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EXHIBIT 10.33
OPERATING AGREEMENT
FOR
SUTRO VENTURE PARTNERS III LLC
A DELAWARE LIMITED LIABILITY COMPANY
THE SECURITY WHICH IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 506 PROMULGATED UNDER THE ACT, AND THIS SECURITY
HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE STATE SECURITIES LAWS OF ANY
RELEVANT JURISDICTION IN WHICH THIS SECURITY HAS BEEN OFFERED AND SOLD PURSUANT
TO AN APPLICABLE EXEMPTION THEREFROM. IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY WITHOUT PROVIDING THE MANAGER WITH AN OPINION OF
COUNSEL TO THE EFFECT THAT A PROPOSED TRANSFER OR SALE OF THIS SECURITY (i) DOES
NOT AFFECT THE ORIGINAL ISSUANCE AND SALE OF SECURITIES IN THE COMPANY PURSUANT
TO THE EXEMPTIONS FROM REGISTRATION PROVIDED BY RULE 506 UNDER THE ACT AND
PURSUANT TO ANY APPLICABLE STATE EXEMPTION FROM REGISTRATION AND QUALIFICATION
RELIED UPON BY THE MANAGER AND (ii) IS IN COMPLIANCE WITH ALL APPLICABLE STATE
AND FEDERAL SECURITIES LAWS.
THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITY WHICH IS THE
SUBJECT OF THIS AGREEMENT OR ANY INTEREST THEREIN IS SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN Article VII OF THIS AGREEMENT.
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TABLE OF CONTENTS
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ARTICLE I - DEFINITIONS........................................................1
1.1 "Act"........................................................1
1.2 "Affiliate"..................................................1
1.3 "Agreement"..................................................1
1.4 "Articles"...................................................1
1.5 "Assignee"...................................................1
1.6 "Bankruptcy".................................................1
1.7 "Borrower"...................................................2
1.8 "Capital Account"............................................2
1.9 "Capital Contribution".......................................2
1.10 "Code".......................................................3
1.11 "Company"....................................................3
1.12 "Company Minimum Gain".......................................3
1.13 "Depreciation"...............................................3
1.14 "Determination Date".........................................3
1.15 "Disability".................................................3
1.16 "Dissolution Event"..........................................3
1.17 "Economic Interest"..........................................3
1.18 "Fiscal Period"..............................................3
1.19 "Fiscal Year"................................................3
1.20 "Gross Asset Value"..........................................3
1.21 "Interest"...................................................5
1.22 "Majority Interest"..........................................5
1.23 "Manager"....................................................5
1.24 "Master Company".............................................5
1.25 "Member".....................................................5
1.26 "Membership Interest"........................................5
1.27 "Memorandum".................................................5
1.28 "Nonmanager Member"..........................................5
1.29 "Offering"...................................................5
1.30 Not Used.....................................................5
1.31 "Percentage Interest"........................................6
1.32 "Person".....................................................6
1.33 "Plan".......................................................6
1.34 "Profits" and "Losses".......................................6
1.35 "Purchase Date"..............................................6
1.36 "Regulations"................................................6
1.37 "Remaining Members"..........................................6
1.38 "Securities Act".............................................6
1.39 "Subscription"...............................................7
1.40 "Sutro Employee".............................................7
1.41 "Sutro Group"................................................7
1.42 "SVM"........................................................7
1.43 "Tax Matters Partner"........................................7
ARTICLE II - ORGANIZATIONAL MATTERS............................................7
2.1 Formation....................................................7
2.2 Name.........................................................7
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2.3 Term.........................................................7
2.4 Office and Agent.............................................7
A. Principal Office....................................7
B. Registered Office...................................7
C. Other Jurisdictions.................................7
2.5 Purpose and Business of the Company..........................8
ARTICLE III - CAPITAL CONTRIBUTIONS............................................8
3.1 Capital Contributions of Members.............................8
3.2 Other Contributions..........................................8
3.3 Certain Restrictions upon Interest Sales.....................8
3.4 No Interest..................................................8
3.5 Borrowing....................................................8
3.6 Vesting......................................................9
ARTICLE IV - MEMBERS...........................................................9
4.1 Limitations on Liability of Members..........................9
4.2 Liability of Members to the Company..........................9
A. Liability of Members to the Company.................9
B. Member as Trustee for the Company..................10
C. Waiver of Liability of Member......................10
4.3 Admission of Additional Members.............................10
4.4 Withdrawals.................................................10
4.5 Transactions With The Company...............................11
4.6 Remuneration To Members.....................................11
4.7 Members Are Not Agents......................................11
4.8 Voting Rights...............................................11
4.9 Meetings of Members.........................................11
A. Date, Time and Place of Meetings of Members;
Secretary..........................................11
B. Power to Call Meetings.............................12
C. Notice of Meeting..................................12
D. Manner of Giving Notice; Affidavit of Notice.......12
E. Validity of Action.................................12
F. Quorum.............................................12
G. Adjourned Meeting; Notice..........................12
H. Waiver of Notice or Consent........................13
I. Action by Written Consent without a Meeting........13
J. Telephonic Participation by Member at Meetings.....13
K. Record Date........................................13
L. Proxies............................................14
4.10 Certificate of Membership Interest..........................14
ARTICLE V - MANAGEMENT AND CONTROL OF THE COMPANY.............................14
5.1 Management of the Company by Manager........................14
5.2 Resignation and Removal of Managers.........................14
5.3 Powers of Manager...........................................15
X. Xxxxxx of Manager..................................15
B. Limitations on Power of Manager....................15
5.4 Performance of Duties; Liability of Manager.................15
5.5 Payments to Manager.........................................16
5.6 Limited Liability...........................................16
5.7 Interests Held by Manager...................................16
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ARTICLE VI - ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS.................16
6.1 Capital Accounts............................................16
6.2 Allocations.................................................17
A. Allocations........................................17
1. Profits and Losses........................17
2. Recapture.................................17
B. Special Capital Account Allocations................17
1. Section 704 Allocations...................17
2. Tax Allocations...........................17
3. Other Allocation Rules....................18
4. Provisional Allocation....................18
C. Withdrawals from Capital Accounts..................18
6.3 Distributions in General....................................19
6.4 Restriction on Distribution.................................19
A. Limitation.........................................19
B. Liability for Return...............................19
C. Limitation on Liability............................19
6.5 Returned Distributions......................................19
6.6 Obligations of Members to Report Allocations................20
ARTICLE VII - TRANSFER AND ASSIGNMENT OF INTERESTS............................20
7.1 Transfer and Assignment of Interests........................20
7.2 Further Restrictions on Transfer of Interests...............20
7.3 Substitution of Members.....................................20
7.4 Permitted Transfers.........................................20
7.5 Effective Date of Permitted Transfers.......................20
7.6 Rights of Legal Representatives.............................21
7.7 No Effect to Transfers in Violation of Agreement............21
ARTICLE VIII - CONSEQUENCES OF DISSOLUTION EVENTS.............................21
ARTICLE IX - ACCOUNTING, RECORDS, REPORTING BY MEMBERS........................21
9.1 Books and Records...........................................21
9.2 Delivery to Members and Inspection..........................22
A. Delivery of Information............................22
B. Inspection and Copying.............................22
C. Right to Request...................................22
D. Copies of Amendments...............................22
9.3 Annual Statements...........................................22
A. Delivery of Statements.............................22
B. Tax Information....................................23
9.4 Company Accounts............................................23
9.5 Accounting Decisions and Reliance on Others.................23
9.6 Tax Matters for the Company Handled by Manager and Tax
Matters Partner.............................................23
ARTICLE X - DISSOLUTION AND WINDING UP........................................23
10.1 Dissolution.................................................23
10.2 Certificate of Dissolution..................................23
10.3 Winding Up..................................................23
10.4 Distributions in Kind.......................................24
10.5 Order of Payment Upon Dissolution...........................24
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10.6 Limitations on Payments Made in Dissolution.................24
10.7 Certificate of Cancellation.................................24
ARTICLE XI - INDEMNIFICATION..................................................24
11.1 Indemnification.............................................24
11.2 Successors and Assigns; Limitations.........................25
ARTICLE XII - COMPETING ACTIVITIES............................................25
ARTICLE XIII - MISCELLANEOUS..................................................25
13.1 Counsel to the Company......................................25
13.2 Complete Agreement..........................................26
13.3 Binding Effect..............................................26
13.4 Parties in Interest.........................................26
13.5 Pronouns; Statutory References..............................26
13.6 Headings....................................................26
13.7 Interpretation..............................................26
13.8 References to this Agreement................................26
13.9 Jurisdiction................................................26
13.10 Exhibits....................................................27
13.11 Severability................................................27
13.12 Additional Documents and Acts...............................27
13.13 Notices.....................................................27
13.14 Amendments..................................................27
13.15 Reliance on Authority of Person Signing Agreement...........27
13.16 No Interest in Company Property; Waiver of Action for
Partition...................................................28
13.17 Multiple Counterparts.......................................28
13.18 Attorney Fees; Arbitration..................................28
13.19 Remedies Cumulative.........................................29
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OPERATING AGREEMENT
FOR
SUTRO VENTURE PARTNERS III LLC
A DELAWARE LIMITED LIABILITY COMPANY
This Operating Agreement is made as of December 15, 1998, by and among
Sutro Venture Management, Inc., a Delaware corporation, and those persons who,
themselves or by attorney-in-fact, have executed this Agreement or a counterpart
signature page to this Agreement and been admitted as Members in accordance with
the provisions hereof. The parties by this Agreement set forth the operating
agreement for the limited liability company being organized by them under the
laws of the State of Delaware upon the terms and subject to the conditions of
this Agreement.
