LIMITED LIABILITY COMPANY AGREEMENT OF PNIR, LLC
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Exhibit
10.30
Portions
of this Exhibit 10.30 have been omitted based upon a request for confidential
treatment. This Exhibit, including the non-public information, has been filed
separately with the Securities and Exchange Commission. "[***]" designates
portions of this document that have been redacted pursuant to the request for
confidential treatment filed with the Securities and Exchange
Commission.
OF
PNIR,
LLC
THIS
LIMITED LIABILITY COMPANY AGREEMENT ("Agreement")
is
made effective as of February 19, 2008 (the "Effective
Date")
by and
among Cyberkinetics Neurotechnology Systems, Inc., a Delaware corporation having
its principal place of business at 000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000 ("Cyberkinetics"),
NEUROMetrix Corporation, a Delaware corporation having its principal place
of
business at 00 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 ("NEUROMetrix"),
and
such other individuals and entities who may become members of PNIR, LLC (the
"Company")
in
accordance with law and the terms hereof (hereinafter collectively referred
to
as the "Members"
and
individually as a "Member").
Capitalized terms used but not defined herein shall be given the same meaning
as
provided in the Collaboration Agreement of even date herewith by and among
the
Company, Cyberkinetics and NEUROMetrix, as amended from time to time (the
"Collaboration
Agreement").
ARTICLE
I
FORMATION
AND MANAGEMENT
Section
1.01. Formation.
The
Company shall be organized as a limited liability company pursuant to the
Delaware Limited Liability Company Act, as the same may be amended from time
to
time (the "Act").
The
Act shall govern the rights and liabilities of the parties hereto except as
otherwise expressly stated herein.
Section
1.02. Members;
Delegation of Authority to Board of Directors.
The
Company shall be Member managed for purposes of the Act. The Members of the
Company are those persons listed on Schedule
A
attached
hereto, as the same may be amended from time to time. Each Member hereby agrees
that (a) the Company's management shall be vested solely and exclusively in
the
Company's Board of Directors designated by the Members as provided in
Section
1.03
hereof
and (b) it will not exercise any authority (actual, apparent or otherwise)
that
it may have to bind or obligate the Company, transact any business on behalf
of
or in the name of the Company, or otherwise participate in the control of the
business affairs of the Company, except as expressly provided herein, in the
Collaboration Agreement, in any Transaction Agreement, or as authorized by
the
Board of Directors (as defined in Section
1.03
below).
Section
1.03. Board
of Directors.
(a) The
business and affairs of the Company shall be managed solely and exclusively
by a
Board of Directors that is designated by the Members pursuant to the terms
of
this Section
1.03
(the
"Board
of Directors").
No
Member shall have any power to manage the Company other than through its
designated representatives on the Board of Directors. The Board of Directors
shall not have any power to take any actions on behalf of the Company unless
such actions are unanimously approved at a meeting of the Board of Directors
or
by unanimous written consent of the Board of Directors.
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(b) Except
where the approval of the Members is expressly required by this Agreement or
by
non-waivable provisions of the Act, the Board of Directors shall have full
and
complete authority, power and discretion to direct, manage and control the
business, affairs and properties of the Company and to make all decisions and
take all actions relating thereto, including, without limitation, the authority
to (i) negotiate and execute agreements on behalf of the Company; (ii) make
representations and warranties on behalf of the Company; (iii) waive rights
of
the Company; (iv) extend credit on behalf of the Company; and (v) take or grant
licenses of intellectual property on behalf of the Company. Notwithstanding
anything contained in this Agreement to the contrary, the Board of Directors
shall not take actions which are inconsistent with or in violation of the
Collaboration Agreement or any of the Transaction Agreements.
(c) Unless
otherwise determined by the unanimous consent of the Members, the Board of
Directors shall consist of six (6) persons (each a "Director"),
which
shall include three (3) individuals designated by Cyberkinetics (the
"Cyberkinetics
Directors"),
in
its sole discretion, and three (3) individuals designated by NEUROMetrix (the
"NEUROMetrix
Directors"),
in
its sole discretion. The Directors need not be Members. The initial
Cyberkinetics Directors shall be Xxxxxxx X. Xxxxxxxx, Xxxx X. Xxxxxx and Xxxx
X.
Xxxxxx and the initial NEUROMetrix Directors shall be Xxxx X. Xxxxxx, M.D.,
Ph.D., Xxxxxxx Xxxxxxxx, Ph.D., and W. Xxxxxxxx Xxxxx. Each of the Directors
shall also serve as a member of the Steering Committee established pursuant
to
the Collaboration Agreement.
(d) Each
Director shall be elected at any annual or special meeting of the Members (or
by
unanimous written consent of the Members in lieu of a meeting of the Members)
and shall serve until his or her successor is duly elected and qualified, or
until his or her earlier death, resignation or removal. The Members hereby
irrevocably agree to vote all membership interests of the Company presently
owned or hereafter acquired by them, as may be required from time to time,
in
order to ensure that the Directors designated in accordance with clause (c)
of
this Section
1.03
are
elected to the Board of Directors. The Members intend that the provisions of
this Section
1.03
shall be
a voting agreement by and among the Members and shall be specifically
enforceable for all purposes and at all times by the Members until the voting
agreement provisions are amended or terminated pursuant to a duly authorized
written amendment to this Agreement.
(e) Any
of
the Cyberkinetics Directors may be removed at any time during his or her term
of
office, with or without cause, by and only by written notice from Cyberkinetics
to the other Members. Any vacancy in the office of the Cyberkinetics Directors
shall be filled by and only by a person designated by Cyberkinetics. Any of
the
NEUROMetrix Directors may be removed at any time during his or her term of
office, with or without cause, by and only by written notice from NEUROMetrix
to
the other Members. Any vacancy in the office of the NEUROMetrix Directors shall
be filled by and only by a person designated by NEUROMetrix.
