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EXHIBIT 10.9
OPERATING AGREEMENT
FOR
MICROSCRIBE, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS
AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH
ARE SET FORTH HEREIN.
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LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
MICROSCRIBE, LLC
This Limited Liability IMMERSION Operating Agreement (the "Agreement")
is entered into effective as of July 1, 1997 by and among the parties listed on
the signature page hereof (referred to individually as a "Member" and
collectively as "Members"), with reference to the following facts:
A. On June 2, 1997, Articles of Organization for MicroScribe, LLC (the
"IMMERSION"), a limited liability company organized under the laws of the State
of California, were filed with the California Secretary of State.
B. The Members desire to adopt and approve an operating agreement for
IMMERSION.
NOW THEREFORE, the Members by this Agreement set forth the operating
agreement for IMMERSION under the laws of the State of California, upon the
terms and subject to the conditions of this Agreement.
ARTICLE 1.
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article 1 shall have the meanings set forth elsewhere in this Agreement):
ARTICLE 1.1 "Act" shall mean the Xxxxxxx-Xxxxxx Limited Liability
IMMERSION Act, codified in the California Corporations Code, Section 17000 et
seq., as amended from time to time.
ARTICLE 1.2 "Affiliate" of a Member or Manager shall mean any Person,
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with a Member or Manager, as applicable.
The term "control," as used in the immediately preceding sentence, shall mean
with respect to a corporation or limited liability company the right to
exercise, directly or indirectly, more than fifty percent (50%) of the voting
rights attributable to the controlled corporation or limited liability company,
and, with respect to any individual, partnership, trust, other entity or
association, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity.
ARTICLE 1.3 "Agreement" shall mean this Operating Agreement, as
originally executed
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and as amended from time to time.
ARTICLE 1.4 "Articles" shall mean the Articles of Organization for
IMMERSION originally filed with the California Secretary of State, as amended
from time to time.
ARTICLE 1.5 "Assignee" shall mean the owner of an Economic Interest who
has not been admitted as a substitute Member in accordance with Article 7.
ARTICLE 1.6 "Bankruptcy" shall mean: (a) the filing of an application by
a Member for, or the Member's consent to, the appointment of a trustee,
receiver, or custodian of the Member's other assets; (b) the entry of an order
for relief with respect to a Member in proceedings under the United States
Bankruptcy Code, as amended or superseded from time to time; (c) the making by a
Member of a general assignment for the benefit of creditors; (d) the entry of an
order, judgment, or decree by any court of competent jurisdiction appointing a
trustee, receiver, or custodian of the assets of a Member unless the proceedings
and the person appointed are dismissed within ninety (90) days; or (e) the
failure by a Member generally to pay the Member's debts as the debts become due
within the meaning of Section 303(h)(1) of the United States Bankruptcy Code, as
determined by the Bankruptcy Court, or the admission in writing of the Member's
inability to pay the Member's debts as they become due.
ARTICLE 1.7 "Capital Account" shall mean with respect to any Member the
capital account which IMMERSION establishes and maintains for such Member as
follows:
Each Member's Capital Account shall be:
A. increased by (1) the aggregate amount of cash contributions to
IMMERSION by such Member, (2) such Member's share of IMMERSION Income, (3) the
fair market value of property contributed by the Member net of liabilities
secured by such property that IMMERSION is considered to assume or take
subject to under Section 752 of the Code, and (4) the amount of any other upward
adjustment to the Member's Capital Account required under Regulations Section
1.704-1(b), or any successor thereto; and
B. decreased by (1) cash distributions to such Member from
IMMERSION (other than to any Member in repayment of any loan or advance), (2)
such Member's share of IMMERSION Losses, (3) the fair market value of property
distributed to the Member by IMMERSION net of liabilities secured by such
property that such Member is considered to assume or take subject to under
Section 752 of the Code, and (4) the amount of any other downward adjustment to
the Member's Capital Account required under Regulations Section 1.704-1(b), or
any successor thereto.
For purposes of computing the balance in a Member's Capital Account, no
credit shall be given for any capital contribution which the Member is obligated
to make until such contribution is actually made. For purposes of this
Agreement, a transferee of any part of the interest of a Member who succeeds to
the Economic Interest of a Member shall be deemed to have made the
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capital contributions which were made by the Member with respect to the Economic
Interest to which the transferee succeeds and to have received from IMMERSION
the credits, allocations and charges received from IMMERSION by such transferor
Member with respect to the transferred Economic Interest.
Notwithstanding any other provision in this Agreement, the Capital
Accounts of the Members shall be maintained in accordance with Regulations
Section 1.704-1(b), or any successor thereto. If a Member holds an interest as
both a Class 1 Member and a Class 2 Member, a single Capital Account shall
nevertheless be maintained for such Member.
ARTICLE 1.8 "Capital Contribution" shall mean the total amount of cash
and fair market value of property contributed to IMMERSION by a Member.
ARTICLE 1.9 "Capital Event" means a sale or disposition of any of
IMMERSION's capital assets, the receipt of insurance and other proceeds derived
from the involuntary conversion of IMMERSION property, or a similar event with
respect to IMMERSION property or assets.
ARTICLE 1.10 "Class 1 Member" means a Member holding Units as a Class 1
Member.
ARTICLE 1.11 "Class 2 Member" means a Member holding Units as a Class 2
Member.
ARTICLE 1.12 "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 Regulations.
ARTICLE 1.13 "Common Stock" has the meaning set forth in Article 7.8.
ARTICLE 1.14 "IMMERSION" shall mean MicroScribe, LLC, a California
limited liability company.
ARTICLE 1.15 "IMMERSION Minimum Gain" shall have the meaning ascribed to
the term "Partnership Minimum Gain" in Regulations Section 1.704-2(d).
ARTICLE 1.16 "Corporations Code" shall mean the California Corporations
Code, as amended from time to time, and the provisions of succeeding law.
ARTICLE 1.17 "Dissolution Event" shall mean with respect to all Managers
who are Members one or more of the following: the death, insanity, withdrawal,
resignation, retirement, expulsion, bankruptcy or dissolution of any such
Member-Managers.
ARTICLE 1.18 "Distributable Cash" shall mean the amount of cash which
the Managers deem available for distribution to the Members, taking into account
all debts,
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liabilities, and obligations of IMMERSION then due, and working capital and
other amounts which the Managers deem necessary for IMMERSION's business or to
place into reserves for customary and usual claims with respect to such
business.
ARTICLE 1.19 "Economic Interest" shall mean the right to receive
distributions of IMMERSION's assets and allocations of income, gain, loss,
deduction, credit and similar items from IMMERSION pursuant to this Agreement
and the Act, but shall not include any other rights of a Member, including,
without limitation, the right to vote or participate in the management of
IMMERSION, or except as provided in Section 17106 of the Corporations Code, any
right to information concerning the business and affairs of IMMERSION.
ARTICLE 1.20 "Fiscal Year" shall mean IMMERSION's fiscal year, which
shall be the calendar year.
ARTICLE 1.21 "Income" and "Losses" The IMMERSION's "Income" and "Losses"
shall be determined as of December 31 or any other year end of each year of
IMMERSION, and shall be deemed to mean the income and losses of IMMERSION for
federal income tax purposes as determined by the Managers on the advice of the
certified public accountant who prepares the company's federal income tax
returns. "Income" shall include income exempt from federal income taxation and
"Losses" shall include expenditures described in Section 705(a)(2)(B) of the
Code or treated as such under Regulations Section 1.704-1(b). Income or Losses
upon the disposition of any property contributed to IMMERSION shall be
determined with respect to the book basis of such property instead of its income
tax basis. Any items of gross income allocated pursuant to Articles 6.2B or 6.2C
shall be excluded in determining Income or Losses for the years in which
allocated.
ARTICLE 1.22 "Majority Interest" shall mean those Members who hold a
majority of the Percentage Interests which all Members who are not defaulting
Members hold.
ARTICLE 1.23 "Manager" shall mean each of the persons named as Managers
on Exhibit A, or any other persons that succeed any of them as a manager of
IMMERSION.
ARTICLE 1.24 "Member" shall mean each Person who (a) is an initial
signatory to this Agreement, has been admitted to IMMERSION as a Member in
accordance with the Articles or this Agreement or is an Assignee who has become
a Member in accordance with Article 7, and (b) has not ceased to be a Member for
any reason.
ARTICLE 1.25 "Member Nonrecourse Debt" shall have the meaning ascribed
to the term "Partner Nonrecourse Debt" in Regulations Section 1.704-2(b)(4).
ARTICLE 1.26 "Member Nonrecourse Deductions" shall mean items of
IMMERSION loss, deduction, or Code Section 705(a)(2)(B) expenditures which are
attributable to Member Nonrecourse Debt.
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ARTICLE 1.27 "Membership Interest" shall mean a Member's entire interest
in IMMERSION including the Member's Economic Interest, the right to vote on or
participate in the management, and the right to receive information concerning
the business and affairs, of IMMERSION.
ARTICLE 1.28 "Nonrecourse Liability" shall have the meaning set forth in
Regulations Section 1.752-1(a)(2).
ARTICLE 1.29 "Percentage Interest" shall mean the percentage of a Member
as of any relevant date determined by dividing a Member's Units by the total
outstanding Units as of that date, as such percentage may be adjusted from time
to time pursuant to the terms of this Agreement.
ARTICLE 1.30 "Person" shall mean an individual, partnership, limited
partnership, limited liability company, corporation, trust, estate, association
or any other entity.
ARTICLE 1.31 "Preferred Stock" has the meaning set forth in Article 7.8.
ARTICLE 1.32 "Regulations" shall, unless the context clearly indicates
otherwise, mean the regulations in force as final or temporary that have been
issued by the U.S. Department of Treasury pursuant to its authority under the
Code, and any successor regulations.
ARTICLE 1.33 "Tax Matters Partner" (as defined in Code Section 6231)
shall be Xxxxxxx Xxxxx or his successor as designated pursuant to Article 8.8.
ARTICLE 1.34 "Unit" means a Unit held as a Class 1 or Class 2 Member in
IMMERSION, as applicable.
ARTICLE 1.35 "Unreturned Capital" means the excess of a Member's
aggregate Capital Contributions to IMMERSION over the aggregate distributions
to the Member under Article 6.4, as such excess may vary from time to time.
ARTICLE 2.
ORGANIZATIONAL MATTERS
ARTICLE 2.1 Formation. The Members have formed a California limited
liability company under the laws of the State of California by filing the
Articles with the California Secretary of State and entering into this
Agreement, which Agreement shall be deemed effective as of the date of this
Agreement. The rights and liabilities of the Members shall be determined
pursuant to the Act and this Agreement. To the extent that the rights or
obligation of any Member are different by reason of any provision of this
Agreement than they would be in the
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absence of such provision, this Agreement shall, to the extent permitted by the
Act, control.
ARTICLE 2.2 Name. The name of IMMERSION shall be "MicroScribe, LLC."
The business of IMMERSION may be conducted under that name or, upon compliance
with applicable laws, any other name that the Managers deem appropriate or
advisable.
ARTICLE 2.3 Term. The term of this Agreement commenced on the filing of
the Articles and shall continue until December 31, 2047, unless extended or
sooner terminated as hereinafter provided.
ARTICLE 2.4 Office and Agent. The IMMERSION shall continuously maintain
an office and registered agent in the State of California. The principal office
of IMMERSION shall be at 0000 Xxxxxxx Xxxxx, Xxx Xxxx, Xxxxxxxxxx or as the
Managers may determine. The IMMERSION may also have such offices, anywhere
within and without the State of California, as the Managers may determine from
time to time, or the business of IMMERSION may require. The registered agent
shall be as stated in the Articles or as otherwise determined by the Managers.
