<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 2, 1998
ACACIA RESEARCH CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 000-26068 95-4405754
- ------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
12 South Raymond Avenue, Pasadena, California 91105
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (626) 449-6431
(Former name or former address, if changed since last report.)
Not applicable.
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 2, 1998, Acacia Research Corporation ("Registrant") acquired
a 25% membership interest in Internet Software LLC, a Delaware limited liability
company ("Internet Software"), pursuant to the terms of the Amended and Restated
Operating Agreement by and between H. Lee Browne, Michael Lloyd, Nicholas E.K.
Heckett, and Registrant dated April 2, 1998 (the "Operating Agreement"), a copy
of which is attached hereto as Exhibit 2.1. Internet Software has developed
proprietary software products for use on the Internet and has five patent
applications pending, as well as other intellectual property.
The purchase price for the Registrant's investment in Internet
Software was $2.5 million. The purchase price for the 25% membership interest
was determined by negotiations among the parties and is based upon estimates of
the business potential and risk of Internet Software. The Registrant's
investment was made with the proceeds of a private equity financing, made in
part to finance the investment, where the Registrant raised gross proceeds of
$3.65 million through the sale of 317,393 units, each unit consisting of one
share of the Registrant's common stock and one common-stock purchase warrant.
Under the terms of the Operating Agreement, Mr. Browne, who holds a
33.4% membership interest in Internet Software, was named chief executive
officer of Internet Software. Mr. Browne is also the president and chief
executive officer of Soundview Technologies Incorporated, a Delaware
corporation, of which the Registrant holds a majority interest of 66.7% in its
outstanding common stock. In addition, Mr. Browne is the chief executive
officer and majority owner of Greenwich Information Technologies LLC, a Delaware
limited liability company, of which the Registrant holds a minority interest of
33.3% in its outstanding membership interests. Any compensation Mr. Browne
receives as chief executive officer of Internet Software would be in addition to
any amounts earned from his positions with the other two entities.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited financial statements. Financial statements of Internet
Software for the period from the date of formation to December 31,
1997 and independent accountants' report thereon. It is impracticable
for the Registrant to file such audited financial statements at the
time of filing of this Current Report. The Registrant will file such
audited financial statements as soon as practicable, but in no event
later than 60 days from April 17, 1998.
(b) Exhibits
2.1 Amended and Restated Operating Agreement of Internet Software LLC
dated April 2, 1998 by and between H. Lee Browne, Michael Lloyd,
Nicholas E.K. Heckett, and Acacia Research Corporation (certain
2
<PAGE>
portions omitted and filed separately with the Securities and
Exchange Commission pursuant to an application for confidential
treatment).
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ACACIA RESEARCH CORPORATION
/s/ Paul R. Ryan
------------------------------------------
By: Paul R. Ryan
President and Chief Executive Officer
DATED: April 17, 1998
3
<PAGE>
EXHIBIT 2.1
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
INTERNET SOFTWARE LLC
A DELAWARE LIMITED LIABILITY COMPANY
-------------------------------------
* OR + SYMBOLS IN TEXT INDICATE
CONFIDENTIAL PORTIONS OMITTED AND
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO RULE 24b-2
-------------------------------------
<PAGE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OPERATING
AGREEMENT OR THE INTERESTS PROVIDED FOR HEREIN. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), IN RELIANCE UPON THE EXEMPTIONS SET FORTH
THEREIN; THE ISSUER IS UNDER NO OBLIGATION TO REGISTER THE INTERESTS UNDER THE
1933 ACT.
AN INTEREST MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE SENIOR MEMBERS THAT SUCH
REGISTRATION IS NOT REQUIRED. ADDITIONAL RESTRICTIONS ON THE TRANSFER OF
INTERESTS ARE CONTAINED IN THIS AGREEMENT. BASED UPON THE FOREGOING, EACH
ACQUIROR OF AN INTEREST MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF INVESTMENT
THEREIN FOR AN INDEFINITE PERIOD OF TIME.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
<C> <S> <C>
DEFINITIONS . . . . . . . . . . . . . . . 1
1.1 ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 ADDITIONAL MEMBER. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 AFFILIATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 ARTICLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 ASSIGNEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 BANKRUPT MEMBER. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 BUDGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 CAPITAL ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 CAPITAL CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 2
1.11 CHANGEOVER DATE. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 COMPANY LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 COMPANY PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 DISSOLUTION EVENT. . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 INITIAL CAPITAL CONTRIBUTION . . . . . . . . . . . . . . . . . . 3
1.20 INITIAL MEMBERS. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 MAJORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 MANAGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 MEMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 MEMBERSHIP INTEREST. . . . . . . . . . . . . . . . . . . . . . . 3
1.25 NET PROFITS OR NET LOSSES. . . . . . . . . . . . . . . . . . . . 3
1.26 OFFSETTABLE DECREASE . . . . . . . . . . . . . . . . . . . . . . 4
1.27 ORGANIZATIONAL EXPENSES. . . . . . . . . . . . . . . . . . . . . 4
1.28 ORIGINAL MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 PATENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 PERCENTAGE INTEREST. . . . . . . . . . . . . . . . . . . . . . . 4
1.31 PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 PROCEEDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 REGULAR MEMBERS. . . . . . . . . . . . . . . . . . . . . . . . . 5
1.35 REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.36 REVALUATION EVENT. . . . . . . . . . . . . . . . . . . . . . . . 5
1.37 SENIOR MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 STRATEGIC INVESTOR . . . . . . . . . . . . . . . . . . . . . . . 5
1.39 STRATEGIC TRANSACTION. . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
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<TABLE>
<C> <S> <C>
1.40 SUBSTITUTE MEMBER. . . . . . . . . . . . . . . . . . . . . . . . 5
1.41 SUPERMAJORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.42 TAXABLE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.43 TAXING JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . 6
1.44 TRIGGER DATE . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.45 TRIGGER EVENT. . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
FORMATION. . . . . . . . . . . . . . . . 6
2.1 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 REGISTERED AGENT AND OFFICE. . . . . . . . . . . . . . . . . . . 7
2.5 PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 BUSINESS PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 NAMES AND ADDRESS OF INITIAL MEMBERS . . . . . . . . . . . . . . 7
2.8 LIMITED LIABILITY COMPANY AGREEMENT. . . . . . . . . . . . . . . 7
ARTICLE III
RECORDS AND ADMINISTRATION. . . . . . . . . . . . 8
3.1 RECORDS AND FINANCIAL STATEMENTS.. . . . . . . . . . . . . . . . 8
3.2 SPECIAL POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . 8
3.3 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
RIGHTS AND DUTIES OF MEMBERS . . . . . . . . . . . 9
4.1 MANAGEMENT RIGHTS OF SENIOR MEMBERS. . . . . . . . . . . . . . . 9
4.2 MANAGEMENT RIGHTS OF REGULAR MEMBERS . . . . . . . . . . . . . . 10
4.3 LIABILITY OF MEMBERS . . . . . . . . . . . . . . . . . . . . . . 10
4.4 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 11
4.6 CONFLICTS OF INTEREST. . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
MANAGERS . . . . . . . . . . . . . . . . 11
5.1 MANAGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 VOTING; APPOINTMENT OF CHIEF EXECUTIVE OFFICER . . . . . . . . . 12
5.3 CHIEF EXECUTIVE OFFICER. . . . . . . . . . . . . . . . . . . . . 12
5.4 AUTHORITY OF CHIEF EXECUTIVE OFFICER TO BIND THE COMPANY . . . . 12
5.5 CONSULTATION WITH MEMBERS. . . . . . . . . . . . . . . . . . . . 13
5.6 COMPENSATION OF MANAGERS . . . . . . . . . . . . . . . . . . . . 13
5.7 MANAGERS' STANDARD OF CARE . . . . . . . . . . . . . . . . . . . 13
5.8 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
<C> <S> <C>
CONTRIBUTIONS AND CAPITAL ACCOUNTS. . . . . . . . . . 14
6.1 INITIAL CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 14
6.2 ADDITIONAL CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . 14
6.3 NO INCREASE OF PERCENTAGE INTEREST . . . . . . . . . . . . . . . 15
6.4 MAINTENANCE OF CAPITAL ACCOUNTS. . . . . . . . . . . . . . . . . 15