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Section
1.04. Further
Delegation of Authority.
The
Board of Directors may create such committees or offices, appoint the members
of
such committees and such officers, and hire such other individuals or entities
and delegate to any of the foregoing such management responsibility or authority
as the Board of Directors determines appropriate, including without limitation
those duties and responsibilities which may have been delegated to the Steering
Committee under the Collaboration Agreement. It is contemplated that all
committees will consist of an equal number of representatives from each of
Cyberkinetics and NEUROMetrix. Any contract, agreement, instrument or other
document to which the Company is a party may be executed by any Director,
officer or other individual or entity that has been expressly authorized to
do
so by the Board of Directors.
Section
1.05. Director
Fiduciary Duties and Liability.
To the
fullest extent permitted by applicable law, no Director shall have any fiduciary
or similar duty, at law or in equity, or any liability relating thereto, to
the
Company or any Member (or any affiliate of any Member), with respect to the
Company or its business or affairs. In furtherance of and without limiting
any
of the foregoing, to the fullest extent permitted by applicable law, each Member
hereby waives any claim for breach of fiduciary duty or similar duty against
any
Director with respect to the Company or its business or affairs. However,
nothing contained in this Agreement is intended to or will relieve or discharge
any Director (a) from its obligation to act in good faith with respect to the
Company and its business and affairs or (b) from liability to the Company or
the
Members on account of any fraudulent or similar intentional misconduct or a
knowing violation of law.
ARTICLE
II
OFFICES,
NAME, ETC.
Section
2.01. Principal
Office.
The
principal office of the Company shall be located at 00 Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000 or such place within the Commonwealth of Massachusetts
as
may be determined by the Board of Directors from time to time. The Company
shall
maintain its records at such address.
Section
2.02. Registered
Office; Resident Agent.
The
name and address of the Company's registered agent for service of process in
the
Commonwealth of Massachusetts shall be NEUROMetrix, 00 Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000, Attention: President, or such other name and address as
determined by the Board of Directors.
Section
2.03. Name.
The
business of the Company shall be conducted under the name of PNIR, LLC" or
such
other name as may be determined by the Board of Directors.
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Section
2.04. Term.
The
term of the Company shall commence upon the filing of the Certificate of
Formation (the "Effective
Date")
and
shall continue until it is terminated as hereinafter provided.
Section
2.05. Business
Ventures.
Any
Member may engage independently or with others in other business ventures of
every nature and description, and neither the Company nor any Member shall
have
any rights in and to such independent ventures or the income or profits derived
therefrom; provided that a Member's participation in such venture is subject
to
and consistent with all applicable provisions of the Collaboration
Agreement.
ARTICLE
III
PURPOSES
AND POWERS
Section
3.01. Purpose.
The
purpose of the Company is to (a) research, develop, commercialize and market
the
Collaboration Products and (b) engage in all such other activities permitted
under the Act as are determined by the Board of Directors.
Section
3.02. Powers.
The
Company shall have all the powers necessary or convenient to the conduct,
promotion or attainment of the business, trade, purposes or activities of the
Company, including, without limitation, all the powers of an individual,
partnership, corporation or other entity.
ARTICLE
IV
MEMBERS
AND THEIR CONTRIBUTIONS
Section
4.01. Capital
Contributions; Failure to Contribute.
(a) Capital
Contributions; Percentage Interests.
(i) Each
Member will contribute capital to the Company as and when provided in the
Collaboration Agreement and as and when otherwise determined by the Board of
Directors. The mutually agreed upon fair value of the property contributed
by
each Member as of the Effective Date (hereinafter referred to as each Member's
"Initial
Property Capital Contribution")
is set
forth in Schedule
A
attached
hereto. The Development Plan and the Commercialization Plan developed and
approved as provided in the Collaboration Agreement shall each include a budget
for activities to be conducted by or on behalf of the Company and shall provide
for the timing and amount of cash capital calls from the Members to be made
to
fund such activities. Except as specifically provided in the Collaboration
Agreement or the Act, no Member shall have any obligation to make any
contribution of cash or property to the Company. In the event a Member fails
to
make a cash contribution to capital as and when provided in the Collaboration
Agreement or as and when otherwise determined by the Board of Directors, without
limiting any other remedies that may arise hereunder, under the Collaboration
Agreement or under any other Transaction Agreement, such overdue amount shall
bear interest, from the date such capital contribution is due until it is paid
in full (including, for the avoidance of doubt, from the proceeds of a Default
Loan as described below), at a rate equal to the London Interbank Offer Rate
(LIBOR) plus three percentage points (but in no event higher than the highest
rate permitted by applicable law) until paid in full.
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(ii) No
interest shall accrue on any Capital Contributions, and no Member shall have
the
right to withdraw or to be repaid any capital it has contributed, except as
otherwise specifically provided in this Agreement.
(iii) Except
as
otherwise provided in Article
V
of this
Agreement, each Member's share of Net Profits and Net Losses ("Percentage
Interest")
is set
forth in Schedule
A,
as the
same may be amended from time to time in accordance with the provisions of
this
Agreement.
(b) Failure
to Make Cash Contributions.
(i) If
any
Member (the "Non-Contributing
Member"):
(A)
fails to make all or any portion of any cash Capital Contribution required
to be
made by it in accordance with the Development Plan or Commercialization Plan,
and such Member fails to cure such failure within the time periods provided
in
the Collaboration Agreement or (B) otherwise fails timely to make all or any
portion of any cash Capital Contribution required to be made by it in accordance
with Section
4.01(a)(i)
above
(in either case, the amount of capital not so contributed is the "Delinquent
Contribution"
and the
date when such amount is first overdue, taking into account and waiting until
expiration of the applicable cure periods under the Collaboration Agreement,
is
the “Delinquency
Date”),
then,
in both such cases, each Member who makes the cash Capital Contribution required
in accordance with the Collaboration Agreement and otherwise as required by
the
foregoing Section 4.01(a)(i) (the "Contributing
Members"),
in
addition to any and all other remedies available to a Contributing Member under
this Agreement, the Collaboration Agreement, or otherwise at law or in equity
(including, without limitation, instituting a legal proceeding to collect the
Delinquent Contribution), shall have the right, but not the obligation, to
proceed in accordance with the terms and conditions set forth in this
Section
4.01(b).
