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NBC/Quokka Ventures LLC Agreement 02-09-1999

OPERATING AGREEMENT

 

OF

 

NBC/QUOKKA VENTURES, LLC

 

 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR

CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933. A COMPLETE

COPY OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

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ARTICLE 1 DEFINITIONS................................................................1

 

1.1 Definitions...................................................................1

 

ARTICLE 2 FORMATION OF COMPANY.......................................................8

 

2.1 Formation.....................................................................9

 

2.2 Name..........................................................................9

 

2.3 Principal Place of Business...................................................9

 

2.4 Registered Office and Registered Agent........................................9

 

2.5 Term..........................................................................9

 

ARTICLE 3 PURPOSES OF COMPANY........................................................9

 

3.1 Company Purposes..............................................................9

 

ARTICLE 4 MANAGEMENT OF COMPANY......................................................9

 

4.1 Generally.....................................................................9

 

4.2 Number of Directors; Classification of Directors.............................10

 

4.3 Tenure, Election and Qualifications..........................................10

 

4.4 Resignation..................................................................10

 

4.5 Removal......................................................................10

 

4.6 Vacancies....................................................................11

 

4.7 Meetings.....................................................................11

 

4.8 Quorum and Transaction of Business...........................................12

 

4.9 Directors Have No Exclusive Duty to Company..................................12

 

4.10 Salaries.....................................................................12

 

ARTICLE 5 POWERS OF AND RESTRICTIONS ON THE DIRECTORS...............................12

 

5.1 Management...................................................................12

 

5.2 Adherence to Current Content Plan............................................13

 

5.3 Content Plan, Long-term Strategic Plan and Annual Operating Plan.............13

 

5.4 Additional Capital...........................................................14

 

5.5 Actions Requiring Simple Majority Approval...................................15

 

5.6 Actions Requiring Supermajority Approval.....................................16

 

5.7 Actions Requiring Approval of Only One Class of Directors....................18

 

5.8 Certain Powers of Directors..................................................19

 

5.9 Reports to Members ..........................................................20

 

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5.10 Independent Public Accountants...............................................20

 

5.11 Litigation...................................................................20

 

ARTICLE 6 OFFICERS; COMMITTEES......................................................20

 

6.1 Appointment of Officers......................................................20

 

6.2 Tenure and Duties of Officers................................................21

 

ARTICLE 7 RIGHTS AND OBLIGATIONS OF MEMBERS.........................................22

 

7.1 Limitation of Liability......................................................22

 

7.2 Nature of Rights and Obligations.............................................22

 

7.3 Member Access to Records.....................................................22

 

7.4 Certain Actions Requiring Special Approval...................................22

 

7.5 Outside Activities...........................................................23

 

ARTICLE 8 CERTAIN MATTERS CONCERNING MEMBERS, DIRECTORS AND EXECUTIVE OFFICERS......23

 

8.1 Liability of Directors and Officers; Indemnification.........................23

 

8.2 Other Matters Concerning the Directors and Officers of the Company...........24

 

ARTICLE 9 MEETINGS OF MEMBERS.......................................................25

 

9.1 Annual and Special Meetings..................................................25

 

9.2 Place of Meetings............................................................25

 

9.3 Notice of Meetings...........................................................25

 

9.4 Meeting of all Members.......................................................25

 

9.5 Record Date..................................................................25

 

9.6 Quorum.......................................................................26

 

9.7 Manner of Acting.............................................................26

 

9.8 Proxies......................................................................26

 

9.9 Action by Members Without a Meeting..........................................26

 

9.10 Waiver of Notice.............................................................27

 

ARTICLE 10 CONTRIBUTIONS TO THE COMPANY, CAPITAL UNITS AND CAPITAL ACCOUNTS..........27

 

10.1 Capital Contributions........................................................27

 

10.2 Units........................................................................27

 

10.3 Capital Accounts ............................................................27

 

 

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10.4 Withdrawal or Reduction of Members, Contributions to Capital.................27

 

10.5 Unit Certificates............................................................28

 

ARTICLE 11 ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS............................28

 

11.1 Allocation of Profits and Losses from Operations.............................28

 

11.2 Special Allocations..........................................................29

 

11.3 Distributions................................................................30

 

11.4 Limitation Upon Distributions................................................32

 

11.5 Accounting Principles........................................................32

 

11.6 Interest on and Return of Capital Contributions..............................32

 

11.7 Records and Reports..........................................................32

 

11.8 Returns and Other Elections..................................................33

 

11.9 Tax Matters Partner..........................................................33

 

ARTICLE 12 TRANSFERABILITY...........................................................33

 

12.1 Restrictions on Transferability..............................................34

 

12.2 No Effect to Transfers in Violation of Operating Agreement...................34

 

Article 13 Additional And Substitute Members.........................................34

 

13.1 Admission of Additional Members and Substitute Members.......................34

 

13.2 Allocations to Additional Members and Substitute Members.....................35

 

13.3 Effect of Transfer...........................................................35

 

ARTICLE 14 DISSOLUTION AND TERMINATION...............................................35

 

14.1 Dissolution..................................................................35

 

14.2 Effect of Filing of Certificate of Cancellation..............................35

 

14.3 Distribution of Assets Upon Dissolution......................................35

 

14.4 Winding Up...................................................................36

 

14.5 Filing of Certificate of Cancellation........................................36

 

ARTICLE 15 MERGER OR CONSOLIDATION...................................................36

 

15.1 Merger or Consolidation......................................................36

 

15.2 Vote Relating to Merger or Consolidation.....................................37

 

15.3 Exchange Relating to Merger or Consolidation.................................37

 

15.4 Filing and Effect of Certificate of Merger or Consolidation..................37

 

15.5 Amendment of Old or Adoption of New Operating Agreement .....................37

 

 

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15.6 Assumption of Assets and Liabilities.........................................37

 

ARTICLE 16 MISCELLANEOUS PROVISIONS..................................................37

 

16.1 Notices......................................................................37

 

16.2 Application of Delaware Law..................................................38

 

16.3 Waiver of Action for Partition...............................................38

 

16.4 Amendments...................................................................38

 

16.5 Execution of Additional Instruments..........................................38

 

16.6 Construction.................................................................38

 

16.7 Headings.....................................................................38

 

16.8 Waivers......................................................................38

 

16.9 Rights and Remedies Cumulative...............................................38

 

16.10 Severability.................................................................38

 

16.11 Heirs, Successors and Assigns................................................39

 

16.12 Creditors....................................................................39

 

16.13 Counterparts.................................................................39

 

16.14 No Third Party Beneficiaries.................................................39

 

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR

CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933. A COMPLETE

COPY OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

NBC/QUOKKA VENTURES, LLC

 

OPERATING AGREEMENT

 

 

 

THIS OPERATING AGREEMENT is made as of the 9th day of February 1999 (the

"Effective Date"), by and between NBC OLYMPICS, INC., a Delaware corporation

("NBC"), and QUOKKA SPORTS, INC., a Delaware corporation ("Quokka"), with

respect to the operation of NBC/QUOKKA VENTURES, LLC, a Delaware limited

liability company (the "Company").

 

WHEREAS, the Company was formed under the name "NBC/QUOKKA VENTURES,

LLC" pursuant to the provisions of the Delaware Limited Liability Company Act,

upon the filing of a certificate of formation (the "Certificate of Formation")

with the Delaware Secretary of State on February 5, 1999; and

 

WHEREAS, NBC and Quokka (together, the "Initial Members") desire to set

forth their respective ownership interests in the Company and the principles by

which the Company will be operated and governed;

 

NOW, THEREFORE, in consideration of mutual covenants and other good and

valuable consideration, the receipt and sufficiency of which is hereby

acknowledged, the parties hereby agree as follows:

 

 

ARTICLE 1

 

DEFINITIONS

 

1.1 DEFINITIONS. The following terms used in this Operating Agreement

shall have the following meanings (unless otherwise expressly provided herein):

 

(a) "ACCOUNTING PERIOD" shall be (i) the Company's Fiscal Year if

there are no changes in the Members' respective interests in Company income,

gain, loss or deductions during such Fiscal Year except on the first day

thereof, or (ii) any other period beginning on the first day of a Fiscal Year,

or any other day during a Fiscal Year, upon which occurs a change in such

respective interests, and ending on the last day of a Fiscal Year, or on the day

preceding an earlier day upon which any change in such respective interest shall

occur.

 

(b) "ADDITIONAL MEMBER" shall mean any Person who or which is

admitted to the Company as an Additional Member pursuant to Article 13 hereof.

 

(c) "ADJUSTED ASSET VALUE" with respect to any asset shall be the

asset's adjusted basis for federal income tax purposes, except as follows:

 

(1) The initial Adjusted Asset Value of any asset (other

than money) contributed by a Member to the Company shall be the gross fair

market value of such asset at the time of contribution, as determined by the

contributing Member and a Supermajority of the Directors; provided, however,

that the initial Adjusted Asset Value (which is the initial fair value as agreed

by the Members) of the assets contributed by the Members to the Company shall be

as set forth on Schedule A attached hereto.

 

 

1.

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(2) The Adjusted Asset Values of all Company assets

shall be adjusted to equal their respective gross fair market values, as

determined by a Supermajority of the Directors, and the resulting unrecognized

profit or loss allocated to the Capital Accounts of the Members pursuant to

Articles 10 and 11, as of the following times: (i) 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; (ii) the distribution by the

Company to a Member of more than a de minimis amount of Company assets, unless

all Members receive simultaneous distributions of either undivided interests in

the distributed property or identical Company assets in proportion to their

interests in Company distributions as provided in Section 11.3; and (iii) the

liquidation of the Company within the meaning of Treasury Regulation Section

1.704-1(b)(2)(ii)(g).

 

(d) "ADVERTISER CATEGORY" shall have the meaning specified in the

Master Venture Agreement.

 

(e) "AFFILIATE" with respect to any Person other than an entity

subject to the reporting requirements of the Security Exchange Act of 1934, as

amended, shall mean (i) any Person which beneficially holds, directly or

indirectly, or otherwise controls, ten percent (10%) or more of such Person's

outstanding securities, (ii) any Person, ten percent (10%) or more of which

Person's outstanding securities are beneficially held, directly or indirectly,

or are otherwise controlled, by such a Person and (iii) any Person, ten percent

(10%) or more of which Person's outstanding securities are beneficially held,

directly or indirectly, or are otherwise controlled, by a Person described in

(i) above. "Affiliate" with respect to any entity subject to the reporting

requirements of the Securities Exchange Act of 1934, as amended, shall mean (i)

any Person which beneficially holds, directly or indirectly, or otherwise

controls, fifteen percent (15%) or more of such entity's outstanding securities,

(ii) any Person, fifteen percent (15%) or more of which Person's outstanding

securities are beneficially held, directly or indirectly, or are otherwise

controlled, by such an entity and (iii) any Person, fifteen percent (15%) or

more of which Person's outstanding securities are beneficially held, directly or

indirectly, or are otherwise controlled, by a Person described in (i) above.

 

(f) "ANNUAL OPERATING PLAN" shall have the meaning specified in

Section 5.3(c).

 

(g) "BANKRUPTCY" of a Person shall mean (i) the filing by a

Person of a voluntary petition seeking liquidation, reorganization, arrangement

or readjustment, in any form, of its debts under the U.S. Bankruptcy Code (or

corresponding provisions of future laws) or any other federal, state or foreign

insolvency law, or a Person's filing an answer consenting to or acquiescing in

any such petition; (ii) the making by a Person of any assignment for the benefit

of its creditors or the admission by a Person of its inability to pay its debts

as they mature; or (iii) the expiration of 60 days after the filing of an

involuntary petition under the Bankruptcy Code (or corresponding provisions of

future laws) seeking an application for the appointment of a receiver for the

assets of a Person, or an involuntary petition seeking liquidation,

reorganization, arrangement or readjustment of its debts under any other

federal, state or foreign insolvency law, unless the same shall have been

vacated, set aside or stayed within such 60-day period.

 

(h) "BOARD OF DIRECTORS" shall have the meaning specified in

Section 4.1.

 

 

2.

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(i) "CAPITAL ACCOUNT" as of any given date shall mean, with

respect to any Member, the account maintained for such Member in accordance with

the provisions of Section 10.3.

 

(j) "CAPITAL CONTRIBUTION" shall mean the amount of money and the

initial Adjusted Asset Value of any property contributed to the Company by a

Member whenever made. Any reference to a capital contribution of a Member shall

include the Capital Contribution made by a predecessor holder of any Units held

by such Member with respect to such Units.