ARTICLE I
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 I shall have the meanings set forth elsewhere in this
Agreement):
1.1 "ACT" shall mean the Delaware Limited Liability Company Act,
as the same may be amended from time to time.
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.
1.3 "AGREEMENT" shall mean this Operating Agreement, as originally
executed and as amended from time to time.
1.4 "ARTICLES" shall mean the Certificate of Formation for the
Company originally filed with the Delaware Secretary of State and as amended
from time to time.
1.5 "ASSIGNEE" shall mean the owner of an Economic Interest who
has not been admitted as a substitute Member in accordance with Article VII.
1.6 "BANKRUPTCY" shall mean: (a) the filing of an application by a
Manager for, or his or her consent to, the appointment of a trustee, receiver,
or custodian of his or her other assets; (b) the entry of an order for relief
with respect to a Manager in proceedings under the United States Bankruptcy
Code, as amended or superseded from time to time; (c) the making by a Manager of
a general assignment for the benefit of creditors; (d) the entry of an order,
judgement, or decree by any court of competent jurisdiction appointing a
trustee, receiver, or custodian of the assets of a Manager unless the
proceedings and the person appointed are dismissed within ninety (90) days; or
(e) the failure by a Manager generally to pay his or her 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 his or her inability to pay his or her debts as they
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become due.
1.7 "BORROWER" shall have the meaning ascribed to such term in
Section 3.5 hereof.
1.8 "CAPITAL ACCOUNT" shall mean with respect to any Member the
individual Capital Account that shall be established and maintained for each
Member and for each Capital Contribution of each Member in accordance with the
following provisions:
(a) To each Capital Account of a Member there shall be
credited such Member's related Capital Contribution, such Member's share of
Profit with respect thereto, any items in the nature of income or gain that are
specifically allocated thereto pursuant to this Agreement and the amount of any
Company liabilities that are personally assumed by such Member or that are
secured by any Company property distributed to such Member with respect thereto;
(b) To each Capital Account of a Member, there shall be
debited the amount of cash and the Gross Asset Value of any Company property
distributed to such Member pursuant to any provision of this Agreement with
respect thereto, such Member's share of Loss with respect thereto, any items in
the nature of expenses or loss that are specifically allocated thereto pursuant
to this Agreement and the amount of any liabilities of such Member that are
assumed by the Company or that are secured by any property contributed by such
Member to the Company with respect thereto;
(c) In determining the amount of any liability, there
shall be taken into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations;
(d) If any interest in the Company is transferred in
accordance with this Agreement, the transferee shall succeed to the Capital
Accounts of the transferor to the extent that they relate to the transferred
interest.
(e) If the Gross Asset Values of Company assets are
adjusted pursuant to this Agreement, the respective Capital Accounts of all
Members shall be adjusted simultaneously to reflect the aggregate net adjustment
as if the Company were to have recognized gain or loss equal to the amount of
such aggregate net adjustment.
(f) The foregoing provisions and other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent therewith. If the Manager determines that it is prudent to
modify the manner in which the Capital Accounts, or any debits or credits
thereto, are computed in order to comply with Regulations Section 1.704-1(b),
the Manager may make such modification if it is not likely to have a material
adverse effect on amounts distributable to any Member pursuant hereto on the
dissolution of the Company. The Manager shall adjust the amounts debited or
credited to Capital Accounts with respect to any property contributed to the
Company or distributed to a Member and any liabilities secured by such
contributed or distributed property or assumed by the Company or Member in
connection with such contribution or distribution if the Manager determines that
such adjustments are necessary or appropriate under Regulations Section
1.704-1(b)(2)(iv). The Manager shall also make any appropriate modifications if
unanticipated events might cause this Agreement not to comply with Regulations
Section 1.704-1(b), and the Manager shall make all elections provided for under
such Regulations.
1.9 "CAPITAL CONTRIBUTION" of a Member shall mean the total amount
of cash and the initial Gross Asset Value of property contributed to the capital
of the Company by such Member.
1.10 "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to
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time, the provisions of succeeding law, and to the extent applicable, the
Regulations.
1.11 "COMPANY" shall mean Sutro Venture Partners III LLC, a
Delaware limited liability company.
1.12 "COMPANY MINIMUM GAIN" shall have the meaning ascribed to the
term "Partnership Minimum Gain" in the Regulations Section 1.704-2(d).
1.13 "DEPRECIATION" shall mean, for each Fiscal Year or other
Fiscal Period, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such Year or other
Period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for Federal income tax purposes at the beginning of such Year or
other Period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the Federal income tax depreciation, amortization
or other cost recovery deduction for such Year or other Period bears to such
beginning adjusted tax basis.
1.14 "DETERMINATION DATE" shall mean the date as of which the value
or amount of Company assets and/or liabilities is to be determined.
1.15 "DISABILITY" shall mean permanent inability to be gainfully
employed at Sutro or its Affiliates.
1.16 "DISSOLUTION EVENT" shall mean with respect to any Manager,
one or more of the following: the death, insanity, withdrawal, resignation,
retirement, removal, expulsion, Bankruptcy or dissolution of any such Manager.
1.17 "ECONOMIC INTEREST" shall mean the right to receive
distributions of the Company's assets and allocations of Profit and Loss and
similar items from the Company 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 the Company, or except as
provided in the Act, any right to information concerning the business and
affairs of the Company.
1.18 "FISCAL PERIOD" shall mean each period commencing (i) on the
first day of each calendar year, (ii) on the date of any Capital Contribution,
(iii) on each date next following the date of any withdrawal from a Capital
Account, and (iv) on the date on which Members are first admitted to the
Company, and the prior Fiscal Period, if any, shall terminate on the day
immediately preceding the day on which a new Fiscal Period commences.
1.19 "FISCAL YEAR" shall mean the period from January 1 (or the
date purchasers of Interests are first admitted to the Company in the case of
the first Fiscal Year) through the succeeding December 31 or, if earlier, the
date of dissolution and termination of the Company.
1.20 "GROSS ASSET VALUE" shall mean, with respect to any asset, the
asset's adjusted basis for Federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value of
such asset, determined as provided in Paragraph 1.20(f) below;
(b) The Gross Asset Value of all Company assets shall be
adjusted to equal their respective gross fair market values, determined as
provided in Paragraph 1.20(f) below, as of the following times: (i) on the
acquisition of an additional interest in the Company by any new or
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existing Member in exchange for more than a DE MINIMIS Capital Contribution;
(ii) on the distribution by the Company to a Member of more than a DE MINIMIS
amount of Company property, unless all Members receive simultaneous
distributions of undivided interests in the distributed property in proportion
to their respective Percentage Interests; (iii) on the last day of each Fiscal
Period; and (iv) on a liquidation within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
(c) The Gross Asset Value of any Company property
distributed to any Member shall be the gross fair market value of such Company
property, determined as provided in Paragraph 1.20(f) below;
(d) The Gross Asset Value of any Company property shall
be increased (or decreased) to reflect any adjustments to the adjusted basis of
such Company property pursuant to Code Section 734(b) or 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided that
Gross Asset Values shall not be so adjusted to the extent that the Manager
determines that an adjustment pursuant to Paragraph 1.20(b) is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Paragraph 1.20(d); and
(e) If the Gross Asset Value of an asset has been
determined or adjusted pursuant hereto, such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset
for purposes of computing Profit and Loss, and Capital Accounts shall be
adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(g) and the
Members' distributive shares of depreciation, depletion, amortization, gains and
net loss for tax purposes with respect to such property shall be determined to
take account of the variation between the adjusted tax basis and the Gross Asset
Value of such property in the same manner as under Code Section 704(c).
(f) Whenever the "value,""fair value" or "fair market
value" of Company property is to be determined, such "value" shall be
determined, and the assets and liabilities of the Company shall be valued, on
the following basis:
(i) Marketable securities listed on national
securities exchanges or reported in the National Market System will be valued at
the last sale price on the stock exchange or market on which the security is
traded on the Determination Date or, if the security is traded on more than one
stock exchange or market on the Determination Date, at the last sale price on
the exchange or market on which such securities are principally traded on that
Date; in the absence of a sale on such Date, such securities will be valued at
the average of the closing bid prices as to long positions and asked prices as
to short positions on such exchange or market on the Determination Date. A 25%
discount will be applied in the case of any "restricted securities."
(ii) Marketable securities not so traded will be
valued at the last bid prices as to long positions and at the last asked prices
as to short positions, as reported by NASDAQ in the case of securities quoted on
NASDAQ, or by the National Quotations Bureau, Inc. in the case of any other such
securities. A 25% discount will be applied in the case of any "restricted
securities."
(iii) Short term money market instruments and bank
deposits will be valued at cost plus reported interest to date.
(iv) All other assets and liabilities of the
Company will be valued at the fair value thereof as determined in good faith by
the Manager, except that if the Company's assets could be deemed to be plan
assets or plan property for the purposes of ERISA, securities which are
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of a class which is neither publicly traded nor convertible into a publicly
traded class will be valued by the Company's independent auditors or by such
other independent person which the Members might designate from time to time by
the vote of a Majority Interest. Securities which are neither of a class which
is publicly traded nor currently convertible into such a class will generally be
valued at cost, unless the Manager believes that there is persuasive evidence to
justify a valuation other than at cost. In making that determination, the
Manager will attempt to consider all relevant information available to it
without unreasonable effort or expense, and make a good faith attempt to ensure
that new Interests are sold taking into account the then fair market value of
the underlying investment portfolio, but these judgments will necessarily be
subjective and based in large part on information provided by investee entities
and investee funds. In determining the value of interests owned by the Master
Company in other funds, the Manager will rely on information furnished by the
managers of those other funds.