(ii) Each
of
the Contributing Members may elect to advance to the Company its pro rata
portion (based upon its aggregate Capital Contributions relative to the
aggregate Capital Contributions made by all Contributing Members electing to
fund the Delinquent Contribution) of any Delinquent Contribution, in cash,
within thirty (30) days following the Delinquency Date, and such advance shall
be treated as a non-recourse loan by the Contributing Member(s) to the
Non-Contributing Member (with any accrued interest as provided in this Section
4.01, a "Default
Loan"),
bearing interest at a rate equal to the greater of (x) the London Interbank
Offer Rate (LIBOR) plus five percentage points and (y) twelve percent (12%)
per
annum (but in no event higher than the highest rate permitted by applicable
law)
from the Delinquency Date until paid in full. Each Default Loan shall be due
and
payable upon the earlier of nine (9) months from the date such Default Loan
is
advanced (or such other maturity date as mutually agreed upon by the
Contributing Member and the Non-Contributing Member) or the date of dissolution
of the Company. As of the date of any advance of a Default Loan, the
Non-Contributing Member shall be deemed to have contributed an amount equal
to
the principal amount of such Default Loan to the capital of the Company, and
the
Capital Account of the Non-Contributing Member shall be credited with a like
amount. Notwithstanding the provisions of Articles
VI
and
X
hereof,
until any and all Default Loans are repaid in full, including all applicable
interest, the Non-Contributing Member shall draw no distributions from the
Company and all cash or property otherwise distributable with respect to the
Non-Contributing Member's Interest (or fees payable by the Company to the
Non-Contributing Member or any of its Affiliates) shall be distributed to the
Contributing Member(s) (pro rata in proportion to the amounts advanced) in
repayment of the outstanding balance of the Default Loan, with such funds being
applied first to reduce any and all interest accrued on such Default Loan and
then to reduce the principal amount thereof. Any amounts so applied shall be
treated, for all purposes under this Agreement, as having actually been
distributed to the Non-Contributing Member and applied by the Non-Contributing
Member to repay any outstanding Default Loan(s).
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(iii) If,
upon
the maturity of any Default Loan (taking into account any agreed upon extensions
thereof), any principal thereof or accrued interest thereon remains outstanding
and unpaid by the Non-Contributing Member, the Contributing Member making such
Default Loan shall elect one of the following options: (A) to renew such Default
Loan (or any portion thereof) pursuant to the terms and conditions of this
Section
4.01(b)
for such
term as may be determined by the Contributing Member and bearing interest at
a
rate equal to the greater of (x) the London Interbank Offer Rate (LIBOR) plus
seven percentage points and (y) sixteen percent (16%) per annum (but in no
event
higher than the highest rate permitted by applicable law) from the date of
such
renewal until paid in full, (B) to contribute the right to receive repayment
of
all or any portion of such outstanding principal of, and accrued but unpaid
interest on, such Default Loan (or any portion thereof) to the capital of the
Company and to dilute the Percentage Interest of the Non-Contributing Member
in
accordance with the provisions of Section
4.01(b)(iv)
below or
(C) to pursue any and all other remedies available to the Contributing Member
under this Agreement, the Collaboration Agreement, or otherwise at law or in
equity (including, without limitation, instituting a legal proceeding to collect
the Default Loan). The Contributing Member may elect any of the options set
forth in the immediately preceding sentence by giving written notice of such
election to the Non-Contributing Member no less than ten (10) days prior to
the
maturity date of the Default Loan (or such lesser period of time as may be
practicable in the case of a dissolution of the Company which results in the
maturity of the Default Loan). Failure of the Contributing Member to give such
timely written notice to the Non-Contributing Member shall be deemed to
constitute an election to renew such Default Loan for an additional term of
ninety (90) days on the terms set forth herein.
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(iv) The
Non-Contributing Member may repay any Default Loan in full or in part at any
time before the maturity date without premium or penalty. Upon the maturity
of a
Default Loan that is not fully repaid on or before the maturity date thereof,
the Contributing Member may elect to treat all or any portion of such
outstanding principal of, and accrued but unpaid interest on, such Default
Loan
previously extended by the Contributing Member (or any portion thereof) as
a
direct capital contribution by the Contributing Member to the capital of the
Company and (A) such amounts so contributed shall be deemed repaid and satisfied
by the Non-Contributing Member; (B) such amounts so contributed shall be deemed
to have been distributed to the Non-Contributing Member, and debited to the
Capital Account of the Non-Contributing Member; and (C) the Capital Account
of
the Contributing Member shall be increased by the amount so contributed. Upon
the contribution of the principal and interest of any Default Loan by the
Contributing Member pursuant to this Section
4.01(b)(iv),
the
Percentage Interest of the Non-Contributing Member shall be reduced by the
Dilution Percentage and the Percentage Interest of the Contributing Member
shall
be increased by the Dilution Percentage (and Schedule
A attached
hereto shall be amended to reflect such reductions and increases). The
"Dilution
Percentage"
shall
equal the amount expressed in percentage points (rounded to the nearest
one-hundredth of a percentage point) calculated based upon the following
formula:
Outstanding
Balance of any Default Loan (including interest) Contributed by the Contributing
Member
|
Dilution
Percentage = 150% x
|
Aggregate
amount of all Capital Contributions (cash and property) made by the
Members (including the outstanding balance of any Default Loan (including
interest) contributed by the Contributing
Member)
|
The
application of the provisions of this Section
4.01(b)(iv)
is
illustrated by the following example: Assume that (A) the aggregate Capital
Contributions made by the Members hereunder (prior to the additional Capital
Contribution) was $5,000,000; (B) an additional cash Capital Contribution of
$200,000 was required to be contributed by the Members pursuant to Section
4.01(a)(i);
(C) the
Non-Contributing Member, whose Percentage Interest is at the time 50%, failed
to
contribute its share of such contribution of $100,000 (i.e., 50% x $200,000);
and (D) the Contributing Member, whose Percentage Interest is 50%, made the
Delinquent Contribution of $100,000 to the capital of the Company on behalf
of
the Non-Contributing Member pursuant to this Section
4.01(b).