 

(k) "CAUSE" shall mean, with respect to any Person, fraud, gross

negligence, willful misconduct, embezzlement or a material breach of such

Person's obligations under this Operating Agreement or any contract between such

Person and the Company.

 

(l) "CHAIRMAN OF THE BOARD" shall mean that director who is

elected by the other members of the Board of Directors to serve as Chairman of

the Board of Directors of the Company.

 

(m) "CHANNEL" shall have the meaning specified in the Master

Venture Agreement.

 

(n) "CLASS A ACQUISITION DATE" shall mean the date on which any

Person, or any group of Persons that are Affiliated with each other, (i)

acquires or otherwise beneficially holds or controls fifty percent (50%) or more

of the outstanding voting securities of any Class A Member; (ii) acquires or

otherwise beneficially holds or controls thirty percent (30%) or more of the

outstanding voting securities of any Class A Member that is subject to the

reporting requirements of the Securities Exchange Act of 1934, as amended, where

such 30% or greater voting block represents the largest voting block held by

stockholders of such Class A Member; (iii) controls the appointment of a

majority of the members of the board of directors of such Class A Member; (iv)

acquires all or substantially all the assets of any Class A Member; or (v)

merges or otherwise consolidates with any Class A Member in a transaction where

the Class A Member is not the surviving entity.

 

(o) "CLASS A INTEREST" shall mean the proportion that a Class A

Member's Class A Units bear to the aggregate outstanding Class A Units of all

Class A Members.

 

(p) "CLASS A DIRECTOR" shall mean any Director classified as a

"Class A Director" and elected or designated by the Class A Members in

accordance with Section 4.3(a) of this Operating Agreement.

 

(q) "CLASS A MEMBER" shall mean any Member holding Class A Units.

 

(r) "CLASS A TRIGGER DATE" shall mean the date on which any NBC

Competitor (i) merges or otherwise consolidates with any Class A Member in a

transaction where the Class A Member is not the surviving entity, (ii) shall

have become the beneficial owner (as defined in the Securities Exchange Act of

1934) of fifteen percent (15%) or more of the outstanding equity securities of a

Class A Member, (iii) becomes entitled to elect, appoint or replace a member or

members of the board of directors of a Class A Member unless NBC shall also be

granted the same right to elect, appoint or replace a member or members of the

board of directors of such Class A Member or (iv) acquires all or substantially

all the assets of a Class A Member.

 

 

3.

<PAGE> 9

 

 

 

 

 

 

 

(s) "CLASS A UNIT" shall mean any Unit denominated "Class A."

 

(t) "CLASS B INTEREST" shall mean the proportion that a Class B

Member's Class B Units bear to the aggregate outstanding Class B Units of all

Class B Members.

 

(u) "CLASS B DIRECTOR" shall mean any Director classified as a

"Class B Director" and elected or designated by the Class B Members in

accordance with Section 4.3(b) of this Operating Agreement.

 

(v) "CLASS B MEMBER" shall mean any Member holding Class B Units.

 

(w) "CLASS B TRIGGER DATE" shall mean the date on which any

Quokka Competitor (i) merges with any Class B Member in a transaction where the

Class B Member is not the surviving entity, (ii) shall have become the

beneficial owner (as defined in the Securities Exchange Act of 1934) of fifteen

percent (15%) or more of the outstanding equity securities of a Class B Member,

(iii) becomes entitled to elect a member or members of the board of directors of

a Class B Member unless Quokka shall also be granted the same right to elect,

appoint or replace a member or members of the board of directors of such Class B

Member or (iv) acquires all or substantially all the assets of a Class B Member.

 

(x) "CLASS B UNIT" shall mean any Unit denominated "Class B."

 

(y) "CODE" shall mean the Internal Revenue Code of 1986, as

amended, or corresponding provisions of subsequent superseding federal revenue

laws.

 

(z) "COMPANY PROPERTY" means any tangible and intangible personal

property now owned or hereafter acquired by the Company, including, without

limitation, all cash, cash equivalents, deposits, accounts receivable,

work-in-progress, inventory, equipment, materials, supplies, prototypes,

vehicles, real property, fixtures, permits, approvals, licenses, patents,

consents, contracts, agreements, applications for permits, approvals, licenses,

development rights, development agreements, trade names and warranties, or any

other property.

 

(aa) "CONTENT PLAN" shall mean with respect to the first Games

the Initial Content Plan and with respect to the later Games the content plan

developed in accordance with Section 5.3(a).

 

(bb) "CONTENT PLAN DEADLINE" shall mean the date one hundred

twenty (120) days following the conclusion of the Games prior to the Games with

respect to which such Content Plan applies.

 

(cc) "CURRENT CONTENT PLAN" shall have the meaning specified in

Section 5.2.

 

(dd) "DELAWARE ACT" shall mean the Delaware Limited Liability

Company Act at 6 Del. C. Sections 18-101, et seq., as amended.

 

(ee) "DIRECTORS" shall mean the directors designated or elected

by the Members pursuant to the terms of this Operating Agreement. For purposes

of the Delaware Limited Liability Company Act and for all other purposes, the

term "Director" as used in this Operating Agreement shall mean "manager."

Consequently the parties intend that any restriction

 

 

4.

<PAGE> 10

 

 

 

 

 

on the authority of a Director set forth in this Operating Agreement shall also

be read as a restriction on such person's authority as a manager.

 

(ff) "DISTRIBUTABLE CASH" shall mean for any period the Operating

Cash Flow (as defined below) for such period plus depreciation and amortization

to the extent reflected in Operating Cash Flow for such period minus (i) the

capital expenditures of the Company for such period determined in accordance

with U.S. generally accepted accounting principles, (ii) any net working capital

requirements to be met from Operating Cash Flow for such period as determined by

the Board of Directors and (iii) all amounts distributed by the Company pursuant

to Section 11.3(a) of this Operating Agreement; and where "Operating Cash Flow"

shall mean for any period the gross revenues of the Company for such period less

all operating and nonoperating expenses of the Company for such period,

including all charges of a proper character (including provision for taxes, if

any, which charges shall be limited to current taxes, and provision for current

additions to reserves), all determined in accordance with GAAP applied on a

basis consistent with the Company's prior corresponding periods, if any.

 

(gg) "DROP-DEAD DATE" shall mean March 15, 1999.

 

(hh) "EQUITABLE CLAIM REGARDING CONTENT" shall have the meaning

specified in Section 5.7(c).

 

(ii) "EVENTS" shall have the meaning specified in the Master

Venture Agreement.

 

(jj) "EXCESS CAPITAL CONTRIBUTION" shall mean the amount, if any,

by which the sum of Quokka's Initial Capital Contribution and all Quokka

Quarterly Capital Contributions exceeds [*] dollars $[*].

 

(kk) "FISCAL YEAR" shall mean the Company's fiscal year. The

Company's fiscal year shall be January 1 through December 31 unless a different

taxable year is required by Section 706 of the Code, in which event the

Company's fiscal year shall be the taxable year required by Section 706 of the

Code.

 

(ll) "FUNDS FROM A SALE OF THE COMPANY" means all Distributable

Cash held by the Company which results from a Sale of the Company.

 

(mm) "FUNDS FROM OPERATIONS" means all Distributable Cash held by

the Company which results from the operation of the business of the Company from

whatever source, except for Funds From a Sale of the Company and Capital

Contributions.

 

(nn) "GAMES" shall have the meaning specified in the Master

Venture Agreement.

 

(oo) "INITIAL CAPITAL CONTRIBUTION" shall mean a Member's initial

contribution to the Capital of the Company pursuant to this Operating Agreement

in connection with the initial issuance of Units by the Company, as set forth on

Schedule A hereto.

 

(pp) "INITIAL CONTENT PLAN" shall have the meaning specified in

Section 5.3(a).

 

(qq) "INITIAL MEMBERS" shall mean NBC and Quokka.

 

 

[*] Confidential Treatment Requested

 

5.

<PAGE> 11

 

 

 

 

(rr) "INTEREST" shall mean the proportion that a Member's Units

bears to the aggregate outstanding Units of all Members.

 

(ss) "INTEREST INCOME" shall mean all interest income, including

without limitation, income received from commercial paper, certificates of

deposit, United States treasury bills and other money market investments.

 

(tt) "LONG-TERM STRATEGIC PLAN" shall have the meaning specified

in Section 5.3(b).

 

(uu) "MASTER VENTURE AGREEMENT" shall mean that certain Master

Venture Agreement of even date herewith among NBC, Quokka and the Company.

 

(vv) "MEMBER" shall mean each of Quokka, NBC, any Additional

Member and any Substituted Member which is, as of a given time, a member of the

Company.

 

(ww) "MUTUAL TERMINATION EVENT" shall have the meaning specified

in the Master Venture Agreement.

 

(xx) "NBC COMPETITOR" shall mean any media company that is

significantly engaged in any of the primary businesses of NBC, National

Broadcasting Company, Inc. or its Subsidiaries or any telecommunications,

Internet or similar company that is significantly engaged in any of the primary

businesses of National Broadcasting Company, Inc., its Subsidiaries or Snap! LLC

[*]; provided, however, that NBC Competitor shall not include any Person

identified by Quokka in writing to NBC (a "Request Notice") that NBC does not

identify as such in writing to Quokka within thirty (30) days of such Request

Notice.

 

(yy) "NBC SERVICES AGREEMENT" shall mean that certain NBC Rights

and Services Terms attached as Exhibit A to the Master Venture Agreement.

 

(zz) "NET PROFIT OR NET LOSS" shall be an amount computed for

each Accounting Period as of the last day thereof that is equal to the Company's

taxable income or loss for such Accounting 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 Code Section 703(a)(1)

shall be included in taxable income or loss), with the following adjustments:

 

(1) Any income of the Company that is exempt from

federal income tax and not otherwise taken into account in computing Net Profit

or Net Loss pursuant to this Section 1.1(zz) shall be added to such taxable

income or loss;

 

(2) Any expenditures of the Company described in Code

Section 705(a)(2)(b) or treated as Code Section 705(a)(2)(b) expenditures

pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise

taken into account in computing Net Profit or Net Loss pursuant to this Section

1.1(zz) shall be subtracted from such taxable income or loss; and

 

 

[*] Confidential Treatment Requested

 

6.

<PAGE> 12

 

 

 

 

 

 

(3) Items that are specially allocated pursuant to

Section 11.2 hereof shall not be taken into account in computing Net Profit or

Net Loss.

 

Notwithstanding anything to the contrary contained in this definition of Net

Profit or Net Loss, income, gain or loss resulting from the disposition of,

distribution to a Member of, or depreciation, amortization or other cost

recovery deductions with respect to, any Company asset shall be computed by

reference to the book value of the asset disposed of, distributed or

depreciated, amortized or otherwise recovered, notwithstanding that the adjusted

tax basis of such asset differs from its book value.

 

(aaa) "OPERATING AGREEMENT" shall mean this Operating Agreement

as originally executed and as amended from time to time in accordance with the

terms of this Operating Agreement.

 

(bbb) "PERMITTED PLEDGE" shall mean a pledge by a Member of its

interest in the Company in connection with a debt financing transaction creating

an encumbrance on all or substantially all the assets of such Member, which

assets include such Member's interest in the Company.

 

(ccc) "PERSON" shall mean any individual or corporation,

partnership, limited liability company, joint venture, association, joint stock

company, trust, unincorporated organization or other entity, including any

government or political subdivision or any agency or instrumentality thereof and

the heirs, executors, administrators, legal representatives, successors, and

permitted assigns of such "Person" where the context so admits.

 

(ddd) "QUARTERLY CAPITAL NEEDS" shall have the meaning specified

in Section 5.3(c).

 

(eee) "QUOKKA COMPETITOR" shall mean any Person significantly

engaged in the business of providing coverage, promotion or advertising of

sports or sporting events over the Internet Medium (as such term is defined in

the NBC Services Agreement).

 

(fff) "QUOKKA QUARTERLY CAPITAL CONTRIBUTION" shall have the

meaning specified in Section 5.4(a).

 

(ggg) "QUOKKA SERVICES AGREEMENT" shall mean that certain Quokka

Rights and Services Terms attached as Exhibit B to the Master Venture Agreement.

 

(hhh) "QUOKKA WARRANTS" shall have the meaning specified in the

Master Venture Agreement.

 

(iii) "REDUCED ACTIVITY PERIOD" shall mean any six month period

following the expiration or termination of the Master Venture Agreement (as such

terms are defined in the Master Venture Agreement) during which the Company has

not either accrued expenditures of at least $[*] or recognized revenues of at

least $[*].

 

(jjj) "REDUCED SPENDING PLAN" shall have the meaning specified in

Section 5.3(b).

