redeem all or any portion of its Units (the "Offered
Units"), it will first submit a written offer (the "Offer") to sell
to the other Member (the "Offeree") the Offered Units. If the
Selling Member has received a bona fide written offer from any
Person other than an Affiliate of such Selling Member (a "Third
Party Buyer") to purchase for cash a number of JCOM Shares equal to
the number of Offered Units (a "Third Party Offer"), then the
purchase price per Offered Unit (the "Offer Price") for the Offer
will be the purchase price per JCOM Share offered by the Third Party
Buyer, which will be payable in cash. If the Selling Member has not
received a Third Party Offer, then the Offer Price per Offered Unit
will be the Unit Fair Market Value as of the date on which the Offer
is made, which will be payable in cash. The Offer will be
accompanied by a copy of any Third Party Offer if applicable and
will set forth in reasonable detail (i) the aggregate number of
Offered Units, (ii) the Offer Price, and if applicable, (iii) the
identity of the Third Party Buyer and the name of its ultimate
parent company and controlling shareholders, if any, and the amount
of the Third Party Offer.
(ii) If the Offeree desires to accept the entire Offer, or if there is
not a Third Party Offer, any portion thereof, the Offeree will
notify the Selling Member in writing of its intention to acquire all
of the Offered Units if there is a Third Party Offer or the number
of such Offered Units it desires to acquire if there is not a Third
Party Offer (in either case, the "Acquired Units"), such Notice to
be delivered within five Business Days after the Offer is made (or
if no Notice is given within such five Business Day period, the
Offeree will be deemed to have rejected the Offer in full). The
closing of such purchase and sale of Acquired Units will occur at
such time and will be subject to such conditions as are set forth in
13.5. The Offeree may assign its rights to acquire the Offered Units
under this 13.4(b) to any of its Affiliates. If the closing of the
purchase and sale of the Acquired Units does not occur pursuant to
13.5 due to a breach by the Offeree of any of its covenants,
representations or warranties that are a condition to the
consummation of such purchase, without limiting any rights hereunder
or any remedies provided at law, in equity or otherwise, the Offer
will be considered to have been rejected and the Selling Member may
cause JCOM Shares to be sold and Units to be redeemed in accordance
with the applicable provision set forth in 13.4(c). If the closing
of the
40
purchase and sale of the Acquired Units does not occur pursuant to
13.5 for any reason other than as set forth in the immediately
preceding sentence, then all of the Acquired Units will once again
be subject to all of the provisions of this 13.4. Following the
acquisition of Acquired Units by a Member pursuant to this 13.4(b),
such Member may thereafter require the Company to redeem such Units
as Unacquired Units pursuant to 13.4(c) without first offering such
Units to the other Member pursuant to 13.4(b).
(c) (i) If the Offer is not accepted in full pursuant to 13.4(b)(ii)
(with the difference between the Offered Units and the Acquired
Units being referred to as the "Unacquired Units"), then:
(A) If the Unacquired Units were the subject of a Third Party
Offer, then in accordance with the terms and conditions of the
Third Party Offer as set forth in the Offer and in accordance
with 13.5, the Company will (1) if the Selling Member is LMI
Member, sell to the Third Party Buyer a number of JCOM Shares
no greater than the number of Unacquired Units, (2) if the
Selling Member is SC Member, sell to the Third Party Buyer a
number of JCOM Shares no greater than the lesser of (x) the
number of Unacquired Units, (y) the SC Permitted Number less
the aggregate number of Units that SC Member (including all
predecessor SC Members) has sold to LMI Member pursuant to
13.4(b) and less the aggregate number of JCOM Shares that SC
Member (including all predecessor SC Members) has caused the
Company to sell under 13.4(c), in each case from the JCOM IPO
Date through but not including the date of sale of JCOM Shares
to the Third Party Buyer, and (z) the number obtained by
subtracting the aggregate number of JCOM Shares that SC Member
(including all predecessor SC Members) has caused the Company
to sell under 13.4(c) within the Operating Agreement Year in
which the sale of JCOM Shares to the Third Party Buyer will
occur from the number that equals one-third of the SC
Permitted Number, and (3) in each case, distribute the Net
Proceeds of the sale of the JCOM Shares and any cash or stock
dividends or other distributions the Company has received on
such JCOM Shares that have not previously been distributed to
the Members and that are not otherwise included in the
definition of JCOM Shares, to the Selling Member, first in
retirement of any debt the Company owes to such Selling Member
and next in redemption of a number of its Unacquired Units
equal to the number of JCOM Shares sold; or
(B) If the Unacquired Units were not the subject of a Third Party
Offer, then for a period of 30 days after the Offer was not
accepted in full pursuant to 13.4(b)(ii) (the "Sale Period"),
the Selling Member may cause the Company to (1) if the Selling
Member is LMI Member, sell a number of JCOM Shares no greater
than the aggregate number of Unacquired Units in Ordinary
Market Transactions effected at such times during the Sale
Period as LMI Member may reasonably request, (2) if the
Selling Member is SC Member, sell a number of JCOM Shares, in