ARTICLE 2.5 Addresses of the Members and the Managers. The respective
addresses of the Members and the Managers are set forth on Exhibit A. A Member
may change the Member's address upon notice thereof to the Managers.
ARTICLE 2.6 Purpose and Business of IMMERSION. The purpose of IMMERSION
is to engage in any lawful activity for which a limited liability company may be
organized under the Act.
ARTICLE 3.
CAPITAL CONTRIBUTIONS
ARTICLE 3.1 Initial Capital Contributions.
A. Immersion Corporation. Immersion Corporation, a California
corporation ("Immersion") shall contribute to IMMERSION all of its right, title
and interest in and to certain hardware, software, know-how, patent rights and
trademarks related to three dimensional ("3D") digitizing technology,
specifically including the assets described on Exhibit C, subject to all of the
liabilities related thereto, in exchange for One Thousand (1,000) Units as a
Class 1 Member and Ninety-Eight Thousand Nine Hundred Ninety-Nine (98,999) Units
as a Class 2 Member. Upon its execution of this Agreement, Immersion shall
receive a credit to its Capital Account in the amount set forth on Exhibit A.
The Members acknowledge their understanding that Immersion intends to declare a
dividend and distribute all of its Class 2 Member Units to its shareholders.
B. Other Member. The Capital Contribution of the other Class 2
Member as
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set forth on Exhibit A will be paid in cash. The Class 2 Member will receive One
Unit for One Cent ($.01) contributed to IMMERSION as a Class 2 Member, and
receive a corresponding credit to the Member's Capital Account as and when the
Member's contribution is made.
ARTICLE 3.2 Additional Capital Contributions. No Member shall be
required to make any additional Capital Contributions. To the extent approved by
the Managers and a Majority Interest, from time to time, the Members may be
permitted to make additional Capital Contributions if and to the extent they so
desire. If the Managers determine that such additional Capital Contributions are
necessary or appropriate for the conduct of IMMERSION's business, including
without limitation, expansion or diversification. In that event, the Members
desiring to make such contributions shall have the opportunity, but not the
obligation, for a period of up to twenty (20) days from receipt of written
notice from IMMERSION of the opportunity, to participate in such additional
Capital Contributions for additional Units on a pro rata basis in accordance
with their Percentage Interests. Each Member shall receive a credit to the
Member's Capital Account in the amount of any additional capital which he
contributes to IMMERSION. Immediately following any such Capital
Contributions, the Percentage Interests shall be as adjusted by the Managers as
agreed by a Majority Interest.
ARTICLE 3.3 No Interest. No Member shall be entitled to receive any
interest on the Member's Capital Contributions.
ARTICLE 4.
MEMBERS
ARTICLE 4.1 Limited Liability. Except as expressly set forth in this
Agreement or required by law, no Member shall be personally liable for any debt,
obligation, or liability of IMMERSION, whether that liability or obligation
arises in contract, tort, or otherwise.
ARTICLE 4.2 Admission of Additional Members.
A. Subject to Article 4.2B, the Managers may issue additional
Membership Interests and admit additional Members to IMMERSION. Any additional
Members shall obtain Membership Interests and Units and will participate in the
management, Income and Losses, and distributions of IMMERSION on such terms as
are determined by the Managers and approved by a Majority Interest.
B. If at any time IMMERSION should desire to issue any
additional Membership Interests approved pursuant to Article 4.2A, it shall give
the Members notice of the first right to purchase the Member's pro rata share
(or any part thereof) of all such offered Membership Interests, on the same
terms and subject to the same conditions, as IMMERSION is willing to sell such
Membership Interests to any other person (the "Right of First Refusal Notice").
Each Member's pro rata share shall be such Member's Percentage Interest
immediately
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prior to the offering.
(i) Within twenty (20) days after receipt of the Right of
First Refusal Notice, each Member shall notify IMMERSION whether such Member
desires to exercise the option to purchase the Member's pro rata share (or any
part thereof) of the Membership Interests so offered.
(ii) After termination of the twenty (20) day period
specified in Article 4.2B(i) above, IMMERSION may, during a period of ninety
(90) days following the end of such twenty (20) day period, sell and issue such
Membership Interests as to which no Member indicates a desire to purchase
pursuant to the Member's Right of First Refusal Notice to other persons, upon
the same terms and conditions as those set forth in the Right of First Refusal
Notice to the Members.
(iii) If the Member gives IMMERSION notice that the Member
desires to purchase any of the Membership Interests offered by IMMERSION,
payment for the Membership Interests shall be by check or wire transfer against
delivery of the Membership Interests at the executive offices of IMMERSION
within ten (10) days after giving IMMERSION such notice, or, if later, the
closing date for the sale of such Membership Interests. The IMMERSION shall take
all the action as may be required by any regulatory authority in connection with
the exercise by such Member of the Right of First Refusal.
(iv) The Right of First Refusal contained in this Article
4.2 shall not apply to the issuance by IMMERSION of Membership Interests (i) to
employees, officers, directors or consultants of IMMERSION when approved by the
Managers, (ii) as part of an acquisition by IMMERSION of all or substantially
all of the assets or shares of another company or entity whether through a
merger, exchange, reorganization or the like, or (iii) pursuant to equipment
financing or leasing arrangements or in connection with strategic partnering
transactions approved by the Managers.
(v) A Member shall have the right to assign the Member's
Right of First Refusal to an Affiliate of the Member.
ARTICLE 4.3 Withdrawals or Resignations. Any Member who is under an
obligation to render services to IMMERSION may withdraw or resign as a Member at
any time upon sixty (60) days prior written notice to IMMERSION, without
prejudice to the rights, if any, of IMMERSION or the other Members under any
contract to which the withdrawing Member is a party. Upon such withdrawal, such
Member's Membership Interest shall terminate pursuant to Article 4.4. No other
Member may withdraw or resign from IMMERSION.
ARTICLE 4.4 Termination of Membership Interest. Upon (a) the transfer of
a Member's Membership Interest in violation of Article 7 or (b) the withdrawal
or resignation of a Member in accordance with Article 4.3, the Membership
Interest of a Member shall be terminated by the Managers and thereafter that
Member shall be an Assignee only. Each Member acknowledges
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and agrees that such termination or purchase of a Membership Interest upon the
occurrence of any of the foregoing events is not unreasonable under the
circumstances existing as of the date hereof.
ARTICLE 4.5 Competing Activities.
A. Except as provided in Article 5.6 with regard to Managers,
during the term of IMMERSION, the Members and their officers, directors,
shareholders, partners, members, managers, agents, employees and Affiliates may
engage or invest in, independently or with others, any business activity of any
type or description, including without limitation those that might be the same
as or similar to IMMERSION's business and that might be in direct or indirect
competition with IMMERSION. Neither IMMERSION nor any Member shall have any
right in or to such other ventures or activities or to the income or proceeds
derived therefrom.
B. Except as provided in Article 5.6 with regard to Managers,
during the term of IMMERSION, the Members and their officers, directors,
shareholders, partners, members, managers, agents, employees and Affiliates
shall not be obligated to present any investment opportunity or prospective
economic advantage to IMMERSION. Neither IMMERSION nor any Member shall have
any right in or to such other ventures or activities or to the income or
proceeds derived therefrom.
ARTICLE 4.6 Transactions With The IMMERSION. Subject to any limitations
set forth in this Agreement and with the prior approval of the Managers, a
Member may lend money to and transact other business with IMMERSION. Subject
to other applicable law, such Member has the same rights and obligations with
respect thereto as a Person who is not a Member.
ARTICLE 4.7 Remuneration To Members. Except as otherwise specifically
provided in this Agreement, no Member is entitled to remuneration for acting in
IMMERSION business.
ARTICLE 4.8 Members Are Not Agents. Pursuant to Article 5.1 and the
Articles, the management of IMMERSION is vested in the Managers. The Members
shall have no power to participate in the management of IMMERSION except as
expressly authorized by this Agreement or the Articles and except as expressly
required by the Act. No Member, acting solely in the capacity of a Member, is an
agent of IMMERSION nor does any Member, unless expressly and duly authorized
in writing to do so by a Manager or Managers, have any power or authority to
bind or act on behalf of IMMERSION in any way, to pledge its credit, to
execute any instrument on its behalf or to render it liable for any purpose.
ARTICLE 4.9 Voting Rights. Except as expressly provided in this
Agreement or the Articles, Members shall have no voting, approval or consent
rights. Members shall have the right to approve or disapprove matters as
specifically stated in this Agreement, including the following:
A. Approval by Members Holding a Majority Interest. Except as set
forth in
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Article 5.3B, in all matters in which a vote, approval or consent of the Members
is required, a vote, consent or approval of a Majority Interest (or, in
instances in which there are defaulting or remaining members, non-defaulting or
remaining Members who hold a majority of the Percentage Interests held by all
non-defaulting or remaining Members) shall be sufficient to authorize or approve
such act.
B. Other Voting Rights. Members may vote, consent or approve to
the extent and on the terms provided in this Agreement including, but not
limited to, as provided in the following Articles:
(i) Article 3.2 on additional Capital Contributions;
(ii) Article 4.2 on issuance of additional Membership
interests;
(iii) Article 5.2 on election and removal of a
Manager;
(iv) Article 5.3B on reorganization of IMMERSION;
(v) Article 5.3B on other limitations on the
Managers' authority;
(vi) Article 5.7 on transactions with the Managers
and Affiliates of the Managers;
(vii) Article 5.9A on management fees payable to
Managers;
(viii) Article 7.1 on Transfer of Interests;
(ix) Articles 9.1 and 9.2 on dissolving IMMERSION;
and
(x) Article 12.14 on any amendment to the Articles
or this Agreement.
ARTICLE 4.10 Meetings of Members. No meetings of the Members are
required. If Meetings are held, they shall be called, written notice shall be
given or waived, a quorum shall be constituted, action shall be valid or
consented to, an agent or written proxy may be utilized, and participation may
be through the use of conference telephones or otherwise, all in accordance with
Corporations Code Section 17104. The Managers shall appoint a Person to preside
at the meeting and act as secretary of the meeting. The secretary of the meeting
shall prepare minutes of the meeting which shall be placed in the minute book of
IMMERSION. Any action that may be taken at a meeting of Members may be taken
without a meeting, if a consent in writing is signed and delivered to IMMERSION
in accordance with Corporations Code Section 17104. All such written consents
shall be maintained in IMMERSION's records.
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ARTICLE 4.11 Certificate of Membership Interest.
A. A Membership Interest shall be represented by a certificate of
membership. The exact contents of a certificate of membership may be determined
by action of the Managers but shall be issued substantially in conformity with
the following requirements. The certificates of membership shall be respectively
numbered serially, as they are issued and shall be signed by the Managers or
officers of IMMERSION. Each certificate of membership shall state the name of
IMMERSION, the fact that IMMERSION is organized under the laws of the State of
California as a limited liability company, the name of the person to whom
issued, the date of issue, and the number of Units and the Class of Units
represented thereby.
B. All certificates of membership surrendered to IMMERSION for
transfer shall be cancelled and no new certificates of membership shall be
issued in lieu therefor until the former certificates for a like number of
Membership Interests shall have been surrendered and cancelled, except as herein
provided with respect to lost, stolen, or destroyed certificates.
C. Any Member claiming that the Member's certificate of
membership is lost, stolen, or destroyed may make an affidavit or affirmation of
that fact and request a new certificate. Upon the giving of a satisfactory
indemnity to IMMERSION as reasonably required by the Managers, a new certificate
may be issued of the same tenor and representing the same number of Units of
membership of the particular Class as was represented by the certificate alleged
to be lost, stolen or destroyed.