 

 

[*] Confidential Treatment Requested

 

7.

<PAGE> 13

 

 

 

 

 

 

 

(kkk) "RESTRICTED ADVERTISER CATEGORY" shall have the meaning

specified in the Master Venture Agreement.

 

(lll) "SALE OF COMPANY PROPERTY" shall mean the sale,

disposition, assignment, transfer, lease, pledge, hypothecation or encumbrance

of, or the granting of any security interest in, any Company Property that, when

considered with any other Company Property so transferred or otherwise treated

outside the ordinary course of business, has an aggregate fair market value

greater than 20% of the fair market value of all Company Property (including

without limitation any Sale of the Company).

 

(mmm) "SALE OF THE COMPANY" shall mean the sale or disposition of

all or substantially all the Company Property.

 

(nnn) "SERVICES AGREEMENTS" shall mean the NBC Services Agreement

and the Quokka Services Agreement.

 

(ooo) "SUBSIDIARY" of any Person shall mean any entity of which

such Person beneficially holds, directly or indirectly, fifty percent (50%) or

more of such entities outstanding securities.

 

(ppp) "SUBSTITUTE MEMBER" shall mean any Person who or which is

admitted to the Company as a Substitute Member pursuant to Articles 12 and 13 of

this Operating Agreement.

 

(qqq) "SUPERMAJORITY OF THE DIRECTORS" shall mean the vote of

three (3) or more Directors, including at least one (1) Class A Director and at

least one (1) Class B Director. Every act or decision done or made by three (3)

or more Directors, including at least one (1) Class A Director and at least one

(1) Class B Director, at a meeting duly held and at which a quorum is present

shall be the act of a Supermajority of the Directors. Additionally, any act or

decision done or made pursuant to a written consent executed by all five (5)

Directors (or, in the event of a reduction in the number of Directors pursuant

to Section 4.2, all four (4) Directors) in accordance with the terms of Section

4.7(g) shall be the act of a Supermajority of the Directors. Votes by a Director

shall be as a representative of the Members electing such Director and not as a

fiduciary of the Company or all of its Members.

 

(rrr) "TREASURY REGULATIONS" shall mean the Income Tax

Regulations, including temporary regulations, promulgated under the Code, as

amended from time to time.

 

(sss) "UNITS" shall mean the capital units issued by the Company

to its Members, in exchange for contributions, which represent the Member's

interest in the Company.

 

(ttt) "WARRANT ISSUANCE AGREEMENT" shall mean that certain

Warrant Issuance Agreement dated of even date herewith among Quokka, NBC and the

Company.

 

ARTICLE 2

 

FORMATION OF COMPANY

 

2.1 FORMATION. On February 5, 1999, the Company was organized as a

Delaware limited liability company under and pursuant to the Delaware Act.

 

 

8.

<PAGE> 14

 

 

 

 

2.2 NAME. The name of the Company is NBC/Quokka Ventures, LLC.

 

2.3 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the

Company shall be in the State of New York.

 

2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Company's registered

office in the state of Delaware shall be at the office of its registered agent,

and the name and address of its initial registered agent shall be The

Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,

Wilmington, Delaware 19801. The Corporation Trust Company is located in the

County of Newcastle.

 

2.5 TERM. The Company's existence commenced February 5, 1999 upon the

filing with the Secretary of the State of Delaware of the Company's Certificate

of Formation and shall continue indefinitely, unless the Company is earlier

dissolved in accordance with either the provisions of this Operating Agreement

or the Delaware Act.

 

ARTICLE 3

 

PURPOSES OF COMPANY

 

3.1 COMPANY PURPOSES. The purpose of the Company is to (a) design,

develop, produce and market the Channel in accordance with the Master Venture

Agreement, the Services Agreements and the Content Plans, (b) sell advertising

on, or sponsorships of, the Channel in accordance with the Master Venture

Agreement and the Services Agreements, (c) design, develop, manufacture, market

and sell derivative products relating to the Channel in accordance with the

Master Venture Agreement and the Services Agreements, (d) engage in such other

activities as contemplated by the Master Venture Agreement, the Services

Agreements and the Content Plans and (e) engage in any lawful act or activity

for which a limited liability company may be organized under the laws of the

State of Delaware, incident, necessary, advisable or desirable to carry out the

foregoing. The Company shall have all powers available to limited liability

companies under the Delaware Act to make and perform all contracts and to engage

in all actions and transactions necessary or advisable to carry out the purposes

of the Company.

 

ARTICLE 4

 

MANAGEMENT OF COMPANY

 

4.1 GENERALLY. Except as specifically set forth in this Operating

Agreement, the Members hereby delegate all power and authority to manage the

business and affairs of the Company to the Directors, who shall act as the

managers of the Company subject to and in accordance with the terms of this

Operating Agreement (including, without limitation, Section 5.1). Such five (5)

(or, as provided in Section 4.2 below, four (4)) Directors shall constitute the

"Board of Directors" and such term may be used in this Operating Agreement to

refer to such five (5) (or, as provided in Section 4.2 below, four (4))

Directors. Such term is used for convenience only and is not intended by the

parties to confer to the Board of Directors any additional power or authority

other than that expressly and specifically conferred pursuant to and in

accordance with the terms of this Operating Agreement.

 

4.2 NUMBER OF DIRECTORS; CLASSIFICATION OF DIRECTORS. The number of

Directors of the Company shall be fixed at five (5) Directors. Three (3)

Directors shall be classified as Class

 

 

9.

<PAGE> 15

 

 

 

 

 

A Directors and two (2) Directors shall be classified as Class B

Directors. Notwithstanding the foregoing however, if within thirty (30) days

following the date the Class B Directors receive written notice from the Class A

Directors that a Class A Acquisition Date has occurred (a "Class A Acquisition

Date Notice"), the holders of a majority of the Class B Interests elect to

reduce the number of Class A Directors, the number of Directors of the Company

shall be fixed at four (4) Directors. In such event two (2) Directors shall be

classified as Class A Directors and two (2) Directors shall be classified as

Class B Directors. The Class A Directors shall provide a Class A Acquisition

Date Notice promptly following a Class A Acquisition Date.

 

4.3 TENURE, ELECTION AND QUALIFICATIONS.

 

(a) The initial Class A Directors shall be Richard H. Williams,

Alan Ramadan and Les Schmidt. Each Class A Director shall serve until the

earlier of (i) the election of such Class A Director's successor by Class A

Members holding a majority of the Class A Interests, (ii) the removal of such

Class A Director in accordance with the terms of this Operating Agreement, (iii)

such Class A Director's resignation and (iv) such Class A Director's death.

 

(b) The initial Class B Directors shall be Bob Myers and Gary

Zenkel. Each Class B Director shall serve until the earlier of (i) the election

of such Class B Director's successor by Class B Members holding a majority of

the Class B Interests, (ii) the removal of such Class B Director in accordance

with the terms of this Operating Agreement, (iii) such Class B Director's

resignation and (iv) such Class B Director's death.

 

(c) At the time of his appointment and at all times during his

service as a Director, a Director must be an officer, director or employee of a

Member. In the event a Director shall cease to be an officer, director or

employee of a Member, such Director shall be deemed to have resigned as a

Director effective upon such cessation date. In addition, at least one (1) Class

B Director shall be an officer, director or employee of NBC.

 

4.4 RESIGNATION. A Director may resign at any time by giving written

notice to the Members. The resignation of a Director shall take effect upon

receipt of notice thereof or at such later time as shall be specified in such

notice; unless otherwise specified therein, the acceptance of such resignation

shall not be necessary to make it effective.

 

4.5 REMOVAL.

 

(a) A Class A Director may be removed at any time, with or

without Cause, by the affirmative vote of Class A Members holding a majority of

the Class A Interests. Without limiting the generality of the foregoing, in the

event of a reduction in the number of Directors classified as Class A Directors

pursuant to Section 4.2, the Class A Members holding a majority of the Class A

Interests shall determine which Class A Director shall be removed as a result of

such reduction.

 

(b) A Class B Director may be removed at any time, with or

without Cause, by the affirmative vote of Class B Members holding a majority of

the Class B Interests.

 

(c) Notwithstanding the foregoing, upon the affirmative vote of

any two Directors, any other Director may be removed for Cause.

 

4.6 VACANCIES.

 

 

 

10.

<PAGE> 16

 

 

 

 

 

 

 

(a) Any vacancy occurring in the office of a Class A Director

shall be filled by the affirmative vote of Class A Members holding a majority of

the Class A Interests.

 

(b) Any vacancy occurring in the office of a Class B Director

shall be filled by the affirmative vote of Class B Members holding a majority of

the Class B Interests.

 

4.7 MEETINGS.

 

(a) Subject to the notice provisions set forth in this Section

4.7, regular meetings of the Board of Directors shall be held at such times and

dates as determined by the Board of Directors. The Board of Directors shall hold

at least four (4) regular meetings annually, which meetings shall be held in

such locations as determined pursuant to this Section 4.7. The officers and

other executives of the Company, if any, may attend meetings of the Board of

Directors with the prior approval of the Board of Directors. The Board of

Directors shall meet with the officers and other senior executives of the

Company, if any, at least two (2) times annually.

 

(b) Directors may participate in a meeting through use of

conference telephone or similar communication equipment, so long as all

Directors participating in such meeting can hear one another. Such participation

constitutes presence in person at such meeting.

 

(c) Special meetings of the Board of Directors for any purpose

may be called by the Chairman of the Board or by any two Directors.

 

(d) Each Director shall receive notice of the date, time and

place of all meetings of the Board of Directors at least thirty (30) days before

the meeting. Such notice shall be delivered in writing (which may be by

facsimile or by telegraph) to each Director. Such notice may be given by the

Chairman of the Board, the Secretary of the Company or by the person or persons

who called the meeting. Such notice shall specify the purpose of the meeting.

Notice of any meeting of the Board of Directors shall not be required to be

given to any Director who signs a waiver of notice of such meeting or a consent

to holding the meeting, either before or after the meeting, or who attends the

meeting without protesting prior to such meeting or at the commencement thereof.

No meeting of the Board of Directors shall be considered a valid meeting of the

Board of Directors unless notice as required pursuant to this Section 4.7 has

been given. All such waivers, consents and approvals shall be filed with the

corporate records of the Company.

 

(e) Regular meetings of the Board of Directors shall be held

alternatively in San Francisco, California and New York, New York, or in such

other places as the Directors who desire to attend such meeting may collectively

determine. Special meetings of the Board of Directors shall be held in New York,

New York, or in such other places as the Directors who desire to attend such

meeting may collectively determine, with respect to special meetings called by

the Class A Directors and shall be held in San Francisco, California, or in such

other places the Directors who desire to attend such meeting may collectively

determine, with respect to special meetings called by the Class B Directors. The

location of any meeting of the Board of Directors shall be designated in the

notice of the meeting.

 

(f) Any meeting of the Board of Directors, whether or not a

quorum is present, may be adjourned to another time and place by the affirmative

vote of a majority of the Directors present. If the meeting is adjourned for

more than twenty-four (24) hours, notice of

 

 

 

11.

<PAGE> 17

 

such adjournment to another time or place shall be given prior to the time of

the adjourned meeting to the Directors who were not present at the time of the

adjournment.

 

(g) Any action required or permitted to be taken by the Board of

Directors may be taken without a meeting of the Board of Directors, if all the

Directors individually or collectively consent in writing to such action. Such

written consent or consents shall be filed with the corporate records of the

Company. Such action by written consent shall have the same force and effect as

a unanimous vote of the Directors.

 

4.8 QUORUM AND TRANSACTION OF BUSINESS. The number of Directors that

constitutes a quorum for the transaction of business at a properly noticed

meeting of the Board of Directors shall be three (3); provided, however, that if

a vote requiring a Supermajority of the Directors shall be taken at such

meeting, a Supermajority of the Directors shall constitute a quorum. Except as

required by the Delaware Act or as otherwise set forth in this Operating

Agreement, every act or decision done or made by three (3) or more Directors at

a meeting duly held and at which a quorum is present shall be the act of the

Board of Directors.

 

4.9 DIRECTORS HAVE NO EXCLUSIVE DUTY TO COMPANY. The Directors shall not

be required to manage the Company as their sole and exclusive function, and the

Directors may have other business interests and may engage in other activities

in addition to those relating to the Company. Neither the Company nor any Member

shall have any right, by virtue of this Operating Agreement or otherwise, to

share or participate in such other investments or activities of the Directors or

to the income or proceeds derived therefrom.

 

4.10 SALARIES. The Directors shall receive no salary or other

compensation from the Company; provided, however, the foregoing shall not

prevent any employee of or consultant to the Company from receiving salary or

other compensation from the Company with respect to his services as an employee

or consultant.

