1
* Certain information on all pages has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
Exhibit 10.38A
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF FORMATION
OF "ASIVI, LLC", FILED IN THIS OFFICE ON THE SECOND DAY OF MARCH, A.D. 2000, AT
5 O'CLOCK P.M.
[SECRETARY OF STATE SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
3141736 8100 AUTHENTICATION: 0293184
001107575 DATE: 03-03-00
2
CERTIFICATE OF FORMATION
OF
ASIVI, LLC
This Certificate of Formation of ASIVI, LLC, dated as of March 2, 2000, is
being duly executed and filed by Mark J. Casper, as an authorized person, to
form a limited liability company under the Delaware Limited Liability Company
Act.
FIRST. The name of the limited liability company formed hereby is ASIVI,
LLC (the "LLC").
SECOND. The name of the registered office of the LLC in the State of
Delaware is c/o Capitol Services, Inc., 9 East Loockerman Street,
Dover, Delaware 19901.
THIRD. The name and address of the registered agent for service of process
on the LLC in the State of Delaware Capital Services, Inc., 9 East Loockerman
Street, Suite 214, Dover, Delaware 19901 Kent County.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as the date first above written.
/s/ Mark J. Casper
--------------------
Name: Mark J. Casper
Authorized Person
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 05:00 PM 03/02/2000
001107575 - 3141736
3
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS....................................................... 1
1.1 Specific Definitions.............................................. 1
1.2 General Usage..................................................... 5
SECTION 2 FORMATION......................................................... 6
2.1 Formation and Name................................................ 6
2.2 Term.............................................................. 6
2.3 Purpose and Scope................................................. 6
2.4 Principal Office.................................................. 6
2.5 Delaware Office and Agent......................................... 6
2.6 Names and Contact Information of the Members...................... 6
2.7 Additional Documents.............................................. 7
2.8 Title to Property................................................. 7
SECTION 3 CAPITALIZATION.................................................... 7
3.1 Capital Commitments............................................... 7
3.2 Capital Contributions............................................. 7
3.3 Limitation on Capital Contributions............................... 7
3.4 Withdrawal and Return of Capital.................................. 7
3.5 Loans to the Company.............................................. 8
3.6 Interest on Capital............................................... 8
3.7 Limitation of Liability; Return of Certain Distributions.......... 8
3.8 Contributed Property.............................................. 8
SECTION 4 PROFITS AND LOSSES................................................ 8
4.1 Allocations of Company Profits and Losses......................... 8
4.2 Nonallocation of Distributions to Increases in Minimum Gain....... 10
4.3 Allocation of Liabilities......................................... 10
4.4 Modifications to Preserve Underlying Economic Objectives.......... 10
4.5 Withholding Taxes................................................. 10
4.6 Special Allocation................................................ 101
SECTION 5 DISTRIBUTIONS..................................................... 12
5.1 Operating Distributions........................................... 12
5.2 Liquidating Distributions......................................... 13
5.3 Limitation on Distributions....................................... 13
5.4 Licensing Agreement Distribution.................................. 13
5.5 No Right to Distributions of Property............................. 13
SECTION 6 ADMINISTRATION.................................................... 13
6.1 Management Powers and Authority of the Managing Members........... 13
6.2 Managing Members' Power to Bind the Company....................... 14
6.3 Other Ventures and Activities..................................... 14
6.4 Duties to the Company............................................. 14
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4
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
6.5 Officers................................................ 15
6.6 Member Expenses......................................... 15
6.7 Member Compensation..................................... 15
6.8 Tax Matters Partner..................................... 15
6.9 Records and Financial Statements........................ 16
6.10 Confidentiality......................................... 16
6.11 Disclosures............................................. 16
6.12 Valuation of Company Assets and Interests............... 16
SECTION 7 TRANSFERS AND WITHDRAWALS................................. 17
7.1 Transfers of Interests.................................. 17
7.2 Withdrawal/Removal of a Member.......................... 17
7.3 Procedures Following Member Withdrawal/Removal.......... 18
SECTION 8 DISSOLUTION AND LIQUIDATION............................... 18
8.1 Dissolving Events....................................... 18
8.2 Winding Up and Liquidation.............................. 18
SECTION 9 LIABILITY AND INDEMNIFICATION............................. 20
9.1 Liability............................................... 20
9.2 Indemnification......................................... 20
9.3 Contribution............................................ 21
SECTION 10 GENERAL PROVISIONS....................................... 21
10.1 Meetings................................................ 21
10.2 Action Without a Meeting of All Members................. 22
10.3 Entire Agreement........................................ 22
10.4 Amendments.............................................. 22
10.5 Governing Law........................................... 22
10.6 Severability............................................ 22
10.7 Counterparts; Binding upon Members and Assignees........ 22
10.8 No Third Party Beneficiaries............................ 23
10.9 Notices, Consents, Elections, Etc. ..................... 23
10.10 Certain Member Representations and Covenants............ 23
10.11 Avoidance of Publicly Traded Partnership Status......... 24
10.12 Dispute Resolution...................................... 24
10.13 Remedies for Breach of this Agreement................... 25
10.14 Timing.................................................. 25
10.15 Status Under the Act.................................... 25
10.16 Partnership for Tax Purposes Only....................... 25
10.17 Miscellaneous........................................... 25
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
SECTION 11 ADDITIONAL WARRANTIES AND OBLIGATIONS................... 216
11.1 Additional Warranties of AndroSolutions, Inc. ......... 216
11.2 Additional Warranties of VIVUS, Inc. .................. 226
11.3 Definitive Agreements.................................. 226
11.4 Press Release.......................................... 226
11.5 Joint Product Development Committee.................... 226
11.6 Royalty-Free Right and License......................... 226
11.7 Intellectual Property Analysis......................... 22
SCHEDULE A (Including Schedule A-1 and Schedule A-2)
EXHIBIT 1 Technology Transfer Agreement (VIVUS, Inc.) (Including Schedule A)
EXHIBIT 2 Technology Transfer Agreement (AndroSolutions, Inc.) (Including
Schedule A)
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---------------------------------------------------------------------
OPERATING AGREEMENT
OF
ASIVI, LLC
A DELAWARE LIMITED LIABILITY COMPANY
FEBRUARY 29, 2000
---------------------------------------------------------------------
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THIS OPERATING AGREEMENT OR THE
LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS ("INTERESTS") PROVIDED FOR
HEREIN. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE COMPANY IS UNDER NO OBLIGATION
TO REGISTER THE INTERESTS UNDER THE SECURITIES ACT IN THE FUTURE.
AN INTEREST MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
ADDITIONAL RESTRICTIONS ON THE TRANSFER OF INTERESTS ARE CONTAINED IN SECTION 7
OF THIS AGREEMENT. BASED UPON THE FOREGOING, EACH ACQUIRER OF AN INTEREST MUST
BE PREPARED TO BEAR THE ECONOMIC RISK OF INVESTMENT THEREIN FOR AN INDEFINITE
PERIOD OF TIME.
7
THIS OPERATING AGREEMENT of ASIVI, LLC, a Delaware limited liability
company, is entered into as of February 29, 2000.
----------------------------------
SECTION 1
DEFINITIONS
----------------------------------
1.1 SPECIFIC DEFINITIONS. As used in this Agreement:
ACT shall mean the Delaware Limited Liability Company Act, Title 6,
Delaware Code Ann., Section 18-101 et. seq., as amended.
AFFILIATE shall mean, with respect to any Person, any other Person with
regard to which the Person is controlling, controlled or commonly controlled.
For purposes of the preceding sentence, "control" shall mean the power to
direct the principal business management and activities of a Person, whether
through ownership of voting securities, by agreement, or otherwise.
AGREEMENT shall mean this Operating Agreement of ASIVI, LLC, a Delaware
limited liability company, including all schedules, appendices, and exhibits
hereto, as amended in accordance with the terms hereof.
ALLOCATION PERCENTAGE shall mean, for each Member, as of the date of
determination, the percentage specified for such Member on Schedule A (as
adjusted pursuant to this Agreement).
BANK shall mean the Bank of America National Trust & Savings Assn., San
Francisco, California main branch (or any successor entity thereto).
BANKRUPTCY shall mean, with respect to a Member, the following: (i) a
Member shall seek liquidation under the bankruptcy laws of the United States or
under the insolvency, liquidation, receivership or other similar laws of any
jurisdiction, domestic or foreign, now or hereafter existing, or (ii) a
proceeding is commenced against a Member for liquidation, dissolution or
similar relief under the bankruptcy laws of the United States or other similar
laws of any jurisdiction, domestic or foreign, now or hereafter existing, which
is not dismissed, bonded or discharged within 60 days from the commencement of
such proceedings.
BENEFICIAL OWNER shall mean, with respect to a Member, any Person that
holds an equity interest in such Member, either directly or indirectly through
a nominee or agent or through one or more intervening entities qualifying as
partnerships, grantor trusts or S corporations, in each case as determined for
Federal income tax purposes.