ARTICLE 5.
MANAGEMENT AND CONTROL OF THE COMPANY
ARTICLE 5.1 Management of IMMERSION by Managers.
A. Exclusive Management by Managers. Subject to the provisions of
this Agreement relating to actions required to be approved by the Members, the
business, property and affairs of IMMERSION shall be managed and all powers of
IMMERSION shall be exercised by or under the direction of the Managers acting by
majority vote. Notwithstanding the foregoing, the Managers may delegate to
officers of the LLC the authority to carry out day-to-day functions of
IMMERSION, pursuant to the direction and policies established by the Managers.
B. Agency Authority of Managers. Subject to Article 5.3B, any
Manager, acting alone, is authorized to endorse checks, drafts, and other
evidences of indebtedness ("Instruments") made payable to the order of
IMMERSION, but only for the purpose of depositing such Instruments into
IMMERSION's accounts. All Instruments obligating IMMERSION to pay money
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in an amount less than Ten Thousand Dollars ($10,000.00) may be signed by any
one Manager, acting alone. All Instruments obligating IMMERSION to pay money in
an amount more than Ten Thousand Dollars ($10,000.00) must be signed on behalf
of IMMERSION by two (2) Managers acting together.
C. Meetings of Managers. The provisions of this Article 5.1C
govern meetings of the Managers if the Managers elect, in their discretion, to
hold meetings. Meetings of the Managers may be called by any Manager or by the
chairperson, president, any vice-president or the secretary. All meetings shall
be held upon four (4) days notice by mail or forty-eight (48) hours notice (or
upon such shorter notice period if necessary under the circumstances) delivered
personally or by telephone, telegraph or facsimile. A notice need not specify
the purpose of any meeting. Notice of a meeting need not be given to any Manager
who signs a waiver of notice or a consent to holding the meeting (which waiver
or consent need not specify the purpose of the meeting) or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior to its commencement, the lack of notice to such
Manager. All such waivers, consents and approvals shall be filed with IMMERSION
records or made a part of the minutes of the meeting. A majority of the Managers
present, whether or not a quorum is present, may adjourn any meeting to another
time and place. If the meeting is adjourned for more than twenty-four (24)
hours, notice of any adjournment shall be given prior to the time of the
adjourned meeting to the Managers who are not present at the time of the
adjournment. Meetings of the Managers may be held at any place within or without
the State of California which has been designated in the notice of the meeting
or at such place as may be approved by the Managers. Managers may participate in
a meeting through use of conference telephone or similar communications
equipment, so long as all Managers participating in such meeting can hear one
another. Participation in a meeting in such manner constitutes a presence in
person at such meeting. A majority of the number of Managers constitutes a
quorum of the Managers for the transaction of business. Except to the extent
that this Agreement expressly requires the approval of all Managers, every act
or decision done or made by a majority of the Managers present at a meeting duly
held at which a quorum is present is the act of the Managers. A meeting at which
a quorum is initially present may continue to transact business notwithstanding
the withdrawal of Managers, if any action taken is approved by at least a
majority of the required quorum for such meeting.
Any action required or permitted to be taken by the Managers may be
taken by the Managers without a meeting, if a majority of the Managers
individually or collectively consent in writing to such action, unless the
action requires the unanimous vote of the Managers, in which case all Managers
must consent in writing. Such action by written consent shall have the same
force and effect as a majority vote or unanimous vote, as applicable, of such
Managers.
ARTICLE 5.2 Election of Managers.
A. Number, Term and Qualifications. The IMMERSION shall initially
have three (3) Managers who are as set forth on Exhibit A. The number of
Managers of IMMERSION shall be fixed from time to time by the Managers, provided
that in no instance shall there be less than one Manager and provided further
that if the number of Managers is reduced from more than one to one, the
Articles shall be amended to so state, and if the number of Managers is
increased to
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more than one, the Articles shall be amended to delete the statement that
IMMERSION has only one Manager. Unless he resigns or is removed, each Manager
shall hold office until a successor shall have been elected and qualified.
Managers shall be elected by the affirmative vote or written consent of the
Managers, by majority vote. A Manager need not be a Member, an individual, a
resident of the State of California, or a citizen of the United States.
B. Resignation. Any Manager may resign at any time by giving
written notice to the Members and remaining Managers without prejudice to the
rights, if any, of IMMERSION under any contract to which the Manager is a party.
The resignation of any Manager shall take effect upon receipt of that notice or
at such later time as shall be specified in the notice. Unless otherwise
specified in the notice, the acceptance of the resignation shall not be
necessary to make it effective. The resignation of a Manager who is also a
Member shall not affect the Manager's rights as a Member and shall not
constitute a withdrawal of a Member.
C. Removal. Any Manager may be removed at any time, with or
without cause, by the affirmative vote of a Majority Interest at a meeting
called expressly for that purpose, or by the written consent of a Majority
Interest. Any removal shall be without prejudice to the rights, if any, of the
Manager under any employment contract and, if the Manager is also a Member,
shall not affect the Manager's rights as a Member or constitute a withdrawal of
a Member. Any Manager may also be removed at any time, with cause, by the
affirmative vote or written consent of a majority of the Managers. For purpose
of this Article, "cause" shall mean fraud, gross negligence, willful misconduct,
embezzlement or a material breach of such Manager's obligations under this
Agreement or any employment contract with IMMERSION.
D. Vacancies. Any vacancy occurring for any reason in the number
of Managers may be filled by the affirmative vote or written consent of the
Managers.
ARTICLE 5.3 Powers of Managers.
X. Xxxxxx of Managers. Without limiting the generality of Article
5.1, but subject to Article 5.3B and to the express limitations set forth
elsewhere in this Agreement, the Managers shall have all necessary powers to
manage and carry out the purposes, business, property, and affairs of IMMERSION,
including, without limitation, the power to exercise on behalf and in the name
of IMMERSION all of the powers described in Corporations Code Section 17003
including, without limitation, the power to:
(i) Acquire, purchase, renovate, improve, alter, rebuild,
demolish, replace, and own real property and any other property or assets that
the Managers determine is necessary or appropriate or in the interest of the
business of IMMERSION, and to acquire options for the purchase of any such
property;
(ii) Endorse checks, drafts, and other evidences of
indebtedness made payable to the order of IMMERSION, but only for the purpose of
deposit into IMMERSION's accounts.
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(iii) Sell, exchange, lease, or otherwise dispose of the
real property and other property and assets owned by IMMERSION, or any part
thereof, or any interest therein;
(iv) Borrow money from any party including the Managers
and their Affiliates, issue evidences of indebtedness in connection therewith,
refinance, increase the amount of, modify, amend, or change the terms of, or
extend the time for the payment of any indebtedness or obligation of IMMERSION,
and secure such indebtedness by mortgage, deed of trust, pledge, security
interest, or other lien on IMMERSION assets;
(v) Guarantee the payment of money or the performance of
any contract or obligation of any Person;
(vi) Xxx on, defend, or compromise any and all claims or
liabilities in favor of or against IMMERSION; submit any or all such claims or
liabilities to arbitration; and
(vii) Retain legal counsel, auditors, and other
professionals in connection with IMMERSION business and to pay therefor such
remuneration as the Managers may determine.
B. Limitations on Power of Managers. Notwithstanding any other
provisions of this Agreement, no debt or liability of more than Ten Thousand
Dollars ($10,000.00) may be contracted on behalf of IMMERSION except by the
written consent of a majority of the Managers. Additionally, the Managers shall
not have authority hereunder to cause IMMERSION to engage in the following
transactions without first obtaining the affirmative vote or written consent of
a Majority Interest (or all of the Members to the extent required by Article
5.3B(ii)):
(i) The sale, exchange or other disposition of all, or
substantially all, of IMMERSION's assets occurring as part of a single
transaction or plan, or in multiple transactions over a twelve (12) month
period, except in the orderly liquidation and winding up of the business of
IMMERSION upon its duly authorized dissolution;
(ii) The merger of IMMERSION with another limited
liability company or limited partnership; provided in no event shall a Member be
required to become a general partner in a merger with a limited partnership
without the Member's express written consent or unless the agreement of merger
provides each Member with the dissenter's rights described in the Act;
(iii) The merger of IMMERSION with a corporation or a
general partnership or other Person;
(iv) The establishment of different classes of Members;
(v) Transactions between IMMERSION and one or more of the
16
Managers or Members or one or more of any Manager's or Member's Affiliates, or
transactions in which one or more Managers or Members, or one or more of any
Manager's or Member's Affiliates, has a material financial interest;
(vi) Without limiting subsection (v), the lending of money
by IMMERSION to any Manager, Member, or officer;
(vii) Any act which would make it impossible to carry on
the ordinary business of IMMERSION.
(viii) The confession of a judgment against IMMERSION;
(ix) To file a bankruptcy petition on behalf of IMMERSION;
and
(x) Any other transaction described in this Agreement as
requiring the vote, consent, or approval of the Members.
ARTICLE 5.4 Performance of Duties; Liability of Managers. A Manager
shall not be liable to IMMERSION or to any Member for any loss or damage
sustained by IMMERSION or any Member, unless the loss or damage shall have
been the result of fraud, deceit, gross negligence, reckless or intentional
misconduct, or a knowing violation of law by the Manager. The Managers shall
perform their managerial duties in good faith, in a manner they reasonably
believe to be in the best interests of IMMERSION and its Members, and with
such care, including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances. A Manager who so performs
the duties of Manager shall not have any liability by reason of being or having
been a Manager of IMMERSION.
In performing their duties, the Managers shall be entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, of the following persons or groups unless they have
knowledge concerning the matter in question that would cause such reliance to be
unwarranted and provided that the Managers act in good faith and after
reasonable inquiry when the need therefor is indicated by the circumstances:
A. One or more officers, employees or other agents of IMMERSION
whom the Managers reasonably believe to be reliable and competent in the matters
presented,
B. Any attorney, independent accountant, or other person as to
matters which the Managers reasonably believe to be within such person's
professional or expert competence; or
C. A committee upon which the Managers do not serve, duly
designated in accordance with a provision of the Articles or this Agreement, as
to matters within its designated authority, which committee the Managers
reasonably believe to merit competence.
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ARTICLE 5.5 Devotion of Time. The Managers, in their capacity as
Managers, shall devote whatever time, effort, and skill as they deem appropriate
for the operation of IMMERSION.
ARTICLE 5.6 Competing Activities.
A. The Managers and their officers, directors, shareholders,
partners, members, managers, agents, employees and Affiliates may not engage or
invest in, independently or with others, any Competing Ventures except for
Competing Ventures which have been disclosed to the Managers upon acceptance of
the position as a Manager. For this purpose, "Competing Ventures" are those
business activities that are the same as or similar to IMMERSION's business and
that might be in direct or indirect competition with IMMERSION. Neither
IMMERSION nor any Member shall have any right in or to non-Competing Ventures or
activities or to the income or proceeds derived therefrom.
B. The Managers shall not be obligated to present any investment
opportunity or prospective economic advantage to IMMERSION, unless the
opportunity is of the character that, if presented to IMMERSION, could be taken
by IMMERSION. The Managers shall have the right to hold any other investment
opportunity or prospective economic advantage for their own account or to
recommend such opportunity to Persons other than IMMERSION. Neither IMMERSION
nor any Member shall have any right in or to such other ventures or activities
or to the income or proceeds derived therefrom which the Managers are not
obligated to present to IMMERSION.
ARTICLE 5.7 Transactions between IMMERSION and the Managers.
