LLC OPERATING AGREEMENT
FOR
BCC ACQUISITION II LLC
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT is made as of June 30,
1998, by and between The Bay City Capital Fund I, L.P. (the "MANAGER" and a
"MEMBER") and Bay Investment Group, L.L.C. ("BIG", a "MEMBER" and, with the
Manager, the "MEMBERS").
RECITALS
A. On June 24, 1998, a Certificate of Formation (the "CERTIFICATE") for
BCC ACQUISITION II LLC (the "COMPANY"), a limited liability company formed under
the laws of the State of Delaware, was filed with the Delaware Secretary of
State.
B. The Members desire to adopt and approve an operating agreement (the
"OPERATING AGREEMENT" or "AGREEMENT") for the Company.
C. The business of the Company shall be managed, pursuant to this
Operating Agreement, exclusively by the Manager, who shall not be removable.
NOW, THEREFORE, the Members by this Agreement set forth the Operating
Agreement for the Company under the Delaware Limited Liability Company Act (the
"ACT") upon the terms and subject to the conditions of this Agreement:
ARTICLE I
ORGANIZATIONAL MATTERS AND CERTAIN DEFINITIONS
1.1. NAME. The name of the Company shall be "BCC ACQUISITION II LLC".
The Company may conduct business under that name or any other name approved by
the Manager.
1.2. TERM. The term of the Company commenced on the date of the filing
of the Certificate and, unless sooner terminated under Section 9.1, shall
terminate on December 31, 2020.
1.3. OFFICE AND AGENT. The Company shall continuously maintain an office
and registered agent in the State of Delaware as required by the Act. The
principal office of the Company shall be care of Corporation Service Company,
0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 or such location as the Manager may
determine. The registered agent shall be as stated in the Certificate or as
otherwise determined by the Manager.
1.4. BUSINESS OF THE COMPANY. The Company may engage in any lawful act
or activity for which limited liability companies may be organized under the
Act.
1.5. CERTAIN DEFINITIONS. When used in this Agreement, the following
terms not elsewhere defined shall have the meanings set forth below:
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, the provisions of succeeding law, and to the extent applicable,
the Treasury Regulations.
"NET PROFITS" and "NET LOSSES" shall mean the income, gain, loss,
deductions, and credits of the Company in the aggregate or separately stated, as
appropriate, determined in accordance with generally accepted accounting
principles.
"TREASURY REGULATIONS" shall mean the final or temporary regulations
that have been issued by the U.S. Department of Treasury pursuant to its
authority under the Code.
ARTICLE II
CAPITAL COMMITMENT AND CONTRIBUTIONS
2.1. CAPITAL COMMITMENT. The Manager'S aggregate capital commitment
hereunder is $10,000,000. BIG's aggregate capital commitment hereunder is
$9,047,004.
2.2. CAPITAL CONTRIBUTION. Upon the request of the Manager for capital
contributions, each of the Members shall make capital contributions to the
Company up to such Member's aggregate capital commitment, provided that no
Member shall be obligated to make a capital contribution other than related to
the Common Stock Purchase Agreement dated June 30, 1998 between the Company and
Diametrics Medical, Inc., the Note Purchase Agreement referred to therein and
the transactions contemplated by either of such documents or operating expenses
of the Company. All capital contributions shall be made first by the Manager
(up to $$10,000,000 in the aggregate) and then by BIG (up to $9,047,004 in the
aggregate).
2.3. CAPITAL ACCOUNTS. The Company shall establish an individual capital
account ("CAPITAL ACCOUNT") for each Member. Capital Accounts shall be
increased by the amount of each Member's capital contributions and shares of Net
Profits, and decreased by each Member's capital distributions and shares of Net
Losses.
2.4. NO INTEREST. The Company shall not pay any interest on capital
contributions.
2
ARTICLE III
MEMBERS
3.1. ADMISSION OF ADDITIONAL MEMBERS. The Manager may admit to the
Company additional Members who will participate in the Net Profits, Net Losses
and distributions of the Company on such terms as are determined by the Manager.
3.2. WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or resign as a
Member without the consent of the Manager.
3.3. PAYMENTS TO MEMBERS. Except as specified in this Agreement or
pursuant to a transaction permitted by Section 4.5, no Member is entitled to
remuneration for services rendered or goods provided to the Company.