Ordinary Market
41
Transactions effected at such times during the Sale Period as
SC Member may reasonably request, no greater than the lesser
of (x) the number of Unacquired Units, (y) the SC Permitted
Number less the aggregate number of Units that SC Member
(including all predecessor SC Members) has sold to LMI Member
pursuant to 13.4(b) and less the aggregate number of JCOM
Shares that SC Member (including all predecessor SC Members)
has caused the Company to sell under 13.4(c), in each case
from the JCOM IPO Date until the commencement of the Sale
Period, and (z) the number obtained by subtracting the number
of JCOM Shares that SC Member (including all predecessor SC
Members) has caused the Company to sell under 13.4(c) within
the Operating Agreement Year in which the Sale Period
commences from the number that equals one-third of the SC
Permitted Number and, (3) in each case, at such time and
subject to such conditions as are set forth in 13.5, the
Company will distribute the Net Proceeds of the sales of the
JCOM Shares and any cash or stock dividends or other
distributions the Company has received on such JCOM Shares
that have not previously been distributed to the Members and
that are not otherwise included in the definition of JCOM
Shares, to the Selling Member first in retirement of any debt
the Company owes to such Selling Member and next in redemption
of a number of its Unacquired Units equal to the number of
JCOM Shares sold.
(ii) The redemption of the Selling Member's Unacquired Units pursuant to
13.4(c) will be the only means for a Selling Member to Transfer the
Unacquired Units and the Selling Member may not otherwise Transfer
all or any part of the Unacquired Units in any other manner
whatsoever except as permitted by 13.2.
(iii) To the extent that (A) the closing of the purchase and sale of JCOM
Shares to a Third Party Buyer pursuant to 13.4(c)(i)(A) does not
occur due to a breach by the Third Party Buyer of any of its
covenants, representations or warranties that are a condition to the
consummation of such purchase, (B) prevailing market conditions
prevent the Company from completing any sales of JCOM Shares
requested by the Selling Member pursuant to 13.4(c)(i)(B) during the
Sale Period, (C) any Unacquired Units are not redeemed due to the
limitations on the number of Unacquired Units that may be redeemed
that are set forth in 13.4(c)(i)(A) or (B), or (D) any redemption
provided for in this 13.4(c) does not occur for any other reason,
then in each case any Unacquired Units that are not redeemed by the
Company will remain subject to the provisions of this 13.4.
13.5 PROCEDURES FOR TRANSFER OR REDEMPTION OF UNITS. Any purchase and sale of
Acquired Units to an Offeree pursuant to 13.4(b), any sale of JCOM Shares by the
Company pursuant to 13.4(c) and any redemption of Unacquired Units pursuant to
13.4(c) will be subject to the following terms and conditions:
(a) In the case of a purchase and sale of Acquired Units or the redemption of
any Unacquired Units, the Selling Member will be deemed to have
represented and warranted that: (i) the Offeree or the Company, as
applicable, will receive good and valid title to the Acquired
42
Units free and clear of all Liens of any nature whatsoever; and (ii) all
of such Units can be purchased and sold or redeemed, as applicable,
without any notice to, or consent, approval, order or authorization of, or
declaration or filing with, any other Person other than those already
obtained and except for any required Governmental Approvals. In the case
of a purchase and sale of JCOM Shares to a Third Party Buyer, the Company
will make the following representations and warranties if requested by the
Third Party Buyer: (A) the Third Party Buyer will receive good and valid
title to such JCOM Shares free and clear of all Liens of any nature
whatsoever; and (B) all of such JCOM Shares can be purchased and sold
without any notice to, or consent, approval, order or authorization of, or
declaration or filing with, any other Person other than those already
obtained and except for any required Governmental Approvals. The Selling
Member will use Commercially Reasonable Efforts to require the Third Party
Buyer to accept any additional representations, warranties or covenants
with respect to the sale of the JCOM Shares directly from the Selling
Member and not from the Company. In any case, the Selling Member will
indemnify, defend and hold the Company harmless from and against any and
all losses, damages, expenses or liabilities incurred by the Company and
arising out of the sale of JCOM Shares by the Company at the request of
the Selling Member, including claims made pursuant to any purchase
agreement between the Company and a Third Party Buyer.
(b) The closing of any purchase and sale of Acquired Units or JCOM Shares or
any redemption of Unacquired Units will be subject to the satisfaction of
the following conditions, it being agreed that the parties will use
Commercially Reasonable Efforts to cause such conditions to be met: (i)
the applicable parties will have made all necessary filings and taken all
actions that are required to be made or taken by them to comply with the
TOB Rules; (ii) all consents, notices, approvals, including Governmental
Approvals expressly required with respect to the transactions to be
consummated at such closing will have been obtained; and (iii) there will
be no preliminary or permanent injunction or other order by any court of
competent jurisdiction restricting, preventing or prohibiting the
consummation of the transactions to be consummated at such closing.