 

ARTICLE 5

 

POWERS OF AND RESTRICTIONS ON THE DIRECTORS

 

5.1 MANAGEMENT. The Directors shall in all cases act as a group and

shall have no authority to act individually. The Board of Directors may appoint

one (1) or more officers to manage the day-to-day operations of the Company. The

initial officers shall be as designated in Section 6.1 below and shall have the

respective duties set forth in Section 6.2 below. The Board of Directors may

adopt such rules and regulations for the management of the Company not

inconsistent with this Operating Agreement or the Delaware Act. Except as

otherwise provided in the Delaware Act or authorized pursuant to the terms of

this Operating Agreement, no debt shall be contracted or liability incurred by

or on behalf of the Company except by the Company's Board of Directors.

 

5.2 ADHERENCE TO CURRENT CONTENT PLAN. Except as approved by a Supermajority of

the Directors, the Board of Directors shall operate the Company, and the Company

shall operate the Channel, in a manner in all ways consistent with and in

accordance with the Content Plan as in effect with respect to a Games at any

given time (the "Current Content Plan"). Amendments to the Current Content Plan

shall require approval by a Supermajority of the Directors.

 

 

12.

<PAGE> 18

 

 

 

 

 

Notwithstanding any provision herein to the contrary, approval of any

Content Plan shall not constitute approval of the raising of additional capital

for the Company.

 

5.3 CONTENT PLAN, LONG-TERM STRATEGIC PLAN AND ANNUAL OPERATING PLAN.

 

(a) Until the Drop-Dead Date, the Members shall negotiate in good

faith to develop, for approval by a Supermajority of the Directors, an initial

content plan (the "Initial Content Plan") with respect the first Games,

provided, however, in conducting such negotiations, it will not be NBC's

intention to acquire "participating rights" as defined in EITF 96-16. Nothing

contained in the foregoing proviso, however, will affect the enforceability of

the Initial Content Plan once it has been approved by a Supermajority of the

Directors. Thereafter, no later than thirty (30) days prior to each Content Plan

Deadline, the officers of the Company shall prepare and submit to the Board of

Directors for approval by a Supermajority of the Directors, a content plan (the

"Content Plan") covering with respect to the next upcoming Games the types of

items covered in the Initial Content Plan with respect to the first Games. The

Members shall cause the Directors of the Company to work together in good faith

to develop and approve by such Supermajority of the Directors a Content Plan

with respect to each Games by the Content Plan Deadline; provided, however, in

the event a Supermajority of the Directors do not approve a Content Plan with

respect to the next upcoming Games on or before the Content Plan Deadline, the

Content Plan with respect to the next upcoming Games shall be the Content Plan

for the prior Games as updated by the General Manager and Production

Coordinating Producer of the Company to adjust for (i) the different sports

occurring during such Games (e.g. figure skating shall be substituted for

gymnastics), (ii) changes in technology and (iii) the current competitive

landscape. In the event that the General Manager and the Production Coordinating

Producer cannot agree on the updates necessary to create the Content Plan, the

General Manager shall have final authority to approve such Content Plan.

 

(b) From time to time as requested by the Board of Directors, but

at least one hundred twenty (120) days prior to the beginning of every other

Fiscal Year (beginning with the Fiscal Year commencing January 1, 2001), the

officers of the Company shall prepare and submit to the Board of Directors for

approval a long-term strategic plan for the Company (the "Long-term Strategic

Plan") for the period commencing with such Fiscal Year (or, the current Fiscal

Year in the event the Long-term Strategic Plan is not being considered by the

Board of Directors within sixty (60) days prior to the beginning of a Fiscal

Year) and ending with the Fiscal Year following the completion of the last Games

with respect to which the Company has rights under the NBC Services Agreement.

Notwithstanding the foregoing however, the first Long-term Strategic Plan shall

be prepared and submitted to the Board of Directors for approval no later than

ninety (90) days from the date hereof. Each Long-term Strategic Plan shall

include for each Fiscal Year covered by such Long-term Strategic Plan the

financial goals of the Company for each such Fiscal Year including a summary of

target operating revenues and expenses, capital expenditures and sources and

uses of funds and shall set forth an estimate of the additional capital needs,

if any, of the Company during each quarter of each such Fiscal Year, provided,

however, that such information need not be as detailed as the information

provided in the Annual Operating Plan. The Long-term Strategic Plan shall be

prepared on a basis in all respects consistent with the Current Content Plan. In

the event that there are three (3) Class A Directors and the Board of Directors

approves a Long-term Strategic Plan that provides for disbursement of (x) with

respect to the first Games, less than [*] dollars ([*]), (y) with respect to the

second Games, less than the amount equal to [*] dollars ([*]) multiplied by the

NBC Budget Discount, if any, or (z) with

 

 

[*] Confidential Treatment Requested

 

 

13.

<PAGE> 19

 

 

 

 

respect to the third Games, less than the amount equal to [*] dollars ([*])

multiplied by the NBC Budget Discount, if any, such Long-term Strategic Plan

shall be deemed a "Reduced Spending Plan." If at any time NBC substantially

reduces its overall television network budget with respect to any Games (other

than the 2000 Games) for reasons relating solely to an adverse change in general

economic conditions in the United States, then the "NBC Budget Discount" shall

mean the percentage by which NBC has reduced such budget. The foregoing

notwithstanding, nothing contained in this Section 5.3(b) shall obligate NBC to

provide Quokka or the Company with any written materials relating to NBC's

television network budget for any Games.

 

(c) From time to time as requested by the Board of Directors, but

at least one hundred twenty (120) days prior to the beginning of each Fiscal

Year, the officers of the Company shall prepare and submit to the Board of

Directors for approval an annual operating plan for the Company (the "Annual

Operating Plan") for such Fiscal Year. Notwithstanding the foregoing however,

the first Annual Operating Plan shall be prepared and submitted to the Board of

Directors for approval no later than ninety (90) days from the date hereof. The

Annual Operating Plan shall include the budget of the Company for such fiscal

year including estimates of operating revenues and expenses, capital

expenditures and sources and uses of funds and shall set forth an estimate of

the additional capital needs, if any, of the Company during each quarter of each

such Fiscal Year (the "Quarterly Capital Needs"). The Annual Operating Plan

shall be prepared on a basis in all respects consistent with the Current Content

Plan and the Long-term Strategic Plan. In the event that there are only two (2)

Class A Directors as a result of an election by the Class B Directors pursuant

to Section 4.2 and the Board of Directors is unable to approve an Annual

Operating Plan by the date one hundred (100) days prior to the beginning of a

Fiscal Year, the Annual Operating Plan for the upcoming Fiscal Year shall be the

Annual Operating Plan for the prior Fiscal Year increased by five percent (5%)

in each category.

 

5.4 ADDITIONAL CAPITAL.

 

(a) From time to time, Quokka shall make additional contributions

(the "Quokka Quarterly Capital Contribution") to the capital of the Company in

such amounts necessary to fund the Company's operations on an on-going basis in

accordance with the current Long-term Strategic Plan and the Annual Operating

Plan. Each Quokka Quarterly Capital Contribution, if any, shall be made at the

beginning of each quarter and shall equal the Quarterly Capital Needs for the

subsequent commencing quarter; provided, however, that in the event that a Games

commences during any particular quarter, then (x) the Quokka Quarterly Capital

Contribution that would have otherwise been due at the beginning of the quarter

in which the Games commence shall instead be due at the beginning of the

previous quarter, (y) the Quokka Quarterly Capital Contribution that would have

otherwise been due at the beginning of the quarter subsequent to the quarter in

which the Games commence shall instead be due at the beginning of the quarter in

which the Games commence and (z) no capital contribution shall be required at

the beginning of the quarter subsequent to the quarter in which the Games

commence because the amount that otherwise would have been contributed at such

time was contributed a quarter earlier (e.g., by way of example only, Quokka

shall make a Quokka Quarterly Capital Contribution at the beginning of the first

quarter of the year in an amount equal to the Quarterly Capital Needs during the

second quarter; provided, however, in the event that a Games commences during

the second quarter, the Quokka Quarterly Capital Contribution that would have

otherwise been payable at the beginning of the second quarter (i.e. the

Quarterly Capital Needs during the third quarter) shall also be paid at the

beginning of the first quarter). Quokka

 

 

[*] Confidential Treatment Requested

 

14.

<PAGE> 20

 

 

 

 

 

shall not receive additional Units in exchange for such Quokka Quarterly Capital

Contributions. Additionally, for so long as Quokka shall not have completed an

initial public offering of its equity or other securities, Quokka shall provide

the Board of Directors with (1) Quokka's unaudited quarterly report including a

consolidated balance sheet as at the end of the most recently completed quarter,

and an unaudited consolidated statement of income and an unaudited statement of

cash flows for such quarter, all prepared in accordance with U.S. generally

accepted accounting principles consistently applied (other than for accompanying

notes and changes resulting from year-end audit adjustments) within forty-five

(45) days of the end of each quarter of Quokka's fiscal year and (2) a

consolidated balance sheet of Quokka as at the end of the most recently

completed fiscal year, and a consolidated statement of income and a consolidated

statement of cash flows of Quokka for such year, all prepared in accordance with

U.S. generally accepted accounting principles consistently applied, together

with a report and opinion thereon by independent public accountants of national

standing selected by Quokka's board of directors, within ninety (90) days after

the end of each fiscal year of Quokka.

 

(b) From time to time, pursuant to the provisions of Section

5.7(b), the Class B Directors, in their sole discretion, may direct the Company

to exercise all or a portion of the Quokka Warrants. Concurrently therewith, NBC

shall contribute to the capital of the Company an amount equal to the exercise

price of the Quokka Warrants being exercised at such time (except in the event

of a "net issuance exercise" in accordance with the terms of the Quokka Warrants

pursuant to which a portion of the Quokka Warrants shall be canceled in

satisfaction of the applicable exercise price). Until such amount has been

contributed to the capital of the Company, the Company shall take no action with

respect to such requested exercise of the Quokka Warrants (except in the event

of a "net issuance exercise" in accordance with the terms of the Quokka Warrants

pursuant to which a portion of the Quokka Warrants shall be canceled in

satisfaction of the applicable exercise price). NBC shall not receive additional

Units in exchange for such additional capital contributions.

 

(c) Except as set forth in Section 5.4(a) and 5.4(b) above, the

Company shall not raise additional capital (or, in connection therewith, issue

additional units of the Company or admit Additional Members) without the

approval of a Supermajority of the Directors.

 

(d) Except in the event the Class B Directors elect pursuant to

Section 5.4(b) to exercise the Quokka Warrants for cash or in the event the

Class B Directors elect to control Equitable Claim Regarding Content pursuant to

Section 5.7(c), the Class B Members shall have no obligation to contribute cash

to the Company.

 

5.5 ACTIONS REQUIRING SIMPLE MAJORITY APPROVAL. As set forth in Section

4.8, except as required by the Delaware Act or as otherwise set forth in this

Operating Agreement (including, without limitation, Section 5.6), every act or

decision done or made by three (3) or more Directors at a meeting duly held and

at which a quorum is present shall be the act of the Board of Directors. Without

limiting the generality of Section 4.8 or Section 5.1 or the obligation of the

Board of Directors to operate the Company in accordance with the Current Content

Plan as set forth in Section 5.2, the Members desire to affirmatively set forth

certain actions which may be taken by a simple majority of the Board of

Directors in accordance with Section 4.7. Such actions are as follows:

 

(a) Election of the Chairman of the Board, who shall preside at

all meetings of the Board of Directors;

 

 

15.

<PAGE> 21

 

 

 

 

 

 

 

(b) Approval and amendment of the Annual Operating Plan and

Long-term Strategic Plan (as set forth in Section 5.3);

 

(c) The appointment or removal of the General Manager and other

officers of the Company; provided, however, that the appointment of the

Production Coordinating Producer shall require the approval of a Supermajority

of the Directors;

 

(d) The hiring, firing and compensation of the Company's

personnel; provided, however, that the hiring of the Production Coordinating

Producer shall require the approval of a Supermajority of the Directors;

 

(e) Selection of the equipment and production processes of the

Company in the ordinary course of business;

 

(f) Directing and controlling claims and litigation against or

involving third parties, other than claims or litigation (i) subject to approval

by a Supermajority of the Directors pursuant to Section 5.6, (ii) Equitable

Claims Regarding Content subject to the direction and control of the Class B

Directors pursuant to Section 5.7(c) or (iii) which any Person (other than the

Company) has a contractual right to control and direct; and

 

(g) Negotiation and approval of agreements with third parties,

other than agreements subject to approval by a Supermajority of the Directors

pursuant to Section 5.6.