6.5 REVALUATION OF COMPANY PROPERTY. . . . . . . . . . . . . . . . . 15
6.6 COMPLIANCE WITH SECTION 704(b) OF THE CODE . . . . . . . . . . . 16
ARTICLE VII
ALLOCATIONS AND DISTRIBUTIONS. . . . . . . . . . . 16
7.1 ALLOCATIONS OF NET PROFITS AND NET LOSSES FROM OPERATIONS. . . . 16
7.2 SPECIAL ALLOCATION . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 ALLOCATION FOR TAX PURPOSES. . . . . . . . . . . . . . . . . . . 17
7.4 TRANSFERS OF INTEREST. . . . . . . . . . . . . . . . . . . . . . 17
7.5 INTERIM DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 17
7.6 LIMITATIONS ON DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII
TAXES. . . . . . . . . . . . . . . . . 17
8.1 ELECTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 TAXES OF TAXING JURISDICTIONS. . . . . . . . . . . . . . . . . . 17
8.3 TAX MATTERS PARTNER. . . . . . . . . . . . . . . . . . . . . . . 18
8.4 METHOD OF ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX
TRANSFER OF MEMBERSHIP INTERESTS . . . . . . . . . . 18
9.1 ASSIGNMENT OF INTEREST . . . . . . . . . . . . . . . . . . . . . 18
9.2 EFFECTIVE DATE OF TRANSFER . . . . . . . . . . . . . . . . . . . 18
9.3 SUBSTITUTE MEMBER(S) . . . . . . . . . . . . . . . . . . . . . . 19
9.4 NONSUBSTITUTED ASSIGNEES . . . . . . . . . . . . . . . . . . . . 19
9.5 ADMISSION OF ADDITIONAL MEMBERS. . . . . . . . . . . . . . . . . 19
9.6 UPDATING OF SCHEDULE A . . . . . . . . . . . . . . . . . . . . . 19
9.7 PROCEDURES ON TRANSFERS OF MEMBERSHIP INTERESTS UPON
OCCURRENCE OF TRIGGER EVENT. . . . . . . . . . . . . . . . . . . 20
ARTICLE X
DISSOLUTION AND WINDING UP. . . . . . . . . . . . 21
10.1 DISSOLUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.2 EFFECT OF DISSOLUTION. . . . . . . . . . . . . . . . . . . . . . 22
10.3 DISTRIBUTION OF ASSETS ON DISSOLUTION. . . . . . . . . . . . . . 22
10.4 WINDING UP AND CERTIFICATE OF DISSOLUTION. . . . . . . . . . . . 22
ARTICLE XI
NONDISCLOSURE. . . . . . . . . . . . . . . 22
</TABLE>
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<TABLE>
<C> <S> <C>
11.1 NONDISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.2 SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII
AMENDMENT. . . . . . . . . . . . . . . . 23
ARTICLE XIII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . 23
13.1 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13.2 NO PARTNERSHIP INTENDED FOR NONTAX PURPOSES. . . . . . . . . . . 24
13.3 RIGHTS OF CREDITORS AND THIRD PARTIES UNDER AGREEMENT. . . . . . 24
13.4 INTERPRETATION AND SEVERABILITY OF PROVISIONS. . . . . . . . . . 24
13.5 BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.6 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 24
13.7 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . 25
13.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.9 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
iv
<PAGE>
This Amended and Restated Operating Agreement of Internet Software
LLC, a Delaware Limited Liability Company (the "Company"), is entered into on
April 2, 1998, by and between H. Lee Browne ("Browne"), Michael Lloyd ("Lloyd"),
Nicholas E.K. Heckett ("Heckett"), and Acacia Research Corporation, a California
corporation ("Acacia").
R E C I T A L S
WHEREAS, Browne and Lloyd were parties to an Operating Agreement
with respect to the Company, dated as of October 1, 1997 (the "Original
Agreement"), which Original Agreement was amended by a Consent of Members and
Amendment No. 1 to Operating Agreement of the Company, entered into as of
October 27, 1997, pursuant to which amendment Heckett was admitted as a member
of the Company;
WHEREAS, the parties desire to amend and restate the Original
Agreement, as amended, to, among other things, admit Acacia as a member of the
Company and ratify and reflect the change of the Company's name to "Internet
Software LLC."
A G R E E M E N T
NOW, THEREFORE, for and in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties executing this
Agreement hereby agree to the terms and conditions of this agreement, as it may
from time to time be amended according to its terms.
ARTICLE I
DEFINITIONS
For purposes of this Agreement, unless the context clearly
indicates otherwise, the following terms shall have the following meanings:
1.1 ACT - The Limited Liability Company Act of the State of
Delaware and all amendments thereto.
1.2 ADDITIONAL MEMBER - A Member other than an Initial Member or
a Substitute Member who has acquired a Membership Interest from the Company.
Additional Members may be either Regular Members or Senior Members.
1.3 AFFILIATE - Any corporation, limited partnership, general
partnership, or other entity managed or controlled by, controlling, or under
common control with the Company, a Member or other Person.
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1.4 AGREEMENT - This Amended and Restated Operating Agreement, as
the same may be amended from time to time.
1.5 ARTICLES - The Certificate of Formation of this Company as
properly adopted and amended from time to time by the Members and filed with the
Delaware Secretary of State.
1.6 ASSIGNEE - A transferee of a Membership Interest who has not
been admitted as a Substitute Member pursuant to Section 9.3.
1.7 BANKRUPT MEMBER - A Member with respect to which one or more
of the following events has occurred: (i) the commencement of any bankruptcy or
insolvency case or proceeding against such Member which shall continue and
remain unstayed and in effect for a period of 60 consecutive days, (ii) the
filing by such Member of a petition, answer or consent seeking relief under any
applicable bankruptcy, insolvency or similar law, or (iii) the occurrence of any
other event of bankruptcy listed in Section 18-304 of the Act.
1.8 BUDGET - The budget attached hereto as Schedule C, which
budget is a summary of the expenditure budget reflected in the pro forma
financial statements marked "Revised 3/10/98" and contained in the summary
business plan presented to the Initial Members.
1.9 CAPITAL ACCOUNT - The account maintained for a Member or
Assignee determined in accordance with Article VI.
1.10 CAPITAL CONTRIBUTION - Any contribution of money or Property,
or the obligation to contribute money or Property, by or on behalf of a Member
or Assignee.
1.11 CHANGEOVER DATE - The date if any, on which occurs the
closing of the sale contemplated by Section 9.7(c).
1.12 CODE - The Internal Revenue Code of 1986, as amended from
time to time.
1.13 COMPANY - Internet Software LLC, formed under the Act.
1.14 COMPANY LIABILITY - Any enforceable debt or obligation for
which the Company is liable or which is secured by any Company Property.
1.15 COMPANY PROPERTY - Any Property owned by the Company.
1.16 DISTRIBUTION - A transfer of Property or cash by the Company
to a Member on account of a Membership Interest as described in Article VII.
2
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1.17 DISSOLUTION EVENT - An event, the occurrence of which will
result in the dissolution of the Company under Article X.
1.18 EFFECTIVE DATE - The date and time of the initial filing of
the Articles with the Delaware Secretary of State.
1.19 INITIAL CAPITAL CONTRIBUTION - The Capital Contribution
agreed to be made by the Initial Members as described in Article VI.
1.20 INITIAL MEMBERS - Browne, Lloyd, Heckett and Acacia.
1.21 MAJORITY - The affirmative vote or consent of greater than
fifty percent (50%) of the Percentage Interests of the Members, the Senior
Members or the Original Members or greater than fifty percent (50%) of the
individual Managers, as the case shall be.
1.22 MANAGER - A Person selected to manage the affairs of the
Company under Article V hereof.
1.23 MEMBER - Initial Member, Senior Member, Regular Member,
Substitute Member or Additional Member, and, unless the context expressly
indicates to the contrary, includes Assignees.
1.24 MEMBERSHIP INTEREST - The rights of a Member or, in the case
of an Assignee, the rights of the assigning Member in Distributions (liquidating
or otherwise) and allocations of the profits, losses, gains, deductions, and
credits of the Company.
1.25 NET PROFITS or NET LOSSES - For each fiscal year or other
applicable period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Section 703(a) of the Code shall be included in
taxable income or loss), with the following adjustments:
(i) items of income that are exempt from inclusion in gross
income for federal income tax purposes will be treated as income, and
related deductions that are disallowed under Section 265 of the Code will
be treated as deductions;
(ii) items described in Section 705(a)(2)(B) of the Code will be
treated as deductions;
(iii) items of gain, loss, depreciation, amortization or other cost
recovery deductions that would be computed by reference to the adjusted tax
basis of an item of Company property for federal income tax purposes will
be determined with respect to the book value of such item of property for
Capital Account purposes;
3
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(iv) in the event the book value of any item of Company property
for Capital Account purposes is revalued in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) or 1.704-1(b)(2)(iv)(e) as
provided by Section 6.4 of this Agreement, the effects of upward or
downward revaluation will be treated as gain or loss from the sale of such
property; and
(v) any items specially allocated under Article VII shall not be
taken into account.