The
Dilution Percentage applicable to the Non-Contributing Member in the preceding
illustration would be equal to 2.88 percentage points, calculated as
follows:
|
2.88%
|
=
150%
|
x
|
$100,000
|
||
|
($5,000,000
+ $100,000 + $100,000)
|
The
Percentage Interest of the Non-Contributing Member, therefore, would be reduced
by 2.88 percentage points from 50% to 47.12%, and the Percentage Interest of
the
Contributing Member would be increased by a like amount from 50% to 52.88%.
In
the event there is more than one Contributing Member, such increase shall be
allocated among them in proportion to the amounts of the Default Loan advanced
by each of them. Any and all adjustments to Percentage Interests pursuant to
this Section
4.01(b)
shall be
rounded to the nearest .01%. As a result of any contribution to the capital
of
the Company pursuant to this Section
4.01(b),
any
Contributing Member shall have the right, but not the obligation, to cause
the
Capital Accounts of the Members to be booked-up or booked-down in accordance
with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) to
reflect the fair market value of the Company's assets (as reasonably determined
by such Contributing Member) at the time of such contribution.
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For
avoidance of doubt, interest that would have accrued on the unpaid capital
contribution of the Non-Contributing Member in the above example was excluded
for the sake of simplicity.
Section
4.02. Capital
Accounts.
A
separate account (a "Capital
Account")
shall
be maintained for each Member and adjusted in accordance with Treasury
Regulation Section 1.704-1(b) as follows:
(a) There
shall be (i) credited to each Member's Capital Account (A) the amount of cash
such Member has contributed to the Company, (B) the agreed fair market value
of
any property such Member has contributed to the Company, as determined in good
faith by the Board of Directors, and (C) such Member's allocable share of Net
Profits (and any items in the nature of income or gain separately allocable
to
such Member); and (ii) charged against each Member's Capital Account (A) the
amount of all distributions to such Member, and (B) such Member's allocable
share of Net Losses (and any items in the nature of losses or deductions
separately allocable to such Member).
(b) If
the
Company at any time distributes any of its assets in kind to any Member, the
Capital Account of each Member shall be adjusted to account for that Member's
allocable share (as determined under Section
5.01
below)
of the Net Profits or Net Losses that would have been realized by the Company
had it sold the assets that were distributed at their respective fair market
values immediately prior to their distribution.
(c) In
the
event any Member's interest is transferred in accordance with the terms of
this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred interest.
Section
4.03. Loans.
The
Members shall not make loans to the Company unless the Members unanimously
agree
in writing to make such loans.
Section
4.04. Additional
Members.
Except
as otherwise provided in Section
8.02
with
respect to Substitute Members, additional Members may only be admitted with
the
prior written approval of all of the Members. Such additional Members shall
execute and acknowledge a counterpart to this Agreement or shall otherwise
evidence in writing their agreement to be bound by the terms hereof in such
manner as the Members shall determine.
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Section
4.05. Liability
of Members.
(a) No
Member
shall be liable for the obligations of the Company solely by reason of being
a
Member.
(b) No
Member
shall be required to make any contributions to the capital of the Company other
than as provided in Section
4.01 (a)
hereof.
(c) No
Member
shall be liable to the Company or the other Members for monetary damages for
breach of fiduciary or similar duty as a Member, if any, to the fullest extent
permitted by applicable law; provided,
however,
that
this provision shall not eliminate the liability of a Member (i) for acts or
omissions not in good faith or which involve fraudulent or similar intentional
misconduct or a knowing violation of law, or (ii) for any breach of the
Collaboration Agreement, or this Agreement or any other Transaction Agreement.
No amendment to or repeal of this Section
4.05(c)
shall
apply to or have any effect on the liability or alleged liability of any Member
for or with respect to any acts or omissions of such Member occurring prior
to
such amendment or repeal occurring, or any cause of action, suit or claim that,
but for this Section
4.05(c),
would
accrue or arise prior to such amendment, repeal or adoption of an inconsistent
provision.
Section
4.06. Withdrawal
of Members.
No
Member shall have the right to withdraw from the Company or to demand a return
of its capital interest at any time except upon termination and dissolution
of
the Company, unless agreed to by the unanimous written consent of the other
Members.
ARTICLE
V
ALLOCATIONS
Section
5.01. Certain
Definitions.
For
purposes of this Agreement, the following terms shall have the meanings given
them in this Article
V:
(a) "Adjusted
Capital Account"
for a
Member means such Member's Capital Account (i) reduced by the net adjustments,
allocations and distributions described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) which, as of the end of the Company's
taxable year are reasonably expected to be made to such Member, and (ii)
increased by the sum of (A) the amounts a Member is deemed obligated to restore
pursuant to the penultimate sentences of Treasury Regulation Sections
1.704-2(g)(1) and 2(i)(5), (B) the excess, if any, of such Member's Capital
Contribution over such Member's actual paid-in capital contribution and (c)
that
portion of any indebtedness of the Company (other than "partner
nonrecourse debt"
as
defined in Treasury Regulation Section 1.704-2(b)(4)) with respect to which
the
Member bears the economic risk of loss that such indebtedness would not be
repaid out of the assets of the Company if all of the assets of the Company
were
sold at their respective book values as of the end of the fiscal period and
the
proceeds from the sales together with any amounts described in clause (B) above,
were used to pay the liabilities of the Company.