(v) If the Determination Date is not a business
day, values as of the close of business on the last business day preceding such
Date may be used. All determinations of values will, except as provided in (iv),
above, be accomplished by the Manager, whose determination thereof shall be
conclusive and binding.
1.21 "INTEREST" shall mean any membership interest in the Company
which was offered and sold pursuant to the Offering.
1.22 "MAJORITY INTEREST" shall mean those Members who hold a
majority of the Percentage Interests which all Members hold.
1.23 "MANAGER" shall mean and refer to SVM, as well as to any other
person that succeeds it as a manager of the Company.
1.24 "MASTER COMPANY" shall mean Sutro Venture Fund 34 LLC, a
Delaware limited liability company.
1.25 "MEMBER" shall mean the Manager and each Person who is an
initial signatory to this Agreement or has been admitted to the Company as a
Member in accordance with the Articles or this Agreement (including an Assignee
who has become a Member in accordance with Article VII), and (a) has not ceased
to be a Member for other reason, and the term includes the Manager.
1.26 "MEMBERSHIP INTEREST" shall mean a Member's entire interest in
the Company including the Member's Economic Interest, any right to vote, and the
right to receive information concerning the business and affairs of the Company.
1.27 "MEMORANDUM" shall mean the Confidential Memorandum of the
Company dated November 16, 1998, together with any amendments or supplements
thereto.
1.28 "NONMANAGER MEMBER" shall mean any Member that is not also a
Manager.
1.29 "OFFERING" shall mean the Company's offering of Interests
pursuant to the Memorandum.
1.30 Not Used.
1.31 "PERCENTAGE INTEREST" shall mean for each Member or owner of
Economic Interest as of a given date, the ratio of such Member's Capital Account
to the Capital Accounts of all Members as of such date.
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1.32 "PERSON" shall mean an individual, partnership, limited
partnership, limited liability company, corporation, trust, estate, association
or any other entity.
1.33 "PLAN" shall have the meaning ascribed to such term in
Section 3.5A hereof.
1.34 "PROFITS" and "LOSSES" shall mean, for each Fiscal Year or
Fiscal Period, an amount equal to the Company's taxable income or loss for such
Fiscal Year or Fiscal Period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(a) Any income of the Company that is exempt from Federal
income tax and not otherwise taken into account in computing Profit or Loss
pursuant to this Section 1.34 shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profit and Loss pursuant to this Section 1.34 shall be
subtracted from such taxable income or loss;
(c) If the Gross Asset Value of any company asset is
adjusted pursuant to Paragraphs 1.20(b) or 1.20(d), the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profit and Loss;
(d) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss is recognized for Federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the Company property disposed of, notwithstanding that the adjusted tax basis of
such property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year or
Fiscal Period, computed in accordance with Section 1.13; and
(f) Notwithstanding any other provision of this Section
1.34, any items that are specially allocated pursuant to Section 6.2 shall not
be taken into account in computing Profit and Loss.
1.35 "PURCHASE DATE" shall mean any date on which the Manager
shall, in its sole and absolute discretion, permit purchasers of Interests to
make Capital Contributions.
1.36 "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.
1.37 "REMAINING MEMBERS" shall have the meaning ascribed to it in
Article VIII.
1.38 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.39 "SUBSCRIPTION" shall mean the form of Subscription Agreement
signed by investors under the Offering and attached as Exhibit "C" to the
Memorandum.
1.40 "SUTRO EMPLOYEE" means a full time employee of Sutro Group or
an Affiliate of Sutro
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Group which is controlled by the Sutro Group.
1.41 "SUTRO GROUP" shall mean The Sutro Group, a Nevada
corporation.
1.42 "SVM" shall mean Sutro Venture Management, Inc., a Delaware
corporation.
1.43 "TAX MATTERS PARTNER" (as defined in Code Section 6231(a)(7))
shall be SVM or its successor as designated pursuant to Section 9.6.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 FORMATION. The Members have formed a Delaware limited
liability company under the laws of the State of Delaware by filing the Articles
with the Delaware Secretary of State and entering into 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 obligations of any Member
are different by reason of any provision of this Agreement than they would be in
the absence of such provision, this Agreement shall, to the extent permitted by
the Act, control.
2.2 NAME. The name of the Company shall be "Sutro Venture Partners
III LLC." The business of the Company may be conducted under that name or, upon
compliance with applicable laws, any other name that the Manager deems
appropriate or advisable. The Manager shall file any fictitious name
certificates and similar filings, and any amendments thereto, that the Manager
considers appropriate or advisable.
2.3 TERM. The term of this Agreement commenced on the filing of
the Articles and shall continue until terminated as hereinafter provided.
2.4 OFFICE AND AGENT.
A. PRINCIPAL OFFICE. The principal office of the Company
shall be located at 0000 Xxxxxx Xxxxxx Xxxxxxx, #000 Xxxxx, Xxx Xxxxx, XX 00000,
unless and until the Manager shall determine otherwise, and the Manager may
determine to establish such additional offices to be located at such place or
places inside or outside the State of Delaware as the Manager may designate from
time to time.
B. REGISTERED OFFICE. The Registered Office of the
Company in the State of Delaware is located at 0000 Xxxxxx Xxxx, xx xxx Xxxx xx
Xxxxxxxxxx, Xxxxxx of New Castle. The registered agent of the Company for
service of process at such address is Corporation Service Company.
C. OTHER JURISDICTIONS. The Company shall file or record
such documents and take such other actions under the laws of any jurisdiction
outside the State of Delaware as are necessary or desirable to permit the
Company to do business in any such jurisdiction as is selected by the Manager
and to promote the limitation of liability for the Members in any such
jurisdiction.
2.5 PURPOSE AND BUSINESS OF THE COMPANY. The Company was formed to
acquire, own, hold for investment and otherwise dispose of securities, and to do
any and all acts and things necessary, appropriate, proper, advisable,
incidental to, or convenient for the furtherance and accomplishment of such
business, objectives, and purpose, but subject to the provisions of Paragraph
5.3B hereof. It is contemplated that the Company will accomplish its purpose
principally
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through investment in the Master Company.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 CAPITAL CONTRIBUTIONS OF MEMBERS. Any person, including the
Manager, whose Subscription has been accepted by the Manager and who has signed,
or whose attorney-in-fact has signed, this Agreement shall, on the Purchase Date
immediately following acceptance of such person's most recent Subscription,
contribute to the capital of the Company cash in an amount equal to the amount
as to which such person's Subscription has been accepted in respect of such
Purchase Date, and thereupon such person shall become a Member or, if already a
Member, such person's interest in the Company shall be increased accordingly. In
either case, a new Capital Account shall be established for such person in
respect of the new Capital Contribution. The Manager may, but need not, purchase
Interests (but shall be a Member whether or not it purchases any Interests).
3.2 OTHER CONTRIBUTIONS. No person shall be permitted to make any
Capital Contribution except as permitted pursuant to the provisions of this
Agreement.
3.3 CERTAIN RESTRICTIONS UPON INTEREST SALES. The Company shall
not issue or sell an Interest in any case where that issuance or sale would
cause the Company or the Master Company to fail to qualify for the exemption
from the definition of "investment company" provided by Section 3(c)(1) of the
Investment Company Act of 1940, as amended (the "1940 Act"). Subscriptions shall
not be accepted from more than 35 persons who the Manager does not reasonably
believe to be "accredited investors," as such term is defined in Rule 501
promulgated under the Securities Act.
3.4 NO INTEREST. No Member shall be entitled to receive any
interest on his or her Capital Contributions.
3.5 BORROWING. Certain Members (each, a "Borrower") may be given
the opportunity prior to the due date of any Capital Contribution, to borrow all
or any part of such Contribution from Sutro upon such terms as may be offered by
Sutro. Such terms may include, without limitation, the following:
A. The principal of and interest on the loan shall
accelerate and be payable earlier than the date due as described in the
Memorandum and/or any note memorializing the loan, including, without
limitation; (i) to the extent of 2/3 of any distributions payable to a Borrower
as a Member under this Agreement; (ii) upon the termination of the employment of
the Borrower by Sutro and its Affiliates, except for a termination by reason of
death or Disability, or, in the sole discretion of Sutro, normal retirement
under the applicable policies of Sutro and its Affiliates, or (iii) upon the
sale, redemption, termination, withdrawal or transfer of all or any part of the
Borrower's interest in the Company. The principal of and interest on the loan
shall also accelerate and be payable to the extent of 100% of any distributions
to which the Borrower would otherwise be entitled under the Deferred
Compensation Plan referred to in the Memorandum (the "Plan").
B. The Manager shall have the right to offset and shall
offset loan obligations due Sutro against distributions due the Borrower as a
Member hereunder and to cause the payment of such loans to the extent of such
distributions.
3.6 VESTING. Notwithstanding the foregoing, the Interest of each
Nonmanager Member
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shall be subject to a vesting requirement that the Member remain a Sutro
Employee for a consecutive period of three years following purchase of the
Interest involved and with vesting occurring all at once on the third
anniversary of the Purchase Date relating to the Interest in question (and with
no partial, pro rata or incremental vesting). This vesting requirement may be
waived in whole or in part by the Manager in its discretion and shall be waived
in the event of termination of employment by reason of death or Disability, or,
in the sole discretion of the Manager, normal retirement under the applicable
policies of Sutro and its Affiliates. Upon termination of such employment of a
Member for any reason within three (3) years from the date of a Member's
acquisition of an Interest in the Company, unless the Manager otherwise
determines in its discretion:
A. The right of the Member to any distributions of
assets of the Company under Section 6.3 shall terminate as to the unvested
Interest; and
B. The Member shall be required to withdraw from the
Company in accordance with Section 4.4B as to the nonvested Interest and such
nonvested Interest shall be liquidated under Section 4.4C; provided, however,
that the Manager may elect instead, in its sole discretion, to purchase the
Interest of such Member, or of any Member withdrawing under clause (ii) of
Section 4.4B, on equivalent terms and, notwithstanding any provision of this
Agreement to the contrary, other than Section 7.2 hereof with which there shall
be compliance, the Manager shall be free to assign its purchase right or the
Interest which it acquires to any person and to admit that person as a Member.