ARTICLE IV
MANAGEMENT AND CONTROL OF THE COMPANY
4.1. MANAGEMENT BY MANAGER. The business of the Company shall be
conducted by the Manager, who shall not be removable by the Members. Except as
otherwise required by law or set forth herein, the Manager shall have full and
complete authority, power, and discretion to manage and control the business,
property and affairs of the Company, to make all decisions regarding those
matters, to represent the Company vis-a-vis third parties and to perform any and
all other acts or activities customary or incident to the management of the
Company'S business, property and affairs. Without limiting the foregoing, the
Members shall have no rights to vote on any matter except as required by law, it
being the intention of the Members to vest the management of the Company to the
fullest extent possible in the Manager.
4.2. MEMBER APPROVAL. No annual or regular meetings of the Members are
required to be held. In any instance in which the approval of the Members is
required under the Act, such approval may be obtained in any manner permitted by
the Act, including by written consent.
4.3. DEVOTION OF TIME. The Manager shall not be obligated to devote all
or any particular amount of its time or business efforts to the Company.
4.4. COMPETING ACTIVITIES. The Members (including the Manager) may
engage or invest in any activity, including, without limitation, those that
might be in direct or indirect competition with the Company. Neither the
Company nor any Member shall have any right in or to such other activities or to
the income or proceeds derived therefrom. No Member shall be obligated to
present any investment opportunity to the Company, even if the opportunity is of
the character that, if presented to the Company,
3
could be taken by the Company. Each Member shall have the right to hold any
investment opportunity for its own account or to recommend such opportunity to
persons other than the Company. The Members acknowledge that certain Members
may own and/or manage other businesses, including businesses that may compete
with the Company and for the Members' time. Each Member hereby waives any and
all rights and claims which such Member may otherwise have against the other
Members as a result of any of such activities.
4.5. TRANSACTIONS BETWEEN THE COMPANY AND THE MEMBERS. Notwithstanding
that it may constitute a conflict of interest, a Member (including the Manager)
and its affiliates may engage in any transaction with the Company so long as
such transaction is approved by the Manager or, if the transaction is between
the Company and the Manager or an affiliate of the Manager, the other Member.
ARTICLE V
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS
5.1. ALLOCATIONS OF NET PROFIT AND NET LOSS. Net Profits and Net Losses
shall be allocated to the Members in proportion to their Capital Accounts.
5.2. DISTRIBUTIONS OF ASSETS BY THE COMPANY. Subject to applicable law,
the Manager may cause the Company from time to time to make distributions to the
Members. Distributions shall be first to the Members in proportion to their
Capital Accounts. In the event any distribution exceeds that which is
permissible under the Act, any Member receiving such distribution shall, at the
request of the Manager, return such excess to the Company.
ARTICLE VI
TRANSFER AND ASSIGNMENT OF INTERESTS
6.1. TRANSFER AND ASSIGNMENT OF INTERESTS. Except as provided in
Sections 6.3 and 6.4, no Member shall be entitled to transfer, assign, convey,
sell, encumber or in any way alienate all or any part of its interest in the
Company (collectively, "TRANSFER") except with the prior approval of the
Manager. The Manager may not transfer its interest without the consent of each
of the other Members.
6.2. SUBSTITUTION OF MEMBERS. A transferee of a membership interest
shall have the right to become a substitute Member only if (i) consent of the
Manager is given in accordance with Section 6.1, (ii) such person executes an
instrument satisfactory to the Manager accepting and adopting the terms and
provisions of this Agreement, and (iii) such person pays any reasonable expenses
in connection with its admission as a new Member. The admission of a substitute
Member shall not result in the release of the
4
Member who assigned the membership interest from any liability that such Member
may have to the Company.
6.3. TRANSFERS IN VIOLATION OF THIS AGREEMENT AND TRANSFERS OF PARTIAL
MEMBERSHIP INTERESTS. Upon a transfer in violation of this Article VI, the
transferee shall have no right to vote or participate in the management of the
Company or to exercise any rights of a Member, and such transferee shall not be
considered a Member for any purpose other than receipt of the economic interests
described in the next sentence. Such transferee shall only be entitled to
receive the share of the Company's Net Profits, Net Losses and distributions of
the Company's assets to which the transferor would otherwise be entitled.
Notwithstanding the immediately preceding sentences, if, in the determination of
the Manager, a transfer in violation of this Article VI would cause the
termination of the Company under the Code, the transfer shall be null and void.