 

5.6 ACTIONS REQUIRING SUPERMAJORITY APPROVAL. Notwithstanding any other

provision in this Operating Agreement to the contrary, every act or decision

outside the ordinary course of business shall require the approval of a

Supermajority of the Directors. For purposes of this Operating Agreement,

"outside the ordinary course of business" shall mean acts or decisions regarding

matters of a type (as opposed to matters involving an amount) that is not

consistent with those normally expected to be addressed in directing and

carrying out the purposes of the Company as set forth in Section 3.1, regardless

of whether the events or transactions that would necessitate such decisions are

expected to occur in the near term or in the long term. Operation of the Company

in any way inconsistent with the Current Content Plan is considered "outside the

ordinary course of business" for purposes hereof. In addition, the following

shall require the approval of a Supermajority of the Directors:

 

(a) Any agreement, arrangement or understanding with any Member,

Director or any holder of Units or any Affiliate, employee or relative of any

such Member, Director or holder, or any amendment, renewal or extension of any

such agreement, arrangement or understanding (other than employment contracts

between any such natural person and the Company); provided, however, that the

Master Venture Agreement and the Warrant Issuance Agreement as executed and

delivered as of the date hereof shall be deemed to be approved by a

Supermajority of the Directors as of the date hereof for purposes of this

Section 5.6(a);

 

(b) Amendments of the Current Content Plan of the Company (as set

forth in Section 5.2) and approval of new Content Plans (as set forth in Section

5.3(a));

 

(c) Any redemption of any Unit or other interest in the Company;

 

(d) Distributions pursuant to Section 11.3(b), Section 11.3(d)

and Section 11.3(f);

 

 

16.

<PAGE> 22

 

 

 

 

 

 

 

(e) Acquisitions of assets representing at least twenty percent

(20%) of the net book value of the assets of the Company in any single

transaction or series of related transactions or any Sale of Company Property;

provided, however, that the approval of a Supermajority of Directors shall not

be required if such transaction or transactions represents less than [*] in

any single year and less than [*] in the aggregate;

 

(f) Hiring and appointing the Production Coordinating Producer;

providing, however, that the initial appointment of the Production Coordinating

Producer set forth in Section 6.1 shall be deemed approved by a Supermajority of

the Directors as of the date hereof for purposes of this Section 5.6(i);

 

(g) Decisions to put the Company into Bankruptcy;

 

(h) To prepare and file all tax returns on behalf of the Company,

and to make such tax elections and determinations as a Supermajority of the

Directors deems appropriate;

 

(i) Approving certain indemnifications of Persons by the Company

(as set forth in Section 8.1);

 

(j) Directing and controlling claims and litigation against or

involving third parties with respect to which NBC is not entitled to complete

indemnification and has been named as a co-defendant or in connection with which

the Company could face criminal penalties or negotiating or approving any

settlement with respect to any such claims or litigation;

 

(k) Transfers of Units by the Members (in accordance with Article

12), the admission of any Additional Member or any Substitute Member (in

accordance with Section 13.1) or the issuance of any equity in the Company or

any security convertible into equity in the Company; and

 

(l) Borrowing money for the Company from banks or other Persons,

or hypothecating, encumbering or granting any security interests in the assets

of the Company to repay borrowed funds until such time that the sum of Quokka's

Initial Capital Contribution and Quarterly Capital Contributions has exceeded

[*]; provided, however, that notwithstanding that the sum of Quokka's Initial

Capital Contribution and Quarterly Capital Contributions has exceeded [*], the

Company may not pledge its rights under the NBC Services Agreement or any

content owned by the Company without the consent of a Supermajority of the

Directors.

 

Notwithstanding any provision to the contrary contained in this

Operating Agreement, the approval rights set forth in this Section 5.6 shall

continue to be applicable following a Dissolution Event pursuant to Article 14

until the filing of a Certificate of Cancellation.

 

In voting on any matter requiring approval of a Supermajority of the

Directors, a Director shall vote as a representative of the Members electing

such Director and not as a fiduciary of the Company or all of its Members.

 

5.7 ACTIONS REQUIRING APPROVAL OF ONLY ONE CLASS OF DIRECTORS.

 

(a) Notwithstanding any other provision in this Operating

Agreement to the contrary but subject to any fiduciary duties a Director owes to

the Company and its Members

 

 

[*] Confidential Treatment Requested.

 

 

17.

 

<PAGE> 23

 

 

 

 

 

under Delaware law, (i) the Class A Directors shall have the exclusive right to

direct and control, on behalf of the Company, any claim by the Company against

NBC or any Affiliate of NBC, including, without limitation, exercising all

rights and remedies of the Company in the event any such party breaches the

Master Venture Agreement, the NBC Services Agreement or the Warrant Issuance

Agreement and (ii) the Class B Directors shall have the exclusive right to

direct and control, on behalf of the Company, any claim by the Company against

Quokka or any Affiliate of Quokka, including, without limitation, exercising all

rights and remedies of the Company in the event any such party breaches the

Master Venture Agreement, the Quokka Services Agreement, the Quokka Warrants or

the Warrant Issuance Agreement.

 

(b) Notwithstanding any other provision in this Operating

Agreement to the contrary but subject to the provisions of Section 5.4(b), the

Class B Directors shall have sole authority to direct the Company to distribute

the Quokka Warrants and any shares issued to the Company upon exercise of the

Quokka Warrants (the "Warrant Shares") to NBC in accordance with the terms of

this Operating Agreement and subject to the terms of the Quokka Warrants,

exercise the Quokka Warrants, vote the Warrant Shares, sell the Warrant Shares,

distribute any proceeds from the sale of any Warrant Shares, any dividends

(whether in cash or otherwise) or other distributions received by the Company in

respect of the Warrant Shares in accordance with the terms of this Operating

Agreement or exercise any other rights available to the Company in respect of

the Warrant Shares. The Class B Directors acknowledge and agree that the Quokka

Warrants and Warrant Shares may not be distributed in kind prior to the earlier

of (i) the initial public offering of equity securities of Quokka; (ii) three

(3) years from the initial issuance of the Quokka Warrants; and (iii) the

dissolution of the Company. Any transfer taxes or other fees and expenses (other

than applicable income taxes) arising from any distribution of the Quokka

Warrants or Warrant Shares shall be borne as set forth in the Quokka Warrants.

Additionally, notwithstanding the foregoing, in the event that the Class B

Members transfer any Class B Units pursuant to Section 12.1(a)(ii), the Class B

Directors shall not be entitled to distribute any of the Quokka Warrants or any

of the Warrant Shares (or any securities issued upon conversion thereof) to such

transferee without the consent of the Class A Members, which consent shall not

be unreasonably withheld, and in such event shall only be entitled to distribute

cash dividends or other distributions in respect of the Warrant Shares or any

proceeds from the sale of the Warrant Shares (or any securities issued upon

conversion thereof) to such transferee in accordance with the terms of this

Operating Agreement; provided, however, that this restriction shall not apply in

the event of a dissolution of the Company.

 

(c) Notwithstanding any other provision in this Operating

Agreement to the contrary, in the event the Company faces any claim involving

equitable remedies which may limit the Company's ability to exploit content

provided to it by NBC pursuant to the NBC Rights and Services Agreement and NBC

wishes to contest such potential limitation ("Equitable Claim Regarding

Content"), the Class B Directors may elect to direct and control such Equitable

Claim Regarding Content, provided, however, that the Company shall not enter

into any settlement or other agreement restricting the activities of the Company

without the approval of the Class A Directors if such settlement or other

agreement would have a greater negative impact on the Company than would have

been the case had NBC exercised its rights to withhold the content in question

pursuant to any of clauses (i) through (v) of Sections 3(b), 3(c) or 3(e) of the

NBC Services Agreement, as the case may be. In the event that the Class B

Directors elect to direct and control such Equitable Claim Regarding Content,

the Class B Members shall be required pro rata based on Class B Interests to

contribute additional capital to the Company to cover the

 

 

18.

<PAGE> 24

 

 

 

 

 

expenses and costs relating to such litigation, including without limitation

attorney's fees. No additional Units shall be issued in connection with such

additional capital contributions.

 

5.8 CERTAIN POWERS OF DIRECTORS. Without limiting the generality of

Section 5.1 or the obligation of the Board of Directors to operate the Company

in accordance with the Current Content Plan as set forth in Section 5.2, and

subject to any limitation set forth in this Operating Agreement (including,

without limitation, Sections 5.6 and 5.7), the Board of Directors shall have

power and authority on behalf of the Company:

 

(a) To acquire property from any Person as the Board of Directors

may determine in accordance with the terms of this Operating Agreement;

 

(b) To purchase liability and other insurance to protect the

Company's property and business of a type maintained by companies in a similar

business to that of the Company, it being understood that it shall be reasonable

to maintain insurance providing at least $[*] in coverage and that companies in

a similar business to that of the Company may maintain, without limitation,

director and officer, commercial general liability, umbrella, workers'

compensation, foreign workers compensation and liability, satellite

transmission, errors and omissions and DICE (documentary, industrial, commercial

and educational films);

 

(c) To hold and own any Company real and/or personal properties

in the name of the Company;

 

(d) To invest any Company funds temporarily in time deposits,

short-term governmental obligations, commercial paper or other similar low-risk

investments;

 

(e) Subject to the approval of Members holding a majority of the

Class A Interests and a majority of the Class B Interests, to effect a Sale of

the Company;

 

(f) To execute on behalf of the Company all instruments and

documents necessary, in the opinion of the Board of Directors, to the business

of the Company in accordance with the terms of this Operating Agreement;

 

(g) To open bank accounts from time to time in the name of the

Company;

 

(h) To employ accountants from nationally-recognized accounting

firms, legal counsel, or other experts to perform services for the Company and

to compensate them from Company funds;

 

(i) To enter into any and all other agreements on behalf of the

Company, with any other Person for any purpose, in such forms as the Board of

Directors may approve in accordance with the terms of this Operating Agreement;

 

(j) To establish and enforce limits of authority and internal

controls with respect to all personnel and functions;

 

(k) To develop or cause to be developed accounting procedures for

the maintenance of the Company's books of account; and

 

 

19.

 

[*] Confidential Treatment Requested

<PAGE> 25

 

 

 

 

 

 

 

(l) To do and perform all other acts as may be necessary or

appropriate to the conduct of the Company's business.

 

5.9 REPORTS TO MEMBERS. As soon as practicable after the end of any

quarter but in any event within thirty (30) days thereafter, the Board of

Directors shall provide to each of the Class A Members and Class B Members a

balance sheet, statement of income, statement of operations and statement of

cash flows (including the amount, if any, of the Quokka Quarterly Capital

Contribution made during such quarter) for such period and for the Fiscal Year

to date, prepared in accordance with U.S. generally accepted accounting

principles, consistently applied, with the exception that no notes need be

attached to such statements and year-end audit adjustments may not have been

made. As soon as practicable after the end of any Fiscal Year but in any event

within ninety (90) days thereafter, the Board of Directors shall provide to each

of the Class A Members and Class B Members (i) a balance sheet, statement of

income, statement of operations and statement of cash flows for such Fiscal

Year, prepared in accordance with U.S. generally accepted accounting principles,

consistently applied, and accompanied by a report and opinion thereon by the

Company's independent public accountants and (ii) a statement of the Capital

Account of each of the Class A Members and Class B Members prepared in

accordance with the terms of this Operating Agreement. Additionally, the Board

of Directors shall provide each Member with such other information as shall be

required to support such Member's public reporting obligations as well as such

other information as such Member shall reasonably request from the Board of

Directors.

 

5.10 INDEPENDENT PUBLIC ACCOUNTANTS. Pricewaterhouse Coopers or such

other nationally-recognized accounting firm selected by the board of directors

of Quokka to serve as Quokka's independent public accountants shall be the

Company's independent public accountants. The Company's independent public

accountant shall complete its audit of the Company in a timely fashion each

Fiscal Year so as to provide each Member with reasonable opportunity to include

the results therefrom, as required, in documents required to be filed by such

Member under the Securities Exchange Act of 1934 as amended.

 

5.11 LITIGATION. In the event that the Company and any Member are named

in third-party litigation and such Member is not entitled to complete

indemnification in connection therewith, the Board of Directors shall cooperate

with such Member in directing and controlling such litigation on behalf of the

Company in order to coordinate a common defense as appropriate.