BUSINESS shall mean the actions, operations and activities associated with
conducting research and development regarding manufacturing, marketing,
selling, distributing, and otherwise dealing in (directly or indirectly,
through employees, agents or independent contractors) products and methods for
the treatment of female dysfunction.
CAPITAL ACCOUNT shall mean, for each Member, a separate account that is:
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(a) Increased by: (i) the amount of such Member's Capital Contribution
and (ii) allocations of Profit to such Member pursuant to Section 4;
(b) Decreased by: (i) the amount of cash distributed to such Member by
the Company, (ii) the Fair Market Value of any other property distributed to
such Member by the Company (determined as of the time of distribution, without
regard to Section 7701(g) of the Code, and net of liabilities secured by such
property that the Member assumes or to which the Member's ownership of the
property is subject) and (iii) allocations of Loss to such Member pursuant to
Section 4;
(c) Revalued in connection with any event described in Treasury
Regulation Section 1.704-1(b)(2)(iv)(f); and
(d) Otherwise adjusted so as to conform to the requirements of
Sections 704(b) and (c) of the Code and the Treasury Regulations issued
thereunder.
CAPITAL COMMITMENT shall have the meaning set forth in Section 3.1(a).
CAPITAL CONTRIBUTION shall mean, for any Member, the sum of the net amount
of cash and the Fair Market Value of any other property (determined as of the
time of contribution, without regard to Section 7701(g) of the Code, and net of
liabilities secured by such property that the Company assumes or to which the
Company's ownership of the property is subject) contributed by such Member to
the capital of the Company. The term "capital contribution" (where not
capitalized) shall mean any contribution to the capital of the Company valued in
accordance with the rules set forth in the preceding sentence. For purposes of
this Agreement, each capital contribution shall be deemed to have been made at
the later of: (i) the Close of Business on the due date of such capital
contribution as determined in accordance with this Agreement; or (ii) the Close
of Business on the date on which such capital contribution is actually received
by the Company.
CLOSE OF BUSINESS shall mean 5:00 p.m., local time, in San Francisco,
California.
CODE shall mean the United States Internal Revenue Code of 1986, as
amended.
COMPANY shall mean ASIVI, LLC, a Delaware limited liability company.
DERIVATIVE COMPANY INTEREST shall mean any actual, notional or constructive
interest in, or right in respect of, the Company (other than a Member's total
interest in the capital, profits and management of the Company) that, under
Treasury Regulation Section 1.7704-1(a)(2), is treated as an interest in the
Company for purposes of Section 7704 of the Code. Pursuant to the foregoing,
"Derivative Company Interest" shall include any financial instrument that is
treated as debt for Federal income tax purposes and (i) is convertible into or
exchangeable for an interest in the capital or profits of the Company or (ii)
provides for one or more payments of equivalent value.
DISPUTE NOTICE shall have the meaning set forth in Section 6.12.
DISSOLUTION shall mean, with respect to a legal entity other than a natural
person, that such entity has "dissolved" within the meaning of the partnership,
corporation, limited liability company, trust or other statute under which such
entity was organized.
FAIR MARKET VALUE shall have the meaning set forth in Section 6.12.
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FISCAL YEAR shall mean the period from January 1 through December 31 of
each year (unless otherwise required by law).
GAAP shall mean United States Generally Accepted Accounting Principles,
consistently applied.
INDEMNIFIED PERSON shall mean each Managing Member and each equityholder,
member, director, officer, employee, or agent of a Managing Member. In
addition, "Indemnified Person" shall mean any Non-Managing Member, employee or
agent of the Company to the extent determined by the Managing Members in their
reasonable discretion. A Person that has ceased to hold a position that
previously qualified such Person as an Indemnified Person shall be deemed to
continue as an Indemnified Person with regard to all matters arising or
attributable to the period during which such Person held such position.
INTEREST shall mean, for each Member, such Member's rights, duties and
interest in respect of the Company in such Member's capacity as such (as
distinguished from any other capacity such as employee, debtor or creditor) and
shall include such Member's right, if any, to vote on Company matters, bind the
Company vis-a-vis third parties, or receive distributions as well as such
Member's obligation, if any, to provide services, make capital contributions to
take any other action.
LICENSING AGREEMENT shall mean that certain Licensing Agreement by and
among the Company and VIVUS, Inc. of even date herewith (the "Licensing
Agreement").
LIQUIDATING MEMBER shall mean VIVUS, Inc.
MAJORITY-IN-INTEREST OF THE MEMBERS OR MANAGING MEMBERS shall mean a group
of Members or Managing Members whose aggregate Allocation Percentages at the
time of determination exceed 50 percent of the total Allocation Percentages of
all the Members or Managing Members, as applicable, at such time.
MANAGING MEMBER shall mean each Person listed on Schedule A as such, for
so long as such Person does not become a Withdrawn Member. Except where the
context otherwise requires, or as provided in Section 6.1(b), a reference in
this Agreement to "the Managing Members" shall mean all of the Managing Members
(taken together or acting unanimously, as appropriate).
MATERIAL MISCONDUCT shall mean, with respect to an Indemnified Person,
gross negligence, willful and material breach of this Agreement, fraud, or the
commission of a felony (except in the case of a felony where the Indemnified
Person reasonably believed that no such felony would occur in consequence of
such Indemnified Person's action or inaction, as the case may be). For
purposes of the preceding sentence: (i) an Indemnified Person shall be deemed
to have acted in good faith and without negligence with regard to any action or
inaction that is taken in accordance with the advice or opinion of an attorney,
accountant or other expert advisor so long as such advisor was selected with
reasonable care and the Indemnified Person made a good faith effort to inform
such advisor of all the facts pertinent to such advice or opinion; and (ii) an
Indemnified Person's reliance upon the truth and accuracy of any written
statement, representation or warranty of a Member shall be deemed to have been
reasonable and in good faith absent such Indemnified Person's actual knowledge
that such statement, representation or warranty was not, in fact, true and
accurate.
MEMBER shall mean any Person listed on Schedule A as a Member. Except
where the context requires otherwise, a reference in this Agreement to "the
Members" shall mean all of the Members (taken together or acting unanimously,
as appropriate).
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MEMBER NONRECOURSE DEDUCTION shall mean an item of loss, expense or
deduction attributable to a nonrecourse liability of the Company for which a
Member bears the economic risk of loss within the meaning of Treasury Regulation
Section 1.704-2(i).
MINIMUM GAIN of the Company shall, as provided in Treasury Regulation
Section 1.704-2, mean the total amount of gain the Company would realize for
Federal income tax purposes if it disposed of all assets subject to nonrecourse
liability for no consideration other than full satisfaction thereof.
NONRECOURSE DEDUCTION shall mean an item of loss, expense or deduction
(other than a Member Nonrecourse Deduction) attributable to a nonrecourse
liability of the Company within the meaning of Treasury Regulation Section
1.704-2(b).
OBJECTING MEMBER shall have the meaning set forth in Section 6.12(b).
PATENT RIGHTS shall mean all United States and foreign patents (including
all reissues, extensions, substitutions, re-examinations, supplementary
protection certificates and the like, and patents of addition) and patent
applications (including, without limitation, all continuations,
continuations-in-part and divisions thereof) owned or controlled by Company, in
each case, which claim an invention which is necessary to develop, produce,
make, have made, import, have imported, export, have exported, use, offer for
sale and sell Products, in each case that are controlled by Company.
PERSON shall mean an individual, partnership, corporation, limited
liability company, unincorporated organization, trust, joint venture,
governmental agency, or other entity, whether domestic or foreign.
PRINCIPAL OFFICE shall have the meaning set forth in Section 2.4.
PRODUCT is a product containing prostaglandin E and/or other vasodilators
useful for the treatment of female sexual dysfunction ("FSD") covered by the
intellectual property ("IP") contributed by AndroSolutions, Inc. and VIVUS,
Inc. to Company pursuant to the Technology Assignment Agreements attached
hereto as Exhibits 1 and 2 and as further described on attached Schedule A-1
and Schedule A-2.
PROFITS AND LOSSES shall mean, for any period, the Company's items of
income and gain (including items not subject to Federal income tax) as well as
items of loss, expense and deduction (including items not deductible,
depreciable, amortizable or otherwise excludable from income for Federal income
tax purposes), respectively, as determined under Federal income tax principles;
provided, however, that Profits and Losses attributable to assets with a book
value that differs from tax basis (as determined under Federal income tax
rules) shall be determined with regard to such book value in the manner
required under Treasury Regulation Section 1.704-1(b).
SECURITIES ACT shall mean the United States Securities Act of 1933, as
amended, including the rules and regulations promulgated thereunder.
STATE shall mean any constituent state of the United States, as well as
the District of Columbia.
TAX MATTERS PARTNER shall mean VIVUS, Inc.