The proceeds of such liquidation or purchase shall be applied to payment of the
remaining principal of and accrued interest on any loans owed by a Member who is
a Borrower under Section 3.5 hereof before any payment or distribution of such
proceeds is made to the Member.
ARTICLE IV
MEMBERS
4.1 LIMITATIONS ON LIABILITY OF MEMBERS. The debts, obligations
and liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Member of the Company shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member or by
reason of such Member's acts or omissions in connection with the conduct of the
business of the Company.
4.2 LIABILITY OF MEMBERS TO THE COMPANY.
A. LIABILITY OF MEMBERS TO THE COMPANY. A Member is
liable to the Company: (i) for the difference between his or its contribution to
capital as actually made and that is stated in the Articles, this Agreement,
Subscription or other document executed by the Member as having been made by the
Member; and (ii) for any unpaid Capital Contribution which he, she or it agreed
in the Articles, this Agreement, or any Subscription or other document executed
by the Member to make in the future at the time and on the conditions stated in
the Articles, Agreement, Subscription or other document evidencing such
agreement. No Member shall be excused from an obligation to the Company to
perform any promise to contribute money, property or to perform services because
of death, disability, dissolution or any other reason.
B. MEMBER AS TRUSTEE FOR THE COMPANY. A Member holds as
trustee for the Company (i) specific property stated in the Articles, Agreement,
Subscription or other document executed by the Member as contributed by such
Member, but which was not contributed or which has been wrongfully or
erroneously returned; and (ii) money or other property wrongfully paid or
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conveyed to such Member on account of his or its Capital Contribution.
C. WAIVER OF LIABILITY OF MEMBER. The liabilities of a
Member as set out in this Section 4.2 can be waived or compromised only by the
consent of all Members; but a waiver or compromise shall only affect the right
of a creditor of the Company to the extent permitted by applicable law.
4.3 ADMISSION OF ADDITIONAL MEMBERS. The Manager may admit to the
Company additional Members, from time to time, only as expressly provided in
this Agreement, including pursuant to Sections 3.1 and Article VII hereof, and
neither the Manager nor the Members shall be permitted to admit new Members,
except as otherwise expressly provided in this Agreement.
4.4 WITHDRAWALS OR RESIGNATIONS. Except as otherwise provided in
this Section 4.4 no Member may withdraw or resign from the Company or demand a
return or withdrawal of any part of its Capital Account or Capital Contribution.
A. WITHDRAWAL OF MEMBER. Except as otherwise provided in
this Section 4.4, no Member shall be permitted to withdraw from the Company
until his or her Interest is vested under Section 3.6 hereof and then only with
the approval of the Manager, which approval may be withheld if the Manager does
not believe that such withdrawal is in the best interests of the other Members,
whether because of the cash position of the Company, the undesirability of
liquidating any of the investments of the Company, or otherwise. The following
provisions shall govern with respect to any withdrawals approved by the Manager:
(i) No such withdrawal shall be made except as
of the last day of a Fiscal Year;
(ii) Partial withdrawals shall not be permitted
and a Member desiring to withdraw must withdraw his or her entire interest in
the Company;
(iii) The Member desiring to withdraw must notify
the Manager in writing at least sixty (60) days prior to the close of the Fiscal
Year in which such Member wishes to effect his or her withdrawal; and
(iv) The Manager may, if necessary to accommodate
a request for withdrawal by a Member, attempt to obtain a purchaser of the whole
or a part of such Member's Interest.
B. MANDATORY WITHDRAWAL. Unless the Manager otherwise
determines, a Member shall (i) as to any of his or her unvested Interests, be
required to withdraw from the Company upon his or her resigning as an employee
of, or upon any other termination of his or her employment with, Sutro and its
Affiliates prior to the vesting of his or her Interest under Section 3.6, except
for a termination by reason of death or Disability, or, in the sole discretion
of the Manager, normal retirement under the applicable policies of Sutro and its
Affiliates, and (ii) as to all of his or her Interests, vested or not, be
required to withdraw from the Company upon any default by him or her under any
borrowing as a Borrower under Section 3.5 hereof, and, in each case ((i) or
(ii)), such Interests shall be liquidated under Section 4.3C or purchased by the
Manager as provided under Paragraph 3.6.
C. LIQUIDATING SHARE. In the event any Member shall
withdraw or be required to withdraw in accordance with the provisions of this
Section 4.4, there shall be paid to such Member or his or her legal
representative within 180 days after the last day of the Fiscal Year in which
the effective date of withdrawal occurs, an amount equal to such Member's
positive Capital Account
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balance as to the Interest involved, determined as of the effective date of
withdrawal; provided, however, that in the event of a mandatory withdrawal under
Section 4.4B, such Member shall be paid an amount equal to the lesser of (i) his
or her Capital Contribution(s) as to the subject Interest, less distributions
paid to such Member by the Company in respect thereof prior to the effective
date of withdrawal, other than that amount of such distributions as to the
subject Interest, if any, which is equal to the amount of taxes which is
estimated by the Manager (whose estimate shall be conclusive and binding) to
have been paid and/or to be payable by the Member by reason of Company
allocations to the Member which are attributable to Company operations through
the effective date of withdrawal (assuming a California taxpayer and the
applicability of maximum Federal and state rates), or (ii) his or her positive
Capital Account balance as to the subject Interest, in each case (in the case of
the foregoing clauses (i) and (ii)), less the balance due Sutro in respect of
any borrowing pursuant to Section 3.5 hereof (which balance due shall be
remitted by the Company to Sutro). In the case of mandatory withdrawal under
Section 4.4B, Capital Account balances will be determined and valuations will be
made as of the close of business on the Fiscal Year end closest in time to the
effective date of withdrawal. No interest shall accrue on any Interest between
the date of withdrawal and the date of payment. The term "effective date of
withdrawal" in this Section 4.4C means the date referred to in clause (i) of
Section 4.4A in the case of a withdrawal under Section 4.4A or the date of
termination or default, as the case may be, in the case of Section 4.4B.
4.5 TRANSACTIONS WITH THE COMPANY. Subject to any limitations set
forth in this Agreement and with the prior approval of the Manager, a Member may
lend money to and transact other business with the Company. Subject to other
applicable law, such Member has the same rights and obligations with respect
thereto as a Person who is not a Member.
4.6 REMUNERATION TO MEMBERS. Except as otherwise specifically
provided in this Agreement, no Member is entitled to remuneration for acting in
the Company business.
4.7 MEMBERS ARE NOT AGENTS. Pursuant to Section 5.1, the
management of the Company is vested in the Manager. The Members shall have no
power to participate in the management of the Company 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
the Company nor does any Member, unless expressly and duly authorized in writing
to do so by the Manager, have any power or authority to bind or act on behalf of
the Company in any way, to pledge its credit, to execute any instrument on its
behalf or to render it liable for any purpose.
4.8 VOTING RIGHTS. Except as expressly provided in this Agreement
or the Articles, Members shall have no voting, approval or consent rights.
4.9 MEETINGS OF MEMBERS.
A. DATE, TIME AND PLACE OF MEETINGS OF MEMBERS;
SECRETARY. Meetings of Members may be held at such date, time and place within
or without the State of Delaware as the Manager may fix from time to time. No
regular meetings of Members are required. At any Members' meeting, the Manager
shall appoint a person to preside at the meeting and a person to act as
secretary of the meeting. The secretary of the meeting shall prepare minutes of
the meeting which shall be placed in the minute books of the Company.
B. POWER TO CALL MEETINGS. Meetings of the Members may
be called by the Manager, or upon written demand of Members holding more than
ten percent (10%) of the Percentage Interests, for the purpose of addressing any
matters on which the Members may vote.
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C. NOTICE OF MEETING. Written notice of a meeting of
Members shall be sent or otherwise given to each Member not less than ten (10)
nor more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and the general nature of the
business to be transacted. No other business may be transacted at this meeting.
Upon written request to the Manager by any person entitled to call a meeting of
Members, the Manager shall immediately cause notice to be given to the Members
entitled to vote that a meeting will be held at a time requested by the person
calling the meeting, not less than ten (10) days nor more than sixty (60) days
after the receipt of the request. If the notice is not given within twenty (20)
days after the receipt of the request, the person entitled to call the meeting
may give the notice.
D. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice
of any meeting of Members shall be given either personally or by first-class
mail or telegraphic or other written communication, charges prepaid, addressed
to the Member at the address of that Member appearing on the books of the
Company or given by the Member to the Company for the purpose of notice. If no
such address appears on the Company's books or is given, notice shall be deemed
to have been given if sent to that Member by first-class mail or telegraphic or
other written communication to the Company's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where that office is located. Notice shall be deemed to have been given at the
time when delivered personally or deposited in the mail or sent by telegram or
other means of written communication.
If any notice addressed to a Member at the address of
that Member appearing on the books of the Company is returned to the Company by
the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice to the Member at that address,
all future notices or reports shall be deemed to have been duly given without
further mailing if these shall be available to the Member on written demand of
the Member at the principal executive office of the Company for a period of one
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving
any notice of any meeting shall be executed by the Manager and shall be filed
and maintained in the minute book of the Company.