 

ARTICLE 6

 

OFFICERS; COMMITTEES

 

6.1 APPOINTMENT OF OFFICERS. The Board of Directors may appoint officers

of the Company which may include, but shall not be limited to: (a) General

Manager; (b) one or more positions similar to the position of vice president of

a Delaware corporation as set forth below; (c) secretary; and (d) treasurer or

chief financial officer; provided, however, that the appointment of the

Production Coordinating Producer shall be subject to the approval of a

Supermajority of the Directors. The Board of Directors may delegate their

day-to-day management responsibilities to any such officers, and such officers

shall have the authority to contract for, negotiate on behalf of and otherwise

represent the interests of the Company as authorized by the Board of Directors

pursuant to this Operating Agreement in any job description created by

 

 

20.

<PAGE> 26

 

 

 

 

 

the Board of Directors. As of the effective date of this Operating Agreement,

Paul Gudelis shall be designated Technical Coordinating Producer and Tom Feuer

shall be designated Production Coordinating Producer, Mike Novelly shall be

designated Chief Financial Officer and Mike Novelly shall be designated

Secretary. At the time of his appointment and at all times during his service as

an officer of the Company, each officer must be an officer, director or employee

of a Member or the Company. In the event an officer shall cease to be an

officer, director or employee of a Member or the Company, such officer shall be

deemed to have resigned as an officer effective upon such cessation date.

 

6.2 TENURE AND DUTIES OF OFFICERS. All officers shall hold office at the

pleasure of the Board of Directors and until their successors shall have been

duly elected and qualified, unless sooner removed. Any officer may be removed at

any time by the Board of Directors, with or without Cause. Additionally, any

officer may be removed at any time by any two Directors for Cause. If the office

of any officer becomes vacant for any reason, the vacancy may be filled by the

Board of Directors; provided, however, that the appointment of the Production

Coordinating Producer shall be subject to the approval of a Supermajority of the

Directors.

 

(a) DUTIES OF THE GENERAL MANAGER. The General Manager (the

"General Manager") shall preside at all meetings of the Members, unless the

Board of Directors shall have appointed another person to so preside and such

person is present. The General Manager shall be the Chief Executive Officer of

the Company and shall, subject to the control of the Board of Directors, have

general supervision, direction and control of the business and officers of the

Company. The General Manager shall perform other duties commonly incident to a

president of a Delaware corporation and shall also perform such other duties and

have such other powers as the Board of Directors shall designate from time to

time.

 

(b) DUTIES OF VICE PRESIDENTIAL LEVEL OFFICERS. The Technical

Coordinating Producer, Production Coordinating Producer and other officers

holding positions designated by the Board of Directors as being similar to the

position of vice president of a Delaware corporation (together, the "Senior

Officers"), in the order of their seniority, may assume and perform the duties

of the General Manager in the absence or disability of the General Manager or

whenever the office of General Manager is vacant. The Senior Officers shall

perform other duties commonly incident to a vice president of a Delaware

corporation and shall also perform such other duties and have such other powers

as the Board of Directors shall designate from time to time.

 

(c) DUTIES OF SECRETARY. The secretary (the "Secretary") shall

attend all meetings of the Members, and shall record all acts and proceedings

thereof in the minute book of the Company. The Secretary shall give notice in

conformity with this Operating Agreement of all meetings of the Members

requiring notice. The Secretary shall perform all other duties given him or her

in this Operating Agreement and other duties commonly incident to a secretary of

a Delaware corporation and shall also perform such other duties and have such

other powers as the Board of Directors shall designate from time to time. The

General Manager may direct any Assistant Secretary to assume and perform the

duties of the Secretary in the absence or disability of the Secretary, and each

Assistant Secretary shall perform other duties commonly incident to the office

of assistant secretary in a Delaware corporation and shall also perform such

other duties and have such other powers as the Board of Directors or the General

Manager shall designate from time to time.

 

 

21.

<PAGE> 27

 

 

 

 

 

 

 

(d) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The chief

financial officer (the "Chief Financial Officer") or treasurer (the "Treasurer")

shall keep or cause to be kept the books of account of the Company in a thorough

and proper manner, and shall render statements of the financial affairs of the

Company in such form and as often as required by this Operating Agreement, the

Board of Directors or the General Manager. The Chief Financial Officer or

Treasurer, subject to the order of the Board of Directors, shall have the

custody of all funds and securities of the corporation. The Chief Financial

Officer or Treasurer shall perform other duties commonly incident to the office

of Chief Financial Officer or Treasurer in a Delaware corporation and shall also

perform such other duties and have such other powers as the Board of Directors

or the General Manager shall designate from time to time. The General Manager

may direct any Assistant Treasurer to assume and perform the duties of the Chief

Financial Officer or Treasurer in the absence or disability of the Chief

Financial Officer or Treasurer, and each Assistant Treasurer shall perform other

duties commonly incident to the office the Chief Financial Officer or Treasurer

of a Delaware corporation and shall also perform such other duties and have such

other powers as the Board of Directors or the General Manager shall designate

from time to time.

 

ARTICLE 7

 

RIGHTS AND OBLIGATIONS OF MEMBERS

 

7.1 LIMITATION OF LIABILITY. Each Member's liability shall be limited as

set forth in the Delaware Act and other applicable law. Except as otherwise

provided by the Delaware Act, the debts, obligations and liabilities of the

Company, whether arising in contract, tort or otherwise, shall be the debts,

obligations and liabilities solely of the Company, and the Members of the

Company shall not be obligated personally for any of such debts, obligations or

liabilities solely by reason of being a Member of the Company.

 

7.2 NATURE OF RIGHTS AND OBLIGATIONS. Except as otherwise expressly

provided herein, nothing contained in this Operating Agreement shall be deemed

to constitute a Member an agent or legal representative of the other Members. A

Member shall not have any authority to act for, or to assume any obligation or

responsibility on behalf of, any other Member or the Company.

 

7.3 MEMBER ACCESS TO RECORDS. Upon advance notice, each Member shall

have the right, during regular business hours, to inspect and copy the Company

documents set forth in Section 11.7 at the Member's expense.

 

7.4 CERTAIN ACTIONS REQUIRING SPECIAL APPROVAL. Notwithstanding any

other provision in this Operating Agreement to the contrary, the following shall

require the approval of Members holding a majority of the Class A Interests and

a majority of the Class B Interests:

 

(a) the merger (or any conversion of the Company from a limited

liability company to another type of entity), consolidation, liquidation or

dissolution of the Company;

 

(b) any Sale of the Company; and

 

(c) any amendment of this Operating Agreement or the Certificate

of Formation.

 

 

22.

<PAGE> 28

 

 

 

 

 

 

 

7.5 OUTSIDE ACTIVITIES. Subject to the terms of the Master Venture

Agreement and Services Agreements, each Member and each Affiliate of each Member

shall be entitled to and may have business interests and engage in business

activities in addition to those relating to the Company, and may engage in the

ownership, operation and management of businesses and activities, for its own

account and for the account of others, and may own interests in the same

properties, as those in which the Company or the other Members own an interest,

without having or incurring obligation to offer any interest in such properties,

businesses or activities to the Company or any other Member, and no other

provision of this Operating Agreement shall be deemed to prohibit any such

Person from conducting such other businesses or activities. Subject to the terms

of the Master Venture Agreement and the Services Agreements, no provision of

this Operating Agreement shall be construed to preclude any Member or any of

their respective Affiliates from engaging in or possessing an interest in any

other business ventures of any nature or description, independently or with

others, whether presently existing or hereafter created, and neither the Company

nor any Member shall have any rights in or to such independent ventures or the

income or profits derived therefrom.

 

ARTICLE 8

 

CERTAIN MATTERS CONCERNING

MEMBERS, DIRECTORS AND EXECUTIVE OFFICERS

 

8.1 LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION.

 

(a) No Director or Officer of the Company shall be liable, in

damages or otherwise, to the Company or any Member for any act or omission

performed or omitted to be performed by it in good faith pursuant to the

authority granted to such Director or officer of the Company by this Operating

Agreement or by the Delaware Act.

 

(b) To the fullest extent permitted by the laws of Delaware, the

Company shall indemnify and hold harmless each Member, Director and its

respective Affiliates, officers, directors, shareholders, members or partners

and each Officer of the Company (each, an "Indemnitee"), from and against any

and all losses, claims, demands, costs, damages, liabilities (joint or several),

expenses of any nature (including reasonable attorneys' fees and disbursements),

judgments, fines, settlements and other amounts ("Damages") arising from any and

all claims, demands, actions, suits or proceedings, whether civil, criminal,

administrative or investigative, in which an Indemnitee may be involved, or

threatened to be involved, as a party or otherwise, arising out of or incidental

to the business of the Company, regardless of whether an Indemnitee continues to

be a Member, Director or an Affiliate, officer, director, shareholder, member or

partner of such Member or Director or an officer of the Company at the time any

such liability or expense is paid or incurred, except (i) for any Damages based

upon, arising from or in connection with any act or omission of an Indemnitee

committed without authority granted pursuant to this Operating Agreement or in

bad faith or otherwise constituting willful misconduct, (ii) Damages arising

from any obligation of such Indemnitee to indemnify any Person pursuant to the

Master Venture Agreement or Services Agreement or (iii) to the extent that all

Damages with respect to which the Company has provided indemnification hereunder

exceed [*], unless specifically approved by a Supermajority of the Directors.

 

(c) Expenses (including reasonable attorneys' fees and

disbursements) incurred in defending any claim, demand, action, suit or

proceeding, whether civil, criminal,

 

 

23.

 

[*] Confidential Treatment Requested.

<PAGE> 29

 

 

 

 

 

administrative or investigative, subject to Section 8.1(b) hereof, may be paid

(or caused to be paid) by the Company in advance of the final disposition of

such claim, demand, action, suit or proceeding upon receipt of an undertaking by

or on behalf of the Indemnitee to repay such amount if it shall ultimately be

determined, by a court of competent jurisdiction from which no further appeal

may be taken or the time for any appeal has lapsed (or otherwise, as the case

may be), that the Indemnitee is not entitled to be indemnified by the Company as

authorized hereunder or is not entitled to such expense reimbursement.

 

(d) The indemnification provided by Section 8.1(b) hereof shall

be in addition to any other rights to which an Indemnitee may be entitled under

any agreement properly approved by or vote properly taken by the Members or

Board of Directors (after taking into effect any related party nature of such

agreement or vote), as a matter of law or otherwise, both (i) as to action in

the Indemnitee's capacity as a Member, Director or as an Affiliate, officer,

director, shareholder, member or partner of a Member or Director or as an

Officer of the Company, and (ii) as to action in another capacity, and shall

continue as to an Indemnitee who has ceased to serve in such capacity and shall

inure to the benefit of the heirs, successors, assigns, administrators and

personal representatives of the Indemnitee.

 

(e) Any indemnification hereunder shall be satisfied only out of

the assets of the Company, and the Members shall not be subject to personal

liability by reason of these indemnification provisions.

 

(f) In order to facilitate meeting its obligations under this

Section 8.1, the Company may purchase and maintain a customary director and

officer insurance policy. The Company may purchase and maintain such other

insurance policies of a type maintained by companies in a similar business to

that of the Company, it being understood that it shall be reasonable to maintain

insurance providing at least $[*] in coverage and that companies in a similar

business to that of the Company may maintain, without limitation, director and

officer, commercial general liability, umbrella, workers' compensation, foreign

workers compensation and liability, satellite transmission, errors and omissions

and DICE (documentary, industrial, commercial and educational films).

 

(g) An Indemnitee shall not be denied indemnification in whole or

in part under this Section 8.1 because the Indemnitee had an interest in the

transaction with respect to which the indemnification applies if the transaction

was otherwise permitted by the terms of this Operating Agreement.

 

(h) The provisions of this Section 8.1 are for the benefit of

each Indemnitee and its heirs, successors, assigns, administrators and personal

representatives, and shall not be deemed to create any rights for the benefit of

any other Persons.

 

8.2 OTHER MATTERS CONCERNING THE DIRECTORS AND OFFICERS OF THE COMPANY.

 

(a) Each Director and officer of the Company may rely on, and

shall be protected in acting or refraining from acting upon, any resolution,

certificate, statement, instrument, opinion, report, notice, request, consent,

order, bond, debenture or other paper or document reasonably believed by it to

be genuine and to have been signed or presented by the proper party or parties.

 

 

[*] Confidential Treatment Requested

 

24.

<PAGE> 30

 

 

 

 

 

 

 

(b) For purposes of this Operating Agreement, each Director and

officer of the Company may consult with legal counsel, accountants, appraisers,

management consultants, investment bankers, other consultants and advisers

selected by it and any written advice or written opinion of any such Person as

to matters which such Director and Officer of the Company reasonably believes to

be within such Person's professional or expert competence, and any act or

omission, if done or omitted to be done in good faith reliance upon any such

advice or opinion, will be conclusively presumed not to constitute fraud, gross

negligence or willful or wanton misconduct.