(b) "Net
Profits"
and
"Net
Losses"
mean
the taxable income or loss, as the case may be, for a period (or from a
transaction) as determined in accordance with Section 703(a) of the Internal
Revenue Code of 1986, as amended ("IRC")
(for
this purpose, all items of income, gain, loss, or deduction required to be
separately stated pursuant to IRC Section 703(a) (1) shall be included in
taxable income or loss) computed with the following adjustments: (i) To the
extent required by (and in the manner described in) Treasury Regulation
1.704-1(b) (2), items of gain, loss, and deduction shall be computed based
upon
the book values of the Company's assets rather than upon such assets' adjusted
bases for federal income tax purposes (if different); (ii) Any tax-exempt income
received by the Company shall be included as an item of gross income;(iii)
The
amount of any adjustments to the adjusted bases (or book values if clause (i)
above applies) of any assets of the Company pursuant to IRC Section 743 shall
not be taken into account; and (iv) Any expenditure of the Company described
or
treated as being described in IRC Section 705(a)(2)(B) shall be treated as
a
deductible expense.
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(c) "Member
Loan Nonrecourse Deductions"
means
any Company deductions that would be Nonrecourse Deductions if they were not
attributable to a liability owed to or guaranteed by a Member within the meaning
and intent of Treasury Regulation Section 1.704-2(i).
(d) "Member
Loan Minimum Gain"
has the
meaning set forth in Treasury Regulation Section 1.704-2(i)(3).
(e) "Minimum
Gain"
has the
meaning set forth in Treasury Regulation Section 1.704-2(d). Minimum Gain shall
be computed separately for each Member in a manner consistent with the Treasury
Regulations under IRC Section 704(b).
(f) "Nonrecourse
Deductions"
has the
meaning set forth in Treasury Regulation Section 1.704-2(b)(1). The amount
of
Nonrecourse Deductions for a taxable year of the Company shall be determined
according to the provisions of Treasury Regulation Section
1.704-2(c).
(g) "Nonrecourse
Liability"
means
any liability of the Company with respect to which no Member has personal
liability, as determined in accordance with IRC Section 752 and the Treasury
Regulations promulgated thereunder.
Section
5.02. Allocations
of Profit and Loss.
As of
the end of each fiscal year of the Company, or at the time any allocation is
determined to be necessary by the Board of Directors, Net Profits or Net Losses
shall be allocated as follows:
(a) Except
as
provided in Section 5.03 below, Net Profits and Net Losses for any fiscal year
shall be allocated among the Members in proportion to their respective
Percentage Interests.
(b) With
respect to the allocation of Net Losses or Net Profits pursuant to this
Section
5.02
for any
fiscal year in which an additional or Substitute Member is admitted to the
Company, all Net Losses or Net Profits so allocable shall be allocated in a
manner which takes into account the varying Percentage Interests during such
fiscal year based on an accounting convention chosen by the Board of Directors.
In no event shall a retroactive allocation of Net Losses be made pursuant to
this Section
5.02.
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Section
5.03. Special
Allocations.
Notwithstanding the provisions of Section
5.02
above,
the following allocations of Net Profits and Net Losses and items thereof shall
be made:
(a) If,
during any year a Member unexpectedly receives any adjustment, allocation or
distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4),(5) or (6), and, as a result of such adjustment,
allocation or distribution, such Member's Adjusted Capital Account has a
negative balance (computed with the adjustments set forth in clauses (i) and
(ii) of Section
5.01(a)),
then
items of gross income for such year (and, if necessary, subsequent years) shall
first be allocated to such Member in the amount necessary to eliminate such
negative balance as quickly as possible. This Section
5.03(a)
is
intended to constitute a "qualified
income offset"
provision within the meaning of the above Treasury Regulations, and shall be
so
interpreted.
(b) Nonrecourse
Deductions for a taxable year or other period shall be specially allocated
among
the Members in proportion to their Percentage Interests.
(c) Any
Member Loan Nonrecourse Deduction for any taxable year or other period shall
be
specially allocated to the Member or Members who bear the risk with respect
to
the loan to which the Member Loan Nonrecourse Deduction is attributable in
accordance with Treasury Regulation Section 1.704-2(b).
(d) In
no
event shall Net Losses of the Company be allocated to a Member if such
allocation would cause or increase a negative balance in such Member's Adjusted
Capital Account.
(e) Except
as
set forth in Treasury Regulation Section 1.704-2(f)(2), (3) and (4), if, during
any taxable year, there is a net decrease in Minimum Gain, each Member, prior
to
any other allocation pursuant to this Article
V,
shall
be specially allocated items of gross income and gain for such taxable year
(and, if necessary, subsequent taxable years) in an amount equal to that
Member's share of the net decrease of Minimum Gain, computed in accordance
with
Treasury Regulation Section 1.704-2(g). Allocation of gross income and gain
pursuant to this Section
5.03(e)
shall be
made first from gain recognized from the disposition of Company assets subject
to non-recourse liabilities (within the meaning of the Treasury Regulations
promulgated under IRC Section 752), to the extent of the Minimum Gain
attributable to those assets, and thereafter, from a pro rata portion of the
Company's other items of income and gain for the taxable year. It is the intent
of the parties hereto that any allocation pursuant to this Section
5.03(e)
shall
constitute a "minimum
gain chargeback"
under
Treasury Regulation Section 1.704-2(f). With respect to a net decrease in Member
Loan Minimum Gain, items of gross income shall be specially allocated consistent
with the preceding sentence, and Treasury Regulation Section
1.704-2(i)(4).