E. VALIDITY OF ACTION. Any action approved at a meeting,
other than by unanimous approval of those entitled to vote, shall be valid only
if the general nature of the proposal so approved was stated in the notice of
meeting or in any written waiver of notice.
F. QUORUM. The presence in person or by proxy of a
Majority Interest shall constitute a quorum at a meeting of Members.
G. ADJOURNED MEETING; NOTICE. Any Members' meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the Membership Interests represented at that meeting,
either in person or by proxy, but in the absence of a quorum, no other business
may be transacted at that meeting. When any meeting of Members is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at a meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is subsequently fixed, or
unless the adjournment is for more than forty-five (45) days from the date set
for the original meeting, in which case the Manager shall set a new record date.
At any adjourned meeting the Company may transact any business which might have
been transacted at the original meeting.
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H. WAIVER OF NOTICE OR CONSENT. The actions taken at any
meeting of Members however called and noticed, and wherever held, have the same
validity as if taken at a meeting duly held after regular call and notice, if a
quorum is present either in person or by proxy, and if, either before or after
the meeting, each of the Members entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or consents to the holding of the
meeting or approves the minutes of the meeting. All such waivers, consents or
approvals shall be filed with the Company records or made a part of the minutes
of the meeting.
Attendance of a person at a meeting shall constitute
a waiver of notice of that meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters not included
in the notice of the meeting if that objection is expressly made at the meeting.
Neither the business to be transacted nor the purpose of any meeting of Members
need be specified in any written waiver of notice except as provided in
Paragraph 4.10E.
I. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action that may be taken at a meeting of Members may be taken without a meeting,
if a consent in writing setting forth the action so taken, is signed and
delivered to the Company within sixty (60) days of the record date for that
action by Members having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all Members
entitled to vote on that action at a meeting were present and voted. All such
consents shall be filed with the Manager or the secretary, if any, of the
Company and shall be maintained in the Company records. Any Member giving a
written consent, or the Member's proxy holders, may revoke the consent by a
writing received by the Manager or secretary, if any, of the Company before
written consents of the number of votes required to authorize the proposed
action have been filed.
Unless the consents of all Members entitled to vote
have been solicited in writing, (i) notice of any Member approval of an
amendment to the Articles or this Agreement, a dissolution of the Company, or a
merger of the Company, without a meeting by less than unanimous written consent,
shall be given at least ten (10) days before the consummation of the action
authorized by such approval, and (ii) prompt notice shall be given of the taking
of any other action approved by Members without a meeting by less than unanimous
written consent, to those Members entitled to vote who have not consented in
writing.
J. TELEPHONIC PARTICIPATION BY MEMBER AT MEETINGS.
Members may participate in any Members' meeting through the use of any means of
conference telephones or similar communications equipment as long as all Members
participating can hear one another. A Member so participating is deemed to be
present in person at the meeting.
K. RECORD DATE. In order that the Company may determine
the Members of record entitled to notices of any meeting or to vote, or entitled
to receive any distribution or to exercise any rights in respect of any
distribution or to exercise any rights in respect of any other lawful action,
the Manager, or Members representing more than ten percent (10%) of the
Percentage Interests may fix, in advance, a record date, that is not more than
sixty (60) days nor less than ten (10) days prior to the date of the meeting and
not more than sixty (60) days prior to any other action. If no record date is
fixed:
(i) The record date for determining Members
entitled to notice of or to vote at a meeting of Members shall be at the close
of business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business
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day next preceding the day on which the meeting is held.
(ii) The record date for determining Members
entitled to give consent to Company action in writing without a meeting shall be
the day on which the first written consent is given.
(iii) The record date for determining Members for
any other purpose shall be at the close of business on the day on which the
Manager adopts the resolution relating thereto, or the sixtieth (60th) day prior
to the date of the other action, whichever is later.
(iv) The determination of Members of record
entitled to notice of or to vote at a meeting of Members shall apply to any
adjournment of the meeting unless the Manager or the Members who called the
meeting fix a new record date for the adjourned meeting, but the Manager or the
Members who called the meeting shall fix a new record date if the meeting is
adjourned for more than forty-five (45) days from the date set for the original
meeting.
L. PROXIES. Every Member entitled to vote on any matter
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Manager or
secretary, if any, of the Company. A proxy shall be deemed signed if the
Member's name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission, electronic transmission or otherwise) by the Member or
the Member's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the Company stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the Company before the vote
pursuant to that proxy is counted.
4.10 CERTIFICATE OF MEMBERSHIP INTEREST. Unless the Manager
otherwise elects, a Membership Interest shall not be represented by a
certificate of membership.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 MANAGEMENT OF THE COMPANY BY MANAGER. The business, property
and affairs of the Company shall be managed exclusively by the Manager. Except
for situations in which the approval of the Members is expressly required by the
Articles or this Agreement, the Manager shall have full, complete and exclusive
authority, power, and discretion to manage and control the business, property
and affairs of the Company, to make all decisions regarding those matters and to
perform any and all other acts or activities customary or incident to the
management of the Company's business, property and affairs. The number of
Managers shall be one (1).
5.2 RESIGNATION AND REMOVAL OF MANAGERS. No Manager may resign as
Manager at any time without the consent of a Majority Interest of the Members
other than the departing Manager. A Manager may be removed at any time, with
Cause (but may not be removed without Cause), by the unanimous vote of all of
the Members (other than the Member who is to be removed as Manager) at a meeting
called expressly for that purpose, or by the written consent of all of the
Members (other than the Member who is to be removed as Manager). Removal as
Manager shall not affect the Manager's rights as a Member or constitute a
withdrawal of a Manager as a Member. For purpose of this Section, "Cause" shall
mean fraud, willful misconduct or embezzlement.
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5.3 POWERS OF MANAGER.
X. XXXXXX OF MANAGER. Without limiting the generality of
Section 5.1, but subject to Paragraph 5.3B and to the express limitations set
forth elsewhere in this Agreement, the Manager shall have all necessary powers
to manage and carry out the purposes, business, property, and affairs of the
Company.
B. LIMITATIONS ON POWER OF MANAGER. Notwithstanding any
other provisions of this Agreement, the Manager shall not have authority
hereunder to cause the Company to engage in the following transactions without
first obtaining the affirmative vote or written consent of a Majority Interest
(or such larger percentage as is specified in this Agreement), the concurrence
of the Manager (except where expressly not required) and (except the case of
removal of the Manager) the concurrence of any Member materially and adversely
affected by the proposed amendment:
(i) The merger of the Company with another
limited liability company or limited partnership or corporation, general
partnership or other Person;
(ii) The establishment of different classes of
Members;
(iii) An alteration of the primary purpose or
business of the Company as set forth in Section 2.5;
(iv) Any act which would make it impossible to
carry on the ordinary business of the Company;
(v) To engage in any other transaction described
in this Agreement that requires the vote, consent, or approval of the Members;
5.4 PERFORMANCE OF DUTIES; LIABILITY OF MANAGER. The Manager shall
not be liable to the Company or to any Member for any loss or damage sustained
by the Company 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, and provided that the Manager
shall have acted in good faith and in a manner it reasonably believed to be in
the best interests of the Company and its Members. A Manager who so performs the
duties of Manager shall not have any liability by reason of being or having been
a Manager of the Company. Notwithstanding the foregoing, it is understood and
agreed that the Federal securities laws impose liabilities under certain
circumstances on persons who act in good faith, and, therefore, nothing herein
shall in any way be deemed to constitute a waiver or limitation of any rights
which a Member may have under any Federal securities laws.
In performing its duties, the Manager 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
the Manager has knowledge concerning the matter in question that would cause
such reliance to be unwarranted and provided that the Manager acts in good faith
and after reasonable inquiry when the need therefor is indicated by the
circumstances:
(a) One or more employees or other agents of the Company
or of a portfolio company of the Company or Master Company whom the Manager
reasonably believes to be reliable and competent in the matters presented; or
(b) Any attorney, independent accountant, or other person
as to matters which
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the Manager reasonably believes to be within such person's professional or
expert competence.
5.5 PAYMENTS TO MANAGER. Except as specified in this Agreement or
referred to in the Memorandum, no Manager or Affiliate of a Manager is entitled
to remuneration for services rendered or goods provided to the Company. The
Company shall reimburse the Manager for all expenses incurred by the Manager in
conducting the Company's business, and all direct disbursements made and
obligations incurred on behalf of the Company, including the Company's due
diligence trading, custodial, borrowing, legal, accounting, documentation,
reporting, meeting and auditing expenses, and other items of a general overhead
and administrative nature which are customarily incurred by persons engaged in
the business of the Company; provided, however, that overhead items pertaining
to the operations of the Manager, including salaries to its employees, rent,
office expenses and similar costs and expenses, shall not be reimbursable by the
Company, and it is specifically understood and agreed that all expenses incurred
in connection with the organization of the Company or the preparation of the
Memorandum in excess of Twenty-Five Thousand Dollars ($25,000) shall not be
reimbursed and shall be the sole responsibility of the Manager. In addition, the
Manager shall be entitled to receive payment of an administrative fee in an
amount equal to one percent (1.00%) of the Capital Accounts of each Nonmanager
Member as at the end of each Fiscal Year, which amount shall be calculated,
debited to the Capital Accounts of the Nonmanager Members and paid in cash or by
check to the Manager as soon as practicable following Fiscal Year end. If any
Company Fiscal Year is less than a complete year, then the Manager will be
entitled to payment of a proportionate share of such fee in respect of the
period in question; however, there shall be deducted from the fee otherwise
payable an aggregate amount equal to the amount by which the fair market value
of the Company's pro rata share (based on relative commitments to contribute
capital to the Master Company (as of the Company's admission to contribute
capital to the Master Company)) of the Interim Investments (as such term is
defined in the Memorandum) exceeds their original cost to Sutro (with fair
market value calculated as of the Company's admission to the Master Company).
