Limited Liability Company Agreement: IBM, Sony Royal Philips

Exhibit 10.1


EXECUTION COPY


Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.


LIMITED LIABILITY COMPANY AGREEMENT


OF

OPEN INVENTION NETWORK LLC

TABLE OF CONTENTS

Page
ARTICLE I Defined Terms

SECTION 1.01. Definitions 1

SECTION 1.02. Terms and Usage Generally 8 ARTICLE II General Matters

SECTION 2.01. Formation 8

SECTION 2.02. Name 9

SECTION 2.03. Term 9

SECTION 2.04. Registered Agent and Registered Office 9

SECTION 2.05. Principal Place of Business 9

SECTION 2.06. Purposes and Powers 9 ARTICLE III Members

SECTION 3.01. Members 10

SECTION 3.02. Representations, Warranties and Covenants of Members 10

SECTION 3.03. Powers of Members 11

SECTION 3.04. Member' s Membership Interests; No Right to Partition 11

SECTION 3.05. Membership Interests 12

SECTION 3.06. Resignation and Removal of Members 12

SECTION 3.07. Cessation of Membership 15

SECTION 3.08. Member Meetings 15

SECTION 3.09. [**] Actions 17 ARTICLE IV Management

SECTION 4.01. Company Board 17

SECTION 4.02. Meetings of the Company Board 18

SECTION 4.03. Officers 20

SECTION 4.04. Budgets and Business Plans 21

SECTION 4.05. Investment of Funds 21


i ARTICLE V Operations and Activities of the Company

SECTION 5.01. Promotion of the Linux System 21

SECTION 5.02. Licensing Activities 21

SECTION 5.03. Acquisition of Patent Rights 22

SECTION 5.04. Enforcement of Patent Rights; Counter-measures 22

SECTION 5.05. Linux Definition Committee 22

SECTION 5.06. No Member Right to License Company Patents 22

SECTION 5.07. Independent Operations 23 ARTICLE VI Capital Contributions and Commitments; Contributed Capital Accounts

SECTION 6.01. Capital Contributions and Commitments 23

SECTION 6.02. Status of Capital Contributions 24

SECTION 6.03. Contributed Capital 25 ARTICLE VII Tax Matters

SECTION 7.01. Tax Allocations 25

SECTION 7.02. Tax Matters 25

SECTION 7.03. Taxation as Partnership 26 ARTICLE VIII Distributions

SECTION 8.01. Distributions 26

SECTION 8.02. Limitations on Distribution 26

SECTION 8.03. Withholding 27 ARTICLE IX Books and Records; Accounting

SECTION 9.01. Books, Records and Financial Statements 27

SECTION 9.02. Accounting Method 28

SECTION 9.03. Annual Audit 28

SECTION 9.04. Banking 28


ii ARTICLE X Liability, Exculpation and Indemnification

SECTION 10.01. Liability 29

SECTION 10.02. Exculpation 29

SECTION 10.03. Fiduciary Duty 30

SECTION 10.04. Indemnification 30

SECTION 10.05. Expenses 30

SECTION 10.06. Insurance 31

SECTION 10.07. [**]Claims 31

SECTION 10.08. Other Procedures 31 ARTICLE XI Transfer of Membership Interests

SECTION 11.01. Transfer of Membership Interests Generally 31

SECTION 11.02. Permitted Transfers 31

SECTION 11.03. No Publicly Traded Partnership 32

SECTION 11.04. Securities Law Matters 32 ARTICLE XII Dissolution, Liquidation and Termination

SECTION 12.01. No Dissolution 33

SECTION 12.02. Events Causing Dissolution 33

SECTION 12.03. Liquidation 33

SECTION 12.04. Termination 34

SECTION 12.05. Claims of the Members 34 ARTICLE XIII Certificates Evidencing Membership Interests

SECTION 13.01. Certificates 34

SECTION 13.02. Register 34

SECTION 13.03. New Certificates 34

SECTION 13.04. Membership Interest as a Security 35

SECTION 13.05. Legends 35


iii ARTICLE XIV Miscellaneous

SECTION 14.01. Notices 35

SECTION 14.02. Formation Expenses 36

SECTION 14.03. Failure to Pursue Remedies 36

SECTION 14.04. Cumulative Remedies 36

SECTION 14.05. Parties in Interest 36

SECTION 14.06. Outside Businesses 36

SECTION 14.07. Equitable Relief 36

SECTION 14.08. Headings 37

SECTION 14.09. Severability 37

SECTION 14.10. Counterparts 37

SECTION 14.11. Entire Agreement 37

SECTION 14.12. Governing Law 37

SECTION 14.13. Confidentiality 37

SECTION 14.14. Public Disclosure 37

SECTION 14.15. Amendments 38

SECTION 14.16. Absence of Presumption 38


EXHIBITS

Exhibit A Form of Adoption Agreement Exhibit B Category 1 Linux Related Components Exhibit C Category 2 Linux Related Components