TAX PERCENTAGE shall have the meaning set forth in Section 5.1(a)(ii).
4
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Term shall have the meaning set forth in Section 2.2. Where not
capitalized, "term" shall mean the entire period of the Company's existence,
including any period of winding-up and liquidation following the Dissolution of
the Company pursuant to Section 8.1.
Termination shall mean, with respect to a legal entity other than a natural
person, that such entity has Dissolved, completed its process of winding-up and
liquidation, and otherwise ceased to exist.
Transfer shall mean any sale, exchange, transfer, gift, encumbrance,
assignment, pledge, mortgage, hypothecation or other disposition, whether
voluntary or involuntary.
Treasury Regulation shall mean a regulation issued by the United States
Treasury Department and relating to a matter arising under the Code.
United States shall mean the United States of America.
Updated Capital Account shall mean, with respect to a Member, such Member's
Capital Account determined as if, immediately prior to the time of
determination, all of the Company's assets had been sold for Fair Market Value
and any previously unallocated Profits or Losses had been allocated pursuant to
Section 4.
Valuation Notice shall have the meaning set forth in Section 6.12(a).
Withdrawal Event shall have the meaning set forth in Section 7.3.
Withdrawn Member shall have the meaning set forth in Section 7.3.
1.2 General Usage. The section headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. Except where the context clearly requires to the contrary: (i)
each reference in this Agreement to a designated "Section," "Schedule,"
"Exhibit," or "Appendix" is to the corresponding Section, Schedule, Exhibit, or
Appendix of or to this Agreement; (ii) instances of gender or entity-specific
usage (e.g., "his" "her" "its" "person" or "individual") shall not be
interpreted to preclude the application of any provision of this Agreement to
any individual or entity; (iii) the word "or" shall not be applied in its
exclusive sense; (iv) "including" shall mean "including, without limitation";
(v) references to laws, regulations and other governmental rules, as well as to
contracts, agreements and other instruments, shall mean such rules and
instruments as in effect at the time of determination (taking into account any
amendments thereto effective at such time without regard to whether such
amendments were enacted or adopted after the effective date of this Agreement)
and shall include all successor rules and instruments thereto; (vi) references
to "$" or "dollars" shall mean the lawful currency of the United States; (vii)
references to "Federal" or "federal" shall be to laws, agencies or other
attributes of the United States (and not to any State or locality thereof);
(viii) the meaning of the terms "domestic" and "foreign" shall be determined by
reference to the United States; (ix) references to "days" shall mean calendar
days; references to "business days" shall mean all days other than Saturdays,
Sundays and days that are legal holidays in the State of California; (x)
references to months or years shall be to the actual calendar months or years at
issue (taking into account the actual number of days in any such month or year);
(xi) days, business days and times of day shall be determined by reference to
local time in San Francisco, California; and (xii) the English language version
of this Agreement shall govern all questions of interpretation relating to this
Agreement, notwithstanding that this Agreement may have been translated into,
and executed in, other languages.
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-----------------------------------------
SECTION 2
FORMATION
-----------------------------------------
2.1 Formation and Name. The Members hereby enter into and form the Company
as a limited liability company in accordance with the Act.
(a) The name of the Company shall be "ASIVI, LLC".
2.2 Term. The "Term" of the Company shall commence on the date first above
written and shall continue until the Close of Business on February 28, 2029.
Except as specifically provided in Section 8.1, the Company shall not be
Dissolved prior to the end of its Term.
2.3 Purpose and Scope.
(a) Within the meaning and for purposes of the Act, the purpose and
scope of the Company shall include any lawful action or activity permitted to a
limited liability company under the Act.
(b) Solely for purposes of determining the rights and obligations of
each Member vis-a-vis the other Members and the Company under this Agreement,
and without any consequence for the binding nature of an action taken on behalf
of the Company by any Member, the purpose and scope of the Company shall be
limited to conducting and engaging in the Business, and engaging in such other
lawful actions and activities as are reasonably determined by the Managing
Members to be necessary or advisable in furtherance thereof.
2.4 Principal Office. The Company shall have a single "Principal Office"
which shall at all times be located within the United States. The Principal
Office initially shall be located at 1172 Castro Street, Mountain View,
California 94040, and may thereafter be changed from time to time only by the
unanimous consent of the Managing Members.
2.5 Delaware Office and Agent. The Company shall maintain a Delaware
registered office and agent for service of process as required by the Act. In
the event the registered agent ceases to act as such for any reason or the
registered office shall change, the Managing Members shall promptly designate a
replacement registered agent or file a notice of change of address, as the case
may be.
2.6 Names and Contact Information of the Members. Set forth below the name
of each Member on Schedule A shall be appropriate contact information for such
Member (including such Member's mailing address, telephone number, and facsimile
number as well as, in the case of a Member that is an entity, the name or title
of an individual to whom notices and other correspondence should be directed).
Each Member shall promptly provide the Company with the information required to
be set forth for such Member on Schedule A and shall thereafter promptly notify
the Company of any change to such information.
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2.7 Additional Documents.
(a) The Managing Members shall cause to be executed, filed, recorded,
published, or amended any documents, as the Managing Members in their reasonable
discretion determine to be necessary or advisable, (x) in connection with the
formation, operation, Dissolution, winding-up, or Termination of the Company
pursuant to applicable law or (y) to otherwise give effect to the terms of this
Agreement. The terms and provisions of each document described in the preceding
sentence shall be initially established and shall be amended as necessary to
cause such terms and provisions to be consistent with the terms and provisions
of this Agreement.
2.8 Title to Property. Title to all Company property shall be held in the
name of the Company.
---------------------------------------------------------------
SECTION 3
CAPITALIZATION
---------------------------------------------------------------
3.1 Capital Commitments.
(a) Initial Capital Commitments. Concurrently with its execution of
this Agreement, each Member shall make a capital contribution as set forth as
such Member's Capital Commitment on Schedule A. Except as specifically provided
in this Agreement, the "Capital Commitment" of a Member: (i) shall represent the
maximum aggregate amount of cash and property that such Member shall be required
to contribute to the capital of the Company; and (ii) shall not be changed
during the term of the Company.
(b) Increased Capital Commitments. The Capital Commitments of the
Members may be increased (in proportion to the Members' respective Allocation
Percentages) at such times and in such amounts as shall be determined by the
Managing Members based upon their good faith determination that any such
increase is necessary or advisable for the proper and effective functioning of
the Company.
3.2 Capital Contributions. Except to the extent set forth on Schedule A or
provided in Section 3.7, all capital contributions shall be in cash. The
obligation of a Member to satisfy its Capital Commitment shall be without
interest. Capital Contributions otherwise required to be made by a Member under
Section 3.1(b) shall be due and payable, upon not less than 10 days notice, only
at such times and in such amounts as shall be specified in one or more capital
calls issued by the Managing Members. The Managing Members or either of them may
decline to issue or consent to a capital call in their sole and absolute
discretion.
3.3 Limitation on Capital Contributions. Except as specifically provided
in this Section 3 or Section 4.5(c), no Person shall be permitted or required to
make a contribution to the capital of the Company.
3.4 Withdrawal and Return of Capital. No Member may withdraw any portion
of its Capital Contribution or Capital Account balance. Except as provided in
Sections 5 and 8, no Member shall be entitled to the return of such Member's
Capital Contribution, a distribution in respect of such Member's Capital Account
balance, or any other distribution in respect of such Member's Interest.
7
14
3.5 LOANS TO THE COMPANY. No Member shall be required to lend any money
to the Company or to guaranty any Company indebtedness.
3.6 INTEREST ON CAPITAL. No Member shall be entitled to interest on such
Member's Capital Contribution, Capital Account balance, or share of unallocated
Profits.
3.7 LIMITATION OF LIABILITY; RETURN OF CERTAIN DISTRIBUTIONS.
(a) Except as otherwise required by applicable law, a Member shall
have no personal liability for the debts and obligations of the Company.
(b) A Member that receives a distribution (i) in violation of this
Agreement or (ii) that is required to be returned to the Company under
applicable law shall return such distribution within 30 days after demand
therefor by any Member.
(c) Nothing in this Section 3.7 shall be applied to release any
Member from (i) its obligation to make capital contributions or other payments
specifically required under this Agreement or (ii) its obligations pursuant to
any relationship between the Company and such Member acting in a capacity other
than as a Member (including, for example, as a borrower or independent
contractor).
3.8 CONTRIBUTED PROPERTY. With respect to any property contributed by a
Member to the Company, such Member shall provide to the Company any information
reasonably requested by the Company for purposes of determining the Company's
tax basis in such property.
---------------------------------------------
SECTION 4
PROFITS AND LOSSES
---------------------------------------------
4.1 ALLOCATIONS OF COMPANY PROFITS AND LOSSES.
(a) GENERAL. Except as otherwise provided in this Section 4, the
items of Company Profit and Loss for each fiscal quarter (or shorter period
selected by the Managing Members) shall be allocated among the Members in
proportion to their respective Allocation Percentages.