6.4. PERMITTED TRANSFERS TO AFFILIATES OF BIG. BIG and its successors
and assigns shall have the right to transfer its interest in the Company if such
interest is transferred to an affiliate of BIG or of such successor or assign,
as the case may be. For purposes hereof, "affiliate" with respect to BIG shall
mean (A) all lineal descendants of Xxxxxxxx X. Xxxxxxxx, deceased, and all
spouses and adopted children of such descendants; (B) all trusts for the benefit
of any person described in clause (A) and the trustees of such trusts; (C) all
legal representatives of any person or trust described in clauses (A) or (B);
and (D) all partnerships, corporations, limited liability companies or other
entities owned by or controlling, controlled by or under common control with any
person, trust or other entity described in clauses (A), (B), (C) or (D).
"Control" for these purposes shall mean, the ability to influence, direct or
otherwise significantly affect the major policies, activities or actions of any
person entity.
ARTICLE VII
CONSEQUENCES OF WITHDRAWAL,
BANKRUPTCY, OR DISSOLUTION OF MANAGER
7.1. DISSOLUTION EVENT. Upon the withdrawal, bankruptcy, or dissolution
of the Manager ("DISSOLUTION EVENT"), the Company shall dissolve unless the
remaining Members and the transferee of the Manager unanimously elect, within 90
days of such Dissolution Event, to continue the business of the Company.
ARTICLE VIII
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
8.1. BOOKS AND RECORDS. The books and records of the Company shall be
kept in accordance with generally accepted accounting principles, or such other
method as the Manager may determine. Such books and records shall include:
5
A. A current list of the full name and last known business or
residence address of each Member, together with the capital contributions,
Capital Account of each Member;
B. A copy of the Certificate and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Certificate or any amendments thereto have been executed;
C. Copies of the Company's federal, state, and local income tax
or information returns and reports, if any, for the six (6) most recent taxable
years;
D. A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
E. Copies of the financial statements of the Company, if any, for
the six (6) most recent fiscal years; and
F. The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four (4) fiscal years.
8.2. REPORTS. The Company shall cause to be prepared at least annually
information necessary for the preparation of the Members' federal and state
income tax returns. The Company shall send or cause to be sent to each Member
within ninety (90) days after the end of each taxable year such information as
is necessary to complete federal and state income tax or information returns.
8.3. BANK ACCOUNTS. The Manager shall maintain the funds of the Company
in one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other person. Only the Manager is authorized to endorse checks, drafts,
and other evidences of indebtedness made payable to the order of the Company for
the purpose of deposit into the Company'S accounts, as well as sign checks,
drafts, and other instruments obligating the Company to pay money.
8.4. TAX MATTERS FOR THE COMPANY. Unless the Manager designates another
Member as such, the Manager shall be the "Tax Matters Partner" (as defined in
Code Section 6231), to represent the Company (at the Company's expense) in
connection with all examinations of the Company'S affairs by tax authorities and
to expend Company funds for professional services and costs associated
therewith.
6
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1. CONDITIONS OF DISSOLUTION. The Company shall dissolve upon the
occurrence of any of the following events:
A. Upon the entry of a decree of judicial dissolution pursuant to
Section 18-802 of the Act;
B. Upon the election of the Manager to dissolve the Company; or
C. The occurrence of a Dissolution Event (unless an election to
continue the Company is made pursuant to Section 7.1).
9.2. WINDING UP. Upon the dissolution of the Company, the Company's
assets shall be disposed of and its affairs wound up by the Manager or, if there
be no Manager, the remaining Members.
9.3. ORDER OF PAYMENT OF LIABILITIES UPON DISSOLUTION. After determining
that all the known debts and liabilities of the Company have been paid or
adequately provided for, the remaining assets shall be distributed to the
Members in accordance with their positive Capital Account balances, after taking
into account income and loss allocations for the Company'S taxable year during
which liquidation occurs and deemed income or loss attributable to any
unrealized gain or loss on distributed assets computed as if the assets of the
Company were sold at their then fair market value.
9.4. LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise
specifically provided in this Agreement, each Member shall be entitled to look
solely at the assets of the Company for the return of its positive Capital
Account balance and shall have no recourse for its capital contribution and/or
share of Net Profits against any other Member.
ARTICLE X
INDEMNIFICATION
10.1. INDEMNIFICATION. The Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a Member, Manager, or agent of the Company to the same extent provided
for a Member, Manager, or agent in the Limited Liability Company Operating
Agreement of Bay City Capital LLC dated as of June 24, 1997 (as may be amended
from time to time), all as if such Member, Manager, or agent of the Company were
a Member, Manager, or agent of Bay City Capital LLC.