SCHEDULES

Schedule 2.02 Prohibited Names Schedule 3.01 Members and Capital Contributions Schedule 3.02(a) License Agreements and Other Arrangements Schedule 3.09(a) [**] Actions Schedule 3.09(b) [**] Actions Schedule 4.02(c)(i) [**] Actions Schedule 4.02(c)(ii) [**] Actions


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LIMITED LIABILITY COMPANY AGREEMENT

OF

OPEN INVENTION NETWORK LLC

This Limited Liability Company Agreement (this " Agreement" ) of OPEN INVENTION NETWORK LLC (the " Company" ), dated and effective as of November 8, 2005, is entered into among INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation, NOVELL, INC., a Delaware corporation, RED HAT, INC., a Delaware corporation, SONY CORPORATION OF AMERICA, a New York corporation, and ROYAL PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, a Delaware corporation.


WHEREAS the Initial Members desire to enter into this Agreement to set forth certain agreements relating to the ownership, management and operation of the Company;


WHEREAS the Initial Members have made, simultaneously with the execution and delivery of this Agreement, the Initial Capital Contributions;

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members hereby form a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. a7a718-101, et seq.), as amended from time to time (the " Delaware Act" ), as provided herein, and hereby agree as follows:


ARTICLE I


Defined Terms


SECTION 1.01. Definitions . Unless the context otherwise requires, the terms defined in this Article I shall, for the purposes of this Agreement, have the meanings herein specified.

" Additional Member" shall have the meaning set forth in Section 3.01(b).

" Additional Transferee Member" shall have the meaning set forth in Section 11.02(a).


" Additional Membership Interests" shall mean any Membership Interest that is acquired after the Initial Capital Contributions.

" Adoption Agreement" shall mean an agreement, substantially in the form of Exhibit A, confirming the agreement of a Person to be bound by the terms and provisions of this Agreement.

" Affiliate" shall mean, with respect to any Person, any other Person that directly or through one or more intermediaries, controls, is controlled by or is under common control with, the specified Person. As used in this definition, the term " control" (including with correlative meanings, " controls" , " controlled by" and " under common control with" ) shall mean, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership or other ownership interests, by contract or otherwise. An Affiliate of a Person includes, but is not limited to, a Specified Affiliate of such Person.

" Agreement" shall have the meaning set forth in the preamble hereof.


" Budget" shall have the meaning set forth in Section 4.04.


" Business" shall mean (a) the acquisition and maintenance of Patent Rights useful in protecting the Linux System or of potential value to the Pro-Linux Platform, (b) the management and licensing of such Patent Rights in furtherance of the Pro-Linux Platform, (c) the enforcement of such Patent Rights against Persons who may be, or whose Affiliates may be, infringing the Patent Rights of the Company, and the taking of counter-measures in the event the Company or a Subsidiary of the Company is sued, and (d) taking any other action that is determined [**] to be useful in protecting the Linux System or of potential value to the Pro-Linux Platform.


" Business Day" shall mean any day other than (a) a Saturday or Sunday and (b) any day on which banks located in New York City are authorized or required by Law to be closed for the conduct of regular banking business.

" Business Plan" shall have the meaning set forth in Section 4.04.


" Capital Contribution" shall mean, with respect to any Member, any Initial Capital Contribution and Subsequent Capital Contribution.


" Category 1 Linux Related Component" shall mean any of the software packages identified in Exhibit B whose released source code shall be identified on the Company website [**].


" Category 2 Linux Related Component" shall mean any of the software packages identified in Exhibit C whose released source code shall be identified on the Company website, [**].


" Certificate" means a certificate evidencing a Membership Interest.

" Certificate of Formation" shall mean the Certificate of Formation of the Company and any and all amendments thereto and restatements thereof filed on behalf of the Company with the office of the Secretary of State of the State of Delaware pursuant to the Delaware Act.