Notwithstanding that it may constitute a conflict of interest, the Managers may,
and may cause their Affiliates to, engage in any transaction (including, without
limitation, the purchase, sale, lease, or exchange of any property or the
rendering of any service, or the establishment of any salary, other
compensation, or other terms of employment) with IMMERSION so long as such
transaction is not expressly prohibited by this Agreement and so long as the
terms and conditions of such transaction, on an overall basis, are fair and
reasonable to IMMERSION and are at least as favorable to IMMERSION as those that
are generally available from Persons capable of similarly performing them and in
similar transactions between parties operating at arm's length, and provided
that Members holding a majority of the Percentage Interests and having no
interest in such transaction (other than their interests as Members)
affirmatively vote or consent in writing to approve the transaction.
A transaction between the Managers and/or their Affiliates, on the one
hand, and IMMERSION, on the other hand, shall be conclusively determined to
constitute a transaction on terms and conditions, on an overall basis, fair and
reasonable to IMMERSION and at least as favorable to IMMERSION as those
generally available in a similar transaction between parties operating at arm's
length if a Majority Interest of the Members holding a majority of the
Percentage Interests and having no interest in such transaction (other than
their interests as Members) affirmatively vote or consent in writing to approve
the transaction. Notwithstanding
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the foregoing, the Managers shall not have any obligation, in connection with
any such transaction between IMMERSION and the Managers or an Affiliate of the
Managers, to seek the consent of the Members.
ARTICLE 5.8 Payments to Managers. Except agreed on by all Managers, no
Manager or Affiliate of a Manager is entitled to remuneration for services
rendered or goods provided to IMMERSION. The Managers have initially agreed
that each of them shall receive a salary equal to One Thousand Dollars ($1,000)
per quarter for each Fiscal Year. The Managers and their Affiliates shall
receive only the following payments:
A. Services Performed by Managers or Affiliates. The IMMERSION
shall pay the Managers or Affiliates of the Managers for services rendered or
goods provided to IMMERSION to the extent that the Managers are not required
to render such services or goods themselves without charge to IMMERSION, and
to the extent that the fees paid to such Managers or Affiliates do not exceed
the fees that would be payable to an independent responsible third party that is
willing to perform such services or provide such goods.
B. Expenses. The IMMERSION shall reimburse the Managers and their
Affiliates for the actual cost of materials used for or by IMMERSION. The
IMMERSION shall also pay or reimburse the Managers or their Affiliates for
organizational expenses (including, without limitation, legal and accounting
fees and costs) incurred to form IMMERSION and prepare and file the Articles
and this Agreement. Except as agreed on by the Managers, the Managers and their
Affiliates shall not be reimbursed by IMMERSION for the following expenses:
(i) salaries, compensation and fringe benefits of directors, officers or
employees of the Managers or their Affiliates; (ii) overhead expenses of the
Managers or their Affiliates, including, without limitation, rent and general
office expenses.
ARTICLE 5.9 Officers. The Managers may appoint officers at any time. The
officers of IMMERSION, if deemed necessary by the Managers, may include a
chairperson, president, vice president, secretary, and chief financial officer.
The officers shall serve at the pleasure of the Managers, subject to all rights,
if any, of an officer under any contract of employment. Any individual may hold
any number of offices. No officer need be a resident of the State of California
or citizen of the United States. If a Manager is not an individual, such
Manager's officers may serve as officers of IMMERSION if elected by the
Managers. The officers shall exercise such powers and perform such duties as
shall be determined from time to time by the Managers.
ARTICLE 5.10 Limited Liability. No person who is a Manager or officer or
both a Manager and officer of IMMERSION shall be personally liable under any
judgment of a court, or in any other manner, for any debt, obligation, or
liability of IMMERSION, whether that liability or obligation arises in
contract, tort, or otherwise, solely by reason of being a Manager or officer or
both a Manager and officer of IMMERSION.
ARTICLE 5.11 Membership Interests of Managers. Except as otherwise
provided
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in this Agreement, Membership Interests held by the Managers as Members shall
entitle each Manager to all the rights of a Member, including without limitation
the economic, voting, information and inspection rights of a Member.
ARTICLE 6.
ALLOCATIONS OF INCOME AND LOSSES
AND DISTRIBUTIONS
ARTICLE 6.1 Allocations of Income and Losses.
A. Income and Losses from Normal Business Operations. Income and
Losses other than from a Capital Event shall be allocated to the Members based
on their Percentage Interests. Notwithstanding the previous sentence, Loss
allocations to a Member shall be made only to the extent that such Loss
allocations will not create a deficit Capital Account balance for that Member in
excess of an amount, if any, equal to such Member's share of IMMERSION Minimum
Gain. Any Loss not allocated to a Member because of the foregoing provision
shall be allocated to the other Members (to the extent the other Members are not
limited in respect of the allocation of Losses under this Article 6.1.A). Any
Loss reallocated under this Article 6.1.A shall be taken into account in
computing subsequent allocations of Income and Losses pursuant to this Article
6, so that the net amount of any item so allocated and the Income and Losses
allocated to each Member pursuant to this Article 6, to the extent possible,
shall be equal to the net amount that would have been allocated to each such
Member pursuant to this Article 6 if no reallocation of Losses had occurred
under this Article 6.1.A.
B. Income from a Capital Event. Income from a Capital Event shall
be allocated (1) first to the Members in proportion to and to the extent of the
Members' respective Unreturned Capital Contributions; and (2) the balance to the
Members according to their respective Percentage Interests.
C. Losses from a Capital Event. Losses from a Capital Event shall
be allocated (1) first to the Members in proportion to and to the extent of the
credit balances in their respective Capital Accounts and (2) the balance to the
Members according to their Percentage Interests.
ARTICLE 6.2 Compliance with Allocation Requirements of the Code.
A. Allocations of book and tax items with respect to property
contributed by any Member shall be made solely for federal income tax purposes
as required by Section 704(c) of the Code using the traditional method.
Following any revaluation of IMMERSION's assets and the adjustment of any
Member's Capital Account pursuant to Regulations Section 1.704-1(b)(2)(iv)(f) to
reflect such revaluation, the Members' Capital Accounts shall be adjusted for
various items as computed for book purposes with respect to such revalued assets
as required by Regulations Section 1.704-1(b) and the Members' shares of such
items as computed for tax purposes with respect to such items shall be
determined as required by Regulations
20
Section 1.701-1(b).
B. Any provisions as are required to have a "qualified income"
offset within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d), or any
successor thereto, and the provisions of that Section defining a qualified
income offset are included in this Agreement.
C. Notwithstanding any other provision of this Agreement to the
contrary, if in any year there is a net decrease in the amount of IMMERSION's
Minimum Gain (within the meaning of Regulations Section 1.704-2(d)), or any
successor thereto, then each Member shall first be allocated items of gross
income for such year equal to that Member's share of the net decrease in
IMMERSION Minimum Gain (within the meaning of Regulations Section 1.704-2(g)(1),
or any successor thereto).
D. Any allocations of items of Income or Loss pursuant to
Articles 6.2B or C shall be taken into account in computing subsequent
allocations of Income or Losses pursuant to Article 6.1 so that the net amounts
of the allocations under this Article 6 shall, to the maximum extent possible,
be equal to the net amounts that would have been allocated pursuant to this
Article 6 if there had been no allocations pursuant to Articles 6.2B or C.
ARTICLE 6.3 Allocation of Income and Losses and Distributions in Respect
of a Transferred Interest. If any Economic Interest is transferred, or is
increased or decreased by reason of the admission of a new Member or otherwise,
during any Fiscal Year of IMMERSION, Income or Losses for such Fiscal Year shall
be assigned pro rata to each day in the particular period of such Fiscal Year to
which such item is attributable (i.e., the day on or during which it is accrued
or otherwise incurred) and the amount of each such item so assigned to any such
day shall be allocated to the Member or Assignee based upon his or her
respective Economic Interest at the close of such day.
However, for the purpose of accounting convenience and simplicity,
IMMERSION shall treat a transfer of, or an increase or decrease in, an Economic
Interest which occurs at any time during a semi-monthly period (commencing with
the semi-monthly period including the date hereof) as having been consummated on
the last day of such semi-monthly period, regardless of when during such
semi-monthly period such transfer, increase, of decrease actually occurs (i.e.,
sales and dispositions made during the first fifteen (15) days of any month will
be deemed to have been made on the 15th day of the month).
Notwithstanding any provision above to the contrary, gain or loss of
IMMERSION realized in connection with a sale or other disposition of any of the
assets of IMMERSION shall be allocated solely to the parties owning Economic
Interests as of the date such sale or other disposition occurs.
ARTICLE 6.4 Distributions of Distributable Cash by IMMERSION. Subject to
applicable law and any limitations contained elsewhere in this Agreement, the
Managers may elect from time to time to distribute Distributable Cash to the
Members, which distributions other
21
than on dissolution of IMMERSION shall be made to the Members as indicated
below. All such distributions shall be made only to the Persons who, according
to the books and records of IMMERSION, are the holders of record of the Economic
Interests in respect of which such distributions are made on the actual date of
distribution. Subject to Article 6.6, neither IMMERSION nor any Manager shall
incur any liability for making distributions in accordance with this Article
6.4.
A. Distributable Cash from Normal Business Operations.
Distributable Cash arising from other than a Capital Event shall be distributed
to the Members according to their Percentage Interests.
B. Distributable Cash from Capital Events. Distributable Cash
arising from a Capital Event shall be distributed (1) first to the Members, in
proportion to and to the extent of the Members' Unreturned Capital Contributions
and (2) the balance to the Members according to their respective Percentage
Interests.
ARTICLE 6.5 Form of Distribution. A Member, regardless of the nature of
the Member's Capital Contribution, has no right to demand and receive any
distribution from IMMERSION in any form other than money. Except as provided in
Article 9.4, no Member may be compelled to accept from IMMERSION a distribution
of any asset in kind in lieu of a proportionate distribution of money being made
to other Members and no Member may be compelled to accept a distribution of any
asset in kind.
ARTICLE 6.6 Restriction on Distributions.
A. No distribution shall be made if, after giving effect to the
distribution:
(i) The IMMERSION would not be able to pay its debts as
they become due in the usual course of business; or
(ii) The IMMERSION's total assets would be less than the
sum of its total liabilities plus, unless this Agreement provides otherwise, the
amount that would be needed, if IMMERSION were to be dissolved at the time of
the distribution, to satisfy the preferential rights of other Members, if any,
upon dissolution that are superior to the rights of the Member receiving the
distribution.
B. The Managers may base a determination that a distribution is
not prohibited on any of the following:
(i) Financial statements prepared on the basis of
accounting practices and principles that are reasonable in the circumstances;
(ii) A fair valuation; or
22
(iii) Any other method that is reasonable in the
circumstances.
Except as provided in Corporations Code Section 17254(e), the effect of a
distribution is measured as of the date the distribution is authorized if the
payment occurs within 120 days after the date of authorization, or the date
payment is made if it occurs more than 120 days of the date of authorization.
C. A Member or Manager who votes for a distribution in violation
of this Agreement or the Act is personally liable to IMMERSION for the amount
of the distribution that exceeds what could have been distributed without
violating this Agreement or the Act if it is established that the Member or
Manager did not act in compliance with this Article 6.6 or Article 9.6. Any
Member or Manager who is so liable shall be entitled to compel contribution from
(i) each other Member or Manager who also is so liable and (ii) each Member for
the amount the Member received with knowledge of facts indicating that the
distribution was made in violation of this Agreement or the Act.
ARTICLE 6.7 Return of Distributions. Members and Assignees who receive
distributions made in violation of the Act or this Agreement shall return such
distributions to IMMERSION. Except for those distributions made in violation
of the Act or this Agreement, no Member or Assignee shall be obligated to return
any distribution to IMMERSION or pay the amount of any distribution for the
account of IMMERSION or to any creditor of IMMERSION. The amount of any
distribution returned to IMMERSION by a Member or Assignee or paid by a Member
or Assignee for the account of IMMERSION or to a creditor of IMMERSION shall
be added to the account or accounts from which it was subtracted when it was
distributed to the Member or Assignee.