5.6 LIMITED LIABILITY. No person who is a Manager of the Company
shall be personally liable under any judgement of a court, or in any other
manner, for any debt, obligation, or liability of the Company, whether that
liability or obligation arises in contract, tort, or otherwise, solely by reason
of being a Manager.
5.7 INTERESTS HELD BY MANAGER. Except as otherwise provided in
this Agreement, Interests held by the Manager, if any, shall entitle the Manager
to all the rights of any other holder of Interests, including without limitation
the economic, voting, information and inspection rights of a Member.
ARTICLE VI
ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS
6.1 CAPITAL ACCOUNTS. Individual Capital Accounts shall be
maintained in accordance with Section 1.8.
6.2 ALLOCATIONS. Subject to the provisions below regarding special
allocations and subject to Section 5.5 with respect to the administrative fee
provided for therein, Profits and Losses shall be allocated to the Members for
each Fiscal Period as of the first day of such Fiscal Period as follows:
A. ALLOCATIONS. Profits and Losses shall be allocated to
the Members for each period described as follows:
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1. PROFITS AND LOSSES. Profits and Losses for
each Fiscal Period shall be allocated to the Members in proportion to their
respective Percentage Interests as of the first day of such Fiscal Period.
2. RECAPTURE. Anything herein to the contrary
notwithstanding, any recapture under applicable tax laws shall be allocated to
the Members in the same proportions as the item generating the recapture shall
have been allocated.
B. SPECIAL CAPITAL ACCOUNT ALLOCATIONS. Notwithstanding
the allocation provisions of Section 6.2A, the following special allocations
shall be made in allocating Profits and Losses:
1. SECTION 704 ALLOCATIONS. Any special
allocations necessary to comply with the requirements set forth in Section 704
of the Code and the corresponding Regulations, including the qualified income
offset and minimum gain chargeback provisions contained therein, shall be made.
2. TAX ALLOCATIONS.
(a) Subject to clause 6.3B(2)(b) below,
in each Fiscal Year, items of income, deduction, gain, loss or credit that are
recognized for income tax purposes shall be allocated among the Members in such
manner as to reflect equitably amounts credited to or debited against the
Capital Account of each Member, whether in such Fiscal Year or in prior Fiscal
Years. To this end, the Company shall establish and maintain records that shall
show the extent to which the Capital Account of each Member shall, as of the
last day of each Fiscal Year, be comprised of amounts that have not been
reflected in the taxable income of such Member. To the extent deemed by the
Manager to be feasible and equitable, taxable income and gains in each Fiscal
Year shall be allocated among the Members who have enjoyed the related credits,
and items of deduction, loss and credit in each Fiscal Year shall be allocated
among the Members who have borne the burden of the related debits.
(b) Notwithstanding any of the foregoing
provisions to the contrary, if a Member withdraws capital during a Fiscal Year,
allocations of taxable income and loss may, in the exclusive discretion of the
Manager, be made as follows:
i. Taxable income may be
allocated first, to each Member who shall have withdrawn all or part of such
Member's Capital Account in that Fiscal Year, to the extent that such withdrawal
exceeds such member's adjusted tax basis in such Member's interest in the
Company immediately prior to such withdrawal. If more than one Capital Account
shall have been so withdrawn in full or in part, such allocations, if made,
shall be made to the extent of and in proportion to such differences;
ii. Taxable loss may first be
allocated to each member who shall have withdrawn all of such Member's Capital
Account in that Fiscal Year, to the extent that such Member's adjusted tax basis
in such Member's interest in the Company exceeds that Capital Account
immediately prior to such withdrawal. If more than one Capital Account has been
so withdrawn, such allocations of taxable loss, if made, shall be made to the
extent of and in proportion to such differences; and
iii. Thereafter, taxable income
and loss shall be allocated as provided in clause 6.3B(2)(a) above.
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(c) The Manager, in its exclusive discretion,
may cause the Company to make the election to adjust the basis of the Company
property under Code Section 754. In any year in which the Code Section 754
election is in effect, this clause 6.3B(2) shall be null and void. Any elections
or other decisions relating to such allocations shall be made by the Manager in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Paragraph 6.3B(2) are solely for purposes of
Federal, state and local taxes and shall not affect, or in any way be taken into
account in computing, any Capital Account or share of Profits, Losses or other
items of any Member, or distributions to any Member, pursuant to any provision
of this Agreement.
3. OTHER ALLOCATION RULES.
(1) Generally, all Profits and Losses
shall be allocated among the Members as provided in Section 6.2A and this
Section 6.3B. If Members are admitted to the Company on different dates during
any Fiscal Year, the Profits or Losses allocated among the Members for each such
Fiscal Year shall be allocated in proportion to their respective Capital
Accounts from time to time during such Fiscal Year in accordance with Code
Section 706, using any convention permitted by law and selected by the Manager.
(2) For purposes of determining the
Profits, Losses or any other items allocable to any period, Profits, Losses and
any such other items shall be determined on a daily, monthly or other basis, as
determined by the Manager using any permissible method under Code Section 706
and the Regulations thereunder.
(3) Notwithstanding any of the foregoing
provisions to the contrary, if taxable gain to be allocated includes income
resulting from the sale or disposition of Company property or property of a
limited partnership or joint venture in which the Company owns an interest that
is treated as ordinary income, such gain so treated as ordinary income shall be
allocated to and reported by each Member in proportion to allocations to that
Member of the items that gave rise to such ordinary income, and the Company
shall keep records of such allocations. In the event of the subsequent admission
of any new Member, any item that would constitute "unrealized receivables" under
Code Section 751 and the Regulations thereunder shall not be shared by the newly
admitted Members, but rather shall remain allocated to existing Members.
4. PROVISIONAL ALLOCATION. If any amount
claimed by the Company to constitute a deductible expense in any Fiscal Year is
treated by any Federal, state or local taxing authority as a payment made to a
Member in such Member's capacity as a member of the Company for income tax
purposes, with regard to such authority, items of income and gain of the Company
for such Fiscal Year shall first be allocated to such member to the extent of
such payment.
C. WITHDRAWALS FROM CAPITAL ACCOUNTS. If a Member's
Interest is liquidated by the Company pursuant to Section 4.4C and the Member
receives less than the amount of the balance in his or her Capital Account, then
the excess of (i) the balance in his or her Capital Account over (ii) the amount
distributed by the Company shall be allocated among all the remaining Members in
proportion to their Capital Account balances. This provision shall be applied so
as to maintain equality between the Capital Accounts of the Members and the
amount of Company capital reflected on the Company's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704- 1(b)(2)(iv)(q).
Further, notwithstanding Section 6.1, if a Member's Interest is purchased by the
Manager pursuant to Paragraph 3.6(c) and the purchase price is less than the
balance of the Capital Account of the Member, then (i) the excess of (x) the
balance in the
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Member's Capital Account over (y) the amount paid by the Manager shall be
allocated among all the remaining Members in proportion to their Capital Account
balances and (ii) the Manager (and any assignee of the Manager) shall have a
Capital Account balance with respect to the purchased interest in the Company
equal to the purchase price paid by the Manager.
6.3 DISTRIBUTIONS IN GENERAL. Distributions will be made to all
Members in proportion to their Percentage Interests. The making of distributions
described in this Section 6.3 shall be within the sole and absolute discretion
of the Manager, except that net cash proceeds generated from the sale or other
disposition of investments in portfolio companies will not be reinvested by the
Company; instead, they will be distributed to Members, except that the Manager
may retain in the Company such amounts as it deems prudent as reserves to meet
current or future Company expenses or liabilities and to make tax distributions
as described below, and except that "restricted securities" will generally not
be distributed until they become publicly tradeable by reason of registration or
under Rule 144 of the Securities Act of 1933, as amended, or until the Company
is dissolved. To the extent that there is any amount due to Sutro from a Member
who is a Borrower under Section 3.5, each distribution to such Borrower pursuant
to this Section 6.3 shall be applied in payment of such obligation of such
Borrower. The Manager shall endeavor, but shall not be required, to distribute
cash to the Members in an amount estimated by the Manager to be equal to their
Federal and state income tax liabilities arising from investment in the Company
(assuming California taxpayers and applying the maximum Federal and state then
in effect).
6.4 RESTRICTION ON DISTRIBUTIONS.
A. LIMITATION. No distribution shall be made if, after
giving effect to the distribution, all liabilities of the Company, other than
liabilities to Members on account of their Membership Interests and liabilities
for which the recourse of creditors is limited to specified property of the
Company, exceed the fair value of the assets of the Company, except that the
fair value of property that is subject to a liability for which the recourse of
creditors is limited shall be included in the assets of the Company only to the
extent that the fair value of that property exceeds that liability.
B. LIABILITY FOR RETURN. A Member who receives a
distribution in violation of Paragraph 6.4A and who knew at the time of the
distribution that the distribution violated Paragraph 6.4A shall be liable to
the Company for the amount of the distribution. A Member who receives a
distribution in violation of Paragraph 6.4A and who did not know at the time of
the distribution that the distribution violated Paragraph 6.4A shall not be
liable for the amount of the distribution. Subject to Paragraph 6.4C, this
Paragraph 6.4B shall not affect any obligation or liability of a Member under
this Agreement or applicable law for the amount of a distribution.
C. LIMITATION ON LIABILITY. A Member who receives a
distribution from the Company shall have no liability for the amount of the
distribution after the expiration of three (3) years from the date of the
distribution unless an action to recover the distribution from such Member is
commenced prior to the expiration of the said 3-year period and an adjudication
of liability against such Member is made in the said action.