(c) Unless otherwise agreed by the applicable parties, the closing of any
purchase and sale of Acquired Units, any sale of JCOM Shares to a Third
Party Buyer or any redemption of Unacquired Units will take place at the
principal executive offices of the Company or at such other place as the
Management Committee may decide, at 10:00 a.m. local time on a Business
Day selected by the Offeree in the case of a purchase and sale and
selected by the Company in the case of a redemption, provided that such
closing will occur as promptly as practicable, and in any event, (i) with
respect to a purchase and sale of Acquired Units, within five Business
Days after the Offeree's acceptance of the Offer, (ii) with respect to a
redemption following a sale of JCOM Shares to a Third Party Buyer pursuant
to 13.4(c)(i)(A), within five Business Days following the closing of the
sale to the Third Party Buyer, (iii) with respect to a redemption
following sales of JCOM Shares in Ordinary Market Transactions pursuant to
13.4(c)(i)(B), within five Business Days after the end of the Sale Period,
and (iv) with respect to any sale of JCOM Shares to a Third Party Buyer
pursuant to 13.4(c)(i)(A), within 60 days after the Offeree has rejected
the Offer with respect to the Unacquired Units, subject in each case to
extension for up to 90 days to the extent required to satisfy all of the
conditions set forth in 13.5(b).
43
(d) Unless the applicable parties agree otherwise, the purchase price on any
purchase and sale of Acquired Units, the purchase price on any sale of
JCOM Shares to a Third Party Buyer and the redemption price for any cash
redemption of Unacquired Units will be payable in Japanese yen by wire
transfer of same day funds to an account at a bank designated by the
applicable party, such designation to be made no less than five Business
Days prior to the applicable closing; provided that, if SC Member is the
Selling Member, in order to facilitate SC Member's prompt receipt of
payment, any Third Party Buyer will be instructed by the Company to remit
the payment to the Company's bank account in Japan if the Company has such
an account.
(e) In the case of any purchase and sale of Acquired Units, the conditions set
forth in 13.3 must also be satisfied. In addition, at the reasonable
request of the Company, the Selling Member will cause the requirements of
13.3(a) to be satisfied with respect to the Company as Transferor of JCOM
Shares by delivering to the Company an opinion of counsel meeting the
requirements of 13.3(a)(i) and a statement of the Transferee meeting the
requirements of 13.3(a)(ii), in each case with respect to the Transfer of
JCOM Shares rather than Units.
13.6 RIGHTS OF TRANSFEREES. Any Transferee acquiring Units in compliance with
this Agreement will become a Member automatically on the effective date of the
Transfer.
13.7 SECURITY INTEREST. The Company will not pledge or grant a security
interest, Lien or other encumbrance in or against all or any part of the JCOM
Shares or any other assets of the Company and no Member will pledge or grant a
security interest, Lien or other encumbrance in or against all or any part of
such Member's Units, except as contemplated under the Principal Shareholders
Agreement.
ARTICLE 14: COVENANTS
14.1 CONFIDENTIALITY. Each Member agrees not to disclose (except to its
officers, directors, managers, employees, representatives, advisors, agents and
Affiliates) or to permit any Person Controlled by it to disclose, and will use
its reasonable best efforts to ensure that its officers, directors, managers,
employees, representatives, advisors, agents and Affiliates do not disclose or
permit disclosure of, any Company Confidential Information to any third party.
For purposes of this 14.1, "Company Confidential Information" means the terms of
this Agreement and all knowledge, information or materials relating to the
Company which a Member obtains by reason of being a Member in the Company.
Notwithstanding the foregoing, a Member may disclose Company Confidential
Information:
(a) as authorized in writing by the other Member;
(b) as required by any applicable law, stock exchange rule or by any subpoena
or similar legal process; provided that, if a Member is so required to
disclose Company Confidential Information, such Member, to the extent not
legally prohibited from doing so, will promptly provide the other Member
Notice of such requirement so that the other Member may, if it desired,
seek a protective order or other appropriate remedy, and the Member
required to make such disclosure of Company Confidential Information will
reasonably
44
cooperate with the Member seeking such protective order or other remedy.