(b) ALLOCATION ADJUSTMENTS REQUIRED TO COMPLY WITH SECTION 704(b) OF
THE CODE.
(i) LIMITATION ON ALLOCATION OF LOSSES. There shall be no
allocation of Losses to any Member to the extent that such allocation would
create a negative balance in the Member's Capital Account (or increase the
amount by which the Member's Capital Account balance is negative) unless such
allocation would be treated as valid under Section 704(b) of the Code. Any
Losses that, pursuant to the preceding sentence, cannot be allocated to a
Member shall be reallocated to the other Members (but only to the extent that
such other Members can be allocated Losses without violating the requirements
of the preceding sentence) in proportion to their respective Allocation
Percentages.
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(ii) QUALIFIED INCOME OFFSET. If in any Fiscal Year a Member
receives (or is reasonably expected to receive) a distribution, or an
allocation or adjustment to the Member's Capital Account, that creates a
negative balance in such Account (or increases the amount by which the balance
in such Account is negative), there shall be allocated to the Member such items
of Company income or gain as are necessary to satisfy the requirements of a
"qualified income offset" within the meaning of Treasury Regulation Section
1.704-1(b).
(iii) MEMBER NONRECOURSE DEDUCTIONS. In accordance with the
provisions of Treasury Regulation Section 1.704-2(i), each item of Member
Nonrecourse Deduction shall be allocated among the Members in proportion to the
economic risk of loss that the Members bear with respect to the nonrecourse
liability of the Company to which such item of member Nonrecourse Deduction is
attributable.
(iv) MINIMUM GAIN CHARGEBACK. This Section 4.1(b)(iv) hereby
incorporates by reference the "minimum gain chargeback" provisions of Treasury
Regulation Section 1.704-2. In general, upon a reduction of the Company's
Minimum Gain, the preceding sentence shall require that items of income and gain
be allocated among the Members in a manner that reverses prior allocations of
Nonrecourse and Member Nonrecourse Deductions as well as reductions in the
Members' Capital Account balances resulting from distributions that,
notwithstanding Section 4.2, are allocable to increases in the Company's Minimum
Gain. Subject to the provisions of Section 704 of the Code and the Treasury
Regulations thereunder, if the Managing Members determine at any time that
operation of such "minimum gain chargeback" provisions likely will not achieve
such a reversal by the conclusion of the liquidation of the Company, such
Members shall adjust the allocation provisions of this Section 4.1 as necessary
to accomplish that result.
(v) ALLOCATIONS SUBSEQUENT TO CERTAIN ALLOCATION ADJUSTMENTS.
Any special allocations of items of Profit or Loss pursuant to Section
4.1(b)(i) or 4.1(b)(ii) shall be taken into account in computing subsequent
allocations pursuant to Section 4.1(a) so that, for each Member, the net amount
of any such special allocations and all allocations pursuant to Section 4.1(a)
shall, to the extent possible and taking into account any adjustments
previously made pursuant to Section 4.1(g), be equal to the net amount that
would have been allocated to such Member pursuant to the provisions of Section
4.1(a) without application of Section 4.1(b)(i) or 4.1(b)(ii).
(c) BOOK - TAX ACCOUNTING DISPARITIES. If Company property is reflected
in the Capital Accounts of the Members at a value that differs from the
adjusted tax basis of such property (whether because such property was
contributed to the Company by a Member or because of a revaluation of the
Members' Capital Accounts under Treasury Regulation Section 1.704-1(b)),
allocations of depreciation, amortization, income, gain or loss with respect to
such property shall be made among the Members in a manner which takes such
difference into account in accordance with Code Section 704(c) and the Treasury
Regulations issued thereunder.
(d) ALLOCATIONS IN EVENT OF TRANSFER. If an Interest is Transferred in
accordance with this Agreement, allocations of Profits and Losses as between
the transferor and transferee shall be made using any method selected by the
Managing Members and permitted under Section 706 of the Code.
(e) ADJUSTMENT TO CAPITAL ACCOUNTS FOR DISTRIBUTIONS OF PROPERTY. If
property distributed in kind is reflected in the Capital Accounts of the
Members at a book value that differs from the Fair Market Value of such
property at the time of distribution, the difference shall be treated as Profit
or Loss on the sale of the property and shall be allocated among the Members in
accordance with the provisions of this Section 4.1.
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(f) TAX CREDITS AND SIMILAR ITEMS. Any tax credits or similar items
not allocable pursuant to Section 4.1(a) through 4.1(e) shall be allocated to
the Members in proportion to their respective Allocation Percentages.
Notwithstanding the preceding sentence, if Company expenditures that give rise
to tax credits also give rise to Member Nonrecourse Deductions, the tax credits
attributable to such expenditures shall be allocated in accordance with
Treasury Regulation Section 1.704-1(b)(4)(ii).
(g) REALLOCATION OF CERTAIN LOSSES. To the extent that: (i) Losses
which otherwise would have been allocated to a Member under this Section 4.1
were allocated to one or more other Members pursuant to Section 4.1(b)(i) or
any other provision of this Agreement that prohibits the allocation to a Member
of Losses which would reduce such Member's Capital Account (or Updated Capital
Account) balance below a specified amount; (ii) such allocation has not been
reversed pursuant to the subsequent operation of Section 4.1(b)(v) or this
Section 4.1(g); and (iii) the Member thereafter returns a distributed amount as
required under Section 3.7 or otherwise makes a contribution to the capital of
the Company, the Capital Accounts of the Members shall be adjusted in
connection with such return or contribution (to the extent of the value
thereof) to effect a reallocation, in reverse order, of such Losses to the
Member.
4.2 NONALLOCATION OF DISTRIBUTIONS TO INCREASES IN MINIMUM GAIN. To the
extent permitted under Treasury Regulation Section I.704-2(h), distributions to
Members shall not be allocable to increases in the Company's Minimum Gain. In
general, and except as provided in such Treasury Regulation, the preceding
sentence is intended to ensure that reductions in a Member's Capital Account
balance resulting from distributions of money or other property to that Member
are not reversed by the minimum gain chargeback provisions of Section
4.1(b)(iv).
4.3 ALLOCATION OF LIABILITIES. Solely for purposes of determining the
Members' respective shares of the nonrecourse liabilities of the Company within
the meaning of Treasury Regulation Section 1.752-3(a)(3), each Member's
interest in Company Profits shall be equal to the ratio that such Member's
Allocation Percentage bears to the aggregate Allocation Percentages of the
Members.
4.4 MODIFICATIONS TO PRESERVE UNDERLYING ECONOMIC OBJECTIVES. If, in the
opinion of counsel to the Company, there is a change in the Federal income tax
law (including the Code as well as the Treasury Regulations, rulings, and
administrative practices thereunder) which makes it necessary or prudent to
modify the allocation provisions of this Section 4 in order to preserve the
underlying economic objectives of the Members as reflected in this Agreement,
the Managing Members shall make the minimum modification necessary to achieve
such purpose.
4.5 WITHHOLDING TAXES.
(a) The Company shall withhold taxes from distributions to, and
allocations among, the Members to the extent required by law (as determined by
the Managing Members in their reasonable discretion). Except as otherwise
provided in this Section 4.5, any amount so withheld by the Company with regard
to a Member shall be treated for purposes of this Agreement as an amount
actually distributed to such Member pursuant to Section 5.1. An amount shall be
considered withheld by the Company if, and at the time, remitted to a
governmental agency without regard to whether such remittance occurs at the
same time as the distribution or allocation to which it relates; provided,
however, that an amount actually withheld from a specific distribution or
designated by the Managing Members as withheld from a specific allocation shall
be treated as if distributed at the time such distribution or allocation occurs.
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(b) To the extent that operation of Section 4.5(a) would create a
negative balance in a Member's Updated Capital Account or increase the amount by
which such Updated Capital Account balance is negative, the amount of the deemed
distribution shall instead be treated as a loan by the Company to such Member,
which loan shall be payable upon demand by the Company and shall bear interest
at a floating rate equal to the prime rate as announced from time to time by the
Bank, compounded daily.
(c) In the event that the Managing Members determine in their
reasonable discretion that the Company lacks sufficient cash available to pay
withholding taxes in respect of a Member, one or more of the Managing Members
may, in their sole and absolute discretion (but only with the consent of the
Managing Members), make a loan or capital contribution to the Company to enable
the Company to pay such taxes. Any such loan shall be full-recourse to the
Company and shall bear interest at a floating rate equal to the prime rate as
announced form time to time by the Bank, compounded daily. Notwithstanding any
provision of this Agreement to the contrary, any loan (including interest
accrued thereon) or capital contribution made to the Company by a Managing
Member pursuant to this Section 4.5(c) shall be repaid or returned as promptly
as is reasonably possible.