ARTICLE 6.8 Obligations of Members to Report. The Members are aware of
the income tax consequences of the allocations made by this Article 6 and hereby
agree to be bound by the provisions of this Article 6 in reporting their shares
of IMMERSION Income and Loss for income tax purposes.
ARTICLE 7.
TRANSFER AND ASSIGNMENT OF INTERESTS
ARTICLE 7.1 Transfer and Assignment of Interests. No Member shall be
entitled to transfer, assign, convey, sell, encumber or in any way alienate all
or any part of the Member's Membership Interest (collectively, "transfer")
except with the prior written consent of the Managers who are Members or if
there is only one Manager who is a Member, with the prior consent of a Majority
Interest, which consent may be given or withheld, conditioned or delayed (as
allowed by this Agreement or the Act), as the Managers who are Members or
Majority Interest, as applicable, may determine in their sole and absolute
discretion. Transfers in violation of this Article 7 shall only be effective to
the extent set forth in Article 7.7. After the
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consummation of any transfer of any part of a Membership Interest, the
Membership Interest so transferred shall continue to be subject to the terms and
provisions of this Agreement and any further transfers shall be required to
comply with all the terms and provisions of this Agreement.
ARTICLE 7.2 Further Restrictions on Transfer of Interests. In addition
to other restrictions found in this Agreement, no Member shall transfer, assign,
convey, sell, encumber or in any way alienate all or any part of the Member's
Membership Interest: (i) without compliance with Article 11.9, or (ii) if the
Membership Interest to be transferred, when added to the total of all other
Membership Interests transferred in the preceding twelve (12) consecutive months
prior thereto, would cause the tax termination of IMMERSION under Code Section
708(b)(1)(B).
ARTICLE 7.3 Substitution of Members. An Assignee of a Membership
Interest shall have the right to become a substitute Member only if (i) the
requirements of Articles 7.1 and 7.2 are met, (ii) the Assignee executes an
instrument satisfactory to the Managers accepting and adopting the terms and
provisions of this Agreement, and (iii) the Assignee pays any reasonable
expenses in connection with the Assignee's admission as a new Member. The
admission of an Assignee as a substitute Member shall not result in the release
of the Member who assigned the Membership Interest from any liability that such
Member may have to IMMERSION.
ARTICLE 7.4 Permitted Transfers. The Membership Interest of any Member
may be transferred to any other Member, subject to compliance with Article 7.2,
and without the prior written consent of the Members or Managers. The Economic
Interest of any Member may be transferred subject to compliance with Article 7.2
by the Member (i) by inter vivos gift or by testamentary transfer to any spouse,
parent, sibling, in-law, child or grandchild of the Member, or to a trust for
the benefit of the Member or such spouse, parent, sibling, in-law, child or
grandchild of the Member, or (ii) to any Affiliate of the Member; it being
agreed that, in executing this Agreement, each Member has consented to such
transfers.
ARTICLE 7.5 Effective Date of Permitted Transfers. Any permitted
transfer of all or any portion of a Membership Interest or an Economic Interest
shall be effective as of the date provided in Article 6.3 following the date
upon which the applicable requirements of Articles 7.1, 7.2 and 7.3 have been
met. The Managers shall provide the Members with written notice of such transfer
as promptly as possible after the requirements of Articles 7.1, 7.2 and 7.3 have
been met. Any transferee of a Membership Interest shall take subject to the
restrictions on transfer imposed by this Agreement.
ARTICLE 7.6 Rights of Legal Representatives. If a Member who is an
individual dies or is adjudged by a court of competent jurisdiction to be
incompetent to manage the Member's person or property, the Member's executor,
administrator, guardian, conservator, or other legal representative may exercise
all of the Member's rights for the purpose of settling the Member's estate or
administering the Member's property, including any power the Member has under
the Articles or this Agreement to give an assignee the right to become a Member.
If a Member is a corporation, trust, or other entity and is dissolved or
terminated, the powers of that Member may be exercised by the Member's legal
representative or successor.
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ARTICLE 7.7 No Effect to Transfers in Violation of Agreement. Upon any
transfer of a Membership Interest in violation of this Article 7, the transferee
shall have no right to vote or participate in the management of the business,
property and affairs of IMMERSION or to exercise any rights of a Member. Such
transferee shall only be entitled to become an Assignee and thereafter shall
only receive the share of one or more of IMMERSION's Income, Losses and
distributions of IMMERSION's assets to which the transferor of such Economic
Interest would otherwise be entitled. Notwithstanding the immediately preceding
sentences, if, in the determination of the Managers, a transfer in violation of
this Article 7 would cause the tax termination of IMMERSION under Code Section
708(b)(1)(B), the transfer shall be null and void and the purported transferee
shall not become either a Member or an Assignee.
Upon and contemporaneously with any transfer (whether arising out of an
attempted charge upon that Member's Economic Interest by judicial process, a
foreclosure by a creditor of the Member or otherwise) of a Member's Economic
Interest (other than in accordance with Article 7.4) which does not at the same
time transfer the balance of the rights associated with the Membership Interest
transferred by the Member (including, without limitation, the rights of the
Member to vote or participate in the management of the business, property and
affairs of IMMERSION), IMMERSION shall purchase from the Member, and the Member
shall sell to IMMERSION for a purchase price of $100, all remaining rights and
interests retained by the Member that immediately before the transfer were
associated with the transferred Economic Interest. Such purchase and sale shall
not, however, result in the release of the Member from any liability to
IMMERSION as a Member.
Each Member acknowledges and agrees that the right of IMMERSION to
purchase such remaining rights and interests from a Member who transfers a
Membership Interest in violation of this Article 7 is not unreasonable under the
circumstances existing as of the date hereof.
ARTICLE 7.8 Right of First Refusal. Each time a Member proposes to
transfer all or any part of his Membership Interest (or as required by operation
of law or other involuntary transfer to do so) other than pursuant to Article
7.4, such Member shall first offer such Membership Interest to IMMERSION and the
non-transferring Members in accordance with the following provisions:
A. Such Member shall deliver a written notice ("Option Notice")
to IMMERSION and the other Members stating (i) such Member's bona fide intention
to transfer such Membership Interest, (ii) the Membership Interest to be
transferred, (iii) the purchase price and terms of payment for which the Member
proposes to transfer such Membership Interest and (iv) the name and address of
the proposed transferee.
B. Within thirty (30) days after receipt of the Option Notice,
IMMERSION shall have the right, but not the obligation, to elect to purchase all
or any part of the Membership Interest upon the price and terms of payment
designated in the Option Notice. If the Option Notice provides for the payment
of non-cash consideration, IMMERSION may elect to pay the
25
consideration in cash equal to the good faith estimate of the present fair
market value of the non-cash consideration offered as determined by the
Managers. If IMMERSION exercises such right within such thirty (30) day period,
the Managers shall give written notice of that fact to the transferring and
non-transferring Members.
C. If IMMERSION fails to elect to purchase the entire Membership
Interest proposed to be transferred within the thirty (30) day period described
in Article 7.8, the non-transferring Members shall have the right, but not the
obligation, to elect to purchase any remaining share of such Membership Interest
upon the price and terms of payment designated in the Option Notice. If the
Option Notice provides for the payment of non-cash consideration, such
purchasing Members each may elect to pay the consideration in cash equal to the
good faith estimate of the present fair market value of the non-cash
consideration offered as determined by the Managers. Within sixty (60) days
after receipt of the Option Notice, each non-transferring Member shall notify
the Managers in writing of his desire to purchase a portion of the Membership
Interest proposed to be so transferred. The failure of any Member to submit a
notice within the applicable period shall constitute an election on the part of
that Member not to purchase any of the Membership Interest which may be so
transferred. Each Member so electing to purchase shall be entitled to purchase a
portion of such Membership Interest in the same proportion that the Percentage
Interest of such Member bears to the aggregate of the Percentage Interests of
all of the Members electing to so purchase the Membership Interest being
transferred. In the event any Member elects to purchase none or less than all of
his pro rata share of such Membership Interest, then the other Members can elect
to purchase more than their pro rata share.
D. If IMMERSION and the other Members elect to purchase or obtain
an or all of the Membership Interest designated in the Option Notice, then the
closing of such purchase shall occur within ninety (90) days after receipt of
such notice and the transferring Member, IMMERSION and/or the other Members
shall execute such documents and instruments and make such deliveries as may be
reasonably required to consummate such purchase.
E. If IMMERSION and the other Members elect not to purchase or
obtain, or default in their obligation to purchase or obtain, all of the
Membership Interest designated in the Option Notice, then the transferring
Member may transfer the portion of the Membership Interest described in the
Option Notice not so purchased, to the proposed transferee, providing such
transfer (i) is completed within thirty (30) days after the expiration of
IMMERSION's and the other Members' right to purchase such Membership Interest,
(ii) is made on terms no less favorable to the transferring Member than as
designated in the Option Notice, and (iii) complies with Articles 7.1, 7.2 and
7.3 relating to consent of Managers and Members, securities and tax
requirements; it being acknowledged by the Members that compliance with Article
7.8(a)-(d) does not otherwise entitle a Member to transfer his Membership
Interest other than as provided in this Agreement. If such Membership Interest
is not so transferred, the transferring Member must give notice in accordance
with this Article prior to any other or subsequent transfer of such Membership
Interest.
ARTICLE 7.9 Transfers on Incorporation.
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A. Upon the affirmative vote or written consent of a Majority
Interest, each Member will transfer all of the Member's right, title and
interest in IMMERSION to a corporation (the "Corporation") in exchange for its
stock in a transaction (hereinafter the "Section 351 Transaction") intended to
qualify under Section 351 of the Code. If the requisite approval has been
received, IMMERSION shall pay any and all organizational, legal and accounting
expenses and filing fees incurred in connection with the Section 351
Transaction.
B. In the event the requisite approval has been received as
required by Article 7.9A, the Corporation shall issue its stock in the Section
351 Transaction as follows (the following assumes that in the 351 Transaction
any stock to be issued by the Corporation would be issued only to the Members):
C. The Class 1 Members, as a group, shall in exchange for their
Units as Class 1 Members receive convertible Preferred Stock of the Corporation
having the substantive rights and preferences summarized on Exhibit B attached
hereto (the "Preferred Stock"). The Preferred Stock shall be initially
convertible into common stock (the "Common Stock") of the Corporation which,
immediately after the Section 351 Transaction, will represent that percentage of
the Corporation's outstanding Common Stock which is equal to the total
Percentage Interests of the Class 1 Members as Class 1 Members at the time of
the Section 351 Transaction. That Preferred Stock will be allocated among such
Class 1 Members based on their respective Percentage Interests as Class 1
Members at the time of the Section 351 Transaction.
D. The Class 2 Members shall in exchange for their Units as Class
2 Members receive Common Stock which, immediately after the Section 351
Transaction, will initially represent that percentage of the Corporation's
outstanding Common Stock (assuming conversion of the Preferred Stock) which is
equal to the aggregate Percentage Interests of the Class 2 Members as Class 2
Members at the time of the Section 351 Transaction. That Common Stock will be
allocated among such Class 2 Members based on their respective Percentage
Interests as Class 2 Members at the time of the Section 351 Transaction.
ARTICLE 8.