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" Change in Control" shall mean, with respect to any Member or Member Parent, the consummation of a sale of capital stock, business combination, merger, consolidation, joint venture or other transaction, or series of related transactions, as a result of which (a) any Person (other than a Person that, before consummation of such transaction or series of related transactions, controlled such Member or Member Parent, respectively) shall have become the beneficial owner, directly or indirectly, of in excess of 50% of [**] of such Member or Member Parent, respectively, or (b) a majority of such Member' s or Member Parent' s board of directors or other equivalent managing body shall consist of Persons other than (i) Persons who were members of such board or body continuously for a period of one year prior to such transaction or series of related transactions or (ii) Persons who were elected or nominated for election as members of such board or body by at least a majority of the members described in clause (i) who were still in office at the time such election or nomination was approved by such board or body.


" Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. A reference to a specific section (a7) of the Code includes a reference to any corresponding provision of law enacted after the date of this Agreement.


[**]" Company" shall have the meaning set forth in the preamble hereto.

" Company Board" shall have the meaning set forth in Section 4.01.


" Company CEO" shall have the meaning set forth in Section 4.03.

" Company Licensing Agreement" shall mean a license agreement between the Company and any Person, substantially in the form of the Form Company Licensing Agreement.

" Company Patent Rights" shall mean Patent Rights owned by the Company and Patent Rights under which the Company has the right to grant licenses.


" Continuing Member" shall have the meaning set forth in Section 3.06(h).


" Contributed Capital" shall have the meaning set forth in Section 6.03(a).

" Covered Person" shall mean any Director of the Company, any Member and its Affiliates, and, if and to the extent determined by the Company Board, any Officer or employee of the Company.


" Delaware Act" shall have the meaning set forth in the preamble hereof.

" Director" shall have the meaning set forth in Section 4.01.


" Distributions" shall mean distributions of cash or other property made by the Company with respect to the Membership Interests.


" Fair Value" shall have the meaning set forth in Section 3.06(g).


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" Fiscal Quarter" shall mean (a) with respect to the Fiscal Year ending on December 31, 2005, the period commencing on the date of this Agreement and ending on December 31, 2005 and (b) with respect to any other Fiscal Year, the four consecutive three-month periods ending on March 31, June 30, September 30 and December 31.


" Fiscal Year" shall mean (a) the period commencing upon the date of this Agreement and ending on December 31, 2005 or (b) any subsequent twelve-month period commencing on January 1 and ending on December 31.

" Form Company Licensing Agreement" shall mean the form of Company Licensing Agreement adopted by the Company Board in writing as of the date hereof and designated as such, as such form may be amended or modified from time to time in accordance with this Agreement.

" GAAP" shall mean generally accepted accounting principles in the United States.


" GAAS" shall mean generally accepted auditing standards in the United States.


" Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.


" IFRS" shall mean international financial reporting standards.


" Initial Capital Contribution" shall have the meaning set forth in Section 6.01(a).


" Initial Members" shall mean International Business Machines Corporation, a New York corporation, Novell, Inc., a Delaware corporation, Red Hat, Inc., a Delaware corporation, Sony Corporation of America, a New York corporation, and Philips Electronics North America Corporation, a Delaware corporation.

" Licensee" shall mean any Person who is a licensee of the Company' s Patent Rights pursuant to a Company Licensing Agreement.


" Limitation Election" means an election by a Licensee to limit the licenses granted under any Company Licensing Agreement [**].[**]" Linux Kernel" shall mean the software package within the Category 1 Linux Related Components.

" Linux System" shall mean a Category 1 Linux Related Component or a Category 2 Linux Related Component, or any combination of such components, [**].

" [**] Action" shall have the meaning set forth in Section 4.02(c).


" [**] Action" shall have the meaning set forth in Section 3.08(c).

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" Member" shall mean any Initial Member and any Additional Member until such Initial Member or Additional Member, as applicable, ceases to be a Member of the Company in accordance with the terms of this Agreement.

" Member Parent" shall mean, (a) with respect to any Initial Member, any Person designated as such with respect to such Member on the signature page to this Agreement and (b) with respect to any Additional Member, such other Person, if any, designated as a Member Parent by such Additional Member and the Company in an addendum to this Agreement in connection with the admission of such Additional Member, which other Person owns or controls, directly or indirectly, with one or more Affiliates, more than 50% of [**] of such Additional Member. " Member Parent" also includes a successor Member Parent designated pursuant to Section 3.02(e).