(d) Each Member hereby agrees to indemnify the Company and the other
Members for any liability they may incur for failure to properly withhold taxes
in respect of such Member; moreover, each Member hereby agrees that neither the
Company nor any other Member shall be liable for any excess taxes withheld in
respect of such Member's Interest and that, in the event of overwithholding, a
Member's sole recourse shall be to apply for a refund from the appropriate
governmental authority.
(e) Taxes withheld by third parties from payments to the Company shall
be treated as if withheld by the company for purposes of this Section 4.5. Such
withholding shall be deemed to have been made in respect of all the Members in
proportion to their respective allocative shares under this Section 4 of the
underlying items of Profit to which such third party payments are attributable.
In the event that the Company receives a refund of taxes previously withheld by
a third party from one or more payments to the Company, the economic benefit of
such refund shall be apportioned among the Members in a manner reasonably
determined by the Managing Members to offset the prior operation of this Section
4.5(e) in respect of such withheld taxes.
(f) In the event that the Company is required to recognize income or
gain for income tax purposes under Section 684 of the Code (or similar provision
of State or local law) in respect of an in-kind distribution to a Member, then,
solely for such income tax purposes, to the maximum extent permitted by
applicable law (as determined by the Managing Members in their reasonable
discretion), the income or gain shall be allocated entirely to such Member.
(g) In the event that the Company is required to remit cash to a
governmental agency in respect of a withholding obligation arising from an
in-kind distribution by the Company or the Company's receipt of an in-kind
payment, the Managing Members may cause the Company to sell an appropriate
portion of the property at issue and, to the extent permitted by applicable law
(as determined by the Managing Members in their reasonable discretion), any
resulting income or gain shall be allocated solely for income tax purposes
entirely to the Members in respect of whom such withholding obligation arises.
4.6 Special Allocation. Notwithstanding anything to the contrary contained
in this Agreement, [*] of the Company's income up to an amount equivalent to all
amounts earned in a Fiscal Year under the Licensing Agreement shall be allocated
to AndroSolutions, Inc.
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-----------------------------------------
SECTION 5
DISTRIBUTIONS
-----------------------------------------
5.1 OPERATING DISTRIBUTIONS. Except as otherwise provided in this
Agreement, distributions prior to the Dissolution of the Company shall be made
in accordance with this Section 5.1 and each Member actually receiving amounts
pursuant to a specific distribution by the Company shall receive a pro rata
share of each item of cash or property of which such distribution is
constituted (based upon such Member's share under this Agreement of the total
amount to be included in such distribution).
(a) MANDATORY TAX DISTRIBUTIONS.
(i) The Company shall distribute to each Member, not later
than 90 days after the close each Fiscal Year, an amount of cash equal to the
sum of the following:
(A) The product of the Tax Percentage for such Fiscal
Year and such Member's allocated share of the Company's net long-term capital
gain (as defined in Section 1222(7) of the Code) for such Fiscal Year as shown
on the Company's Federal income tax return (subject to the modification
described in Section 5.1(a)(iii); and
(B) The product of the Tax Percentage for such Fiscal
Year and such Member's allocated share of the Company's net ordinary income and
net short-term capital gain (as defined in Section 1222(5) of the Code) for
such Fiscal Year as shown on the Company's Federal income tax return (subject
to the modification described in Section 5.1(a)(iii)).
(ii) For purposes of this Section 5.1(a): (x) the "Tax
Percentage" with respect to each specific item of net long-term capital gain
shall be the highest blended Federal and State marginal income tax rate
applicable to such specific item of net long-term capital gain recognized by an
individual resident, or a corporation doing business, in the state with the
highest marginal individual or corporate income tax rate applicable to items of
net long-term capital gain; and (y) the "Tax Percentage" with respect to items
of net ordinary income and net short-term capital gain shall be the highest
blended Federal and State marginal income tax rate applicable to ordinary
income recognized by an individual resident, or a corporation doing business,
in the State with the highest marginal individual or corporate income tax rate
applicable to items of ordinary income. In all cases, the highest marginal
income tax rate shall be the highest statutory rate applicable to the specific
type of income or gain in question and shall be determined without regard to
phaseouts of deductions or similar adjustments; moreover, a corporate franchise
tax imposed in lieu of an income tax shall be treated as an income tax. The
Managing Members, acting in their reasonable discretion, may adjust the
determination of Tax Percentages pursuant to this Section 5.1(a)(ii): (x) as
necessary to ensure that the distribution required to be made to each Member
pursuant to Section 5.1(a)(i) for any Fiscal Year is not less than such
Member's actual Federal and State income tax liability in respect of
allocations made to such Member by the Company for such Fiscal Year, or (y) to
reflect any city or other local income tax to which any Member or Members may
be subject; provided, however, that the Tax Percentage with regard to a
particular type of income or gain shall in all events be the same percentage
for all Members.
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(iii) For purposes of calculating the Company's net income and
gain under clause (i), above, there shall be disregarded any items of loss,
expense or deduction the ultimate deductibility of which may, in respect of any
Member or equityholder of a Member, be subject to limitation under Section 67 of
the Code.
(iv) For purposes of determining whether the Company has
satisfied its distribution obligation under Section 5.1(a)(i), all cash
distributions made during a Fiscal Year shall be treated as distributions made
pursuant to Section 5.1(a)(i) in respect of such Fiscal Year (except to the
extent that such distributions were required to satisfy the obligations of the
Company under Section 5.1(a)(i) in respect of one or more prior Fiscal Years, in
which case such distributions shall be treated as having been made pursuant to
Section 5.1(a)(i) in respect of such prior Fiscal Year or Years).
(b) DISCRETIONARY DISTRIBUTIONS. In addition to the distributions
provided for in Section 5.1(a), the Managing Members may cause the Company to
distribute cash or property to the Members, in proportion to the Members'
respective Allocation Percentages, at such times and in such amounts as the
Managing Members shall determine in their sole and absolute discretion.
5.2 LIQUIDATING DISTRIBUTIONS. Notwithstanding the provisions of Section
5.1, cash or property of the Company available for distribution upon the
Dissolution of the Company (including cash or property received upon the sale or
other disposition of assets in anticipation of or in connection with such
Dissolution) shall be distributed in accordance with the provisions of Section
8.2.
5.3 LIMITATION ON DISTRIBUTIONS. No distribution shall be made to a
Member pursuant to Section 5.1 if and to the extent that such distribution
would: (i) create a negative balance in the Updated Capital Account of such
Member or increase the amount by which such Updated Capital Account balance is
negative; (ii) cause the Company to be insolvent; or (iii) render the Member
liable for a return of such distribution under applicable law.
5.4 LICENSING AGREEMENT DISTRIBUTION
[*] of all payments made under the Licensing Agreement shall be distributed
to AndroSolutions, Inc. within ten (10) days after the date the Company receives
such payments. Notwithstanding the foregoing, no mandatory tax distributions as
described in Section 5.1(a) hereof shall be made under this Section 5.4.
5.5 NO RIGHT TO DISTRIBUTIONS OF PROPERTY. Except as otherwise provided
in this Agreement, a Member shall have no right to require that distributions to
such Member consist of any specific item or items of property.
-------------------------------
SECTION 6
ADMINISTRATION
-------------------------------
6.1 MANAGEMENT POWERS AND AUTHORITY OF THE MANAGING MEMBERS. Except as
otherwise specifically provided in this Agreement:
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(a) The Company and its business shall be managed, controlled and
operated exclusively by the Managing Members, who shall be the "managers" of
the Company within the meaning of Section 18-101(10) of the Act and shall have
all of the powers and authority in respect of the Company permitted to managers
under the Act; and
(b) As among the Managing Members, the determination by a Majority-
In-Interest of the Managing Members to take any action or make any decision
(for, in respect of, or on behalf of, the Company) shall control.
6.2 MANAGING MEMBERS' POWER TO BIND THE COMPANY.
(a) Except as specifically provided for in this Agreement, a
Managing Member acting alone shall not have the authority to bind the Company.
A contract, agreement, deed, lease, note or other document or instrument
purportedly executed on behalf of the Company by a Managing Member shall not be
deemed to have been duly executed by the Company unless executed by all
Managing Members. Third parties shall not be entitled to rely upon the
statement or the signature of only one Managing Member on any contract,
agreement, deed, lease, note or other document or instrument.
(b) Notwithstanding the provisions of Section 6.2(a), the Tax
Matters Partner and the Liquidating Member shall have the exclusive authority
to act for or on behalf of the Company with regard to liquidation and tax
matters as described in Sections 6.8 and 8.2 (including, but without
limitation, the authority to execute on behalf of the Company and to file with
any governmental entity, on behalf of the Company and the Members, a
certificate or similar instrument that evidences its power to bind the Company
with respect to liquidation and tax matters).