If such protective order or other remedy is not sought (or, if sought, is
not obtained), the Member required to make such disclosure of Company
Confidential Information will furnish only that portion of the relevant
Company Confidential Information which it is advised by such Member's
counsel is legally required and will exercise reasonable efforts to obtain
that confidential treatment will be accorded to such Company Confidential
Information;
(c) if such Company Confidential Information is required to be disclosed by
order, request or guidance of any Governmental Authority, stock exchange
or stock association;
(d) if such Company Confidential Information was known by the disclosing
Member prior to becoming a Member of the Company;
(e) if such Company Confidential Information is in the public domain;
(f) if such Company Confidential Information is obtained from a third party in
circumstances not involving a breach of the terms of this 14.1; or
(g) to any bona fide prospective purchaser of the equity interests in or
assets of the disclosing Member, provided that such purchaser agrees to be
bound by the provisions of this 14.1.
The nondisclosure obligation contained in this 14.1 will be binding upon each
Member for so long as it holds any Units and for a period of three years
thereafter.
14.2 CONSOLIDATION COOPERATION. If at any time prior to a Dissolution, LMI is
not able to, but still desires to, consolidate the financial results of JCOM
with LMI for purposes of applicable U.S. financial reporting rules and
regulations, then upon request by LMI Member, LMI Member and SC Member will use
Commercially Reasonable Efforts to negotiate amendments to this Agreement and to
any other agreements relating to JCOM or negotiate new agreements relating to
such matters to permit continued consolidation by LMI.
14.3 FORM OF THE COMPANY. The Members acknowledge that SC Member has determined
that as of the date of this Agreement, a Delaware limited liability company is
not entitled to pass-through treatment under Japanese tax laws and based on
Japanese tax laws in place as of the date of this Agreement, SC Member would be
subject to Japanese withholding taxes on its share of any dividends that the
Company receives from JCOM. Accordingly, the Members agree that if JCOM
hereafter intends to begin paying dividends to its shareholders at a time when a
Delaware limited liability company continues, in SC Member's reasonable
judgment, to be ineligible for pass-through treatment under Japanese tax laws,
then SC Member may propose that the Company be reorganized as a different type
of entity and the parties will negotiate in good faith to effect such
reorganization if (a) the form of proposed entity is treated as a pass-through
entity for both U.S. and Japanese tax purposes and (b) such reorganization would
not have an adverse tax or other effect on LMI Member (other than imposing on
LMI Member up to a 20% withholding tax on its pro rata share of dividends paid
by JCOM to the Company) or its rights and obligations with respect to the
Company and the management of the Company, including any adverse effect on LMI's
ability to consolidate the financial results of JCOM with LMI for purposes of
applicable U.S. financial reporting rules and regulations. If the Company is
reorganized as described above, the Members will use reasonable commercial
efforts to (x)
45
negotiate governing documents for the new entity that contain the same rights
and obligations of the Members that are set forth in this Agreement, modified
only as necessary to reflect the new form of entity, and (y) to complete the
reorganization in such a manner so that the TOB Rules do not apply to the
reorganization.
14.4 PARTICIPATION RIGHT. After the JCOM IPO, if LMI Member, SC Member or an
Affiliate of LMI Member or SC Member desires to acquire JCOM Shares through an
Ordinary Market Transaction or from JCOM or any Person other than an Affiliate
of such Member, the Member that desires to acquire JCOM Shares or whose
Affiliate desires to acquire JCOM Shares (the "Purchasing Member") must first
give prompt written notice to the other Member (the "Non-Purchasing Member")
offering the Non-Purchasing Member the right (a "Participation Right") to
purchase a percentage, not to exceed its Percentage Interest, of the total
number of additional JCOM Shares that the Purchasing Member or its Affiliate
proposes to acquire on the same terms and conditions. The Notice will specify in
reasonable detail (a) the number of JCOM Shares proposed to be acquired, (b) the
proposed purchase price per JCOM Share or, with respect to JCOM Shares proposed
to be acquired through Ordinary Market Transactions, the maximum price at which
shares will be acquired, (c) with respect to JCOM Shares to be acquired through
Ordinary Market Transactions, the time period over which such shares will be
acquired, (d) except with respect to JCOM Shares to be acquired through Ordinary
Market Transactions, the identity of the Person from whom the Purchasing Member
or its Affiliate intends to acquire the JCOM Shares and the name of its ultimate
parent company and controlling shareholder(s), if any, and (e) any other
material terms and conditions of the proposed transaction. If the Non-Purchasing
Member desires to accept all or any portion of its Participation Right, the
Non-Purchasing Member will notify the Purchasing Member in writing of its
intention to acquire all or a portion of its Percentage Interest of the JCOM
Shares, such Notice to be given to the Purchasing Member within 20 Business Days
following the Non-Purchasing Member's receipt of Notice of its Participation
Right with respect to the acquisition of JCOM Shares in Ordinary Market
Transactions or any other acquisition of JCOM Shares and which will constitute
the Non-Purchasing Member's agreement to acquire such JCOM Shares on the terms
specified in the Notice (including in the case of Ordinary Market Transactions,