1.26 OFFSETTABLE DECREASE - Any allocation that unexpectedly
causes or increases a deficit in the Member's Capital Account as of the end of
the taxable year to which the allocation relates attributable to depletion
allowances under Section 1.704(b)(2)(iv)(k) of the Regulations, allocations of
loss and deductions under Sections 704(e)(2) or 706 of the Code or
under Section 1.751-1 of the Regulations, or distributions that, as of the end
of the year are reasonably expected to be made to the extent they exceed the
offsetting increases to such member's Capital Account that reasonably are
expected to occur during or (prior to) the taxable years in which such
distributions are expected to be made.
1.27 ORGANIZATIONAL EXPENSES - Those expenses incurred in the
organization of the Company including the costs of preparation of this Agreement
and the Articles.
1.28 ORIGINAL MEMBERS - Browne, Lloyd and Heckett.
1.29 PATENTS - Those patents, patent applications (including
patents obtained pursuant to such applications) and other intellectual property
set forth on Schedule B hereto.
1.30 PERCENTAGE INTEREST - With respect to a Member, the
percentage set forth opposite its name on Schedule A or, if the Percentage
Interests are being determined with respect to a group comprised of fewer than
all of the Members, the percentage which the Percentage Interest of each of the
members of such group bears to the total of the Percentage Interests of all
members of such group.
1.31 PERSON - An individual, trust, estate or any incorporated or
unincorporated organization permitted to be a member of a limited liability
company under the Act.
1.32 PROCEEDING - Any administrative, judicial, or other adversary
proceeding, including without limitation, litigation, arbitration,
administrative adjudication, mediation, and appeal or review of any of the
foregoing.
4
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1.33 PROPERTY - Any property real or personal, tangible or
intangible, including any legal or equitable interest in such property, but
excluding money and promises to perform services in the future.
1.34 REGULAR MEMBERS - Those persons whose Membership Interests
are specifically designated to be "Regular" and to carry no management or
control rights in the Company.
1.35 REGULATIONS - Except where the context indicates otherwise,
the permanent, temporary, proposed, or proposed and temporary regulations of
Department of the Treasury under the Code as such regulations may be lawfully
changed from time to time.
1.36 REVALUATION EVENT - Either (i) the liquidation of the Company
(within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g)); or
(ii) the contribution of more than a DE MINIMIS amount of money or property by a
new or existing member or the distribution of more than a DE MINIMIS amount of
money or property to a retiring or continuing Member where such contribution or
distribution alters the Percentage Interest of any Member.
1.37 SENIOR MEMBERS - The Initial Members and any other Person
who, with the unanimous consent of the Initial Members, is issued a Membership
Interest which is specifically designated to be "Senior" and to carry the
management and control rights set forth herein.
1.38 STRATEGIC INVESTOR - A person or entity (excluding any
Affiliate of a Member) which acquires an interest in the Company with a view
toward benefitting from the strategic relationship of the products and/or
services of the Company to a business of such acquiror, and not solely with a
view toward deriving economic benefit directly from the investment in the
interest acquired.
1.39 STRATEGIC TRANSACTION - (a) An initial public offering of
ownership interests in the Company pursuant to an effective registration
statement under the Securities Act of 1933, as amended, or (b) the
acquisition by a Strategic Investor for cash of an ownership interest (or
option or right to acquire such an interest) in the Company in an offering or
acquisition, as the case may be, in which the implicit value of the Company
as a whole based on such offering or acquisition equals or exceeds *** and in
which ownership interests (or options or rights to acquire such interests)
representing at least 10% of the total ownership interests in the Company are
issued.
1.40 SUBSTITUTE MEMBER - An Assignee who has been admitted to all
of the rights of membership pursuant to Section 9.3.
- ------------------
*** Confidential portions omitted and filed separately with the Commission
pursuant to Rule 24b-2.
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1.41 SUPERMAJORITY - The affirmative vote or consent of greater
than eighty percent (80%) of the Percentage Interests of the Members or the
Senior Members, as the case may be, provided that: (i) for purposes of any
decision, consent or approval made on or prior to the Trigger Date in
connection with a Strategic Transaction, the term "Supermajority" shall mean
the affirmative vote or consent of greater than eighty percent (80%) of the
Percentage Interests of the Senior Members other than Acacia; and (ii) for
purposes of any decision, consent or approval in connection with any matter
described in Section 4.1(a), 4.1(c), 4.1(d), 4.1(e), 4.1(f), 4.1(g), 4.1(h)
or 4.1(j), unless relating to the sale, transfer or disposition of the
Company or its assets in its or their entirety in a transaction in which the
implicit value of the Company is at least *** or unless relating to matters
described in the proviso in Section 4.1 which addresses Strategic
Transactions, the term Supermajority shall mean the affirmative vote or
consent of greater than eighty percent (80%) of the Percentage Interests of
the Initial Members.
1.42 TAXABLE YEAR - The taxable year of the Company as determined
pursuant to Section 706 of the Code.
1.43 TAXING JURISDICTION - Any state, local or foreign government
that collects tax, interest or penalties, however, designated, on any Member's
share of the income or gain attributable to the Company.
1.44 TRIGGER DATE - As defined in Section 9.7(b).
1.45 TRIGGER EVENT - As defined in Section 9.7(a).
ARTICLE II
FORMATION
2.1 ORGANIZATION - The Company was organized as a limited
liability company pursuant to the provisions of the Act, effective on the
Effective Date. The parties are hereby amending and restating the Original
Agreement, as amended, to, among other things, admit Acacia as a Member and
ratify the change in the Company's name as provided in Section 2.2.
2.2 NAME - The name of the Company is "Internet Software LLC" and
all business of the Company shall be conducted under that name or under any
other name determined by a Majority of the Senior Members, but in any case, only
to the extent permitted by applicable law. The name of the Company under the
Original Agreement was "Greenwich Technologies, LLC" which name was changed
pursuant to an amendment to the Company's Articles of Organization which was
filed with the Delaware Secretary of State on March 10, 1998, and was further
changed to the present name pursuant to an amendment to the Company's Articles
of Organization which was filed with the Delaware Secretary of State on April 2,
1998. The members hereby ratify and approve the foregoing.
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*** Confidential portions omitted and filed separately with the Commission
pursuant to Rule 24b-2.
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2.3 TERM - The Company shall be dissolved and its affairs wound
up in accordance with the Act and this Agreement on December 31, 2047, unless
the term shall be extended by amendment to this Agreement and the Articles of
Organization, or unless the Company shall be sooner dissolved and its affairs
wound up in accordance with the Act or Article XI of this Agreement.
2.4 REGISTERED AGENT AND OFFICE - The registered agent for the
service of process and the registered office shall be that Person and location
reflected in the Articles as filed in the office of the Delaware Secretary of
State. The Senior Members may, from time to time, change the registered agent
or office through appropriate filings with the Secretary of State. In the event
the registered agent ceases to act as such for any reason or the registered
office shall change, the Senior Members shall promptly designate a replacement
registered agent or file a notice of change of address as the case may be. If
the Senior Members shall fail to designate a replacement registered agent or
change of address of the registered office, the Senior Members may designate a
replacement registered agent or file a notice of change of address.
2.5 PRINCIPAL OFFICE - The principal office of the Company shall
be located at 2 Soundview Drive, Greenwich, CT 06830, but shall be subject to
change in the discretion of the Senior Members.
2.6 BUSINESS PURPOSE - The Company may engage in any lawful
business relating to the *** and in any other lawful activities determined by
the Managers to be necessary or advisable in relation thereto. The Company
shall have the authority to do all things necessary or convenient to
accomplish its purpose and operate its business as described in this Section
2.7. The authority granted to the Managers hereunder to bind the Company
shall be limited to actions necessary or convenient to this business.
2.7 NAMES AND ADDRESS OF INITIAL MEMBERS - The names and
addresses of the Initial Members are as reflected on Schedule A attached hereto
and by this reference are made a part hereof as if set forth fully herein.
Acacia is hereby admitted as a Member and a Senior Member effective as of the
date on which Acacia makes its initial Capital Contribution as provided in
Section 6.1 of this Agreement.
2.8 LIMITED LIABILITY COMPANY AGREEMENT - This Agreement shall be
the Company's "limited liability company agreement" for all purposes under the
Act.
- ------------------
*** Confidential portions omitted and filed separately with the Commission
pursuant to Rule 24b-2.