6.3 OTHER VENTURES AND ACTIVITIES.
(a) The Members: (i) acknowledge that the Members and their
respective Affiliates, equityholders, and other related Persons, as well as
their respective clients are or may be involved in other business, financial,
investment and professional activities; and (ii) agree that, except as
otherwise specifically set forth in Section 6.4, each Member and its
Affiliates, equityholders, and other related Persons, as well as their
respective clients may engage for their own accounts and for the accounts of
others in any such ventures and activities (without regard to whether the
interests of such ventures and activities conflict with those of the Company).
Except as specifically set forth in Section 6.4: (i) neither the Company nor
any Member shall have any right by virtue of this Agreement or the existence of
the Company in and to such ventures or activities or to the income or profits
derived therefrom; and (ii) the Members, their Affiliates, equityholders, and
other related Persons, as well as their respective clients shall have no duty
or obligation to make any reports to the Members or the Company with respect to
any such ventures or activities.
6.4 DUTIES TO THE COMPANY.
(a) A Member shall not utilize any assets or confidential
information of the Company other than for the exclusive benefit of the Company,
a purpose reasonably related to protecting such Member's Interest (in a manner
not inconsistent with the interests of the Company), or to comply with the
requirements of applicable law. For purposes of the preceding sentence, a
business opportunity within the scope of the Business which is made available
to a Managing Member solely or principally in consequence of such Person's
status as such shall be deemed an asset of the Company.
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(b) The Managing Members shall devote to the Company such reasonable
amounts of time, effort and attention as shall be necessary to cause the
Company and its business to be diligently and prudently managed.
6.5 OFFICERS. The Managing Members may, in their sole and absolute
discretion, appoint, replace and remove, from time to time, Company officers to
whom the Managing Members shall delegate such powers, authority and duties in
respect of the Company as the Managing Members shall determine.
6.6 MEMBER EXPENSES.
(a) GENERAL. Except as otherwise provided in this Section 6.6, no
Member shall be reimbursed for expenses incurred on behalf of, or otherwise in
connection with, the Company. Any reimbursement paid by a third party for
expenses actually reimbursed by the Company shall be retained by (or paid over
by the recipient thereof to) the Company.
(b) MANAGING MEMBERS. Each Managing Member shall be reimbursed by
the Company for reasonable out-of-pocket expenses incurred by such Managing
Member on behalf of the Company; provided, however, that a Managing Member
shall receive more than $1,000 in respect of expenses incurred on behalf of the
Company during any specific Fiscal Year only with the approval of the Managing
Members.
6.7 MEMBER COMPENSATION. The Company shall not be obligated to pay a
salary, bonus or similar compensation to any Member in respect of services
provided to the Company by such Member in its capacity as such.
6.8 TAX MATTERS PARTNER.
(a) GENERAL. The Tax Matters Partner is hereby designated the "tax
matters partner" of the Company within the meaning of Section 6231(a)(7) of the
Code. Except to the extent specifically provided in the Code or the Treasury
Regulations (or the laws of relevant non-Federal taxing jurisdictions), the Tax
Matters Partner shall have exclusive authority to act for or on behalf of the
Company with regard to tax matters, including the authority to make (or decline
to make) any available tax elections.
(b) PARTNERSHIP CLASSIFICATION FOR TAX PURPOSES. Except to the
extent otherwise required by applicable law (disregarding for this purpose any
requirement that can be avoided through the filing of an election or similar
administrative procedure), the Tax Matters Partner shall cause the Company to
take the position that the Company is a "partnership" for Federal, State and
local income tax purposes and shall cause to be filed with the appropriate tax
authorities any elections or other documents necessary to give due legal effect
to such position. A Member shall not file (and each Member hereby represents
that it has not filed) any income tax election or other document that is
inconsistent with the Company's position regarding its classification as a
"partnership" for applicable Federal, State and local income tax purposes.
(c) NOTICE OF INCONSISTENT TREATMENT OF COMPANY ITEM. No Member
shall file a notice with the United States Internal Revenue Service under
Section 6222(b) of the Code in connection with such Member's intention to treat
an item on such Member's Federal income tax return in a manner which is
inconsistent with the treatment of such item on the Company's Federal income tax
return unless such Member has, not less than 30 days prior to the filing of such
notice, provided the Tax Matters Partner with a copy of the notice and
thereafter in a timely manner provides such other information related thereto as
the Tax Matters Partner shall reasonably request.
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(d) NOTICE OF SETTLEMENT AGREEMENT. Any Member entering into a
settlement agreement with the United States Department of the Treasury which
concerns a Company item shall notify the Tax Matters Partner of such settlement
agreement and its terms within 60 days after the date thereof.
6.9 RECORDS AND FINANCIAL STATEMENTS.
(a) The Company shall maintain true and proper books, records,
reports, and accounts in which shall be entered all transactions of the
Company. The Company shall also maintain all schedules to this Agreement and
shall update such schedules promptly upon receipt of new information relating
thereto. Copies of such books, records, reports, accounts and schedules shall be
located at the Principal Office and shall be available to any Member for
inspection and copying, upon at least two business days' notice, during
reasonable business hours.
(b) Within 90 days after the end of each Fiscal Year, the Company
shall furnish to each Member a statement, which need not be audited, of: (i)
the assets and liabilities of the Company, (ii) the net Profit or Loss of the
Company, and (iii) the Capital Account balance of such Member. In addition,
within 90 days after the end of each Fiscal Year, the Company shall supply all
information reasonably necessary to enable the Members to prepare their Federal
income tax returns and (upon request therefor) to comply with other reporting
requirements imposed by law.
6.10 CONFIDENTIALITY. The Members acknowledge and agree that all
information provided to them by or on behalf of the Company or a Managing
Member concerning the business or assets of the Company or any Member shall be
deemed strictly confidential and shall not, without the prior consent of the
Managing Members, be (i) disclosed to any Person (other than a Member) or (ii)
used by a Member other than for a Company purpose or a purpose reasonably
related to protecting such Member's Interest (in a manner not inconsistent with
the interests of the Company). The Managing Members hereby consent to the
disclosure by each Member of Company information to such Member's accountants,
attorneys and similar advisors bound by a duty of confidentiality; moreover,
the foregoing requirements of this Section 6.10 shall not apply to a Member
with regard to any information that is currently or becomes: (i) required to be
disclosed pursuant to applicable law (but only to the extent of such
requirement); (ii) required to be disclosed in order to protect such Member's
Interest (but only to the extent of such requirement and only after
consultation with the Managing Members); (iii) publicly known or available in
the absence of any improper or unlawful action on the part of such Member; or
(iv) known or available to such Member other than through or on behalf of the
Company or a Managing Member. For purposes of this Section 6.10, Company
information provided by one Member to another shall be deemed to have been
provided on behalf of the Company. Provided that the Company or a Managing
Member may disclose any information to the extent necessary or advisable for
the formation, operation, Dissolution, winding-up, or Termination of the
Company (as determined by the Managing Members in their reasonable discretion),
the Company and the Managing Members shall similarly refrain from disclosing
any confidential information furnished by a Member pursuant to Section 6.11.
6.11 DISCLOSURES. Each Member shall furnish to the Company upon request
any information with respect to such Member reasonably determined by the
Managing Members to be necessary or convenient for the formation, operation,
Dissolution, winding-up, or Termination of the Company.
6.12 VALUATION OF COMPANY ASSETS AND INTERESTS.
(a) GENERAL. In the event that the fair market value of a Company
asset or Interest must be determined for purposes of this Agreement, such value
shall be determined by the Managing Members,
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acting in good faith. Within 90 days after such determination, the Managing
Members shall provide notice thereof to all the Members (a "Valuation Notice").
(b) DISPUTE. In the event that, within 30 days after having been
given a Valuation Notice, any Member (an "Objecting Member") provides notice to
the Company asserting that the value set forth in such Valuation Notice is
materially inaccurate due to manifest error (a "Dispute Notice"), the Managing
Members and the Objecting Member shall undertake reasonable efforts to resolve
their differences regarding such valuation through consultation and
negotiation. In the event that the Managing Members and the Objecting Member
agree upon a revised value, such revised value shall be set forth in a new
Valuation Notice to all the Members. In the event that the Managing Members and
the Objecting Member do not reach agreement within 60 days after the date of
the Dispute Notice, the Objecting Member may, by notice to the Company within
30 days after the end of such 60 day period, require that the matter be
submitted to arbitration pursuant to Section 10.12; provided, however, that the
arbitrator shall determine a value for the asset or Interest in question only
if the arbitrator first determines that the value described in the Valuation
Notice is materially inaccurate due to manifest error.
(c) BINDING EFFECT. The value of any Company asset or Interest
determined pursuant to this Section 6.12 shall be binding upon the Company and
the Members and shall establish the "Fair Market Value" of such asset or
Interest for all purposes under this Agreement. Unless and until such time as
the value of an asset or Interest is determined pursuant to arbitration as
described in Section 6.12(b), the value determined by the Managing Members
pursuant to Section 6.12(a) and 6.12(b) shall be deemed the Fair Market Value
of such asset or Interest.