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
ARTICLE 8.1 Books and Records. The books and records of IMMERSION shall
be kept, and the financial position and the results of its operations recorded,
in accordance with the accounting methods followed by IMMERSION for federal
income tax purposes. The books and records of IMMERSION shall reflect all
IMMERSION transactions and shall be appropriate and adequate for IMMERSION's
business. The IMMERSION shall maintain at its principal office in California all
of the following:
A. A current list of the full name and last known business or
residence
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address of each Member and Assignee set forth in alphabetical order, together
with the Capital Contributions, Capital Account and Percentage Interest of each
Member and Assignee;
B. A current list of the full name and business or residence
address of each Manager;
C. A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed;
D. Copies of IMMERSION's federal, state, and local income tax
or information returns and reports, if any, for the six (6) most recent taxable
years;
E. 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;
F. Copies of the financial statements of IMMERSION, if any, for
the six (6) most recent Fiscal Years; and
G. The IMMERSION's books and records as they relate to the
internal affairs of IMMERSION for at least the current and past six (6) Fiscal
Years.
ARTICLE 8.2 Delivery to Members and Inspection.
A. Upon the request of any Member or Assignee for purposes
reasonably related to the interest of that Person as a Member or Assignee, the
Managers shall promptly deliver to the requesting Member or Assignee, at the
expense of IMMERSION, a copy of the information required to be maintained under
Articles 8.1 A, B and D, and a copy of this Agreement.
B. Each Member, Manager and Assignee has the right, upon
reasonable request for purposes reasonably related to the interest of the Person
as Member, Manager or Assignee, to:
(i) inspect and copy during normal business hours any of
IMMERSION records described in Articles 8.1A through G; and
(ii) obtain from the Managers, promptly after their
becoming available, a copy of IMMERSION's federal, state, and local income tax
or information returns for each Fiscal Year.
C. Members representing at least five percent (5%) of the
Percentage Interests, or three or more Members, make a written request to the
Managers for an income
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statement of IMMERSION for the initial three-month, six-month, or nine-month
period of the current Fiscal Year ended more than thirty (30) days prior to the
date of the request, and a balance sheet of IMMERSION as of the end of that
period. Such statement shall be accompanied by the report thereon, if any, of
the independent accountants engaged by IMMERSION or, if there is no report,
the certificate of a Manager that the statement was prepared without audit from
the books and records of IMMERSION. If so requested, the statement shall be
delivered or mailed to the Members within 30 days thereafter.
D. Any request, inspection or copying by a Member or Assignee
under this Article 8.2 may be made by that Person or that Person's agent or
attorney.
E. The Managers shall promptly furnish to a Member a copy of any
amendment to the Articles or this Agreement executed by a Manager pursuant to a
power of attorney from the Member.
ARTICLE 8.3 Annual Statements.
A. The Managers shall cause to be prepared at least annually, at
IMMERSION expense, information necessary for the preparation of the Members' and
Assignees' federal and state income tax returns. The Managers shall send or
cause to be sent to each Member or Assignee 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, and, if IMMERSION has thirty-five
(35) or fewer Members, a copy of IMMERSION's federal, state, and local income
tax or information returns for that year.
B. The Managers shall cause to be filed at least annually with
the California Secretary of State the statement required under California
Corporations Code Section 17060.
ARTICLE 8.4 Financial and Other Information. The Managers shall provide
such financial and other information relating to IMMERSION or any other Person
in which IMMERSION owns, directly or indirectly, an equity interest, as a
Member may reasonably request. The Managers shall distribute to the Members,
promptly after the preparation or receipt thereof by the Managers, any financial
or other information relating to any Person in which IMMERSION owns, directly
or indirectly, an equity interest, including any filings by such Person under
the Securities Exchange Act of 1934, as amended, that is received by IMMERSION
with respect to any equity interest of IMMERSION in such Person.
ARTICLE 8.5 Filings. The Managers, at IMMERSION expense, shall cause the
income tax returns for IMMERSION to be prepared and timely filed with the
appropriate authorities. The Managers, at IMMERSION expense, shall also cause to
be prepared and timely filed, with appropriate federal and state regulatory and
administrative bodies, amendments to, or restatements of, the Articles and all
reports required to be filed by IMMERSION with those entities under the Act or
other then current applicable laws, rules, and regulations. If a Manager
required by the Act to execute or file any document fails, after demand, to do
so within a
29
reasonable period of time or refuses to do so, any other Manager or Member may
prepare, execute and file that document with the California Secretary of State.
ARTICLE 8.6 Bank Accounts. The Managers shall maintain the funds of
IMMERSION in one or more separate bank accounts in the name of IMMERSION, and
shall not permit the funds of IMMERSION to be commingled in any fashion with the
funds of any other Person.
ARTICLE 8.7 Accounting Decisions and Reliance on Others. All decisions
as to accounting matters, except as otherwise specifically set forth herein,
shall be made by the Managers. The Managers may rely upon the advice of the
company's certified public accountants as to whether such decisions are in
accordance with accounting methods followed for federal income tax purposes.
ARTICLE 8.8 Tax Matters for IMMERSION Handled by Managers and Tax
Matters Partner. The Managers shall from time to time cause IMMERSION to make
such tax elections as they deem appropriate. The Tax Matters Partner shall
represent IMMERSION (at IMMERSION's expense) in connection with all examinations
of IMMERSION's affairs by tax authorities, including resulting judicial and
administrative proceedings, and shall expend IMMERSION funds for professional
services and costs associated therewith. The Tax Matters Partner shall oversee
IMMERSION tax affairs in the overall best interests of IMMERSION but shall not
have the right to agree to extend any statute of limitations without the
approval of a Majority Interest. If for any reason the Tax Matters Partner can
no longer serve in that capacity or ceases to be a Member or Manager, as the
case may be, a Majority Interest may designate another Member to be Tax Matters
Partner.
ARTICLE 9.
DISSOLUTION AND WINDING UP
ARTICLE 9.1 Dissolution. The IMMERSION shall be dissolved, its assets
shall be disposed of, and its affairs wound up on the first to occur of the
following:
A. The happening of any event of dissolution specified in the
Articles;
B. The entry of a decree of judicial dissolution pursuant to
Corporations Code Section 17351;
C. The vote of a Majority Interest;
D. The occurrence of a Dissolution Event and the failure of the
Members to vote to continue the business of IMMERSION within ninety (90) days
after the occurrence of such event; or
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E. The sale of all or substantially all of the assets of
IMMERSION.
ARTICLE 9.2 Certificate of Dissolution. As soon as possible following
the occurrence of any of the events specified in Article 9.1, the Managers who
have not wrongfully dissolved IMMERSION or, if none, the Members, shall execute
a Certificate of Dissolution in such form as shall be prescribed by the
California Secretary of State and file the Certificate as required by the Act.
ARTICLE 9.3 Winding Up. Upon the occurrence of any event specified in
Article 9.1, IMMERSION shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Managers who have not wrongfully dissolved IMMERSION or,
if none, a Majority interest, shall be responsible for overseeing the winding up
and liquidation of IMMERSION, shall take full account of the liabilities of
IMMERSION and assets, shall either cause its assets to be sold or distributed,
and if sold as promptly as is consistent with obtaining the fair market value
thereof, shall cause the proceeds therefrom, to the extent sufficient therefor,
to be applied and distributed as provided in Article 9.6. The Persons winding up
the affairs of IMMERSION shall give written notice of the commencement of
winding up by mail to all known creditors and claimants whose addresses appear
on the records of IMMERSION. The Managers or Members winding up the affairs of
IMMERSION shall be entitled to reasonable compensation for such services.
ARTICLE 9.4 Distributions in Kind. Any non-cash asset distributed to one
or more Members shall first be valued at its fair market value to determine the
Income or Loss that would have resulted if such asset were sold for such value,
such Income or Loss shall then be allocated pursuant to Article 6, and the
Members' Capital Accounts shall be adjusted to reflect such allocations. The
amount distributed and charged to the Capital Account of each Member receiving
an interest in such distributed asset shall be the fair market value of such
interest (net of any liability secured by such asset that such Member assumes or
takes subject to). The fair market value of such asset shall be determined by
the Managers or by a Majority Interest if there is no Manager.
ARTICLE 9.5 Order of Payment Upon Dissolution.
A. After determining that all known debts and liabilities of
IMMERSION, including, without limitation, debts and liabilities to Members who
are creditors of IMMERSION, 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 IMMERSION's taxable year during which liquidation occurs. Such
liquidating distributions shall be made by the end of IMMERSION's taxable year
in which IMMERSION is liquidated, or, if later, within ninety (90) days after
the date of such liquidation.
B. The payment of a debt or liability, whether the whereabouts of
the creditor is known or unknown, has been adequately provided for if the
payment has been provided for by
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either of the following means:
(i) Payment thereof has been assumed or guaranteed in good
faith by one or more financially responsible persons or by the United States
government or any agency thereof, and the provision, including the financial
responsibility of the Person, was determined in good faith and with reasonable
care by the Members or Managers to be adequate at the time of any distribution
of the assets pursuant to this Article.
(ii) The amount of the debt or liability has been
deposited as provided in Section 2008 of the Corporations Code.
This Article 9.5B shall not prescribe the exclusive means of making
adequate provision for debts and liabilities.
ARTICLE 9.6 Limitations on Payments Made in Dissolution. Except as
otherwise specifically provided in this Agreement, each Member shall only be
entitled to look solely at the assets of IMMERSION for the return of his
positive Capital Account balance and shall have no recourse for his Capital
Contribution and/or share of Income (upon dissolution or otherwise) against the
Managers or any other Member.
ARTICLE 9.7 Certificate of Cancellation. The Managers or Members who
filed the Certificate of Dissolution shall cause to be filed in the office of,
and on a form prescribed by, the California Secretary of State, a Certificate of
Cancellation of the Articles upon the completion of the winding up of the
affairs of IMMERSION.
ARTICLE 9.8 No Action for Dissolution. Except as expressly permitted in
this Agreement, a Member shall not take any voluntary action that directly
causes a Dissolution Event. The Members acknowledge that irreparable damage
would be done to the goodwill and reputation of IMMERSION if any Member should
bring an action in court to dissolve IMMERSION under circumstances where
dissolution is not required by Article 9.1. This Agreement has been drawn
carefully to provide fair treatment of all parties and equitable payment in
liquidation of the Economic Interests. Accordingly, except where the Managers
have failed to liquidate IMMERSION as required by this Article 9 each Member
hereby waives and renounces his or her right to initiate legal action to seek
the appointment of a receiver or trustee to liquidate IMMERSION or to seek a
decree of judicial dissolution of IMMERSION on the ground that (a) it is not
reasonably practicable to carry on the business of IMMERSION in conformity
with the Articles or this Agreement, or (b) dissolution is reasonably necessary
for the protection of the rights or interests of the complaining Member. Damages
for breach of this Article 9.9 shall be monetary damages only (and not specific
performance), and the damages may be offset against distributions by IMMERSION
to which such Member would otherwise be entitled.
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ARTICLE 10.
INDEMNIFICATION AND INSURANCE
ARTICLE 10.1 Indemnification of Agents. The IMMERSION shall defend and
indemnify any Member or Manager and may indemnify any other 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 he is or was a
Member, Manager, officer, employee or other agent of IMMERSION or that, being
or having been such a Member, Manager, officer, employee or agent, he is or was
serving at the request of IMMERSION as a manager, director, officer, employee
or other agent of another limited liability company, corporation, partnership,
joint venture, trust or other enterprise (all such persons being referred to
hereinafter as an "agent"), to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
hereafter from time to time permit. The Managers shall be authorized, on behalf
of IMMERSION, to enter into indemnity agreements from time to time with any
Person entitled to be indemnified by IMMERSION hereunder, upon such terms and
conditions as the Managers deem appropriate in their business judgment.