6.5 RETURNED DISTRIBUTIONS. The amount of any distribution
returned to the Company by a Member or Economic Interest owner or paid by a
Member or Economic Interest owner for the account of the Company or to a
creditor of the Company shall be added to the account or accounts from which it
was subtracted when it was distributed to the Member or Economic Interest owner.
6.6 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are
aware of the income tax consequences of the allocations made by this Article VI
and hereby agree to be bound
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by the provisions of this Article VI in reporting their shares of Company income
and loss for income tax purposes.
ARTICLE VII
TRANSFER AND ASSIGNMENT OF INTERESTS
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 his or her Membership Interest (collectively, "transfer") except
with the prior written consent of the Manager, which consent may be given or
withheld, conditioned or delayed (as allowed by this Agreement or the Act), as
the Manager may determine in its sole and absolute discretion. Transfers in
violation of this Article VII shall only be effective to the extent set forth in
Section 7.7. After the 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.
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 his or her
Membership Interest: (i) without compliance with all Federal and state
securities law, (ii) if it would cause the Company or the Master Company to fail
to qualify for the exemption from the definition of "investment company"
provided by Section 3(c)(1) of the 1940 Act, (iii) if it would cause the Company
to be treated as a publicly traded partnership ("PTP") taxable as a corporation
under Code Section 7704, or (iv) 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 the Company under Code Section 708(b)(1)(B).
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 Sections 7.1 and 7.2 relating to consent of the Manager and securities and
tax requirements hereof are met, (ii) the Assignee executes an instrument
satisfactory to the Manager accepting and adopting the terms and provisions of
this Agreement, and (iii) the Assignee pays any reasonable expenses in
connection with his or her 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 the Company.
7.4 PERMITTED TRANSFERS. The Economic Interest of any Member may
be transferred subject to compliance with Sections 7.2 and 7.3, but without the
prior written consent of the Manager as required by Section 7.1, by the Member
(i) by inter vivos gift to any spouse, parent, sibling, in-law, child or
grandchild of the Member, (ii) to a trust for the benefit of the Member or such
spouse, parent, sibling, in-law, child or grandchild of the Member or by inter
vivos gift to a trust revocable during the Member's lifetime but for the benefit
of any Person, or (iii) by testamentary transfer to any Person.
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 last day of the calendar quarter following the date upon
which the requirements of Sections 7.1, 7.2 and 7.3 have been met. Any
transferee of a Membership Interest shall take such Interest subject to the
restrictions on transfer imposed by this Agreement.
7.6 RIGHTS OF LEGAL REPRESENTATIVES. If a Member who is an
individual dies or is
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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 his or her legal representative or successor.
7.7 NO EFFECT TO TRANSFERS IN VIOLATION OF AGREEMENT. Upon any
transfer of a Membership Interest in violation of this Article VII, the
transferee shall have no right to vote or participate in the management of the
business, property and affairs of the Company 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 the Company's Profits,
Losses and distributions of the Company'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 Manager, a transfer in
violation of this Article VII would cause the Company to be treated as a PTP
taxable as a corporation or cause the tax termination of the Company 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.
ARTICLE VIII
CONSEQUENCES OF DISSOLUTION EVENTS
Upon the occurrence of a Dissolution Event as to the Manager, the
Company shall dissolve unless the remaining Members ("Remaining Members")
holding a majority of the Percentage Interests which all Remaining Members hold
consent within ninety (90) days of the Dissolution Event to the continuation of
the business of the Company and to the election of a new Manager.
ARTICLE IX
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 BOOKS AND RECORDS. The books and records of the Company shall
be kept, and the financial position and the results of its operations recorded,
in accordance with the accounting methods followed for Federal income tax
purposes. The books and records of the Company shall reflect all the Company
transactions and shall be appropriate and adequate for the Company's business.
The Company shall maintain at its principal office all of the following:
(a) A current list of the full name and last known
business or residence 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 the Company's Federal, state, and local
income tax or information returns and reports, if any, for the six (6) most
recent taxable years;
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(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 the Company, if
any, for the six (6) most recent Fiscal Years; and
(g) The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past four (4)
Fiscal Years.
9.2 DELIVERY TO MEMBERS AND INSPECTION.
A. DELIVERY OF INFORMATION. Upon the request of any
Member or Assignee for purposes reasonably related to the interest of that
Person as a Member or Assignee, the Manager shall promptly deliver to the
requesting Member or Assignee, at the expense of the Company, a copy of the
information required to be maintained under Paragraphs 9.1(a), (b) and (d), and
a copy of this Agreement.
B. INSPECTION AND COPYING. 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 the Company records described in Paragraphs 9.1(a) through 9.1(g);
and
(ii) obtain from the Manager, promptly after
their becoming available, a copy of the Company's Federal, state, and local
income tax or information returns for each Fiscal Year.
C. RIGHT TO REQUEST. Any request, inspection or copying
by a Member or Assignee under this Section 9.2 may be made by that Person or
that Person's agent or attorney.
D. COPIES OF AMENDMENTS. The Manager shall promptly
furnish to a Member a copy of any amendment to the Articles or this Agreement
executed by the Manager pursuant to a power of attorney from the Member.
9.3 ANNUAL STATEMENTS.
A. DELIVERY OF STATEMENTS. Within 180 days after the
close of each Fiscal Year, the Manager will distribute financial statements of
the Company (including a balance sheet, statements of income and expense,
Members' equity and changes in financial position) as at the end of and for the
year then ended, accompanied by an audit report thereon prepared by certified
public accountants. Members will also receive an annual written review of the
performance of the Company's portfolio companies.
B. TAX INFORMATION. The Manager shall provide the
Members with all tax information necessary for the preparation of their Federal,
state and local income tax returns within 120 days after the close of each
Fiscal Year.
9.4 COMPANY ACCOUNTS. The Manager shall maintain the funds of the
Company in such accounts, if any, as it deems appropriate.
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9.5 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS. All decisions as
to accounting matters, except as otherwise specifically set forth herein, shall
be made by the Manager. The Manager may rely upon the advice of the Manager's
accountants as to whether such decisions are in accordance with accounting
methods followed for Federal income tax purposes.
9.6 TAX MATTERS FOR THE COMPANY HANDLED BY MANAGER AND TAX MATTERS
PARTNER. The Manager shall from time to time cause the Company to make such tax
elections as the Manager deems to be in the best interests of the Company and
the Members. The Tax Matters Partner shall represent the Company (at the
Company's expense) in connection with all examinations of the Company's affairs
by tax authorities, including resulting judicial and administrative proceedings,
and shall expend the Company funds for professional services and costs
associated therewith. The Tax Matters Partner shall oversee the Company tax
affairs in the overall best interests of the Company. 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, the Manager may designate another Member to be Tax
Matters Partner.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 DISSOLUTION. The Company shall be dissolved, its assets shall
be disposed of, and its affairs wound up on the first to occur of the following:
(a) The entry of a decree of judicial dissolution;
(b) The vote of the Manager or the vote of a Majority
Interest and the concurrence of the Manager; or
(c) The occurrence of a Dissolution Event and the failure
of the Remaining Members to consent in accordance with Article VIII to continue
the business of the Company within ninety (90) days after the occurrence of such
event.
10.2 CERTIFICATE OF DISSOLUTION. As soon as possible following the
occurrence of any of the events specified in Section 10.1, the Manager who has
not wrongfully dissolved the Company or, if none, the Members, shall execute any
required Certificate of Dissolution in such form, if any, as shall be prescribed
by the Delaware Secretary of State and file the Certificate as required by the
Act.
10.3 WINDING UP. Upon the occurrence of any event specified in
Section 10.1, the Company 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 Manager who has not wrongfully dissolved the
Company or, if none, the Members, shall be responsible for overseeing the
winding up and liquidation of Company, shall take full account of the
liabilities of Company and assets, shall either cause its assets to be sold or
distributed, and if sold shall cause the proceeds therefrom, to the extent
sufficient therefor, to be applied and distributed as provided in Section 10.5.
The Persons winding up the affairs of the Company 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 the Company. The Manager or Members
winding up the affairs of the Company shall not be entitled to any compensation
for such services.
10.4 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one
or more Members shall
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first be valued to determine the Profit or Loss that would have resulted if such
asset were sold for such value, such Profit or Loss shall then be allocated
pursuant to Article VI, 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 value of such interest (net of any liability secured by such asset that such
Member assumes or takes subject to).
10.5 ORDER OF PAYMENT UPON DISSOLUTION. After determining that all
known debts and liabilities of the Company, including, without limitation, debts
and liabilities to Members who are creditors of the Company, have been paid or
adequately provided for, the remaining assets shall be distributed to the
Members in accordance with their positive Capital Account balances, after taking
into account allocations for the Company's taxable year during which liquidation
occurs. Such liquidating distributions shall be made by the end of the Company's
taxable year in which the Company is liquidated, or, if later, within ninety
(90) days after the date of such liquidation.
10.6 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 the Company for the return of his or
her positive Capital Account balance and shall have no recourse for his or her
Capital Contribution and/or share of Profits (upon dissolution or otherwise)
against the Manager or any other Member.
10.7 CERTIFICATE OF CANCELLATION. The Manager or Members who filed
the Certificate of Dissolution shall cause to be filed in the office of, and on
a form prescribed by, the Delaware Secretary of State, a Certificate of
Cancellation of the Articles upon the completion of the winding up of the
affairs of the Company.