--------------------------------------
SECTION 7
TRANSFERS AND WITHDRAWALS
--------------------------------------
7.1 TRANSFERS OF INTERESTS.
(a) A Member shall not Transfer all or any portion of its Interest;
provided, however, a Member shall have the right to transfer its entire
Interest to an Affiliate or to a transferee of all, or substantially all of a
Member's assets. Any permitted transferee shall be bound by and subject to all
provisions of this Agreement as if a Member.
(b) Any attempted Transfer in violation of this Section 7: (i)
shall be null and void as against the Company and the other Members; and (ii)
shall not be recognized or permitted by, or duly reflected in the official
books and records of, the Company.
7.2 WITHDRAWAL/REMOVAL OF A MEMBER.
(a) A Member shall not withdraw from the Company or otherwise cease
to be a Member without the consent of the other Member, which consent may be
withheld in such Member's sole and absolute discretion; provided, however, a
Member shall be deemed to have withdrawn without the consent of the other
Member upon such Member's Bankruptcy, Dissolution or Termination.
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(b) A Member shall not be removed from the Company without its
consent.
7.3 PROCEDURES FOLLOWING MEMBER WITHDRAWAL/REMOVAL. A Member that is
deemed to have withdrawn from the Company in accordance with the provisions of
Section 7.2(a) or otherwise ceases to be a member of the Company under the Act
(each a "Withdrawal Event" and a "Withdrawn Member") shall not be relieved of
any obligations arising under this Agreement. A Withdrawn Member shall not be
entitled to any redemption of its Interest, distribution or payment in
connection with its Withdrawal Event or otherwise in consequence of its status
as a Withdrawn Member. A Withdrawal Event shall cause a Dissolution of the
Company pursuant to Section 8.
-----------------------------------
SECTION 8
DISSOLUTION AND LIQUIDATION
------------------------------------
8.1 DISSOLVING EVENTS. The Company shall be Dissolved upon the occurrence
of any of the following events:
(a) Expiration of the Company's Term;
(b) Failure of the Company to have at least one Managing Member;
(c) Permanent cessation of the Company's business;
(d) An election to dissolve the Company executed by all of the
Managing Members;
(e) A Withdrawal Event;
(f) Termination or cancellation of the Licensing Agreement;
(g) Any other event that results in a mandatory Dissolution of the
Company under the Act.
To the maximum extent permitted by the Act, the Members hereby waive their
rights to seek a judicial dissolution of the Company for reasons other than
those listed in clauses (a) through (g) of this Section 8.1.
8.2 WINDING UP AND LIQUIDATION.
(a) Upon Dissolution of the Company, the Liquidating Member shall
promptly wind up the affairs of, liquidate and Terminate the Company. In
furtherance thereof, the Liquidating Member shall: (i) have all of the
administrative and management rights and powers of the Managing Members
(including the power to bind the Company); and (ii) be reimbursed for Company
expenses it incurs. Following Dissolution, the Company shall sell or otherwise
dispose of assets determined by the Liquidating Member to be unsuitable for
distribution to the Members, but shall engage in no other business activities
except as may be necessary, in the reasonable discretion of the Liquidating
Member, to preserve the value of the Company's assets during the
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period of winding-up and liquidation. In any event, the Liquidating Member
shall use its reasonable best efforts to prevent the period of winding-up and
liquidation of the Company from extending beyond the date which is two years
after the Company's date of Dissolution. At the conclusion of the winding-up
and liquidation of the Company, the Liquidating Member shall: (1) designate one
or more Persons to hold the books and records of the Company (and to make such
books and records available to the Members on a reasonable basis) for not less
than six years following the termination of the Company under the Act; and (ii)
execute, file and record, as necessary, a certificate of termination or similar
document to effect the termination of the Company under the Act and other
applicable laws.
(b) Distributions to the Members in liquidation may be made in cash or in
kind, or partly in cash and partly in kind, as determined by the Liquidating
Member. Distributions in kind shall be valued at Fair Market Value as
determined by the Liquidating Member in accordance with the provisions of
Section 6.12 and shall be subject to such conditions and restrictions as may be
necessary or advisable in the reasonable discretion of the Liquidating Member
to preserve the value of the property so distributed or to comply with
applicable law.
(c) The Profits and Losses of the Company during the period of winding-up
and liquidation shall be allocated among the Members in accordance with the
provisions of Section 4. If any property is to be distributed in kind, the
Capital Accounts of the Members shall be adjusted with regard to such property
in accordance with the provisions of Section 4.1(e).
(d) Except as set forth in Section 8.2(e) below, the assets of the Company
(including proceeds from the sale or other disposition of any assets during the
period of winding-up and liquidation) shall be applied as follows:
(i) First, to repay any indebtedness of the Company, whether to
third parties or the Members, in the order of priority required by law;
(ii) Next, to any reserves which the Liquidating Member reasonably
deems necessary for contingent or unforeseen liabilities or obligations of the
Company (which reserves when they become unnecessary shall be distributed in
accordance with the provisions of clause (iii), below); and
(iii) Next, to the Members in proportion to their respective
positive Capital Account balances (after taking into account all adjustments to
the Members' Capital Accounts required under Section 8.2(c)). Notwithstanding
the foregoing, ASIVI Technology (as defined in the License Agreement) will be
jointly owned by ASI and VI, respectively, with equal rights under the
ASIVI Technology. The parties agree to cooperate in good faith and execute any
documentation to effectuate such joint ownership.
(e) In the event the Company is being dissolved as a result of a
Withdrawal Event, then the assets of the Company (including proceeds from the
sale or other disposition of any assets during the period of winding-up and
liquidation) shall be applied as follows:
(i) First, to repay any indebtedness of the Company, whether to
third parties or the Members, in the order of priority required by law;
(ii) Next, to any reserves which the Liquidating Member reasonably
deems necessary for contingent or unforeseen liabilities or obligations of the
Company (which reserves when they become unnecessary shall be distributed in
accordance with the provisions of clause (iii), below); and
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(iii) Next, to the Member that is not deemed to be the Withdrawn
Member.
(f) Except as otherwise specifically provided in this Agreement, a
Member shall have no liability to the Company or to any other Member in respect
of a negative balance in such Member's Capital Account during the term of the
Company or at the conclusion of the Company's Termination.
-----------------------------------------------------------
SECTION 9
LIABILITY AND INDEMNIFICATION
-----------------------------------------------------------
9.1 LIABILITY. Except as otherwise specifically provided in this
Agreement, no Indemnified Person shall be personally liable for the return of
any contributions made to the capital of the Company by the Members or the
distribution of Capital Account balances. Except to the extent that Material
Misconduct on the part of an Indemnified Person shall have given rise to the
matter at issue, such Indemnified Person shall not be liable to the Company or
the Members for any act or omission concerning the Company. Without limitation
on the preceding sentence, except to the extent that such action constitutes
Material Misconduct, an Indemnified Person shall not be liable to the Company
or to any Member in consequence of voting for, approving, or otherwise
participating in the making of a distribution by the Company pursuant to Section
5 or 8. An Indemnified Person shall not be liable to the Company or the Members
for losses due to the acts or omissions of any other Person serving as an
independent contractor, employee or other agent of the Company unless such
Indemnified Person was or should have been directly involved with the selection,
engagement or supervision of such Person and the actions or omissions of such
Indemnified Person in connection therewith constituted Material Misconduct.
9.2 INDEMNIFICATION. Except to the extent that Material Misconduct on the
part of an Indemnified Person shall have given rise to the matter at issue, the
Company shall indemnify and hold such Indemnified Person harmless from and
against any loss, expense, damage or injury suffered or sustained by such
Indemnified Person by reason of any actual or threatened claim, demand, action,
suit or proceeding (civil, criminal, administrative or investigative) in which
such Indemnified Person may be involved, as a party or otherwise, by reason of
its actual or alleged management of, or involvement in, the affairs of the
Company. This Indemnification shall include, but not be limited to: (i) payment
as incurred of reasonable attorneys fees and other out-of-pocket expenses
incurred in investigating or settling any claim or threatened action (where, in
the case of a settlement, such settlement is approved by the Managing Members),
or incurred in preparing for, or conducting a defense pursuant to, any
proceeding up to and including a final non-appealable adjudication; (ii) payment
of fines, damages or similar amounts required to be paid by an Indemnified
Person; and (iii) removal of liens affecting the property of an Indemnified
Person.
(b) Indemnification payments shall be made pursuant to this Section
9.2 only to the extent that the Indemnified Person is not entitled to receive
(or will not in any event receive) from a third party equal or greater
indemnification payments in respect of the same loss, expense, damage or injury.