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ARTICLE III
RECORDS AND ADMINISTRATION
3.1 RECORDS AND FINANCIAL STATEMENTS.
(a) The Company shall maintain true and proper books,
records, reports, and accounts in which shall be entered all transactions of the
Company as well as such other information as is described in Section
18-305(a)(1)-(5) of the Act. Such books, records, reports and accounts shall be
located at the principal place of business of the Company and shall be available
to any Member for inspection and copying at reasonable intervals during the
Company's normal business hours.
(b) The Managers shall maintain this Agreement and shall
update this Agreement (including all schedules and exhibits attached thereto)
promptly upon receipt of new information relating thereto. This Agreement shall
be deemed to be appropriately updated concurrently with any change in the status
of a Member pursuant to the terms of this Agreement and shall be treated as
records of the Company for purposes of Section 3.1(a).
(c) The Company shall supply all other information
reasonably necessary to enable the Members to prepare their Federal income tax
returns and (upon request therefor) to comply with other reporting requirements
imposed by law.
(d) Without limiting the foregoing, (i) within 75 days
after the end of each fiscal year of the Company, the Company shall cause to be
prepared and distributed to each Member audited financial statements (including
an income statement and balance sheet) as at and for the year then ended
prepared in accordance with generally accepted accounting principles and (ii)
within 30 days after the end of each fiscal quarter, the Company shall cause to
be prepared and distributed to each Member unaudited financial statements as at
and for the quarter then ended.
3.2 SPECIAL POWER OF ATTORNEY - Each Member hereby grants to the
Chief Executive Officer a special power of attorney (with full rights of
assignment) irrevocably appointing the Chief Executive Officer as the granting
Member's attorney-in-fact with power and authority to execute and acknowledge,
in the granting Member's name and on its behalf, (i) any document required or
desirable to be executed, filed, recorded or amended in connection with the
formation, operation or dissolution of the Company, subject to any approval
requirement contained in this Agreement or the Act, and (ii) such documents as
may be necessary or desirable, as determined by the Chief Executive Officer, in
his reasonable discretion, to comply with legal requirements applicable to the
formation, operation or dissolution of the Company or otherwise give effect to
the terms of this Agreement. Such special power of attorney is coupled with an
interest and shall not be revoked by the bankruptcy, death, disability or other
event of legal incapacity of the granting Member.
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3.3 CONFIDENTIALITY - The Members acknowledge and agree that all
information provided to them by or on behalf of the Company concerning the
business of the Company shall be deemed strictly confidential and shall not,
except as required by law, be disclosed to any person (other than a Member)
without the prior consent of the Senior Members. The Members acknowledge that
Acacia is a public company and has disclosure obligations relating to its
investment in the Company. The Senior Members hereby consent to the disclosure
by each Member of Company information to such Member's accountants, attorneys
and similar advisors bound by a duty of confidentiality; moreover, the foregoing
requirements of this Section 3.3 shall not apply to a Member with regard to any
information that becomes publicly known or available in the absence of any
improper or unlawful action on the part of such Member (including, without
limitation, any action in violation of this Section 3.3).
3.4 DISCLOSURES - Each Member shall furnish any data with
respect to itself reasonably required in connection with the formation,
operation or dissolution of the Company.
ARTICLE IV
RIGHTS AND DUTIES OF MEMBERS
4.1 MANAGEMENT RIGHTS OF SENIOR MEMBERS - All Senior Members
(other than Assignees) shall be entitled to vote on any matter submitted to a
vote of the Members. In order for the following actions to be taken (other than
any of such actions which are reasonably required to effect, and are directly
related to, the issuance of Membership Interests in connection with a Strategic
Transaction prior to the Trigger Date and the admission of the Strategic
Investor as a Member), a Supermajority of the Senior Members must consent
thereto:
(a) amending this Agreement; or
(b) continuing the Company after a Dissolution Event; or
(c) admitting Additional Members; or
(d) selling (i) all or substantially all of Company Property not
in the ordinary course of the Company's business, or (ii) any
or all of the Company's right, title and interest in and to
the Patents (other than the licensing of the Patents in the
ordinary course of the Company's business on terms fair and
reasonable to the Company); or
(e) merging, consolidating, liquidating, winding-up or dissolving
the Company; or
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(f) entering into, by the Company, of any transaction with any of
its or any Affiliates' managers, officers, directors,
employees or Affiliates except under terms no less favorable
than the terms of such a transaction with an unrelated third
party, or except as expressly contemplated by this Agreement;
or
(g) the issuance of any equity of the Company ("Equity"),
including Equity issued upon the conversion of any bonds,
debentures or other securities of the Company and fixing the
consideration to be received by the Company for the issuance
of Equity; or
(h) the issuance of any options, warrants or rights to purchase
or otherwise acquire Equity; or
(i) entering into any transaction or series of related
transactions involving an aggregate amount to be paid or
received by the Company in excess of $250,000 unless pursuant
to the Budget and unless such transaction(s) are contemplated
by such budget to occur within one year from the date of this
Agreement; or
(j) any equity split or recapitalization of the Company.
4.2 MANAGEMENT RIGHTS OF REGULAR MEMBERS - Regular Members shall
have no right to participate in the management of the Company or to vote on any
matter submitted to the Members for their consent.
4.3 LIABILITY OF MEMBERS - No Member shall be liable as such for
the liabilities of the Company. The failure of a limited liability company to
observe any formalities or requirements relating to the exercise of its powers
or management of its business or affairs under this Agreement or the Act shall
not be grounds for imposing personal liability on the Members for liabilities of
this Company.
4.4 INDEMNIFICATION - In the absence of fraud, material breach of
fiduciary duty, willful violation of this Agreement, or other willful misconduct
on the part of a Member (which malfeasance shall have given rise to the matter
at issue), the Company shall indemnify and hold each Member harmless from and
against any loss, expense, damage or injury suffered or sustained by any of them
by reason of any acts, omissions, or alleged acts or omissions arising out of
any activity performed or not performed by, for, on behalf of, or otherwise
related to the interests of the Company. This indemnification shall include,
but not be limited to, (i) payment of reasonable attorneys' fees and other
expenses incurred in settling any claim or threatened action (where such
settlement is approved by counsel to the Company) or in connection with any
legal proceeding, and (ii) the removal of any liens affecting the property of a
Member.
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4.5 REPRESENTATIONS AND WARRANTIES - Each Member, and, in the
case of an organization, the person(s) executing this Agreement on behalf of the
organization, hereby represent and warrant to the Company and each other Member
that: (a) if such Member is an organization, that it is duly organized, validly
existing, and in good standing under the law of its state of organization and
that it has full organizational power to execute and agree to this Agreement and
to perform its obligations hereunder; (b) the Member is acquiring its interest
in the Company for the Member's own account as an investment and without an
intent to distribute the interest; and (c) the Member acknowledges that the
interests have not been registered or qualified under the Securities Act of 1933
or any state securities laws, and may not be resold or transferred by the Member
without appropriate registration or qualification or the availability of an
exemption from such requirements.
4.6 CONFLICTS OF INTEREST - A Member does not violate a duty or
obligation to the Company merely because the Member's conduct furthers the
Member's own interest. A Member may lend money to and transact other business
with the Company. The rights and obligations of a Member who lends money to or
transacts business with the Company are the same as those of a person who is not
a Member, subject to other applicable law. No transaction with the Company
shall be voidable solely because a Member has a direct or indirect interest in
the transaction if either (i) the transaction is fair to the Company, or
(ii) the disinterested Managers or disinterested Senior Members, in either case
knowing the material facts of the transaction and the Member's interest,
authorize, approve, or ratify the transaction.
ARTICLE V
MANAGERS
5.1 MANAGERS - Subject to Section 4.1 and the last sentence of
Section 5.4, any decisions concerning the business affairs of the Company shall
be made by the Managers, or their designees. The Company shall have three
Managers, provided that following the Changeover Date the Company shall have
five Managers, unless a different number is designated by a Supermajority of the
Senior Members. The Managers shall hold office until removed by the affirmative
vote of a Supermajority of the Senior Members or he/she resigns. A new Manager
shall be elected by the affirmative vote of a Supermajority of the Senior
Members. Notwithstanding the preceding, Acacia, so long as it retains a
Percentage Interest of at least 10%, shall have the right to appoint one of the
Managers up to and including the Changeover Date and three of the Managers
following the Changeover Date, and to remove and replace such appointee
(provided that until the Trigger Date Acacia's appointee shall be Paul R. Ryan,
so long as he is able to serve). The initial Managers shall be Browne, Lloyd
and Paul R. Ryan.
The Managers (acting by a Majority) shall establish the policies
and procedures for the management of the business and affairs of the Company,
and shall be charged with oversight of the Company's operations and affairs.