(f) In
the
event that Net Profits, Net Losses or items thereof are allocated to one or
more
Members pursuant to paragraphs (a) or (d) above, subsequent Net Profits and
Net
Losses will first be allocated (subject to the provisions of paragraphs (a)
through (d)) to the Members in a manner designed to result in each Member having
a Capital Account balance equal to what it would have been had the original
allocation of Net Profits, Net Losses or items thereof pursuant to paragraphs
(a) or (d) not occurred.
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(g) The
respective Percentage Interests in the Net Profits and Net Losses or items
thereof shall remain as set forth above unless changed by amendment to this
Agreement or by an assignment of an interest in the Company authorized by the
terms of this Agreement. Except as otherwise provided herein, for tax purposes,
all items of income, gain, loss, deduction or credit shall be allocated to
the
Members in the same manner as are Net Profits and Net Losses; provided,
however,
that
if, as a result of clause (i) of Section
5.01(b),
the
book value of any property of the Company was used in computing Net Profits
or
Net Losses, then items of income, gain, deduction or credit related to such
property for tax purposes shall be allocated among the Members so as to take
account of the variation between the adjusted basis of the property for tax
purposes and its book value in the manner provided for by the "traditional
method" under IRC Section 704(c).
(h) If
a
Member's Percentage Interest is reduced (provided the reduction does not result
in a complete termination of the Member's interest in the Company), the Member's
share of the Company's "unrealized
receivables"
and
"substantially
appreciated inventory"
(within
the meaning of IRC Section 751) shall not be reduced, so that, notwithstanding
any other provisions of this Agreement to the contrary, that portion of the
Net
Profit otherwise allocable upon a liquidation or dissolution of the Company
pursuant to Article
V
hereof
which is taxable as ordinary income (recaptured) for federal income tax purposes
shall, to the extent possible without increasing the total gain to the Company
or to any Member, be specially allocated among the Members in proportion to
the
deductions (or basis reductions treated as deductions) giving rise to such
recapture.
(i) In
the
event that (a) there is a change in the federal income tax law, (b) the Company
borrows money or property, or (c) the Company makes an election to adjust the
basis of the Company’s assets under Section 754 of the Code, the Board of
Directors, acting in its reasonable discretion after consultation with tax
counsel to the Company, shall make the minimum modifications to the allocation
provisions of this Agreement necessary to preserve the underlying economic
objectives of the Members as reflected in this Agreement, and, in the case
of
such a borrowing or election, shall properly allocate the tax items relating
to
such borrowing or election in accordance with the IRC and the Treasury
Regulations.
ARTICLE
VI
DISTRIBUTIONS
Section
6.01. General.
Except
as provided in Article X, after providing for the payment of any amounts due
on
the indebtedness of the Company, if any, and providing for a reasonable reserve
for the payment of expenses and liabilities of the Company, the balance of
the
Net Profits of the Company shall be distributed to the Members at
such
times as determined by the Board of Directors, but on no less than a quarterly
basis,
pro
rata among the Members based upon their respective Percentage
Interests.
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Section
6.02. Tax
Distributions.
Notwithstanding anything contained herein to the contrary, within ninety (90)
days following each fiscal year, subject to the availability of cash after
providing for the payment of any amounts due on the indebtedness of the Company,
if any, and providing for a reasonable reserve for the payment of expenses
and
liabilities of the Company, the Company shall distribute to each Member cash
in
an amount equal to forty percent (40%) of the Company’s net taxable income or
gain shown as allocated to such Member on the Company’s federal income tax
return for such fiscal year. Notwithstanding the foregoing, the aggregate amount
of any distribution payable to any Member under this Section
6.02
shall be
reduced by any other distributions received by such Member during the applicable
fiscal year.
ARTICLE
VII
INDEMNIFICATION
Section
7.01. Indemnification
of Directors and Officers.
The
Company shall, to the fullest extent permitted by the Act, as amended from
time
to time, and subject to the limitations and conditions set forth in this Article
VII, indemnify the organizer, officers and Directors of the Company
(collectively, "Indemnified
Persons")
from
and against all expenses and liabilities (including counsel fees, judgments,
fines, excise taxes, penalties and amounts payable in settlements) reasonably
incurred by or imposed upon an Indemnified Person in connection with any
threatened, pending or completed action, suit or other proceeding, whether
civil, criminal, administrative or investigative, in which such Indemnified
Person may become involved by reason of his or her service as an officer or
Director of the Company. The Members shall have such indemnification rights
and
obligations as set forth in the Collaboration Agreement and as otherwise
determined by all of the Members.
(a) Indemnification
may include payment by the Company of expenses in defending an action or
proceeding in advance of the final disposition of such action or proceeding
upon
receipt of any undertaking by the Indemnified Person to repay such payment
if it
is ultimately determined that he is not entitled to indemnification under this
Article
VII,
which
undertaking may be accepted without reference to the financial ability of the
Indemnified Person to make such repayments.
(b) The
Company shall not indemnify any Indemnified Person in connection with a
proceeding (or part thereof) initiated by such person unless he or she is
successful on the merits, the proceeding was authorized by the Members or the
Board of Directors or the proceeding seeks a declaratory judgment regarding
his
own conduct.
(c) The
indemnification rights provided in this Article
VII
(i)
shall not be deemed exclusive of any other rights to which Indemnified Persons
may be entitled under any law, agreement or vote of disinterested Members,
Board
of Directors or otherwise, and (ii) shall inure to the benefit of the heirs,
executors and administrators of Indemnified Persons. The Company may, to the
extent authorized from time to time by the Board of Directors, grant
indemnification rights to employees or agents of the Company or persons other
than Indemnified Persons serving the Company and such rights maybe equivalent
to, or greater or less than, those set forth in this Article
VII.