ARTICLE XI
INDEMNIFICATION
11.1 INDEMNIFICATION. The Manager may authorize the Company to pay
expenses incurred by, or to satisfy a judgement or fine rendered or levied
against, a present or former Manager, an employee of a Manager or a former or
present employee of the Company in an action brought by a third party against
such person (whether or not this Company is joined as a party defendant) to
impose a liability or penalty on such person for an act alleged to have been
committed by such person while a Manager, employee of such Manager or former or
present employee of the Company, provided that (i) the person to be indemnified
was acting in good faith within what he reasonably believed to be the scope of
his employment or authority and for a purpose which he reasonably believed to be
in the furtherance of the purpose and best interests of the Company or the
Members, and (ii) the action or failure to act in which respect of which
indemnification is sought does not constitute gross negligence, willful
misconduct or violation of applicable law. Payments authorized hereunder include
amounts paid and expenses incurred in settling any such action or threatened
action. This provision does not apply to any action instituted or maintained in
the right of this Company or by a Member. The indemnification authorized by this
Article XI shall be made from assets of the Company and no Member shall be
personally liable to an indemnitee.
11.2 SUCCESSORS AND ASSIGNS; LIMITATIONS. This Article XI shall
inure to the benefit of the Manager, its shareholders, partners, employees and
agents, the employees and agents of the Company, and their respective heirs,
executors, administrators, successors and assigns. The Federal securities laws
impose liabilities under certain circumstances on persons who act in good faith,
and, therefore, nothing herein shall in any way constitute a waiver or
limitation of any rights
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which a Member may have under any Federal securities laws.
ARTICLE XII
COMPETING ACTIVITIES
The Manager need not devote all of its business time to the affairs of
the Company, but shall devote only so much of its time and attention as it shall
deem necessary and advisable. Each of the parties hereto acknowledges and agrees
that any of the Members may engage in or possess an interest in other business
ventures of any nature and description independently or with others, and neither
the Company nor the Members shall have any right by virtue of this Agreement in
or to such independent ventures or to the income or profits derived therefrom.
No Member shall be accountable to the Company for any investment or business
opportunity which a Member hereafter becomes aware of by reason of the affairs
of the Company. The Members and each of them hereby waive any and all rights
which they or any of them have now or may have in the future by reason of the
doctrine of partnership or corporate opportunity in connection with the affairs
of the Company. The fact that any Member, or any Affiliate of any Member, or a
member of his or her family, is employed by, or is directly or indirectly
interested in or connected with, any person, firm or corporation employed or
engaged by the Company to render or perform a service, or from whom the Company
may make any purchase, or to whom the Company may make any sale, or from or to
whom the Company may obtain or make any loan or enter into any lease or other
arrangement, shall not prohibit the Company from engaging in any transaction
with such person, firm or corporation, or create any additional duty of legal
justification by such Member or such person, firm or corporation beyond that of
an unrelated party, and neither the Company nor any other Member shall have any
right in or to any revenues or profits derived from such transaction by such
Partner, Affiliate, person, firm or corporation. Neither the Company nor any
Member shall have any right in or to any such independent venture or investment
or the revenues or profits derived therefrom. The above references to Members
include Members who are Managers.
ARTICLE XIII
MISCELLANEOUS
13.1 COUNSEL TO THE COMPANY. Counsel to the Company may also be
counsel to any Manager or any Affiliate of a Manager. The Manager may execute on
behalf of the Company and the Members any consent to the representation of the
Company that counsel may request pursuant to the California Rules of
Professional Conduct or similar rules in any other jurisdiction ("Rules"). The
Company has initially selected Buchalter, Nemer, Fields & Younger ("Company
Counsel") as legal counsel to the Company. Each Member acknowledges that Company
Counsel does not represent any Nonmanager Member in the absence of a clear and
explicit written agreement to such effect between the Nonmanager Member and
Company Counsel, and that in the absence of any such agreement Company Counsel
shall owe no duties directly to a Nonmanager Member. Notwithstanding any
adversity that may develop, in the event any dispute or controversy arises
between any Members and the Company, or between any Members or the Company, on
the one hand, and a Manager (or Affiliate of a Manager) that Company Counsel
represents, on the other hand, then each Member agrees that Company Counsel may
represent either the Company 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. Each Member further
acknowledges that: (a) Company Counsel has represented the interests of Sutro
and its Affiliates in connection with the formation of the Company and the
preparation and negotiation of this Agreement, (b) while communications with
Company Counsel concerning the formation of the Company, its Members and
Managers may be confidential with respect to third parties, no Member
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has any expectation that such communications are confidential with respect to
Sutro, and (c) Company Counsel has heretofore represented and will continue to
represent Affiliates of Sutro in connection with other matters, including their
investment activities, which may be competitive with those of the Company.
13.2 COMPLETE AGREEMENT. This Agreement and the Subscription
Agreement and the Articles constitute the complete and exclusive statement of
agreement among the Members and Manager 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 Manager 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 Manager or have any force or
effect whatsoever. To the extent that any provision of the Articles conflicts
with any provision of this Agreement, the Articles shall control.
13.3 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.
13.4 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.
13.5 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 or other statutes or laws
will include all amendments, modifications, or replacements of the specific
sections and provisions concerned.
13.6 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.
13.7 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 or her counsel.
13.8 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.
13.9 JURISDICTION. Each Member hereby consents to the exclusive
jurisdiction of the state and Federal courts sitting in the State of 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 or her may be effected by
service of process by registered or certified mail addressed as provided in
Section 13.13 of this Agreement, and that when so made shall be as if served
upon him or her personally within the State of California.
13.10 EXHIBITS. All Exhibits attached to this Agreement are
incorporated and shall be
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treated as if set forth herein.
13.11 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.
13.12 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.
13.13 NOTICES. Any notice to be given or to be served upon the
Company or any party hereto in connection with this Agreement must be in writing
(which may include facsimile) and will be deemed to have been given and received
when delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member 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.
13.14 AMENDMENTS. This Agreement may be amended only upon the
written consent thereto of the Manager and a Majority Interest of the Nonmanager
Members, except that the Manager may amend this Agreement without the consent of
or notice to any of the Members to (a) cure any ambiguity, correct or supplement
any provision in the Agreement which may be inconsistent with any other
provision in this Agreement, or make any other provisions with respect to
matters or questions arising under the Agreement which will not be inconsistent
with the intent of the Agreement; (b) delete or add any provision of the
Agreement required to be so deleted or added by the Securities and Exchange
Commission or by a state securities law administrator or similar such official,
which addition or deletion is deemed by such agency or official to be for the
benefit or protection of the Members; (c) reflect the withdrawal, expulsion,
addition or substitution of Members; (d) reflect the proposal, promulgation or
amendment of Regulations under Code Section 704, if, in the opinion of the
Manager, the amendment does not have a material adverse effect on the Members;
(e) elect for the Company to be bound by any successor statute to the Act if, in
the opinion of the Manager, the amendment does not have a material adverse
effect on the Members; (f) conform the Agreement to changes in the Act or
interpretations thereof which, in the discretion of the Manager, it believes
appropriate, necessary or desirable, if, in its reasonable opinion, such
amendment does not have a materially adverse effect on the Members or the
Company; (g) change the name of the Company; and (h) make any change which, in
the discretion of the Manager, is advisable to qualify or to continue the
qualification of the Company as a limited liability company or that is necessary
or advisable, in the discretion of the Manager, so that the Company will not be
treated as an association taxable as a corporation for Federal income tax
purposes. Any amendments made pursuant to this Section 13.14 may by its terms be
made effective as of the date of this Agreement.
13.15 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT. If a Member
is not a natural person, neither the Company 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.
13.16 NO INTEREST IN COMPANY PROPERTY; WAIVER OF ACTION FOR
PARTITION. No Member or
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Assignee has any interest in specific property of the Company. Without limiting
the foregoing, each Member and Assignee irrevocably waives during the term of
the Company any right that he or she may have to maintain any action for
partition with respect to the property of the Company.
13.17 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.
13.18 ATTORNEY FEES; ARBITRATION. In the event that any dispute
between the Company and the Members or among the Members should result in
litigation, including arbitration, the prevailing party in such dispute shall be
entitled to recover from the other party all reasonable fees, costs and expenses
of enforcing any right of the prevailing party, including without limitation,
reasonable attorneys' fees and expenses, 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 judgement. Any judgement or order entered in such
action shall contain a specific provision providing for the recovery of attorney
fees and costs incurred in enforcing such judgement and an award of
pre-judgement interest from the date of the breach at the maximum rate of
interest allowed by law. For the purposes of this Section: (a) attorney fees
shall include, without limitation, fees incurred in the following: (1)
post-judgement 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. Any controversy or dispute arising out of this Agreement,
interpretation of any of the provisions hereof, or the actions of the Manager or
Members hereunder shall be submitted to arbitration before the National
Association of Securities Dealers, Inc. ("NASD") under the rules then obtaining
of the NASD. If the NASD refused to accept jurisdiction of the matter, then the
dispute shall be submitted to arbitration before the New York Stock Exchange
under the rules then obtaining of said Exchange. Any such arbitration shall be
held in San Francisco, California, and judgment upon any award thus obtained may
be entered in any court having jurisdiction thereof. In any such arbitration
each party to the arbitration shall bear its own expenses, including expenses of
attorneys, financial experts and other witnesses; and any arbitration fees and
expenses of the arbitrators shall be divided equally between the disputing
parties.
13.19 REMEDIES CUMULATIVE. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
IN WITNESS WHEREOF, this Operating Agreement has been executed on the
date first above written.
MANAGER
SUTRO VENTURE MANAGEMENT, INC.,
a Delaware corporation
By: _______________________________
OTHER MEMBERS
By: Sutro Venture Management, Inc.,
a Delaware corporation
Attorney-in-Fact
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By: _______________________________
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