to acquire such JCOM Shares from time to time during the period specified in the
Notice given by the Purchasing Member) and to be bound by the terms and
conditions of such purchase. If any consideration other than cash is to be paid
by the Purchasing Member or its Affiliate in exchange for the JCOM Shares to be
acquired, the Purchasing Member will take all necessary actions to permit the
Non-Purchasing Member to be able to use cash to exercise its Participation
Right, with the value of any non-cash consideration to be paid by the Purchasing
Member to be valued at its Fair Market Value, as reasonably determined by the
Members. If the Members are unable to agree on the Fair Market Value within 30
days following the Purchasing Member's receipt of the Non-Purchasing Member's
Notice to exercise its Participation Right, each Member will retain within 45
days following the receipt of such Notice, an internationally recognized
investment bank to determine Fair Market Value in accordance with the valuation
process specified in 5.4(b). The closing of any purchase of JCOM Shares under
this 14.4 will occur at the time and place reasonably specified by the
Purchasing Member, with each Member directly purchasing the JCOM shares to be
acquired by it pursuant to this 14.4. If the Non-Purchasing Member elects not to
exercise its Participation Right, which election will be deemed to have been
made by the Non-Purchasing Member if it does not notify the Purchasing Member
within such 20-Business Day period, then the Purchasing Member or its Affiliate
may acquire a number of JCOM Shares no greater than
46
the amount specified in its Notice and on the terms and conditions specified in
the Notice, without further notice to the Non-Purchasing Member. Notwithstanding
the foregoing, if the Purchasing Member or its Affiliate desires to purchase any
JCOM Shares prior to the JCOM IPO from Microsoft Corporation, Microsoft Holdings
V, Inc. or either of their respective Affiliates, then the Non-Purchasing Member
will have the opportunity to acquire 50% of such JCOM Shares, rather than its
Percentage Interest.
ARTICLE 15: DISPUTES
15.1 RESOLUTION BY THE PARTIES. In the event of a disagreement among the
parties, including a disagreement regarding this Agreement, or any breach
thereof, the parties engaged in such disagreement will use their Commercially
Reasonable Efforts to resolve such disagreement amicably and where applicable
the party in breach will promptly take all reasonable steps to remedy such
breach. If, at the end of thirty (30) days from notification to the other
parties of such disagreement or breach, no resolution has been reached, the most
senior executive officer (jomu) of each party involved in the disagreement or
alleging or contesting the breach will meet to resolve the matter. If they, too,
are unable to reach a mutually agreeable resolution within thirty (30) days of
the matter being referred to them any party involved may elect that the matter
will be arbitrated in accordance with 15.2.
15.2 RESOLUTION BY ARBITRATION. Any and all disputes with respect to which such
authorized persons failed to reach a mutually agreeable resolution will be
finally and exclusively settled by arbitration conducted in New York, New York
under UNCITRAL Arbitration Rules by three (3) arbitrators in the English
language. Any such decision will be given in writing and will state the basis
therefore. Nothing in this 15.2 will prevent a party from seeking injunctive
relief. Any arbitral award rendered under this 15.2 will be final and binding
upon the parties.
15.3 WAIVER OF IMMUNITIES. In connection with the enforcement of any arbitral
award obtained pursuant to the requirements of 15.1 and 15.2 or the exercise by
any party of its rights under 15.1 and 15.2, each party irrevocably waives any
right that it has or may hereafter acquire, in any jurisdiction, to claim for
itself or its revenues, assets or properties, immunity from service of process,
suit, the jurisdiction of any court, an interlocutory order or injunction or the
enforcement of the same against its property in such court, attachment prior to
judgment, attachment in aid of execution of an arbitral award or judgment
(interlocutory or final) or any other legal process.
ARTICLE 16: GENERAL PROVISIONS
16.1 REPRESENTATIONS. Each Member represents and warrants to each other Member
that, as of the signing of this Agreement:
(a) such Person is duly organized, validly existing and in good standing (if
applicable) under the laws of the jurisdiction where it purports to be
organized and has the requisite power and lawful authority to own and
operate its assets and properties and to conduct its business in which it
is currently or proposed to be engaged;
(b) such Person has full power and authority to enter into this Agreement and
perform its obligations hereunder;
47
(c) all actions necessary to authorize the signing and delivery of this
Agreement, and the performance of obligations under it, have been duly
taken;
(d) this Agreement has been duly signed and delivered by a duly authorized
officer or other representative of such Person and constitutes the legal,
valid and binding obligation of such Person enforceable in accordance with
its terms (except as such enforceability may be affected by applicable
Bankruptcy, insolvency or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies is
subject to judicial discretion);
(e) no consent, approval, notice, hearing, filing, registration or any other
action with any other Person is required in connection with the signing,
delivery and performance of this Agreement by such Person;
(f) the signing, delivery and performance of this Agreement do not violate the
organizational documents of such Person, or any material agreement to
which such Person is a party or by which such Person is bound; and
(g) such Person has had an opportunity to perform any due diligence such
Person deems necessary or desirable.