" Membership Interest" shall mean a unit of limited liability company interest in the Company, which represents a right to receive allocations of the profits and losses of the Company, a right to participate in the management of the Company and a right to receive Distributions, in each case in accordance with this Agreement and the Delaware Act.


" Officers" shall mean those Persons appointed by the Company Board or the Company CEO to participate in the management of the affairs of the Company pursuant to Section 4.03.

" Open Source License" shall mean a license that conforms to the Open Source Definition (Version 1.9) as published by the non-profit organization known as the Open Source Initiative (OSI) or any successor organization [**].


" Patent Acquisition and Operating Expenses" shall mean the costs and expenses that are incurred by the Company in the operation of the Company, including rent, salaries, the fees and expenses relating to legal, consulting and accounting expenses (including litigation expenses), expenses incurred in maintaining a registered office in the State of Delaware, taxes or other governmental charges payable by the Company, costs of reporting to the Members, costs of acquiring, maintaining and licensing Patent Rights, costs of promoting the understanding and use of the Linux System, and costs of winding up and liquidating the Company, except that " Patent Acquisition and Operating Expenses" shall not include Patent Litigation Expenses.

" Patent Litigation Expenses" shall mean the costs and expenses that are incurred in connection with the activities described in Section 5.04, including enforcement actions and counter-measures.


" Patent Rights" shall mean patents and patent applications in any jurisdiction, and inventions and discoveries patentable in any jurisdiction.


" Permitted Transferee" shall have the meaning set forth in Section 11.02.

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" Person" includes any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company or other legal entity or organization.

" Predecessor Release" shall mean, as to any Category 1 Linux Related Component or a Category 2 Linux Related Component, a previous release of such component [**].


" Pro-Linux Platform" shall mean the furtherance of the Linux System as a viable alternative to other operating systems and related software for consumers and other users, including by (a) enabling and encouraging the development of the Linux System and computers, computer systems and software around the Linux System; (b) helping to ensure that the Linux System is not unduly vulnerable to potential Patent Rights infringement claims that could harm the development of the Linux System or computers, computer systems and software around the Linux System; and (c) placing the Linux System on a similar footing as other operating systems and related software with respect to Patent Rights that could be used to further the resolution of claims made against the Linux System. " Pro-Linux Platform" also includes attracting Persons with and without Patent Rights to enter into Company Licensing Agreements.

" Pro Rata Portion" shall have the meaning set forth in Section 6.03(c).


" Specified Affiliate" shall mean, with respect to any Person, any other Person that (a) is a Subsidiary of such first Person, (b) owns or controls, directly or indirectly, more than 50% of [**] of such first Person, or (c) is a Subsidiary of another Person that owns or controls, directly or indirectly, more than 50% of [**] of such first Person. Such other Person shall be deemed to be a Specified Affiliate only so long as such ownership or control exists.

" Subsequent Capital Contribution" shall mean any capital contribution other than an Initial Capital Contribution.


" Subsidiary" shall mean, with respect to any Person, any other Person of which more than 50% of [**] is owned or controlled, directly or indirectly, by such first Person, but such other Person shall be deemed to be a Subsidiary only so long as such ownership or control exists.


" Successor Release" shall mean, as to any Category 1 Linux Related Component or Category 2 Linux Related Component, a later release of such component [**]


" [**] Action" shall have the meaning set forth in Section 4.02(c).

" [**] Vote" shall mean, subject to Sections 4.02(c) and 4.02(e), the votes of Directors designated by Members holding Membership Interests constituting at least [**]% of the [**], provided that if at any time the Company Board shall consist of less than five Directors, then " [**] Vote" shall mean the votes of at least a number of Directors [**].


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" [**] Action" shall have the meaning set forth in Section 3.09(a).

" [**] Vote" shall mean, subject to Sections 3.08(c) and 3.08(f), the votes of Members holding Membership Interests constituting at least [**]% of the [**], provided that if at any time the Company shall have less than five Members, the " [**] Vote" shall mean the votes of at least a number of Members [**].


" Suspended Director" shall mean a Director designated by a Suspended Member.


" Suspended Member" shall mean a Member with respect to which a Suspension Period is then in effect.