The Managers shall delegate to the Chief Executive Officer responsibility for
the management and direction of
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the day-to-day activities of the Company. At all times during which a duly
appointed Chief Executive Officer is acting in such capacity for and on
behalf of the Company, no individual Manager other than the Chief Executive
Officer shall take any action for or on behalf of the Company except as
expressly provided for in this Agreement. Each of Browne and Lloyd shall
also hold the title of Co-Chairman of the Company during their term as
Managers.
5.2 VOTING; APPOINTMENT OF CHIEF EXECUTIVE OFFICER - Each Manager
shall have one vote. The Managers shall determine the overall policy of the
Company and shall appoint and entrust a chief executive officer (the "Chief
Executive Officer") with sufficient powers required to carry into effect such
policy and to administer all the affairs of the Company.
5.3 CHIEF EXECUTIVE OFFICER - The Chief Executive Officer shall
be appointed by the Managers. The Chief Executive Officer shall direct the day-
to-day activities of the Company. The Chief Executive Officer shall report on
his or her activities to the Managers quarterly or more frequently as determined
by the Managers. The initial Chief Executive Officer shall be Browne.
5.4 AUTHORITY OF CHIEF EXECUTIVE OFFICER TO BIND THE COMPANY -
Subject to Sections 4.1, 5.1 and 5.5, the Chief Executive Officer or his or her
designated chief operating officer (the "Chief Operating Officer"), shall have
the power, on behalf of the Company, to do all things necessary or convenient to
carry out the business and affairs of the Company, including, without
limitation:
(a) the institution, prosecution and defense of any
Proceeding in the Company name;
(b) the purchase, receipt, lease or other acquisition,
ownership, holding, improvement, use and other dealing with, Property, wherever
located;
(c) the sale, conveyance, mortgage, pledge, lease,
exchange, and other disposition of Property;
(d) the entering into contracts (other than for guarantees,
borrowing money, issuing notes, bonds and other debt obligations, and securing
any of the Company's obligations by mortgage or pledge of any of its Property or
income);
(e) the investment and reinvestment of the Company's funds;
(f) the conduct of the Company's business, the
establishment of Company offices, and the exercise of the powers of the Company
within or without the State of Delaware;
(g) the appointment of employees and agents of the Company,
the defining of their duties, the establishment of their compensation;
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(h) the payment or donation, or any other act that furthers
the business and affairs of the Company;
(i) the purchase of insurance on the life of any of its
Managers, or employees for the benefit of the Company;
(j) the participation in partnership agreements, joint
ventures, or other associations of any kind with any person or persons; or
(k) the indemnification of Managers or any other Person.
The Chief Executive Officer shall have the power and authority, without the
further consent or approval of the Managers, the Members or the Senior Members,
and notwithstanding any other provision of this Agreement, to take any of the
foregoing actions (or any other action) which is contemplated by, or does not
materially vary from, the Budget to the extent the Budget contemplates that such
action will be taken within one year from the date of this Agreement.
5.5 CONSULTATION WITH MEMBERS - Notwithstanding Section 5.4, the
Chief Executive Officer and Managers must consult with the Senior Members prior
to taking any of the following actions:
(a) The approval of a budget for the ensuing financial
period;
(b) Any mortgage, lien, charge, pledge, creation of a
security interest, or encumbrance on or in any Company Property with a fair
market value in excess of $500,000; or
(c) The creation, incurrence, assumption, guarantee or
liability for, contingently or otherwise, by the Company or any of its
Affiliates, of any indebtedness which in the aggregate exceeds $500,000.
For purposes of this Section 5.5, the term "consult" does not require the
approval or the consent of each of the Senior Members in order for the Managers
to take the actions set forth in this Section 5.5.
5.6 COMPENSATION OF MANAGERS - Each Manager shall be reimbursed
for all reasonable expenses incurred by such Manager in managing the Company and
shall be entitled to compensation, if any, in an amount to be determined from
time to time by a Majority of the Managers, subject to the terms of any
agreement of employment or retention between the Company and such Manager.
5.7 MANAGERS' STANDARD OF CARE - A Manager's duty of care in the
discharge of the Manager's duties to the Company and the Members is limited to
refraining from engaging in grossly negligent or reckless conduct, intentional
misconduct, or a knowing
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violation of law. In discharging its duties, a Manager shall be fully
protected in relying in good faith upon the records required to be maintained
under Article IV and upon such information, opinions, reports or statements
by any of its other Managers, Members, or agents, or by any other person, as
to matters the Manager reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Company, including information, opinions, reports
or statements as to the value and amount of the assets, liabilities, profits
or losses of the Company or any other facts pertinent to the existence and
amount of assets from which distributions to Members might properly be paid.
5.8 INDEMNIFICATION - In the absence of fraud, material breach of
fiduciary duty, willful violation of this Agreement, or other willful misconduct
on the part of the Chief Executive Officer, the Chief Operating Officer or any
Manager (which malfeasance shall have given rise to the matter at issue), the
Company shall indemnify and hold such person harmless from and against any loss,
expense, damage or injury suffered or sustained by any of them by reason of any
acts, omissions, or alleged acts or omissions arising out of any activity
performed or not performed by, for, on behalf of, or otherwise related to the
interests of the Company. This indemnification shall include, but not be
limited to, (i) the payment of reasonable attorneys' fees and other expenses
incurred in settling any claim or threatened action (where such settlement is
approved by counsel to the Company) or in connection with any legal proceeding,
and (ii) the removal of any liens affecting the property of the Chief Executive
Officer, the Chief Operating Officer or any Manager.
ARTICLE VI
CONTRIBUTIONS AND CAPITAL ACCOUNTS
6.1 INITIAL CONTRIBUTIONS - Each of the Original Members has
heretofore made the Capital Contribution described for that Member on Schedule
A. Acacia is making the Capital Contribution described for it at the time and
on the terms specified on Schedule A. The value of the Capital Contributions
shall be as set forth on Schedule A. No interest shall accrue on any Capital
Contribution and no Member shall have the right to withdraw or be repaid any
Capital Contribution except as provided in this Agreement.
6.2 ADDITIONAL CAPITAL CONTRIBUTIONS - No Member shall be
required to make any additional Capital Contributions to the Company. Subject
to Section 4.1, the Managers may at any time cause the Company to seek
additional Capital Contributions to the Company by issuing additional Membership
Interests. Such additional Membership Interests shall have such attributes and
shall be issued at such price and upon such terms as shall be so approved;
PROVIDED, HOWEVER, that the admission of any new Members shall be subject to
the other provisions of this Agreement. Without limiting the foregoing, such
price and terms may differ in any and all respects from the price and terms at
which Membership Interests were issued or sold to the Members hereunder. The
Managers shall do all things necessary to comply with the Act in connection with
the issuance of such additional Membership Interests. Subject to the exceptions
set forth below, each Member shall have the preemptive
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right to purchase such additional Membership Interests up to its Percentage
Interest, all for the same price and upon the same terms for such proposed
issuance as shall be so approved. The Managers shall give written notice to
each Member at least thirty (30) days prior to the issuance of any additional
Membership Interests. Each such Member who intends to purchase a portion of
the additional Membership Interests shall, within twenty (20) days of receipt
of such written notice from the Managers, deliver written notice of such
intention to the Managers. The failure of such a Member to give such notice
of his or its intention to purchase additional Membership Interests shall be
deemed to be (i) a waiver of such Member's right to purchase additional
Membership Interests, (ii) a consent to the admission of any purchaser as a
Member and (iii) a consent to the amendment to this Agreement to provide for
such additional Membership Interests. The closing of the purchase of such
additional Membership Interests shall be held at such time and place as the
Managers shall determine. If the Company does not issue any of such
additional Membership Interests within 180 days following the twenty (20) day
period after receipt of the notice referred to above at a price and on terms
no less favorable to the Company than the price and terms as shall have been
so approved, the Company may not issue such additional Membership Interests
without first complying with this Section 6.2, as if such additional
Membership Interests were first being proposed for issuance. The foregoing
provisions of this Section 6.2 shall be inapplicable to the issuance of
interests in the Company in a Strategic Transaction and no Member shall have
a pre-emptive right to participate in such a transaction.
6.3 NO INCREASE OF PERCENTAGE INTEREST - No loan or loans made by
any Member to the Company shall increase any such Member's Percentage Interest.
6.4 MAINTENANCE OF CAPITAL ACCOUNTS - The Company shall establish
and maintain Capital Accounts for each Member and Assignee. Each Member's
Capital Account shall be increased by (1) the amount of any money actually
contributed by the Member to the capital of the Company, (2) the fair market
value of any Property contributed, as determined by the Company and the
contributing Member at arm's length at the time of contribution (net of
liabilities assumed by the Company or subject to which the Company takes such
Property, within the meaning of Section 752 of the Code), and (3) the Member's
share of Net Profits and of any separately allocated items of income or gain.