16.2 UNREGISTERED INTERESTS. Each Member: (a) acknowledges that the Units are
being offered and sold without registration under the U.S. Securities Act of
1933, as amended, or under similar provisions of state law, (b) acknowledges
that such Member is fully aware of the economic risks of an investment in the
Company, and that such risks must be borne for an indefinite period of time, (c)
represents and warrants that such Member is acquiring Units for such Member's
own account, for investment, and with no view to the distribution of the Units
and (d) agrees not to Transfer, or to attempt to Transfer, all or any part of
its Units without registration under the U.S. Securities Act of 1933, as
amended, and any applicable state securities laws, unless the Transfer is exempt
from such registration requirements. Each Member further represents and warrants
that such Member is an "accredited investor" as defined in Rule 501(a) of the
Regulation D under the U.S. Securities Act of 1933, as amended.
16.3 WAIVER OF DISSOLUTION RIGHTS. The Members agree that irreparable damage
would occur if any Member should bring an action for judicial dissolution of the
Company. Accordingly, each Member accepts the provisions under this Agreement as
such Person's sole entitlement on Dissolution of the Company and waives and
renounces such Person's right to seek a court decree of dissolution or to seek
the appointment by a court of a liquidator for the Company. Each Member further
waives and renounces any alternative rights which might otherwise be provided by
law upon the Withdrawal of such Person and accepts the provisions under this
Agreement as such Person's sole entitlement upon the happening of such event.
16.4 WAIVERS AND CONSENTS GENERALLY. No course of dealing will be deemed to
amend or discharge any provision of this Agreement. No delay in the exercise of
any right will operate as a waiver of such right. No single or partial exercise
of any right will preclude its further exercise. A waiver of any right on any
one occasion will not be construed as a bar to, or waiver of, any such right on
any other occasion.
48
16.5 EQUITABLE RELIEF. If any Member proposes to Transfer all or any part of its
Units or to disclose confidential information in violation of the terms of this
Agreement, the Company, the Management Committee, or any Member may apply to any
court of competent jurisdiction for a temporary injunctive order prohibiting
such proposed Transfer or disclosure except upon compliance with the terms of
this Agreement. Any attempted Transfer in violation of this Agreement is null
and void, and of no force and effect. The Person against whom such action or
proceeding is brought waives the claim or defense that an adequate remedy at law
exists, and such Person will not urge in any such action or proceeding the claim
or defense that such remedy at law exists.
16.6 REMEDIES FOR BREACH. Except as provided in 16.3 and 16.5, (a) the rights
and remedies of the Members, the Managers and the Management Committee set forth
in this Agreement are neither mutually exclusive nor exclusive of any right or
remedy provided by law, in equity or otherwise and (b) all legal remedies (such
as monetary damages) as well as all equitable remedies (such as specific
performance) will be available for any breach or threatened breach of any
provision of this Agreement.
16.7 LIMITATION OF LIABILITY. No party will be liable to any other party for
indirect, consequential or special damages arising out of a breach by such party
of this Agreement, whether based in contract or tort (including negligence,
strict liability or otherwise) and whether or not advised of the potential for
such damages.
16.8 AMENDMENTS. This Agreement may be amended by the affirmative vote of all
Members; provided, that the Management Committee will have the power, without
the affirmative vote of the Members, to amend this Agreement solely to reflect
the admission, substitution, termination, or Withdrawal of Members in accordance
with this Agreement. Any amendment will become effective upon such approval,
unless otherwise provided. Notice of any proposed amendment must be delivered to
the Members at least five days in advance of the meeting at which the amendment
will be considered (unless the approval is evidenced by duly signed minutes of
action). Any duly adopted amendment to this Agreement is binding upon, and
inures to the benefit of, each Person who holds a Unit at the time of such
amendment, without the requirement that such Person sign the amendment or any
republication or restatement of this Agreement.
16.9 THIRD-PARTY RIGHTS. A Person who is not a party to this Agreement has no
right to enforce or enjoy the benefit of any term of this Agreement.
16.10 COUNTERPARTS. This Agreement may be signed in multiple counterparts (or
with detachable signature pages). Each counterpart will be considered an
original instrument, but all of them in the aggregate will constitute one
agreement. Telecopies of signatures will be given effect for purposes of the
signature page of this Agreement and any amendments to this Agreement.