 

ARTICLE 9

 

MEETINGS OF MEMBERS

 

9.1 ANNUAL AND SPECIAL MEETINGS. Meetings of the Members shall be held

at such date and time as the Board of Directors may fix from time to time.

Additionally, unless otherwise prescribed by statute, a special meeting may be

called by any Member or Members holding at least a majority of the Class A

Interests or a majority of the Class B Interests. No annual or regular meetings

of Members are required.

 

9.2 PLACE OF MEETINGS. The Board of Directors may designate any place,

either within or outside the State of Delaware, as the place of meeting for any

meeting of the Members; provided however that if a special meeting is called by

the holders of a majority of the Class A Interests, the meeting shall be held in

New York, New York and if a special meeting is called by the holders of the

Class B Interests, the meeting shall be held in San Francisco, California. If no

designation is made by the Board of Directors or pre-determined pursuant to this

Section 9.2, the place of meeting shall be the principal executive office of the

Company.

 

9.3 NOTICE OF MEETINGS. Except as provided in Section 9.6, written

notice stating the place, day and hour of the meeting and the purpose or

purposes for which the meeting is called shall be delivered not less than thirty

(30) nor more than sixty (60) days before the date of the meeting, either

personally or by mail, by or at the direction of the Board of Directors or

person calling the meeting, to each Member entitled to vote at such meeting. If

mailed, such notice shall be deemed to be delivered as provided in Section 16.1.

 

9.4 MEETING OF ALL MEMBERS. If all of the Members shall meet at any time

and place, either within or outside of the State of Delaware, and consent to the

holding of a meeting at such time and place, such meeting shall be valid without

call or notice, and at such meeting lawful action may be taken.

 

9.5 RECORD DATE. For the purpose of determining Members entitled to

notice of or to vote at any meeting of Members or any adjournment thereof, or

Members entitled to receive payment of any distribution, or in order to make a

determination of Members for any other purpose, the date on which notice of the

meeting is mailed or the date on which the resolution declaring such

distribution is adopted, as the case may be, shall be the record date for such

determination of Members. When a determination of Members entitled to vote at

any meeting of Members has been made as provided in this Section 9.5, such

determination shall apply to any adjournment thereof.

 

 

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9.6 QUORUM. Members holding a majority of the Class A Interests and a

majority of the Class B Interests, present in person or represented by proxy,

shall constitute a quorum at any meeting of Members. Notwithstanding the

foregoing, if the action to be taken by the Members is to be taken only by one

class of Members (such as the election of a Class A Director), Members holding a

majority of the Interests represented by such class shall constitute a quorum.

In the absence of a quorum at any such meeting, Members holding a majority of

the Interests so represented may adjourn the meeting from time to time for a

period not to exceed sixty (60) days without further notice. However, if the

adjournment is for more than sixty (60) days, or if after the adjournment a new

record date is fixed for the adjourned meeting, a notice of the adjourned

meeting shall be given to each Member of record entitled to vote at the meeting.

At such adjourned meeting at which a quorum shall be present or represented, any

business may be transacted that might have been transacted at the meeting as

originally noticed. The Members present at a duly organized meeting may continue

to transact business until adjournment, notwithstanding the withdrawal during

such meeting of Members holding Interests whose absence would cause less than a

quorum.

 

9.7 MANNER OF ACTING. If a quorum is present, the affirmative vote of

Members entitled to vote holding a majority of the Class A Interests and a

majority of the Class B Interests shall be the act of the Members, unless the

vote of a greater or lesser proportion or number is otherwise required by the

Delaware Act, by the Certificate of Formation or by this Operating Agreement.

 

9.8 PROXIES. At all meetings of Members, a Member may vote in person or

by proxy executed in writing by the Member or by a duly authorized

attorney-in-fact. Such proxy shall be filed with the Board of Directors of the

Company before or at the time of the meeting. No proxy shall be valid after

eleven (11) months from the date of its execution, unless otherwise provided in

the proxy.

 

9.9 ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted to

be taken at a meeting of Members may be taken without a meeting if the action is

evidenced by one (1) or more written consents describing the action taken,

signed and delivered to the Board of Directors within sixty (60) days of the

record date for that action, by Members having not less than the minimum number

of votes that would be necessary to authorize or take that action at a meeting

at which all Members entitled to vote on that action were present and voted. All

such consents shall be delivered to the Board of Directors of the Company for

inclusion in the minutes or for filing with the Company records. Action taken

under this Section 9.9 is effective when the number of consents required to

authorize the proposed action shall have been received by the Board of

Directors, unless the consent specifies a different effective date. Any Member

giving a written consent may revoke the consent by a writing received by the

Board of Directors before written consents representing the number of votes

required to authorize the proposed action have been received by the Board of

Directors. The record date for determining Members entitled to take action

without a meeting shall be the date the first Member signs a written consent.

 

9.10 WAIVER OF NOTICE. When any notice is required to be given to any

Member, a waiver thereof in writing signed by the person entitled to such

notice, whether before, at or after the time stated therein, shall be equivalent

to the giving of such notice.

 

ARTICLE 10

 

 

 

26.

<PAGE> 32

 

 

 

 

 

 

CONTRIBUTIONS TO THE COMPANY,

CAPITAL UNITS AND CAPITAL ACCOUNTS

 

10.1 CAPITAL CONTRIBUTIONS. Concurrently with the execution and delivery

of this Operating Agreement, Quokka made an Initial Capital Contribution to the

Company in the amount as shown on Schedule A hereto, in exchange for the number

of Class A Units held by Quokka as shown on Schedule A. As reflected on Schedule

A, NBC made no Initial Capital Contribution in exchange for the number of Class

B Units held by NBC as shown on Schedule A.

 

10.2 UNITS. Each Member's interest in the Company shall be represented

by Units of membership interest, denoted "Class A" or "Class B" as set forth on

Schedule A. Concurrently with the execution and delivery of this Operating

Agreement, the Initial Members received the number and type of Units set forth

on Schedule A.

 

10.3 CAPITAL ACCOUNTS.

 

(a) A separate Capital Account will be maintained for each

Member.

 

(1) To each Member's Capital Account there shall be

credited (a) such Member's Capital Contributions, (b) such Member's distributive

share of Net Profits and any items in the nature of income or gain which are

specially allocated pursuant to Section 11.2 hereof, and (c) the amount of any

Company liabilities assumed by such Member or which are secured by any Property

distributed to such Member.

 

(2) To each Member's Capital Account there shall be

debited (a) the amount of money and the Adjusted Asset Value of any Company

asset distributed to such Member pursuant to any provision of this Operating

Agreement, (b) such Member's distributive share of Net Losses and any items in

the nature of expenses or losses which are specially allocated pursuant to

Section 11.2 hereof, and (c) the amount of any liabilities of such Member

assumed by the Company or which are secured by any property contributed by such

Member to the Company.

 

(b) In the event of a permitted assignment, sale or exchange of

all or part of a Member's interest in the Company, the Capital Account of the

transferor shall become the Capital Account of the transferee to the extent it

relates to the transferred interest.

 

(c) The manner in which Capital Accounts are to be maintained

pursuant to this Section 10.3 is intended, and shall be construed and applied so

as, to comply with the requirements of Code Section 704(b) and the Treasury

Regulations promulgated thereunder.

 

10.4 WITHDRAWAL OR REDUCTION OF MEMBERS, CONTRIBUTIONS TO CAPITAL.

 

(a) A Member shall not receive out of the Company's property any

part of its contributions to capital until all liabilities of the Company,

except liabilities to Members on account of their contributions to capital, have

been paid or there remains property of the Company sufficient to pay them.

 

 

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(b) A Member shall not be entitled to demand or receive from the

Company the liquidation of his interest in the Company until the Company is

dissolved in accordance with the provisions hereof and other applicable

provisions of the Delaware Act.

 

10.5 UNIT CERTIFICATES. The Company shall issue certificates evidencing

the Units issued by the Company. Such certificates shall indicate whether the

Units represented thereby are Class A Units or Class B Units and shall (in

addition to any legend required under applicable state securities laws) bear the

following legends:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR

OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL

REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF

COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS

NOT REQUIRED.

 

THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS

CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE

HOLDER HEREOF OR ITS PREDECESSOR IN INTEREST. COPIES OF SUCH AGREEMENT MAY BE

OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO

THE SECRETARY OF THE COMPANY.

 

ARTICLE 11

 

ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS

 

11.1 ALLOCATION OF PROFITS AND LOSSES FROM OPERATIONS.

 

(a) ALLOCATION OF NET PROFITS. The Net Profits of the Company for

each Accounting Period shall be allocated among the Members as follows:

 

(i) First, to all Class A Members in proportion to their

respective Class A Interests until the Capital Accounts of the Class A Members

are equal to the Excess Capital Contributions of the Class A Members less all

distributions to the Class A Members;

 

(ii) Second, to all Members in proportion to their

respective Interests.

 

(b) ALLOCATION OF NET LOSSES. The Net Losses of the Company for

each Accounting Period shall be allocated among the Members as follows:

 

(i) First, to all Members to the extent of and in

proportion to the Net Profits previously allocated to them pursuant to Section

11.1(a)(ii);

 

(ii) Second, to all Class A Members in proportion to

their respective Class A Interests until there have been allocated Net Losses

under this Section 11.1(b)(ii) in an amount equal to the Excess Capital

Contribution of the Class A Members;

 

(iii) Third, to all Class A Members in proportion to

their respective Class A Interests until there have been allocated Net Losses

under this Section 11.1(b)(iii) in an

 

 

28.

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amount equal to the Capital Contribution of the Class A Members less the Excess

Capital Contribution of the Class A Members;

 

(iv) Fourth, to all Members in proportion to their

respective Interests.

 

11.2 SPECIAL ALLOCATIONS. Notwithstanding Section 11.1,

 

(a) INTEREST INCOME. All Interest Income earned on Capital

Contributions made by the Class A Members (until such Capital Contributions have

either been distributed or utilized to fund the Company's operations) shall be

allocated solely to the Class A Members pro rata in proportion to their

respective Class A Interests.

 

(b) QUOKKA WARRANTS. The parties agree that, for federal and

state tax purposes, NBC shall be treated as having received ownership of the

Quokka Warrants on the date of grant of the Quokka Warrants to the Company.

Therefore, any profits or losses (including the initial value of the Quokka

Warrants upon receipt by the Company) realized on the receipt by the Company of

or a taxable disposition (including exercise) of, an adjustment of the Adjusted

Asset Values of, or a distribution in kind of the Quokka Warrants or any

securities issued upon exercise thereof (including, without limitation, the

Warrant Shares) shall be allocated solely to NBC. Any transfer taxes or other

costs or expenses (other than applicable income taxes) arising from any

distribution to NBC of the Quokka Warrants shall be borne as set forth in the

Quokka Warrants.

 

(c) EQUITABLE CLAIM REGARDING CONTENT. Any costs or expenses

connected to any Equitable Claim Regarding Content subject to the direction and

control of the Class B Directors in accordance with Section 5.7(c) shall be

allocated solely to the Class Members in proportion to their respective Class B

Interests. Any profits received by the Company from a final judgment in

connection with, or final settlement of, an Equitable Claim Regarding Content

shall first be allocated to the Class B Members in proportion to their

respective Class B Interests until there have been allocated profits under this

Section 11.2(c) in the current Accounting Period and all prior Accounting

Periods in an amount equal to the costs or expenses previously allocated to the

Class B Members under this Section 11.2.

 

(d) SUBSTANTIAL ECONOMIC EFFECT. The Members agree that they

shall take such other actions and make such other allocations as are necessary

to ensure that the allocations described in this Article 11 have substantial

economic effect within the meaning of Regulations Section 1.704-1(b)(2).

 

(e) QUALIFIED INCOME OFFSET. In the event any Member unexpectedly

receives any adjustments, allocations or distributions described in Section

1.704-l(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, items of

Company income and gain shall be specially allocated to each such Member in an

amount and manner sufficient to eliminate, to the extent required by the

Treasury Regulations, the deficit balance of the Capital Account of such Member

as quickly as possible, provided that an allocation pursuant to this Section

11.2(c) shall only be made if and to the extent such Member would have a deficit

balance in its Capital Account after all other allocations provided for in

Section 11.1 and Section 11.2 have been made as if this Section 11.2(c) were not

in this Operating Agreement.

 

(f) SECTION 754 ELECTION. At the request of any Member (or

Members) holding not less than twenty-five percent (25%) of the Interests, the

Company shall elect,

 

 

29.