ARTICLE 10.2 Insurance. The IMMERSION shall have the power to purchase
and maintain insurance on behalf of any Person who is or was an agent of
IMMERSION against any liability asserted against such Person and incurred by
such Person in any such capacity, or arising out of such Person's status as an
agent, whether or not IMMERSION would have the power to indemnify such Person
against such liability under the provisions of Article 10.1 or under applicable
law.
ARTICLE 11.
MEMBER REPRESENTATIONS
Each Member hereby represents and warrants to, and agrees with, the
Managers, the other Members, and IMMERSION as follows:
ARTICLE 11.1 No Registration of Membership Interest. The Member
acknowledges that the Membership Interest has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or qualified under
the California Corporate Securities Law of 1968, as amended, in reliance, in
part, on his representations, warranties, and agreements herein.
ARTICLE 11.2 Membership Interest in Restricted Security. The Member
understands that the Membership Interest is a "restricted security" under the
Securities Act in that the Membership Interest will be acquired from IMMERSION
in a transaction not involving a public offering, and that the Membership
Interest may be resold without registration under the Securities Act only in
certain limited circumstances and that otherwise the Membership Interest
33
must be held indefinitely.
ARTICLE 11.3 No Obligation to Register. The Member represents, warrants,
and agrees that IMMERSION and the Managers are under no obligation to register
or qualify the Membership Interest under the Securities Act or under any state
securities law, or to assist him in complying with any exemption from
registration and qualification.
ARTICLE 11.4 No Disposition in Violation of Law. Without limiting the
representations set forth above, and without limiting Article 7 of this
Agreement, he will not make any disposition of all or any part of the Membership
Interest which will result in the violation by him or by IMMERSION of the
Securities Act, the California Corporate Securities Law of 1968, or any other
applicable securities laws. Without limiting the foregoing, he agrees not to
make any disposition of all or any part of the Membership Interest unless and
until:
A. There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement and any applicable requirements
of state securities laws; or
B. (i) The Member has notified IMMERSION of the proposed
disposition and has furnished IMMERSION with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Managers, he has furnished IMMERSION with a written opinion
of counsel, reasonably satisfactory to IMMERSION, that such disposition will
not require registration of any securities under the Securities Act or the
consent of or a permit from appropriate authorities under any applicable state
securities law.
ARTICLE 11.5 Legends. The Member understands that the certificates (if
any) evidencing the Membership Interest may bear one or all of the following
legends:
A. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS, AND CONDITIONS
WHICH ARE SET FORTH HEREIN IN THE COMPANY'S OPERATING AGREEMENT, A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
B. Any legend required by applicable state securities laws.
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ARTICLE 12.
MISCELLANEOUS
ARTICLE 12.1 Counsel to IMMERSION. Counsel to IMMERSION may also be
counsel to any Manager or any Affiliate of a Manager. The Managers may execute
on behalf of IMMERSION and the Members any consent to the representation of
IMMERSION that counsel may request pursuant to the California Rules of
Professional Conduct or similar rules in any other jurisdiction ("Rules"). The
IMMERSION has initially selected Xxxx Xxxx Xxxx & Freidenrich ("IMMERSION
Counsel") as legal counsel to IMMERSION. Each Member acknowledges that IMMERSION
Counsel does not represent any Member in the absence of a clear and explicit
written agreement to such effect between the Member and IMMERSION Counsel, and
that in the absence of any such agreement IMMERSION Counsel shall owe no duties
directly to a Member. Notwithstanding any adversity that may develop, in the
event any dispute or controversy arises between any Members and IMMERSION, or
between any Members or IMMERSION, on the one hand, and a Manager (or Affiliate
of a Manager) that IMMERSION Counsel represents, on the other hand, then each
Member agrees that IMMERSION Counsel may represent either IMMERSION or such
Manager (or his or her Affiliate), or both, in any such dispute or controversy
to the extent permitted by the Rules, and each Member hereby consents to such
representation.
ARTICLE 12.2 Complete Agreement. This Agreement and the Articles
constitute the complete and exclusive statement of agreement among the Members
and Managers with respect to the subject matter herein and therein and replace
and supersede all prior written and oral agreements or statements by and among
the Members and Managers or any of them. No representation, statement, condition
or warranty not contained in this Agreement or the Articles will be binding on
the Members or Managers or have any force or effect whatsoever. To the extent
that any provision of the Articles conflict with any provision of this
Agreement, the Articles shall control.
ARTICLE 12.3 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.
ARTICLE 12.4 Parties in Interest. Except as expressly provided in the
Act, nothing in this Agreement shall confer any rights or remedies under or by
reason of this Agreement on any Persons other than the Members and Managers and
their respective successors and assigns nor shall anything in this Agreement
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
ARTICLE 12.5 Pronouns; Statutory References. All pronouns and all
variations thereof shall be deemed to refer to the masculine, feminine, or
neuter, singular or plural, as the context in which they are used may require.
Any reference to the Code, the Regulations, the Act, Corporations Code or other
statutes or laws will include all amendments, modifications, or
35
replacements of the specific sections and provisions concerned.
ARTICLE 12.6 Headings. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
ARTICLE 12.7 Interpretation. 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 implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
Member or his counsel.
ARTICLE 12.8 References to this Agreement. Numbered or lettered
articles, sections and subsections herein contained refer to articles, sections
and subsections of this Agreement unless otherwise expressly stated.
ARTICLE 12.9 Jurisdiction. Each Member hereby consents to the exclusive
jurisdiction of the state and federal courts sitting in California 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 him may be effected by service of process by
registered or certified mail addressed as provided in Article 12.13 of this
Agreement, and that when so made shall be as if served upon him personally
within the State of California.
ARTICLE 12.10 Exhibits. All Exhibits attached to this Agreement are
incorporated and shall be treated as if set forth herein.
ARTICLE 12.11 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.
ARTICLE 12.12 Additional Documents and Acts. Each Member agrees to
execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions, and conditions of this Agreement and
the transactions contemplated hereby.
ARTICLE 12.13 Notices. Any notice to be given or to be served upon
IMMERSION or any party hereto in connection with this Agreement must be in
writing (which may include facsimile provided a confirmation copy is
concurrently sent by a nationally recognized express courier for overnight
delivery) 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 or Manager at the address specified in Exhibit A hereto. Any
party may, at any time by giving five (5) days' prior written notice to the
other parties, designate any other address in substitution of the foregoing
address to which such notice will be given.
36
ARTICLE 12.14 Amendments. All amendments to this Agreement will be in
writing and signed by a Majority Interest. In the absence of any opinion of
counsel as to the effect thereof, no amendment to this Agreement or the Articles
shall be made which violates the Act or is likely to cause IMMERSION to be
taxed as a corporation.
ARTICLE 12.15 Reliance on Authority of Person Signing Agreement. If a
Member is not a natural person, neither IMMERSION nor any Member will (a) be
required to determine the authority of the individual signing this Agreement to
make any commitment or undertaking on behalf of such entity or to determine any
fact or circumstance bearing upon the existence of the authority of such
individual or (b) be responsible for the application or distribution of proceeds
paid or credited to individuals signing this Agreement on behalf of such entity.
ARTICLE 12.16 No Interest in IMMERSION Property; Waiver of Action for
Partition. No Member or Assignee has any interest in specific property of
IMMERSION. Without limiting the foregoing, each Member and Assignee irrevocably
waives during the term of IMMERSION any right that he may have to maintain any
action for partition with respect to the property of IMMERSION.
ARTICLE 12.17 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.
ARTICLE 12.18 Attorney Fees. In the event that any dispute between
IMMERSION and the Members or among the Members should result in litigation, 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, all of which shall be deemed to have accrued upon the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment. Any judgment or order entered in such action shall contain a specific
provision providing for the recovery of attorney fees and costs incurred in
enforcing such judgment and an award of prejudgment interest from the date of
the breach at the maximum rate of interest allowed by law. For the purposes of
this Article: (a) attorney fees shall include, without limitation, fees incurred
in the following: (1) post-judgment motions; (2) contempt proceedings; (3)
garnishment, levy, and debtor and third party examinations; (4) discovery; and
(5) bankruptcy litigation and (b) prevailing party shall mean the party who is
determined in the proceeding to have prevailed or who prevails by dismissal,
default or otherwise.
ARTICLE 12.19 Time is of the Essence. All dates and times in this
Agreement are of the essence.
ARTICLE 12.20 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
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ARTICLE 12.21 Special Power of Attorney.
A. Attorney in Fact. Each Member grants each Manager a special
power of attorney irrevocably making, constituting, and appointing the Manager
as the Member's attorney in fact, with all power and authority to act in the
Member's name and on the Member's behalf to execute, acknowledge and deliver and
swear to in the execution, acknowledgment, delivery and filing of the following
documents:
(i) Assignments of Membership Interests or other documents
of transfer to be delivered in connection with the transfer of a Membership
Interest pursuant to Article 7.7;
(ii) Any consent to the representation of IMMERSION by
counsel selected by the Managers as described in Article 12.1; and
(iii) Any amendment to this Agreement approved by a
Majority Interest.
B. Irrevocable Power. The special power granted in Article
12.21A: (i) is irrevocable, (ii) is coupled with an interest and (iii) shall
survive a Member's death, incapacity or dissolution.
C. Signatures. The Managers may exercise the special power of
attorney granted in Article 12.21A by a facsimile signature of any Manager or by
signature of any Manager.
ARTICLE 12.22 Statement of Restrictions. This Agreement and any
amendments hereto constitute an "Initial Transaction Statement" as described in
California Commercial Code Section 8408.
ARTICLE 12.23 Consent of Spouse. Within twenty (20) days after any
individual becomes a Member or a Member marries, such Member shall have his
spouse execute a consent substantially in the form attached to this Agreement.
38
All of the Members of MicroScribe, LLC, a California limited liability
company, have executed this Agreement, effective as of the date written above.
Immersion Corporation,
a California corporation
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------
/s/ Xxxxxxx Xxxxx
----------------------------------
Xxxxxxx Xxxxx
39
EXHIBIT A
CAPITAL CONTRIBUTION OF MEMBERS AND ADDRESSES OF MEMBERS
AND MANAGERS OF MICROSCRIBE, LLC
AS OF JULY 1, 1997
MEMBER'S NAME AND MEMBERS CAPITAL
ADDRESS CONTRIBUTION MEMBERS UNITS
CLASS 1 CLASS 2 TOTAL
Immersion Corporation $128,000 1,000 98,999 98,999
0000 Xxxxxxx Xxxxx
Xxx Xxxx, XX
Xxxxxxx Xxxxx $ 0.01 0 1 1
Manager's Name Manager's Address
-------------- -----------------
Xxxxx Xxxxxx 0000 Xxxxxxx Xxxxx, Xxx Xxxx, XX 00000
Xxxxxxx Xxxxx same address
Xxxxx Xxxxxxxxx same address
40
EXHIBIT B
The rights, preferences and privileges of the Preferred Stock which
could be issued to the Class 1 Members if the requirements of Article 7.9 of the
Agreement are fulfilled are summarized as follows:
(a) Dividends. The holders of Preferred Stock shall be entitled to
receive dividends when, as and if declared by the Board of Directors. The right
to such dividends will be noncumulative and no right shall accrue in any year if
dividends are not declared. Such dividends, when, as and if declared, shall be
payable in cash at the annual rate equal to nine percent (9%) of the liquidation
preference as defined in subparagraph (b) below per share prior to payment of
any dividend on Common Stock.
(b) Preference on Liquidation. The holders of shares of Preferred Stock
then outstanding shall be entitled to a liquidation preference equal to their
total unreturned capital contributions as Class 1 Members. If upon liquidation
the assets of the Corporation available for the distribution to its shareholders
shall be insufficient to pay the holders of the Preferred Stock such liquidation
price, the holders of the Preferred Stock shall share ratably in any
distribution of assets.