16.11 NOTICE. All Notices under this Agreement will be in writing in English and
will be either delivered or sent addressed as set forth on EXHIBIT A or to such
other address as the addressee may hereafter designate by Notice given to the
other parties to this Agreement. In computing time periods, the day of Notice
will be included. For Notice purposes, a day means a calendar day unless
otherwise provided in this Agreement. Any Notices given to any Member or
49
Manager in accordance with this Agreement will be deemed to have been duly given
and received: (a) on the date of receipt if personally delivered, (b) upon
confirmation of transmission by the sender's facsimile machine if sent by
facsimile transmission or (c) three Business Days after having been sent by an
internationally recognized overnight courier service; provided, that any Notice
regarding a change in address of the sender will not be deemed to have been duly
given and received until actually received. Any Notice to be given to a Manager
or Member pursuant to Article 7 will also be deemed to have been duly given and
received on the date such Notice is received by the Manager or Member by e-mail
transmission to the most recent e-mail address on file with the Company in the
case of a Manager or to the e-mail address set forth on EXHIBIT A in the case of
a Member.
16.12 PARTIAL INVALIDITY. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. However, if for any reason any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
action will not affect any other provision of this Agreement. In such event,
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it. Should any provision of this Agreement
be or become ineffective for reasons beyond the control of the parties, the
parties will use reasonable efforts to agree upon a new provision which will as
nearly as possible have the same commercial effect as the ineffective provision.
16.13 COSTS. Except as otherwise specified in this Agreement, each of the
parties hereto will pay its own costs, charges and expenses connected with the
preparation and implementation of this Agreement and the transactions
contemplated by it.
16.14 ENTIRE AGREEMENT. This Agreement (including its Exhibits) and the
Contribution Agreement contain the entire agreement and understanding of the
Members concerning its subject matter.
16.15 BENEFIT. The contribution obligations of each Member will inure solely to
the benefit of the other Members and the Company, without conferring on any
other Person any rights of enforcement or other rights.
16.16 BINDING EFFECT. This Agreement is binding upon, and inures to the benefit
of, the Members, the Managers, and Permitted Transferees.
16.17 FURTHER ASSURANCES. Each Member agrees, without further consideration, to
sign and deliver such other documents of further assurance as may reasonably be
necessary to effectuate the provisions of this Agreement.
16.18 HEADINGS. Article and section titles have been inserted for convenience of
reference only and are not intended to affect the meaning or interpretation of
this Agreement.
16.19 TERMS. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural includes the other, as the context requires or
50
permits. The word "include" (and any variation) is used in an illustrative
sense rather than a limiting sense. The word "day" means a calendar day.
16.20 GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware. Any conflict or apparent
conflict between this Agreement and the Act will be resolved in favor of this
Agreement, except as otherwise required by the Act.
16.21 ENGLISH LANGUAGE. If this Agreement or the Certificate is translated into
Japanese for the convenience of the parties or some of them, the English
language version hereof/thereof will for all purposes be deemed to be the
definitive and binding version thereof.
16.22 LMI GUARANTEE. LMI hereby agrees that it will cause each of LJ, LJII, LHJ,
Liberty Kanto and Liberty Jupiter to perform its obligations under this
Agreement and guarantees to SC Member (as a primary obligor and not as a surety
only) the performance by each of them of all of their obligations from time to
time in force under the terms of this Agreement for so long as any of them is a
Member. Notwithstanding the foregoing, LMI's guarantee will terminate with
respect to a Member at such time that the Member ceases to be an Affiliate of
LMI or Parent pursuant to a transaction permitted by this Agreement.
16.23 REGISTRATION RIGHTS AGREEMENT. It is expected that the Company will enter
into a Registration Rights Agreement with JCOM and Microsoft Holdings V, Inc. in
connection with the JCOM IPO (the "Registration Rights Agreement"). If at any
time, JCOM proposes to file a Registration Statement (as defined in the
Registration Rights Agreement) under the U.S. Securities Act of 1933, as
amended, with respect to any JCOM Shares, the Company, SC Member and LMI Member
will promptly and in good faith negotiate amendments to this Agreement to permit
SC Member to direct the Company to exercise its piggyback registration rights or
its rights to participate in any demand registration initiated by any Original
Shareholder (as defined in the Registration Rights Agreement) and/or up to four
of its demand registration rights under the Registration Rights Agreement in
connection with subsequent sales by the Company of JCOM Shares on SC Member's
behalf in accordance with the provisions of Article 13 so that such sales can be
made under any Registration Statement to the extent permitted under the
Registration Rights Agreement.
51
All of the MEMBERS have signed this AMENDED AND RESTATED OPERATING AGREEMENT of
LMI/SUMISHO SUPER MEDIA, LLC, to be effective from the Effective Date,
notwithstanding the actual date of signing.
SUMITOMO CORPORATION
By:
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: General Manager, Media Division
LIBERTY JAPAN, INC.
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
LIBERTY JAPAN II, INC.
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
LMI HOLDINGS JAPAN, LLC
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
LIBERTY KANTO, INC.
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
LIBERTY JUPITER, INC.
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
52
Solely with respect to Sections 3.1(c),
3.1(d) and 16.22:
LIBERTY MEDIA INTERNATIONAL, INC.