Each Member's Capital Account shall be decreased by (1) the amount of any money
actually distributed to the Member from the capital of the Company, (2) the fair
market value of any Property distributed to the Member, as determined by the
Company and the distributing Member at arm's length at the time of distribution
(net of liabilities of the Company assumed by the Member or subject to which the
Member takes such Property within the meaning of Section 752 of the Code), and
(3) the Member's share of Net Losses and of any separately allocated items of
deduction or loss.
6.5 REVALUATION OF COMPANY PROPERTY.
(a) Upon the occurrence of a Revaluation Event, the Company shall
revalue all Company Property (whether tangible or intangible) for Capital
Account purposes to reflect their respective fair market values (as
reasonably determined by
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the Managers) immediately prior to the Revaluation Event, and the
Capital Account of each Member shall be adjusted to account for that
Member's allocable share (as determined under Article VII below) of the
Net Profits or Net Losses that would have been realized by the Company
had it sold all such property at their respective fair market values.
(b) If the Company at any time distributes any of its assets in-
kind to any Member, the Capital Account of each Member shall be adjusted to
account for that Member's allocable share (as determined under Article VII
below) of the Net Profits or Net Losses that would have been realized by
the Company had it sold the assets that were distributed at their
respective fair market values immediately prior to their distribution.
6.6 COMPLIANCE WITH SECTION 704(b) OF THE CODE - The provisions
of this Article VI as they relate to the maintenance of Capital Accounts are
intended, and shall be construed, and, if necessary, modified to cause the
allocations of profits, losses, income, gain and credit pursuant to Article VII
to have substantial economic effect under the Regulations promulgated under
Section 704(b) of the Code, in light of the distributions made pursuant to
Articles VII and VIII and the Capital Contributions made pursuant to this
Article VI. Notwithstanding anything herein to the contrary, this Agreement
shall not be construed as creating a deficit restoration obligation or otherwise
personally obligate any Member to make a Capital Contribution in excess of the
Initial Contribution.
ARTICLE VII
ALLOCATIONS AND DISTRIBUTIONS
7.1 ALLOCATIONS OF NET PROFITS AND NET LOSSES FROM OPERATIONS -
After the allocation in Section 7.2, Net Profits and Net Losses for any final
year or other period, shall be allocated among the Members in proportion to
their Percentage Interests.
7.2 SPECIAL ALLOCATION.
(a) QUALIFIED INCOME OFFSET. In the event any Member, in such
capacity, unexpectedly receives an Offsettable Decrease, such Member will
be allocated items of income and gain (consisting of a pro rata portion of
each item of partnership income and gain for such year) in an amount and
manner sufficient to offset such Offsettable Decrease as quickly as
possible.
(b) CORRECTIVE ALLOCATION. In the event any allocation of income
or gain is made pursuant to Section 7.2(a), then items of income, gain,
loss or deduction shall be specially allocated among the Members in such a
manner so as to cause the Capital Account balances of the Members to equal
the amounts the Capital Account balances would have been if the allocation
under Section 7.2(a) had not occurred.
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7.3 ALLOCATION FOR TAX PURPOSES - Except as otherwise provided
herein, each item of income, gain, loss and deduction for federal and state
income tax purposes shall be allocated among the Members in the same manner
as its correlative item of income, gain, loss or deduction is allocated for
Capital Account purposes pursuant to Sections 7.1 and 7.2 above; provided,
however, that in the event that the book value of an item of Company property
for Capital Account purposes differs from its adjusted basis for federal
income tax purposes, the allocations of depreciation, amortization, cost
recovery deductions, and gain or loss with respect to such property will be
made for federal income tax purposes in a manner that takes into account the
variation of such book value and adjusted tax basis in accordance with
Section 704(c)(1)(A) of the Code and Treasury Regulations Section
1.704-1(b)(4)(i). The Company will select the "remedial method" for making
any such allocations pursuant to Treasury Regulations Section 1.704-3(d).
7.4 TRANSFERS OF INTEREST - Upon the transfer of or other
change in the Members' Percentage Interests during any fiscal year or other
period, the Company shall allocate Net Profits or Net Loss or other items of
income, gain, loss or deduction among the Members in a manner that takes into
account their varying Percentage Interests pursuant to the "interim closing
of the books method" pursuant to Code Section 706 and the Treasury
Regulations thereunder.
7.5 INTERIM DISTRIBUTIONS - Subject to Section 7.6 and only to
the extent cash is available for such purpose (as determined in the
reasonable judgment of the Managers), the Company shall distribute to the
Members in proportion to their Percentage Interests not less than 40% of the
taxable income of the Company for such year. Such distributions shall be
made in a timely fashion to allow the Members to satisfy their estimated, as
well as annual, tax payment obligations relating to their allocable shares of
such taxable income, but only to the extent cash is available for such
purpose. Any other distributions may, in the Managers' sole and absolute
discretion, be made to the Members in accordance with their Percentage
Interests.
7.6 LIMITATIONS ON DISTRIBUTIONS - No distribution shall be
declared and paid unless, after the distribution is made, the assets of the
Company are in excess of all liabilities of the Company, except liabilities
to Members in respect of their Capital Accounts.
ARTICLE VIII
TAXES
8.1 ELECTIONS - The Managers may make any tax elections for the
Company allowed under the Code or the tax laws of any state or other
jurisdiction having taxing jurisdiction over the Company.
8.2 TAXES OF TAXING JURISDICTIONS - To the extent that the law
of any Taxing Jurisdiction so requires, each Member requested to do so by the
Managers will submit an agreement indicating that the Member will make timely
income tax payments to
17
<PAGE>
the Taxing Jurisdiction and that the Member accepts personal jurisdiction of
the Taxing Jurisdiction with regard to the collection of income taxes
attributable to the Member's income, and interest, and penalties assessed on
such income. If the Member fails to provide such agreement, the Company may
withhold and pay over to such Taxing Jurisdiction the amount of tax, penalty
and interest determined under the laws of the Taxing Jurisdiction with
respect to such income. Any such payments with respect to the income of a
Member shall be treated as a distribution for purposes of Article VII. The
Company may, where permitted by the rules of any taxing Jurisdiction, file a
composite, combined or aggregate tax return reflecting the income of the
Company and pay the tax, interest and penalties of some or all of the Members
on such income to the Taxing Jurisdiction, in which case the Company shall
inform the Members of the amount of such tax interest and penalties so paid.
8.3 TAX MATTERS PARTNER - Browne shall act as tax matters
partner of the Company pursuant to Section 6231(a)(7) of the Code. Browne
shall take such actions as may be necessary to cause each other Member to
become a notice partner within the meaning of Section 6223 of the Code. Any
Member who is designated tax matters partner may not take any action
contemplated by Code Sections 6222 through 6232 without the consent of Browne.
8.4 METHOD OF ACCOUNTING - The records of the Company shall be
maintained in accordance with Generally Accepted Accounting Principles using
such appropriate method of accounting as is selected by the Managers.
ARTICLE IX
TRANSFER OF MEMBERSHIP INTERESTS
9.1 ASSIGNMENT OF INTEREST - No Member shall (voluntarily,
involuntarily or by operation of law), without the express written consent of
each of the Senior Members which may be withheld in their sole discretion,
give, sell, assign, transfer, mortgage, hypothecate, encumber, bequeath or
devise its Membership Interest, and no Member or assignee of a Membership
Interest shall permit any person or group of persons acting in concert to
acquire beneficial ownership of 50% or more of the outstanding voting
securities of such Member or assignee (any such disposition is hereinafter
referred to as a "transfer"). Any purported transfer of all or any portion
of a Membership Interest without such written consent shall be void and of no
effect against the Company or the other Members. Notwithstanding the
foregoing, a Member shall have the right, without compliance with the
foregoing terms of this Section 9.1, to transfer all, but not less than all,
of its Membership Interest to any Affiliate in which the Member is the owner
of a one hundred percent (100%) equitable interest in such entity; provided,
however, each of the Senior Members shall be entitled to transfer to any
Affiliate its Membership Interest, but shall not be entitled to transfer any
of its rights to participate in the management of the Company.
9.2 EFFECTIVE DATE OF TRANSFER - Every transfer of a Membership
Interest shall be deemed to be effective, and the allocation of cash profits and
losses pertaining to
18
<PAGE>
such Membership Interest shall be allocated between the transferor and
transferee, as of the close of business on the day in which such transfer
shall have occurred. The profits, gains, losses, deductions and credits of
the Company for the fiscal year during which such transfer occurs shall be
allocated between or among the respective parties or the Members in a manner
which is consistent with the interim closing of the books method under
Section 706(c) and the Treasury Regulations thereunder, and the Capital
Account of the transferor Member that is attributed to the transferred
interest shall be determined and maintained in accordance with the provisions
of Section 704(b) of the Code.