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(d) No
indemnification shall be provided for any Indemnified Person with respect to
(i)
any matter as to which he or she shall have been finally adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Company, (ii) any act which constitutes
gross negligence or willful misconduct, or (iii) any matter disposed of by
a
compromise payment by such Indemnified Person, pursuant to a consent decree
or
otherwise, unless the payment and indemnification thereof have been approved
by
the Board of Directors, which approval shall not unreasonably be withheld or
delayed, or by a court of competent jurisdiction.
(e) Any
amendment or repeal of the provisions of this Article
VII
shall
not adversely affect any right or protection of an Indemnified Person with
respect to any act or omission of such Indemnified Person occurring prior to
such amendment or repeal.
ARTICLE
VIII
ASSIGNABILITY
OF MEMBERSHIP INTERESTS
Section
8.01. Assignment.
(a) A
Member
may not assign his or its membership interest in the Company, or any of his
or
its rights or obligations under this Agreement, in whole or in part, without
the
prior written consent of all of the other Members, who may or may not consent
thereto in their absolute discretion. In addition to the foregoing limitation,
Cyberkinetics and NEUROMetrix shall assign all of their respective interests
in
the Company, including without limitation their membership interest in the
Company, and their rights and obligations under this Agreement, to any assignee
of such party’s rights under the Collaboration Agreement and, notwithstanding
the foregoing sentence, no such assignment shall require the consent of any
other Member.
(b) An
assignment of a Member's interest does not of itself dissolve the Company or
permit the assignee to participate in the business and affairs of the Company
or
to become a Member or exercise any rights or powers of a Member.
Section
8.02. Substitute
Members.
Except
for an assignee of a Member's interest in accordance with the second sentence
of
Section
8.01 (a),
who
shall be admitted as a Substitute Member, no assignee of a Member's interest
shall have the right to be admitted as a Substitute Member in place of the
assignor unless:
(a) the
assignor shall designate in writing satisfactory to the other Members the
intention that the assignee is to become a Substitute Member;
(b) the
assignee shall agree in writing to be bound by all of the terms of this
Agreement;
(c) all
of
the other Members consent in writing to the admission of the assignee as a
Substitute Member, which consent may be withheld in their absolute
discretion;
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(d) the
assignee shall execute and/or deliver such instruments, including without
limitation, an opinion of counsel satisfactory to the Members, to the effect
that such proposed assignment and substitution does not violate state or federal
securities laws, and such instrument as the Members deem necessary or desirable
to effect such assignee's admission as a Substitute Member and to evidence
the
assignee's acceptance of the terms of this Agreement; and
(e) the
assignee shall pay all reasonable expenses in connection with the assignee's
admission as a Substitute Member.
Section
8.03. Rights
of Assignees.
An
assignee who does not become a Substitute Member shall succeed only to the
rights of the assignor to receive allocations and distributions from the Company
as provided in Articles
V,
VI
and
X,
and
shall not have the right to vote to the extent of the assigned
interest.
Section
8.04. Other
Restrictions.
A
Member may not pledge, encumber or hypothecate any of its interest without
the
prior written consent of all of the other Members.
ARTICLE
IX
FISCAL
YEAR, ACCOUNTING, INSPECTION OF BOOKS
Section
9.01. Fiscal
Year and Accounting.
Except
as otherwise approved by the Board of Directors, or required by law, the fiscal
year of the Company shall be the calendar year and the books of the Company
shall be kept on the accrual method.
Section
9.02. Inspection
of Books.
The
books of the Company shall at all times be available for inspection and audit
by
any Member at the Company's principal place of business during business hours.
The Company shall furnish each Member with all necessary tax reporting
information as to its interest in the Company, with an annual balance sheet
and
profit and loss statement and with a cash flow statement showing any
distributions made to the Members, within ninety (90) days
after the close of each fiscal year.
ARTICLE
X
DISSOLUTION
Section
10.01. Events
of Dissolution.
The
term of the Company shall commence on the Effective Date and shall be in full
force and effect until the earliest of the following:
(a) the
sale
or disposition of all or substantially all of the assets of the
Company;
(b) the
dissolution of the Company by the unanimous consent of the Members;
(c) the
death, insanity, retirement, resignation, expulsion, bankruptcy, or dissolution
of a Member; provided,
however,
that
the Members may consent to the continuation of the business of the Company
after
the occurrence of such an event, pursuant to Section 18-806 of the Act and
Section
10.02
of this
Agreement;
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(d) the
entry
of a decree of judicial dissolution under Section 18-802 of the Act;
(e) the
occurrence of any event, other than those referred to in paragraph (d), which
causes dissolution of a limited liability company under the Act; or
(f) upon
the
termination of the Collaboration Agreement in accordance with its
terms.
Notwithstanding
the dissolution of the Company, the business of the Company shall continue
to be
governed by this Agreement until the winding up of the Company
occurs.
Section
10.02. Consent
to Continue Company.
The
Members may vote to continue the business of the Company within ninety (90)
days
after the occurrence of an event of dissolution as set forth in Section
10.01,
pursuant to and in accordance with Section 18-806 of the Act. The agreement
of
the remaining Members holding a majority of the remaining Percentage Interests
shall constitute the consent of the Members to the continuation of the
Company.
Section
10.03. Distribution
Upon Dissolution.
(a) After
payment of liabilities owing to creditors, the Board of Directors or the
liquidator, as the case may be, shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or obligations
of the Company, including the expenses of liquidation. Such reserves may be
paid
over by the Board of Directors or the liquidator to a bank to be held in escrow
for the purpose of paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the Board of Directors
or
the liquidator may deem advisable, such reserves shall be distributed to the
Members or their assigns in the manner set forth below in Section
10.03(b).
In the
event that any part of such net assets consists of securities or other non-cash
assets, the Board of Directors or liquidator may (but shall not be required
to)
take whatever steps it deems appropriate to convert such assets into cash or
into any other form that would facilitate the distribution thereof.