7
ARTICLE XI
INVESTMENT REPRESENTATIONS
Each Member hereby represents and warrants to, and agrees with, the other
Members, and the Company as follows:
11.1. PREEXISTING RELATIONSHIP OR EXPERIENCE. The Member has a
preexisting personal or business relationship with the Company or its Members,
or by reason of the Member's business or financial experience, or by reason of
the business or financial experience of the Member's financial advisor who is
unaffiliated with and who is not compensated, directly or indirectly, by the
Company or any affiliate or selling agent of the Company, the Member is capable
of evaluating the risks and merits of an investment in the Company and of
protecting the Member's own interests in connection with this investment.
11.2. NO ADVERTISING. The Member has not seen, received, been presented
with, or been solicited by any leaflet, public promotional meeting, article or
any other form of advertising or general solicitation with respect to the sale
of the membership interest.
11.3. INVESTMENT INTENT. The Member is acquiring the membership interest
for the Member's own account only and not with a view to or for sale in
connection with any distribution of all or any part of the membership interest.
No other person will have any direct or indirect beneficial interest in or right
to the membership interest.
ARTICLE XII
MISCELLANEOUS
12.1. COMPLETE AGREEMENT. This Agreement and the Certificate constitute
the complete and exclusive statement of agreement among the Members with respect
to the subject matter herein and therein and replace and supersede all prior
written and oral agreements among the Members. To the extent that any provision
of the Certificate conflicts with any provision of this Agreement, the
Certificate shall control.
12.2. BINDING EFFECT. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.
12.3. INTERPRETATION. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
interpretation of any provision of this Agreement. Numbered or lettered
articles, sections and subsections herein contained refer to articles, sections
and subsections of this Agreement unless otherwise expressly stated. In the
event any claim is made by any Member relating to any conflict, omission or
ambiguity in this Agreement, no presumption or burden of proof or persuasion
shall be
8
implied by virtue of the fact that this Agreement was prepared by or at the
request of a particular Member.
12.4. JURISDICTION. Each Member hereby consents to the jurisdiction of
the state and federal courts sitting in California or Delaware in any action on
a claim arising out of, under or in connection with this Agreement, or the
transactions contemplated by this Agreement. Each Member further agrees that
personal jurisdiction over the Member may be effected by service of process by
registered or certified mail addressed as provided in Section 12.6 of this
Agreement, and that when so made shall be as if served upon the Member
personally within the State of California or the State of Delaware.
12.5. SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid shall not be affected
thereby.
12.6. NOTICES. Any notice to be given or to be served upon the Company or
any party hereto in connection with this Agreement must be in writing (which may
include facsimile) and will be deemed to have been given and received when
delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member at the address specified in the signature page
hereto. Any party may, at any time by giving five (5) days' prior written
notice to the other Members, designate any other address in substitution of the
foregoing address to which such notice will be given.
12.7. AMENDMENTS. All amendments to this Agreement shall be in writing
and signed by all of the Members.
12.8. MULTIPLE COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. Delivery of any executed
counterpart to this Agreement by facsimile shall be the same as delivery of an
original counterpart.
12.9. ATTORNEY FEES. In the event that any dispute between the Company
and the Members or among the Members should result in litigation or arbitration,
the prevailing party in such dispute shall be entitled to recover from the other
party all reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including, without limitation, reasonable attorneys' fees and
expenses.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
9
IN WITNESS WHEREOF, each of the Members of BCC ACQUISITION II LLC have
executed this Agreement, effective as of the date written above.
THE BAY CITY CAPITAL FUND I, L.P.
Address: c/o Bay City Capital LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
By: Bay City Capital Management LLC
Its: General Partner
By: /s/ XXXX X. XXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Managing Partner
BAY INVESTMENT GROUP, L.L.C.
Address: 000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
By: /s/ XXXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Co-Trustee of R.A. Trust No. 25, a
general partner of R.A. Investment
Group, a member of Bay Investment
Group, L.L.C.
By: /s/ XXXXXXXX X. XXXXXXXXX
--------------------------------------
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Co-Trustee of R.A. Trust No. 25, a
general partner of R.A. Investment
Group, a member of Bay Investment
Group, L.L.C.
10