" Suspension Period" shall mean, with respect to any Member, (a) the period beginning on the date of the occurrence of any event or taking of any action which will or is reasonably likely to result in a Triggering Event with respect to such Member, and ending on the earlier of (i) a determination by the Company (by resolution of the Company Board in accordance with Section 3.06(c)) as to whether to redeem the Membership Interests of such Member ( provided that if the Company determines to redeem such Membership Interests in accordance herewith, such Suspension Period shall end on the date of such redemption) and (ii) the date that is six months after the date the Company first becomes aware of the occurrence of the Triggering Event, or (b) the period beginning on the date that such Member provides written notice of its proposed resignation to the Company Board and ending on the earlier of (i) the date that such Member' s Membership Interests are redeemed or (ii) the date on which such Member provides written notice that it is withdrawing its proposed resignation.


" Tax Matters Partner" shall have the meaning set forth in Section 7.02(a).


" [**]" shall mean [**], with each Member entitled to one vote.


" Transfer" shall mean any sale, assignment, transfer, exchange, gift, bequest, pledge, hypothecation or other disposition or encumbrance, direct or indirect, by operation of law or otherwise. The terms " Transferred" , " Transferring" , " Transferor" and " Transferee" shall have meanings correlative to the foregoing.

" Treasury Regulations" shall mean the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

" Triggering Event" shall mean, with respect to any Member, [**]1 of this Agreement [**] by a Member or its Specified Affiliates of any Company Licensing Agreement between such Member or its Specified Affiliates, on the one hand, and the Company, on the other hand, if such Member or its Specified Affiliates, as applicable, [**] pursuant to this Agreement [**] advising the Member [**] under this Agreement [**], the Member [**] of the Company [**] by a Member of the terms of this Agreement [**] by a Member or its Specified Affiliates of any Company Licensing Agreement between such Member or its Specified Affiliates, on the one hand, and the Company, on


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the other hand, [**] with respect to such Member if such Member or its Specified Affiliates, as applicable, [**] pursuant to this Agreement [**] the Member [**] under this Agreement [**], the Member [**] of the Company [**], (c) the making [**] by such Member [**] pursuant to any Company Licensing Agreement , or (d) [**] by a Member or its Specified Affiliates [**] of its Specified Affiliates, [**] as described in Section 11.02).


" [**] Action" shall have the meaning set forth in Section 4.02(c).

" [**] Action" shall have the meaning set forth in Section 3.09(b).


" Withdrawing Member" shall mean a Member that elects or is required to resign or is removed from the Company pursuant to Section 3.06 or who otherwise ceases to be a Member pursuant to Section 3.07.

SECTION 1.02. Terms and Usage Generally . All references herein to an " Article" or a " Section" , " Exhibit" or " Schedule" shall refer to an Article or a Section of, or an Exhibit or a Schedule to, this Agreement. Whenever the words " include" , " includes" or " including" are used in this Agreement, they shall be deemed to be followed by the words " without limitation." The words " hereof" , " herein" and " hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein shall mean such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent in writing and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

ARTICLE II


General Matters

SECTION 2.01. Formation . (a) Pursuant to the provisions of the Delaware Act, the Company was formed on October 31, 2005 by filing in the Office of the Secretary of State of the State of Delaware of a Certificate of Formation, and the Initial Members hereby agree that the rights, duties and liabilities of the Members shall be as provided in the Delaware Act, except as otherwise provided herein.


(b) Each Officer of the Company is hereby designated as an " authorized person" , within the meaning of Section 18-201 of the Delaware Act, to execute, deliver and file, or cause the execution, delivery and filing of, all certificates, notices or other

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instruments (and any amendments and/or restatements thereof) required or permitted by the Delaware Act to be filed in the office of the Secretary of State of the State of Delaware and any other certificates, notices or other instruments (and any amendments or restatements thereof) necessary for the Company to qualify to do business in a jurisdiction in which the Company may wish to conduct business. The Company shall provide to each Member, upon request, copies of each such document as filed and recorded.

SECTION 2.02. Name . The name of the Company shall be " Open Invention Network LLC" . The Company Board may change the name of the Company or adopt such trade or fictitious names as it determines in its sole discretion. Neither the Company nor any Subsidiary of the Company shall have a corporate name, or do business using a name, that includes the name of any Member or any initials referring to such Member or any name or initials confusingly similar thereto or that contains any abbreviation or derivative thereof, including such names, abbreviations and derivatives identified on Schedule 2.02, provided that the Company may disclose in publicly available materials the identity of the Members.


SECTION 2.03. Term . The term of the Company commenced on October 31, 2005, with the filing of the Certificate of Formation in the office of the Secretary of State of the State of Delaware, and shall continue perpetually unless th ...