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
Acknowledged by:
LMI/SUMISHO SUPER MEDIA, LLC
By: ___________________________
Name:
Title:
53
LIST OF EXHIBITS
----------------
Exhibit A Names and Addresses of the Company, the Members and
the Managers
Exhibit B Capital Contributions and Units
Exhibit C Transfer Agreement
EXHIBIT A
NAMES AND ADDRESSES OF THE COMPANY, THE MEMBERS AND THE MANAGERS
LMI/SUMISHO SUPER MEDIA, LLC:
c/o Liberty Media International, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
XXX
Attention: Xxxxxx Xxxxxx
Fax: x0 000 000 0000
e-mail address:xxxxxx@xxxxxxxxxxxx.xxx
with copies to:
Attention: Xxxxx Xxxxxxxx (at the same address)
Fax: x0 000 000 0000
e-mail address:xxxxx@xxxxxxxxxxxx.xxx
LIBERTY JAPAN, INC.
LIBERTY JAPAN II, INC.
LMI HOLDINGS JAPAN, LLC
LIBERTY KANTO, INC.
LIBERTY JUPITER, INC.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
XXX
Attention: Xxxxxx Xxxxxx
Fax: x0 000 000 0000
e-mail address:xxxxxx@xxxxxxxxxxxx.xxx
with copies to:
Attention: Xxxxx Xxxxxxxx (at the same address)
Fax: x0 000 000 0000
e-mail address:xxxxx@xxxxxxxxxxxx.xxx
and
Xxxxxxx & Xxxxxx L.L.C.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
XXX
Attention: Xxxxxx Xxxxxx
Fax: x0 000 000 0000
A-1
SUMITOMO CORPORATION:
1-8-00 Xxxxxx
Xxxx-xx, Xxxxx 000-0000
Xxxxx
Attention: Xxxxxxx Xxxxxxxx
Fax: x00 0 0000 0000
e-mail address:xxxxxxx.xxxxxxxx@xxxxxxxxxxxx.xx.xx
with copies to:
Attention: Xxxxx Xxxxx
Deputy General Manager, Planning and Administration Dept., Media,
Electronics and Network Business Unit
Fax: x00 0 0000 0000
e-mail address:xxxxx.xxxxx@xxxxxxxxxxxx.xx.xx
and
Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Fukoku Seimei Building 2F
0-0-0 Xxxxxxxxxxxxx
Xxxxxxx-xx, Xxxxx 000-0000
Xxxxx
Attention: Xxxx Xxxx
Fax: x00 0 0000 0000
MANAGERS:
LMI Member
Xx. Xxxxxx Xxxxxx
Liberty Media International, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Fax: x0 000 000 0000
e-mail address:Xxxxxx@xxxxxxxxx.xxx
SC Member
Xx. Xxxxxxxx Xxxxxxxx
0-0-00 Xxxxxx
Xxxx-xx, Xxxxx 000-0000
Xxxxx
Fax: x00 0 0000 0000
e-mail address:x.xxxxxxxx@xx.xxxxxxxxxxxx.xx.xx
A-2
B-1
EXHIBIT B
CAPITAL CONTRIBUTIONS AND UNITS
PERCENTAGE INITIAL CAPITAL
INTEREST UNITS ACCOUNT
---------- --------- ---------------
SUMITOMO CORPORATION 30.32% 1,017,851 $ 636,156,875
LIBERTY JAPAN, INC. 32.82% 1,101,600 $ 688,500,000
LIBERTY JAPAN II, INC. 1.66% 55,586 $ 34,741,250
LMI HOLDINGS JAPAN, LLC 17.62% 591,507 $ 369,691,875
LIBERTY KANTO, INC. 9.38% 314,743 $ 196,714,375
LIBERTY JUPITER, INC. 8.2% 275,400 $ 172,125,000
TOTALS: 100% 3,356,687 $ 2,097,929,375
B-1
EXHIBIT C
TRANSFER AGREEMENT
The undersigned TRANSFEROR hereby transfers and assigns Units in LMI/Sumisho
Super Media, LLC, a Delaware limited liability company, to , as TRANSFEREE. The
Capital Account of the TRANSFEROR that is attributable to the transferred Units
will carry over to the TRANSFEREE. The Units transferred are subject to all of
the terms and conditions of the Amended and Restated Operating Agreement of
LMI/Sumisho Super Media, LLC, dated November 26, 2004, as such Agreement may be
amended (the "Operating Agreement"). As a TRANSFEREE of such Units, the
undersigned agrees to be bound as a party to the Operating Agreement (which, as
it may be amended, is hereby incorporated by reference).
TRANSFEROR:
___________________ ____________________________________________
Date
TRANSFEREE:
___________________ ____________________________________________
Date
Address: __________________________________
___________________________________
Taxpayer ID Number:_________________________
Telephone Number:___________________________
Fax Number: ________________________________
C-1