9.3 SUBSTITUTE MEMBER(S) - No assignee of a Membership Interest
under Section 9.1, other than one who is already a Member, shall have the
right to become a Member ("Substitute Member") in place of its transferor
unless and until all of the following conditions are satisfied:
(a) The transferor and Assignee have executed and
delivered to the remaining Senior Members a written instrument of assignment,
fully executed and acknowledged, setting forth the intention of the
transferor and Assignee that the Assignee become a Substitute Member in the
transferor's place;
(b) The transferor and Assignee have executed and
acknowledged such other instruments as the remaining Senior Members may deem
necessary or advisable to effect the admission of such person as a
Substituted Member in accordance with the provisions of applicable law,
including without limitation, the written acceptance and adoption by such
person of the provisions of this Agreement; and
(c) A Majority of the Members, and each of the Senior
Members, have consented in writing to the admission of such person as a
Substitute Member, which consent may be withheld in each Member's or Senior
Member's sole and absolute discretion.
9.4 NONSUBSTITUTED ASSIGNEES - Any Assignee who has not become
a Substitute Member pursuant to this Article IX shall be deemed to take only
the right of its assignor or transferor to share in profits, losses and
distributions of the Company, but shall acquire no right to any legal
interest in the Company nor the right to exercise any power granted to a
Member under this Agreement.
9.5 ADMISSION OF ADDITIONAL MEMBERS - Additional Members or
Senior Members shall not be admitted to the Company except with the written
consent of a Supermajority of the Senior Members and, upon the admission of
such Additional Members, the Membership Interests of all then-existing
Members, both Senior and Regular, shall be diluted pro rata as a result of
the admission of such Additional Members.
9.6 UPDATING OF SCHEDULE A - The Senior Members shall amend
Schedule A hereto by means of a signed writing each time there is an addition
or removal of a Member, a change in the Capital Contribution made by any
Member or a change in the Percentage Interest of any Member.
19
<PAGE>
9.7 PROCEDURES ON TRANSFERS OF MEMBERSHIP INTERESTS UPON
OCCURRENCE OF TRIGGER EVENT
(a) For purposes of this Section 9.7, the "Trigger
Event" shall have occurred if, as of the Trigger Date, (i) the Company has
not effected a Strategic Transaction or (ii) there is not in effect an
agreement or letter of intent to effect a Strategic Transaction, provided
that, if the transaction contemplated by such agreement or letter of intent
is not consummated within six months after the original Trigger Date, then
the Trigger Event shall be the earlier of the expiration of such six-month
period or the termination of the transaction contemplated thereby, and the
Trigger Date shall be the last day of such period.
(b) For purposes of this Section 9.7, the "Trigger Date"
shall be defined to mean the date on which the Fair Market Value of the
Company is determined in accordance with Section 9.7(c)(iii).
(c) (i) If the Trigger Event occurs, then Acacia
(provided Acacia is then a Senior Member) shall have the right and option to
purchase from the Original Members for cash such of the Membership Interests
of the Original Members as is necessary to permit Acacia to be the holder of
51% of the Membership Interests. Such option shall be exercised by delivery
of a written notice (the "Purchase Notice") to the Company and each of the
Original Members within 30 days after the determination of the Fair Market
Value pursuant to Section 9.7(c)(iii).
(ii) Notwithstanding the preceding, if Acacia
delivers the Purchase Notice, a Majority of the Original Members may, by
delivery of written notice (the "Put Notice") to the Company and each other
Member within 30 days following delivery of the Purchase Notice, require
Acacia to purchase from the Original Members up to all of the Membership
Interests then held by the Original Members for shares of Acacia voting
common stock and/or cash in such proportion as the Original Members may, in
their discretion, determine provided that the Original Members shall not have
the right to require Acacia to pay cash in an amount greater than that
payable pursuant to clause (i) above. If so requested by the Original
Members, Acacia shall use its best efforts to effect such transaction as a
reorganization within the meaning of Section 368(a) of the Code.
(iii) The purchase price for a Membership Interest
purchased pursuant to this Section 9.7 shall be equal to the product of (A)
the Percentage Interest represented by such Membership Interest times (B) the
Fair Market Value of the Company. For this purpose, "Fair Market Value"
shall mean, a price agreed to between Acacia and a Majority of the Senior
Members (other than Acacia), or if such agreement is not reached within 20
days following delivery of the notice referred to in the proviso to this
sentence, the fair market value of the Company as determined by a nationally
recognized independent investment banking or appraisal firm familiar with the
industry in which the Company is engaged in business, provided that there
shall be no obligation to determine the Fair Market Value unless Acacia gives
written notice of its desire to have the Fair Market Value determined within
30 days after the date which is 18 months after the date of this
20
<PAGE>
Agreement. Such firm shall be selected by mutual agreement of Acacia and a
Majority of the Original Members, which selection shall be made within 15
days following delivery of the Purchase Notice. Such firm shall within 30
days following its selection deliver its written opinion (the "Fair Market
Value Notice") of the fair market value of the Company, assuming a sale of
the Company pursuant to an active marketing process. The Company and its
Managers and officers shall cooperate with such firm to provide all requested
information relating to the business and prospects of the Company. The fees
and expenses of such firm shall be borne by Acacia.
(d) Sales of Membership Interests under this Section 9.7
shall be made at the offices of the Company on a mutually satisfactory
business day within 120 days after the Trigger Date. Delivery of any
certificates or other instruments evidencing such Membership Interests, free
and clear of all liens, claims, encumbrances and adverse interests of any
kind (other than hereunder), and duly endorsed for transfer to Acacia shall
be made on such date against payment of the purchase price therefor. The
selling Members shall make all customary and usual representations and
warranties to permit such transaction to be effected as a private placement
or other transaction eligible for a regulatory exception to the registration
requirements of applicable federal and state securities laws and/or as a
tax-free reorganization. Unless the selling Members otherwise agree, all
such sales shall be made by the selling Members pro rata in accordance with
their respective Percentage Interests.
(e) The selling Members shall have registration rights
with respect to any and all shares of Acacia stock received pursuant hereto
in accordance with the terms of Schedule D.
(f) References in this Section 9.7 to the Company and
Membership Interests and assets thereof shall be deemed to include any
successor to the Company and the equity interests and assets of such
successor.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 DISSOLUTION - The Company shall be dissolved and its
affairs wound up, upon the first to occur of the following events (which
shall constitute Dissolution Events):
(a) the expiration of the Term, unless the business of
the Company is continued with the unanimous written consent of the Senior
Members;
(b) the written consent of a Supermajority of the Senior
Members; or
(c) the entry of a decree of judicial dissolution under
Section 18-802 of the Act.
21
<PAGE>
10.2 EFFECT OF DISSOLUTION - Upon dissolution, the Company shall
cease the carrying on (as distinguished from the winding up) of the Company's
business, but the Company is not terminated, and continues until the winding
up of the affairs of the Company is completed and the Certificate of
Dissolution has been issued by the Secretary of State.
10.3 DISTRIBUTION OF ASSETS ON DISSOLUTION - Upon the winding up
of the Company, the Company Property shall be distributed:
(a) to creditors, including Members who are creditors,
to the extent permitted by law, in satisfaction of Company Liabilities;
(b) to Members in accordance with positive Capital
Account balances taking into account all Capital Account adjustments for the
Company's taxable year in which the liquidation occurs, provided that
distributions shall first be made to those Members who contributed cash to
the capital of the Company to the extent of, and in proportion to, the
difference between the amount of cash so contributed and the amount of
distributions theretofore made to such Members (for purposes of which,
distributions other than liquidating distributions made to Members who
contributed both cash and other property shall be deemed to have been
proportionately made in respect of cash and property other than cash).
Liquidation proceeds shall be paid within 60 days of the end of the Company's
taxable year or, if later, within 90 days after the date of liquidation.
Such distributions shall be in cash or Property (which need not be
distributed proportionately) or partly in both, as determined by the
Managers.
10.4 WINDING UP AND CERTIFICATE OF DISSOLUTION - The winding up
of the Company shall be completed when all debts, liabilities, and
obligations of the Company have been paid and discharged or reasonably
adequate provision therefor has been made, and all of the remaining property
and assets of the Company have been distributed to the Members. Upon the
completion of winding up of the Company, a certificate of dissolution shall
be delivered to the Secretary of State for filing. The certificate of
dissolution shall set forth the information required by the Act.