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pursuant to Section 754 of the Code, to adjust the basis of the Company assets

as permitted and provided in Sections 734 and 743 of the Code, in which case

Capital Accounts shall be maintained and allocations shall be made in accordance

with Regulations Section 1.704-1(b)(2)(iv)(m).

 

(g) TAX ALLOCATIONS. Except as otherwise permitted in this

Agreement, the Company's ordinary income and losses, and capital gains income

and losses, as determined for federal income tax purposes (and each item of

income, gain, loss or deduction entering into the computation thereof) shall be

allocated to the Members in the same proportion as the corresponding items are

allocated for Capital Account maintenance purposes. Notwithstanding the

foregoing, federal income tax items relating to assets that have an Adjusted

Asset Value that is not equal to their tax basis shall be allocated in

accordance with Section 704(c) of the Code, and the Company shall adopt the

traditional method under Section 704(c) for purposes of such allocation.

 

11.3 DISTRIBUTIONS.

 

(a) MANDATORY DISTRIBUTIONS.

 

(i) Subject to applicable law and any limitations

contained elsewhere in this Operating Agreement and provided that the Company is

being taxed as a partnership, the Board of Directors shall distribute cash to

the Members in an amount equal to the product of (i) the Tax Percentage and (ii)

the Company's taxable income for such Fiscal Year determined in accordance with

Section 703(a) of the Code as reflected on the Schedule K-1's in respect of each

Unit. For purposes hereof, "Tax Percentage" shall mean initially forty percent

(40%) and shall be adjusted from time to time by the Board of Directors in

response to changes in the tax rates applicable to corporations under the Code

and under the state income tax laws of the State of California and the State of

New York and in response to any other factors which cause the distributions

under this Section 11.3(a) to be less than a Member's tax liability in respect

of each Unit.

 

(ii) In the event of a Reduced Activity Period, the

Board of Directors shall establish reasonable reserves for purposes of

satisfaction of all liabilities and obligations of the Company (other than those

to Members on account of their Capital Contributions) and shall distribute the

remaining cash of the Company (x) first, to the Class A Members pro rata in

proportion to their Class A Interests on the record date of such distribution

until the Class A Members shall have received total distributions pursuant to

this Article 11 in an amount equal to the Excess Capital Contribution of the

Class A Members and (y) second, to the Members pro rata in proportion to their

respective Interests on the record date of such distribution.

 

(b) DISTRIBUTIONS OF FUNDS FROM OPERATIONS. Subject to applicable

law and any limitations contained elsewhere in this Operating Agreement

(including, without limitation, Section 5.6), the Board of Directors may elect

from time to time to distribute Funds From Operations (x) first, to the Class A

Members pro rata in proportion to their Class A Interests on the record date of

such distribution until the Class A Members shall have received total

distributions pursuant to this Article 11 in an amount equal to the Excess

Capital Contribution of the Class A Members and (y) second, to the Members pro

rata in proportion to their respective Interests on the record date of such

distribution.

 

 

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(c) DISTRIBUTIONS RELATING TO THE QUOKKA WARRANTS. The Class B

Directors may elect from time to time to distribute the Quokka Warrants, the

Warrant Shares, any other securities or other rights with respect to the

Warrants or the Warrant Shares or any cash obtained by any sale of the Warrant

Shares to NBC, subject to the terms of the Quokka Warrants. The Class B

Directors acknowledge and agree that the Quokka Warrants and Warrant Shares may

not be distributed in kind prior to the earlier of (i) the initial public

offering of equity securities of Quokka; (ii) three (3) years from the initial

issuance of the Quokka Warrants; and (iii) the dissolution of the Company. The

Class B Directors further acknowledge the additional restrictions set forth in

Section 5.4(b) in the event of any transfer of the Class B Units.

 

(d) DISTRIBUTIONS OF FUNDS FROM A SALE OF THE COMPANY. Subject to

applicable law and any limitations contained elsewhere in this Operating

Agreement, the Board of Directors may elect from time to time to distribute

Funds From a Sale of the Company to the Members. Any distribution of Funds From

a Sale of the Company made under this Section 11.3(d) shall be made (x) first,

to the Class A Members pro rata in proportion to their Class A Interests on the

record date of such distribution until the Class A Members shall have received

total distributions pursuant to this Article 11 in an amount equal to the Excess

Capital Contribution of the Class A Members and (y) second, to the Members pro

rata in proportion to their respective Interests on the record date of such

distribution.

 

(e) DISTRIBUTIONS UPON DISSOLUTION OF THE COMPANY. Upon

dissolution of the Company, after satisfaction of the liabilities of the Company

in accordance with Section 14.3(a), the remaining assets of the Company shall be

distributed to the Members pro rata in proportion to their respective Capital

Account balances; provided, however, that any securities or other property

issued upon exercise of the Quokka Warrants shall be distributed to NBC and that

such distribution shall be reflected in the Capital Account balances of NBC

prior to making or determining the amount of any other distribution pursuant to

this Section 11.3(e).

 

(f) OTHER DISTRIBUTIONS. All other distributions of cash or other

property shall be made (x) first, to the Class A Members in proportion to their

Class A Interests on the record date of such distribution until the Class A

Members shall have received total distributions pursuant to this Article 11 in

an amount equal to the Excess Capital Contribution of the Class A Members and

(y) second, to the Members in proportion to their respective Interests on the

record date of such distribution.

 

(g) TAX WITHHOLDING. The Company shall comply with withholding

requirements under federal, state and local law and shall remit amounts withheld

to, and file required forms with, the applicable jurisdictions. To the extent

the Company is required to withhold and pay over any amounts to any authority

with respect to distributions or allocations to any Member, the amount withheld

shall be treated as a distribution in the amount of the withholding to that

Member. If the amount of withholding tax paid by the Company was not withheld

from actual distributions, the Company may, at its option, (i) require the

Member to promptly reimburse the Company for such withholding or (ii) reduce any

subsequent distributions by the amount of such withholding. Each Member agrees

to furnish the Company with any representations and forms as shall reasonably be

requested by the Company to assist it in minimizing or eliminating and in

determining the extent of, and in fulfilling, its withholding obligations.

 

11.4 LIMITATION UPON DISTRIBUTIONS.

 

 

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(a) No distribution shall be declared and paid to a Member in

violation of the Delaware Act.

 

(b) A Member who receives a distribution in violation of the

Delaware Act, and who knew at the time of the distribution that the distribution

violated the Delaware Act, shall be liable to the Company for the amount of the

distribution. A Member who receives a distribution in violation of the Delaware

Act, and who did not know at the time of the distribution that such distribution

violated the Delaware Act and shall have made a good faith effort to return as

much as possible of the improper distribution shall not be liable for the amount

of the distribution.

 

(c) A Member who receives a distribution from the Company shall

have no liability under the Delaware Act or other applicable law for the amount

of the distribution after the expiration of three (3) years from the date of the

distribution unless an action to recover the distribution from such Member is

commenced prior to the expiration of the said three (3) year period and an

adjudication of liability against such Member is made in the said action.

 

11.5 ACCOUNTING PRINCIPLES. The profits and losses of the Company shall

be determined in accordance with United States generally accepted accounting

principles applied on a consistent basis under the accrual method of accounting.

 

11.6 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall be

entitled to interest on its Capital Contribution or to return of its Capital

Contribution. In addition, no Member shall have the right to withdraw any

portion of such member's Capital Account. No Member shall be personally liable

to any other Member for the return of any Capital Contributions (or any

additions thereto), it being agreed that any distribution as may be made from

time to time shall be made solely from the assets of the Company and only in

accordance with the terms of this Operating Agreement.

 

11.7 RECORDS AND REPORTS. At the expense of the Company, the Directors

shall maintain records and accounts of all operations and expenditures of the

Company for a period of five (5) years from the end of the Fiscal Year during

which the last entry was made on such record, the first two (2) years in the

principal office of the Company. At a minimum the Company shall keep the

following records:

 

(a) A current list of the full name and last known business

address of each Director and each Member;

 

(b) A copy of the Certificate of Formation and all amendments

thereto, together with executed copies of any written powers of attorney

pursuant to which the Operating Agreement and any certificate and all amendments

thereto have been executed;

 

(c) Copies of the Company's federal, foreign, state and local

income tax returns and reports, if any, for all years of the Company's

existence, except for those years for which all applicable statures of

limitation, as they may apply to any Member, may have run;

 

(d) Copies of the Operating Agreement and all amendments thereto;

 

 

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(e) True and full information regarding the status of the

business and financial condition of the Company, including financial statements

of the Company for the five (5) most recent years;

 

(f) Information regarding expenses incurred by a Member and

reimbursed by the Company; and

 

(g) True and full information regarding the amount of cash and a

description and statement of the agreed value of any other property or services

contributed by each Member and which each Member has agreed to contribute in the

future, and the date on which each became a Member.

 

11.8 RETURNS AND OTHER ELECTIONS. The Company shall be treated as a

partnership for federal income tax purposes and, to the extent possible, state

and local income tax purposes. The Board of Directors shall cause the

preparation and timely filing of all tax returns required to be filed by the

Company pursuant to the Code and all other tax returns deemed necessary and

required in each jurisdiction in which the Company does business. Copies of such

returns, or pertinent information therefrom, shall be furnished to the Members

within a reasonable time after the end of the Company's Fiscal Year. All

elections permitted to be made by the Company under federal or state laws shall

be made by the Board of Directors in its discretion.

 

11.9 TAX MATTERS PARTNER. Quokka is hereby designated the "tax matters

partner" of Company for purposes of Chapter 63 of the Code and the Treasury

Regulations thereunder. During any Company income tax audit or other income tax

controversy with any governmental agency, the tax matters partner shall keep the

Members informed of all material facts and developments on a timely basis, shall

provide each Member with a copy of each of the Company's tax filings at least

thirty (30) days prior to the filing thereof and shall consult with the Members

upon the request of any Member. The tax matters partner shall not be authorized

to enter into any settlement, agreement or arrangement which binds the Members

or the Company or take any other action with respect to taxes which could

adversely impact any of the Members without the advance consent of such Members

which consent may not be unreasonably withheld. The tax matters partner may be

changed by the Board of Directors.

 

ARTICLE 12

 

TRANSFERABILITY

 

12.1 RESTRICTIONS ON TRANSFERABILITY.

 

(a) No Member shall sell, assign, pledge, mortgage, or otherwise

encumber, dispose of or transfer its interest in the Company without the prior

approval of a Supermajority of the Directors.

 

(i) Notwithstanding the foregoing, a Member shall be

entitled to effect a Permitted Pledge, provided that any pledgee of an Interest

shall, in the event of foreclosure, hold such Interest subject to the

restrictions of this Operating Agreement, including the provisions of this

Article 12.

 

(ii) Furthermore, notwithstanding the foregoing, NBC

shall be entitled to transfer its Interests in the Company to any Affiliate

which assumes NBC's obligations under

 

33.

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the Master Venture Agreement and NBC Rights and Services Agreement and which

assumes NBC's obligations, and is the permitted transferee of NBC's rights with

respect to the IOC (as such term is defined in the Master Venture Agreement).

Furthermore, notwithstanding the foregoing, NBC shall be entitled to transfer up

to [*] of the Class B Interests originally issued to NBC to [*], or any

combination thereof. Furthermore, notwithstanding the foregoing, NBC shall be

entitled to transfer to [*] up to [*] of NBC's economic interest in the Class B

Interests excluding the Quokka Warrants (the effect of any transfer of an

economic interest being that the transferee shall be only an assignee of NBC's

rights to allocations and distributions with respect to the Class B Interests

subject to such transfer of economic interest but shall not become a Member and

shall have no voting rights or other rights of a Member, which non-economic

rights shall be retained by NBC). Notwithstanding any provision in this

Operating Agreement to the contrary, in the event of any transfer of Class B

Interests or any transfer of economic interest with respect to Class B

Interests, any allocations or distributions made pursuant to this Operating

Agreement with respect to the Quokka Warrants shall remain with NBC and shall

not be transferred to such transferee (and shall not be reflected in the Capital

Account of any such transferee).

 

(b) In addition to other restrictions on transfer contained

herein, each Member agrees that it will not make any disposition of all or any

part of its interest in the Company which will result in the violation by it or

by the Company of the Securities Act of 1933 or any other applicable securities

laws.

 

12.2 NO EFFECT TO TRANSFERS IN VIOLATION OF OPERATING AGREEMENT. Any

purported transfer in violation of this Article 12 shall be null and void and

the purported transferee shall become neither a Member nor a holder of any

interest in the Company whatsoever.