(b) After
payment has been made pursuant to Section
10.03(a),
the
Board of Directors or the liquidator shall (i) cause the assets described in
Section 13.03 of the Collaboration Agreement to be distributed in accordance
with the applicable terms of such section and (ii) cause the remaining net
assets of the Company to be distributed to and among the Members in proportion
to and to the extent of their positive Capital Account balances (after such
balances have been adjusted to reflect all allocations of Net Profits and Net
Losses and the payments made in Section
10.03(a)).
For
purposes of distributing assets pursuant to the foregoing clause (ii), cash
and
non-cash assets shall be distributed to each Member on a pro rata basis, or
in
such other manner as the Board of Directors may determine, with all non-cash
assets being distributed on the basis of their fair market value.
(c) The
Company shall terminate when all property has been distributed among the
Members. Upon such termination, the Board of Directors shall execute and cause
to be filed a certificate of cancellation of the Company, as provided for in
Section 18-203 of the Act, and any and all other documents necessary in
connection with the termination of the Company.
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ARTICLE
XI
GENERAL
PROVISIONS
Section
11.01. Complete
Agreement; Conflicts Among Agreements; Modification.
This
Agreement and the Collaboration Agreement contain a complete statement of all
the agreements among the parties hereto with respect to the Company. There
are
no representations, agreements, arrangements or undertakings, oral or written,
between or among the Members relating to the subject matter of this Agreement
and the Collaboration Agreement which are not fully expressed in this Agreement
and the Collaboration Agreement. Except to the extent this Agreement
specifically provides that it shall control as to any conflicting provisions
as
between it and the Collaboration Agreement, it is intended that the provisions
of this Agreement and the provisions of the Collaboration Agreement will
supplement each other and such agreements shall be reconciled with one another
to the maximum extent possible. This Agreement may be amended or modified only
with the prior written consent of all of the Members.
Section
11.02. Governing
Law; Severability.
All
questions with respect to the construction of this Agreement and the rights
and
liabilities of the parties shall be determined in accordance with the applicable
provisions of the laws of the State of Delaware, and this Agreement is intended
to be performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations of such state. If any
provision of this Agreement, or the application thereof to any person or
circumstances, shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of that
provision to other persons or circumstances shall not be affected but rather
be
enforced to the extent permitted by law.
Section
11.03. Notice.
Any
consent, notice or report required or permitted to be given or made under this
Agreement by one of the parties hereto to the other shall be in writing,
delivered personally, by facsimile or by electronic transmission (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid (where
applicable), addressed to such other party at its address indicated on
Schedule
A,
or to
such other address as the addressee shall have last furnished in writing to
the
addressor, and shall be effective upon receipt by the addressee.
Section
11.04. Pronouns.
Feminine or masculine pronouns shall be substituted for the neuter pronouns,
neuter pronouns for masculine or feminine pronouns, plural for the singular
and
the singular for the plural, in any place in this Agreement where the context
may require such substitution.
Section
11.05. Titles.
The
titles of Articles and Sections are included only for convenience and shall
not
be construed as a part of this Agreement or in any respect affecting or
modifying its provisions.
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Section
11.06. Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of all parties hereto
and their heirs, successors, permitted assigns, and legal
representatives.
Section
11.07. Counterparts.
This
Agreement may be signed in one or more counterparts and all counterparts so
executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all parties have not signed the original or the same
counterpart.
Section
11.08. Dispute
Resolution.
Any
dispute or claim arising out of or relating to this Agreement, or a breach
hereof, shall be resolved consistent with and pursuant to the dispute resolution
procedures set forth in Section
14.10(c) and (d)
of the
Collaboration Agreement, as the same may be amended from time to time, and
such
provisions are incorporated herein by reference and applicable hereto regardless
of any termination of the Collaboration Agreement.
Section
11.09. Legal
Counsel.
Each
Member hereby acknowledges and agrees that
each
Member will, if it desires to engage counsel on any matter, retain its own
independent counsel with respect thereto and will pay all fees and expenses
of
such independent counsel. The Company may engage legal counsel in connection
with its business and affairs so long as the selection thereof is approved
by
the Board of Directors.
Section
11.10. Auditors.
The
Company may engage independent auditors in connection with its business and
affairs so long as the selection thereof is approved by the Board of
Directors.
[The
remainder of this page is intentionally left blank.]
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IN
WITNESS WHEREOF,
we have
affixed our signatures as of the day first above written.
| MEMBERS : | ||
| |
|
|
| Date: | By: | /s/ Xxx Xxxxxxxx |
|
Title: President |
||
|
NEUROMetrix
Corporation
|
||
| |
|
|
| By: | /s/ Xxxx Xxxxxx | |
|
Title: President |
||
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Schedule
A
As
of February 19, 2008
Members
000
Xxxxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxxxxxx,
Xxxxxxxxxxxxx 00000
Attn:
President
NEUROMetrix
Corporation
00
Xxxxxx
Xxxxxx
Xxxxxxx,
Xxxxxxxxxxxxx 00000
Attn:
President
Initial
Property Capital Contributions
|
[***]
*
|
|
|
NEUROMetrix
Corporation:
|
[***]
**
|
*
Agreed
fair market value for Cyberkinetics Patent Rights, Cyberkinetics Technology
and
Cyberkinetics Manufacturing Know-How contributed as of the Effective Date
pursuant to the terms of the Collaboration Agreement.
**
Agreed
fair market value for NEUROMetrix Patent Rights, NEUROMetrix Technology and
NEUROMetrix Manufacturing Know-How contributed as of the Effective Date pursuant
to the terms of the Collaboration Agreement.
Percentage
Interests
|
50
|
%
|
|||
|
NEUROMetrix
Corporation
|
50
|
%
|
||
|
Total:
|
100
|
%
|
20