ARTICLE XI
NONDISCLOSURE
11.1 NONDISCLOSURE - Each Member agrees that for the period of
confidentiality described below, it shall not disclose to any third person,
or use, for its own benefit, for the benefit of any third person, any
confidential information not generally available in the public domain
relating to the business or operations of the Company or of any Affiliate of
the Company. For purposes of this Article XI, "confidential information"
shall include, without limitation, customer lists, technical information,
trade secrets and documents, records, and any other practice or information
relating to the business or operations of the Company or any of its
Affiliates to the extent that it shall not have been known to a Member prior
to disclosure to such Member by another Member and shall not
22
<PAGE>
have been made public (as for instance through issuance of patents or in
printed publications of general nature). Such confidential information shall
continue to be confidential and subject to the nondisclosure provisions of
this Article XI until:
(a) at least 15 years have expired from the date of its
disclosure to the recipient;
(b) it becomes public information through no fault of
the recipient; or
(c) it is lawfully acquired by the recipient in good
faith from a third party who has the right to make said disclosure.
11.2 SPECIFIC PERFORMANCE - Each Member acknowledges that the
restrictions set forth in this Article XI are necessary for the protection of
the Company and the breach thereof may cause irreparable damage for which
there may be no adequate remedy at law. Each Member agrees that, in addition
to any other remedies available, any equitable remedy may be invoked by any
party to this agreement to enforce performance or enjoin any breach of this
Article XI.
ARTICLE XII
AMENDMENT
This Agreement may be amended or modified from time to time only
by a written instrument adopted and executed by a Supermajority of the Senior
Members.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 NOTICE - Any notice, request, demand, instruction or other
communication ("Notice") required or permitted hereunder shall be in writing
and shall be either (w) personally delivered by a commercial messenger
service regularly retaining receipts for such delivery, (x) sent by
registered or certified mail, return receipt requested, (y) delivered by the
air courier services known as Federal Express, DHL, Airborne or Emery Air, or
(z) sent by facsimile to the applicable facsimile number set forth below.
Notices shall be deemed given upon receipt if given in accordance with (w)
above, and deposit in the United States mail if given in accordance with (x)
above, upon delivery to the carrier if given in accordance with (y) above,
and upon the recipient's receipt of a facsimile transmission (evidenced by an
acknowledgement of receipt by the recipient's facsimile machine) if
transmitted by facsimile in accordance with (z) above. All notices to a
Member shall be addressed to such Member as set forth on Schedule A. All
notices to the Company shall be addressed as set forth in Section 2.5.
23
<PAGE>
If a Member or the Company desires to change its address for the
purpose of receipt of notice, such notice or change of address shall be given
in the manner specified herein. However, unless and until such written
notice of change is actually received, the last address and addressee as
stated by written notice, or provided herein if no written notice of change
has been received, shall be deemed to continue in effect for all purposes
hereunder.
13.2 NO PARTNERSHIP INTENDED FOR NONTAX PURPOSES - The Members
hereby form the Company as a limited liability company under the Act. The
Members expressly do not intend hereby to form a partnership except insofar
as the Company be treated as a partnership solely for tax purposes. The
Members do not intend to be partners one to another, or partners as to any
third party.
13.3 RIGHTS OF CREDITORS AND THIRD PARTIES UNDER AGREEMENT -
This Agreement is entered into by and among the Company and the Members for
the exclusive benefit of the Company, its Members, and their successors and
assignees. This Agreement is expressly not intended for the benefit of any
creditor of the Company or any other Person. Except and only to the extent
provided by applicable statute, no such creditor or third party shall have
any rights under this Agreement or any agreement between the Company and any
Member with respect to any Capital Contribution or otherwise.
13.4 INTERPRETATION AND SEVERABILITY OF PROVISIONS - Except to
the extent a provision of the Agreement expressly incorporates federal income
tax rules by reference to sections of the Code or Regulations or is expressly
prohibited or ineffective under the Act, this Agreement shall govern, even
when inconsistent with, or different than, the provisions of the Act or any
other law or rule. To the extent any provision of the Agreement is
prohibited or ineffective under the Act, this Agreement shall be considered
amended to the smallest degree possible in order to make the agreement
effective under the Act. In the event the Act is subsequently amended or
interpreted in such a way to make any provision of this Agreement that was
formerly invalid valid, such provision shall be considered to be valid from
the effective date of such interpretation or amendment.
13.5 BINDING EFFECT - This Agreement shall be binding on and
inure to the benefit of the parties hereto, their legal representatives,
administrators, executors, heirs, legatees, distributees, successors and
assigns, and on transferees by operation of law, whether or not any such
person or entity shall have signed this agreement, and shall be binding upon
successors or assigns of the Company.
13.6 ENTIRE AGREEMENT - This Agreement and the schedules annexed
hereto contain the entire agreement of the parties hereto with respect to the
subject matter hereof and no waiver of any provision of this Agreement shall
be valid unless in writing and signed by the party to be charged herewith.
No waiver of any breach of this Agreement by any party hereto shall be deemed
a waiver by such party of any other prior or subsequent breach of this
Agreement, whether known or unknown.
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<PAGE>
13.7 NO THIRD PARTY BENEFICIARIES - The provisions of this
Agreement are not intended to be for the benefit of or enforceable by any
third party.
13.8 GOVERNING LAW - This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed solely within such State.
13.9 COUNTERPARTS - This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
H. LEE BROWNE
/s/ H. Lee Browne
-----------------------------
MICHAEL LLOYD
/s/ Michael Lloyd
-----------------------------
NICHOLAS E.K. HECKETT
/s/ Nicholas E.K. Heckett
-----------------------------
ACACIA RESEARCH CORPORATION,
a California corporation
By: /s/ Kathryn King-Van Wie
----------------------------
Name: Kathryn King-Van Wie
--------------------------
Title: Chief Operating Officer
-------------------------
25
<PAGE>
SCHEDULE A
TO OPERATING AGREEMENT OF
INTERNET SOFTWARE LLC
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NAME AND ADDRESS PERCENTAGE CAPITAL
OF MEMBER INTEREST CONTRIBUTION
---------------- ---------- ------------
<S> <C> <C>
- ------------------------------------------------------------------------------
H. Lee Browne 33.4% $2,564,282.33*
Two Soundview Drive
Greenwich, CT 06830
Fax: (203) 869-8594
- ------------------------------------------------------------------------------
Michael Lloyd 33.4% $2,555,000.00*
P.O. Box 926
Old Lyme, CT 06371
Fax: (860) 434-9675
- ------------------------------------------------------------------------------
Nicholas E.K. Heckett 8.2% $200,000.00
12711 Chestnut Street
Clifton, VA 20124
Fax: (703) 502-4862
- ------------------------------------------------------------------------------
Acacia Research Corporation 25% $2,500,000.00**
12 South Raymond Avenue
Pasadena, CA 91105
Fax: (626) 449-7189
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL $7,832,133.66
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
- -------------------------
* Such capital contributions were made by way of the transfer to the
Company of cash (in the amount of $64,282.33 and $55,000.00 by Browne
and Lloyd, respectively), technology and know-how related to the
contributors' business of developing +++ products and services, as more
particularly set forth in the Assignment Agreements, between the Company
and each of the contributors, and the interests of the transferors in
the business of the Company as conducted prior to the formation of the
Company (valued at $2,500,000 for each of Browne and Lloyd).
** To be paid contemporaneously with the execution of this Agreement.
+++ Confidential portions omitted and filed separately with the Commission
pursuant to Rule 24b-2.
<PAGE>
SCHEDULE B
PATENTS AND PATENT APPLICATIONS
Application Serial No. *
Application Serial No. *
Application Serial No. *
Application Serial No. *
Application filed *
OTHER INTELLECTUAL PROPERTY
U.S. Trademark Applications:
*
Internet Domain Name Registrations:
*
- ---------------------
* Confidential portions omitted and filed separately with the Commission
pursuant to Rule 24b-2.
<PAGE>
SCHEDULE C
PROFORMA USE OF PROCEEDS
<TABLE>
<CAPTION>
USES: AMOUNTS % TOTAL
<S> <C> <C>
Capital Expenditures * *
Selling, General & Administrative * *
Advertising & Public Relations * *
Cash Reserve * *
- ---------------------------------- ---------- ----------
Total Uses * 100.0%
</TABLE>
- ---------------------
* Confidential portions omitted and filed separately with the Commission
pursuant to Rule 24b-2.
<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of ________________ consents to the
transactions contemplated by the Operating Agreement of Internet Software LLC
(the "Company") and the purchase of interests in the Company, without waiving or
relinquishing any interest such spouse may possess in the Company under the laws
of the State of California or otherwise.
Signature:
-------------------------
Print Name:
-------------------------
Date:
-------------------------