(c) Voting. The shares of the Preferred Stock shall have the number of
votes equal to the largest number of full shares of Common Stock into which the
Preferred Stock may be converted.
(d) Conversion Rights. Each holder of Preferred stock may, at any time
after the date of issuance convert any or all of such holder's Preferred Stock
into shares of Common Stock, at the rate of one (1) share of Common Stock for
each share of Preferred Stock so surrendered. The number of shares of Common
Stock into which Preferred Stock may be converted shall be subject to adjustment
from time to time in the event of subdivisions or combinations of the
Corporation's Common Stock or upon the issuance of a stock dividend or other
distribution to holders of Common Stock.
(e) Changes. So long as any shares of Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval of the holders
of at least a majority of the total number of shares of Preferred Stock
outstanding, voting separately as a class, alter or change any of the powers,
preferences or rights of the Preferred Stock.
41
EXHIBIT C
Immersion shall contribute to IMMERSION its MicroScribe design and
manufacturing know-how; the MicroScribe-3D, Personal Digitizer and Immersion
Probe trademarks; and the all of its right, title and interest in and to the
following patents, pending patents and patent applications below:
1. MicroScribe Design Patent D 377,932 (issued February 11,
1997).
2. MicroScribe Technology Patents (pending patents 08/512,084;
08/741,190; 08/744,725; and 08/739,454).
3. MicroScribe PCT Patent Application (IMM1P010.P).
In connection with the foregoing assignment of patents, and pursuant to
the provisions of the Patent License Agreement by and between IMMERSION and
Immersion, IMMERSION shall grant to Immersion a worldwide, royalty-free,
exclusive, irrevocable, perpetual (for the duration of each product) license to
make, have made, use, sell, offer to sell and import products in the Force
Feedback Field of Use (as defined in the Patent License Agreement) and to
sublicense such rights to affiliates and to third parties through multiple tiers
of sublicenses.
42
TABLE OF CONTENTS
(continued)
Page
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ARTICLE 1. DEFINITIONS...........................................................1
ARTICLE 1.1 "Act".................................................................1
ARTICLE 1.2 "Affiliate"...........................................................1
ARTICLE 1.3 "Agreement"...........................................................1
ARTICLE 1.4 "Articles"............................................................2
ARTICLE 1.5 "Assignee"............................................................2
ARTICLE 1.6 "Bankruptcy"..........................................................2
ARTICLE 1.7 "Capital Account".....................................................2
ARTICLE 1.8 "Capital Contribution"................................................3
ARTICLE 1.9 "Capital Event".......................................................3
ARTICLE 1.10 "Class 1 Member"......................................................3
ARTICLE 1.11 "Class 2 Member"......................................................3
ARTICLE 1.12 "Code"................................................................3
ARTICLE 1.13 "Common Stock"........................................................3
ARTICLE 1.14 "IMMERSION".............................................................3
ARTICLE 1.15 "IMMERSION Minimum Gain"................................................3
ARTICLE 1.16 "Corporations Code"...................................................3
ARTICLE 1.17 "Dissolution Event"...................................................3
ARTICLE 1.18 "Distributable Cash"..................................................3
ARTICLE 1.19 "Economic Interest"...................................................4
ARTICLE 1.20 "Fiscal Year".........................................................4
ARTICLE 1.21 "Income" and "Losses".................................................4
ARTICLE 1.22 "Majority Interest"...................................................4
ARTICLE 1.23 "Manager".............................................................4
ARTICLE 1.24 "Member"..............................................................4
ARTICLE 1.25 "Member Nonrecourse Debt".............................................4
ARTICLE 1.26 "Member Nonrecourse Deductions".......................................4
ARTICLE 1.27 "Membership Interest".................................................5
ARTICLE 1.28 "Nonrecourse Liability"...............................................5
ARTICLE 1.29 "Percentage Interest".................................................5
ARTICLE 1.30 "Person"..............................................................5
ARTICLE 1.31 "Preferred Stock".....................................................5
ARTICLE 1.32 "Regulations".........................................................5
ARTICLE 1.33 "Tax Matters Partner".................................................5
ARTICLE 1.34 "Unit"................................................................5
ARTICLE 1.35 "Unreturned Capital"..................................................5
ARTICLE 2. ORGANIZATIONAL MATTERS................................................5
ARTICLE 2.1 Formation.............................................................5
ARTICLE 2.2 Name..................................................................6
43
Page
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ARTICLE 2.3 Term..................................................................6
ARTICLE 2.4 Office and Agent......................................................6
ARTICLE 2.5 Addresses of the Members and the Managers.............................6
ARTICLE 2.6 Purpose and Business of IMMERSION...................................6
ARTICLE 3 CAPITAL CONTRIBUTIONS.................................................6
ARTICLE 3.1 Initial Capital Contributions.........................................6
ARTICLE 3.2 Additional Capital Contributions......................................7
ARTICLE 3.3 No Interest...........................................................7
ARTICLE 4 MEMBERS...............................................................7
ARTICLE 4.1 Limited Liability.....................................................7
ARTICLE 4.2 Admission of Additional Members.......................................7
ARTICLE 4.3 Withdrawals or Resignations...........................................8
ARTICLE 4.4 Termination of Membership Interest....................................8
ARTICLE 4.5 Competing Activities..................................................9
ARTICLE 4.6 Transactions With The IMMERSION.........................................9
ARTICLE 4.7 Remuneration To Members...............................................9
ARTICLE 4.8 Members Are Not Agents................................................9
ARTICLE 4.9 Voting Rights.........................................................9
ARTICLE 4.10 Meetings of Members..................................................10
ARTICLE 4.11 Certificate of Membership Interest...................................11
ARTICLE 5 MANAGEMENT AND CONTROL OF THE COMPANY............................... 11
ARTICLE 5.1 Management of IMMERSION by Managers................................11
ARTICLE 5.2 Election of Managers.................................................12
ARTICLE 5.3 Powers of Managers...................................................13
ARTICLE 5.4 Performance of Duties; Liability of Managers.........................15
ARTICLE 5.5 Devotion of Time.....................................................15
ARTICLE 5.6 Competing Activities.................................................16
ARTICLE 5.7 Transactions between IMMERSION and the Managers....................16
ARTICLE 5.8 Payments to Managers.................................................17
ARTICLE 5.9 Officers.............................................................17
ARTICLE 5.10 Limited Liability....................................................17
ARTICLE 5.11 Membership Interests of Managers.....................................17
ARTICLE 6 ALLOCATIONS OF INCOME AND LOSSES AND DISTRIBUTIONS...................18
ARTICLE 6.1 Allocations of Income and Losses.....................................18
ARTICLE 6.2 Compliance with Allocation Requirements of the Code..................18
ARTICLE 6.3 Allocation of Income and Losses and Distributions in Respect
of a Transferred Interest............................................19
ARTICLE 6.4 Distributions of Distributable Cash by IMMERSION...................19
ARTICLE 6.5 Form of Distribution.................................................20
44
Page
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ARTICLE 6.6 Restriction on Distributions.........................................20
ARTICLE 6.7 Return of Distributions..............................................21
ARTICLE 6.8 Obligations of Members to Report.....................................21
ARTICLE 7. TRANSFER AND ASSIGNMENT OF INTERESTS.................................21
ARTICLE 7.1 Transfer and Assignment of Interests.................................21
ARTICLE 7.2 Further Restrictions on Transfer of Interests........................22
ARTICLE 7.3 Substitution of Members..............................................22
ARTICLE 7.4 Permitted Transfers..................................................22
ARTICLE 7.5 Effective Date of Permitted Transfers................................22
ARTICLE 7.6 Rights of Legal Representatives......................................22
ARTICLE 7.7 No Effect to Transfers in Violation of Agreement.....................22
ARTICLE 7.8 Right of First Refusal...............................................23
ARTICLE 7.9 Transfers on Incorporation...........................................24
ARTICLE 8. ACCOUNTING, RECORDS, REPORTING BY MEMBERS............................25
ARTICLE 8.1 Books and Records....................................................25
ARTICLE 8.2 Delivery to Members and Inspection...................................26
ARTICLE 8.3 Annual Statements....................................................27
ARTICLE 8.4 Financial and Other Information......................................27
ARTICLE 8.5 Filings..............................................................27
ARTICLE 8.6 Bank Accounts........................................................28
ARTICLE 8.7 Accounting Decisions and Reliance on Others..........................28
ARTICLE 8.8 Tax Matters for IMMERSION Handled by Managers and Tax Matters
Partner..............................................................28
ARTICLE 9. DISSOLUTION AND WINDING UP...........................................28
ARTICLE 9.1 Dissolution..........................................................28
ARTICLE 9.2 Certificate of Dissolution...........................................29
ARTICLE 9.3 Winding Up...........................................................29
ARTICLE 9.4 Distributions in Kind................................................29
ARTICLE 9.5 Order of Payment Upon Dissolution....................................29
ARTICLE 9.6 Limitations on Payments Made in Dissolution..........................30
ARTICLE 9.7 Certificate of Cancellation..........................................30
ARTICLE 9.8 No Action for Dissolution............................................30
ARTICLE 10. INDEMNIFICATION AND INSURANCE........................................31
ARTICLE 10.1 Indemnification of Agents............................................31
ARTICLE 10.2 Insurance............................................................31
ARTICLE 11. MEMBER REPRESENTATIONS...............................................31
ARTICLE 11.1 No Registration of Membership Interest...............................31
ARTICLE 11.2 Membership Interest in Restricted Security...........................31
ARTICLE 11.3 No Obligation to Register............................................32
45
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ARTICLE 11.4 No Disposition in Violation of Law...................................32
ARTICLE 11.5 Legends..............................................................33
ARTICLE 12. MISCELLANEOUS........................................................33
ARTICLE 12.1 Counsel to IMMERSION...............................................33
ARTICLE 12.2 Complete Agreement...................................................33
ARTICLE 12.3 Binding Effect.......................................................33
ARTICLE 12.4 Parties in Interest..................................................33
ARTICLE 12.5 Pronouns; Statutory References.......................................33
ARTICLE 12.6 Headings.............................................................34
ARTICLE 12.7 Interpretation.......................................................34
ARTICLE 12.8 References to this Agreement.........................................34
ARTICLE 12.9 Jurisdiction.........................................................34
ARTICLE 12.10 Exhibits.............................................................34
ARTICLE 12.11 Severability.........................................................34
ARTICLE 12.12 Additional Documents and Acts........................................34
ARTICLE 12.13 Notices..............................................................34
ARTICLE 12.14 Amendments...........................................................35
ARTICLE 12.15 Reliance on Authority of Person Signing Agreement....................35
ARTICLE 12.16 No Interest in IMMERSION Property; Waiver of Action for Partition......35
ARTICLE 12.17 Multiple Counterparts................................................35
ARTICLE 12.18 Attorney Fees........................................................35
ARTICLE 12.19 Time is of the Essence...............................................35
ARTICLE 12.20 Remedies Cumulative..................................................35
ARTICLE 12.21 Special Power of Attorney............................................36
ARTICLE 12.22 Statement of Restrictions............................................36
ARTICLE 12.23 Consent of Spouse....................................................36
CONSENT OF SPOUSE .........................................................................38
46
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EXHIBIT A CAPITAL CONTRIBUTION OF MEMBERS AND ADDRESSES OF MEMBERS AND MANAGERS
OF MICROSCRIBE, LLC AS OF JULY 1, 1997..........................................39
EXHIBIT B..................................................................................40
EXHIBIT C..................................................................................41