In the event, however, that the Managing Members determine that an Indemnified
Person would be entitled to receive indemnification payments from the Company
but for the operation of the preceding sentence, the Managing Members may cause
the Company to advance indemnification payments to the Indemnified Person (with
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repayment of such advance to be secured by the Indemnified Person's right to
receive indemnification payments from the applicable third party).
(c) As a condition to receiving an indemnification payment pursuant to this
Section 9.2, an Indemnified Person shall execute an undertaking in form and
substance acceptable to the Managing Members providing that, in the event it is
subsequently determined that such Person was not entitled to receive such
payment (whether by virtue of such Person's Material Misconduct or otherwise),
such Person shall return such payment to the Company promptly upon demand
therefor by any Member.
(d) Notwithstanding the foregoing provisions of this Section 9.2, the
Company shall be under no obligation to indemnify an Indemnified Person from and
against any reduction in the value of such Person's interest in the Company that
is attributable to losses, expenses, damages or injuries suffered by the Company
or to any other decline in the value of the Company's assets.
(e) The indemnification provided by this Section 9.2 shall not be deemed to
be exclusive of any other rights to which any Indemnified Person may be entitled
under any agreement, as a matter of law, in equity or otherwise.
9.3 CONTRIBUTION. In the event that, notwithstanding the provisions of
Sections 3.7 and 9.1, two or more Members share joint and several personal
liability:
(a) In connection with any action, omission or situation that would entitle
such Members to indemnification pursuant to the provisions of Section 9.2 but
for the fact that such action, omission or situation included or constituted
Material Misconduct on the part of such Members; or
(b) In connection with any action, omission or situation that entitles such
Members to indemnification pursuant to the provisions of Section 9.2, but the
assets of the Company are insufficient to provide for the full amount of
indemnification to which such Members are entitled or their entitlement to
indemnification is otherwise unenforceable; then
(c) Such Members shall share the burden of the liability in a manner that
is fair and reasonable as determined by such Members or, if they are unable to
agree within a reasonable period of time, by an arbitrator selected and acting
in accordance with the provisions of Section 10.12(a).
--------------------
SECTION 10
GENERAL PROVISIONS
--------------------
10.1 MEETINGS. Meetings of the Members may be called as provided in this
Agreement as well as by the Managing Members. Any such meeting shall be held in
California, Tennessee, or such other location as mutually agreed to by the
Managing Members. Unless otherwise agreed to, the meetings will alternate
between California and Tennessee. Reasonable accommodation shall be made for any
Member that elects to attend a meeting via telephone or similar means pursuant
to which all Persons attending the meeting can hear one another. No action may
be taken at a meeting of the Members without the consent of that number or
percentage of the Members whose consent is otherwise required for such action
under this Agreement. Except
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as specifically provided in this Agreement, there shall be no requirement of
annual or periodic meetings of the Company's members or managers within the
meaning of the Act.
10.2 ACTION WITHOUT A MEETING OF ALL MEMBERS. Any action of the Members
(or a subset thereof) may be taken by written consent of that number or
percentage of the Members whose consent is otherwise required for such action
under this Agreement. The fact that a Member has not received notice of an
action taken by written consent, or taken at a meeting actually held, shall not
invalidate such action so long as it was taken with the consent of that number
or percentage of the Members whose consent is otherwise required for such
action under this Agreement; provided, however, that no consent, election,
approval or other action of any or all the Non-Managing Members that has the
effect of limiting the power or authority of the Managing Members shall be
effective until the Managing Members have received notice thereof.
(b) A Member may authorize another Person to vote or otherwise act on its
behalf through a written proxy or power of attorney.
(c) In order to facilitate the determination of whether any action of the
Members (or a subset thereof) has been taken by or with the consent of the
requisite number or percentage of the Members under this Agreement, the
Managing Members may adopt, from time to time upon not less than 10 days notice
to the Members, reasonable procedures for establishing the Members of record
entitled to vote, consent or otherwise take action on any matter; provided,
however, that any date as of which Members of record is determined shall not
precede the date of the related action by more than 60 days.
10.3 ENTIRE AGREEMENT. This Agreement contains the entire understanding
among the Members and supersedes any prior written or oral agreement between
them respecting the Company. There are no representations, agreements,
arrangements, or understandings, oral or written, among the Members relating to
the Company which are not fully expressed in this Agreement.
10.4 AMENDMENTS.
(a) Except as otherwise provided in this Section 10.4, this Agreement may
be amended, in whole or in part, only through a written amendment executed by
all of the Managing Members.
10.5 GOVERNING LAW. The interpretation and enforceability of this
Agreement and the rights and liabilities of the Members as such shall be
governed by the laws of the State of Delaware as such laws are applied in
connection with limited liability company operating agreements entered into and
wholly performed upon in Delaware by residents of Delaware. To the extent
permitted by the Act and other applicable law, the provisions of this Agreement
shall supersede any contrary provisions of the Act or other applicable law.
10.6 SEVERABILITY. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, such provision shall be deemed
severed from the remainder of this Agreement and replaced with a valid and
enforceable provision as similar in intent as reasonably possible to the
provision so severed, and shall not cause the invalidity or unenforceability of
the remainder of this Agreement.
10.7 COUNTERPARTS; BINDING UPON MEMBERS AND ASSIGNEES. This Agreement may
be executed in any number of counterparts and, when so executed, all of such
counterparts shall constitute a single instrument binding upon all parties
notwithstanding the fact that all parties are not signatory to the original or
to the same counterpart.
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10.8 NO THIRD PARTY BENEFICIARIES. Except with regard to the Company's
obligation to Indemnified Persons as set forth in Section 9 and as otherwise
specifically provided in this Agreement, the provisions of this Agreement are
not intended to be for the benefit of or enforceable by any third party and
shall not give rise to a right on the part of any third party to (i) enforce or
demand enforcement of a Member's Capital Commitment, obligation to return
distributions, or obligation to make other payments to the Company as set forth
in this Agreement or (ii) demand that the Company or the Managing Members issue
any capital call.
10.9 NOTICES, CONSENTS, ELECTIONS, ETC. Subject to the provisions of
Section 10.7, all notices, consents, agreements, elections, amendments, and
approvals provided for or permitted by this Agreement or otherwise relating to
the Company shall be in writing and signed copies thereof shall be retained with
the books of the Company.
(a) NOTICE TO MEMBERS. Except as otherwise specifically provided in
this Agreement, notice to a Member shall be deemed duly given upon the earliest
to occur of the following: (i) personal delivery to such Member, to the address
set forth on Schedule A for such Member, or to any other address which such
Member has provided to the Company for purposes of this Section 10.9(a); (ii)
the Close of Business on the third day after being deposited in the United
States mail, registered or certified, postage prepaid and addressed to such
Member at the address set forth on Schedule A for such Member, or at any other
address which such Member has provided to the Company for purposes of this
Section 10.9(a); (iii) the Close of Business on the first business day after
being deposited in the United States with a nationally recognized overnight
delivery service, with delivery charges prepaid and addressed as provided in the
preceding clause; or (iv) actual receipt by such Member via any other means
(including public or private mail, electronic mail, facsimile, telex or
telegram); provided, however, that notice sent via electronic mail shall be
deemed duly given only when actually received and opened by the Member to whom
it is addressed.
(b) NOTICE TO THE COMPANY. Notice to the Company shall be deemed
duly given when clearly identified as such and duly given to the Managing
Members in accordance with the procedures set forth in Section 10.9(a).
10.10 CERTAIN MEMBER REPRESENTATIONS AND COVENANTS.
(a) Each member hereby represents that, with respect to its
Interest: (i) it is acquiring or has acquired such Interest for purposes of
investment only, for its own account (or a trust account if such Member is a
trustee), and not with a view to resell or distribute the same or any part
thereof; and (ii) no other Person has any interest in such Interest or in the
rights of such Member under this Agreement other than a spouse having a
community property or similar interest under applicable law. Each Member also
represents that it has the business and financial knowledge and experience
necessary to acquire its Interest on the terms contemplated herein and that it
has the ability to bear the risks of such investment (including the risk of
sustaining a complete loss of all its capital contributions) without the need
for the investor protections provided by the registration requirements of the
Securities Act.
(b) Except to the extent set forth in a notice provided to the
Company, each Member hereby represents that allocations, distributions and other
payments to such Member by the Company are not subject to tax withholding under
the Code. Each Member hereby agrees to promptly notify the Company in the event
that any allocation, distribution or other payment previously exempt from such
withholding becomes or is anticipated to become subject thereto.
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(c) Each Member hereby acknowledges that certain provisions of this
Agreement (including Sections 6.3 and 9.1) have the effect of limiting the
fiduciary duties or obligations of some or all Members to the Company and the
other Members under applicable law. Each Member hereby represents that it has
carefully considered and fully understands each such provision and has made an
informed decision to consent thereto.
10.11 AVOIDANCE OF PUBLICLY TRADED PARTNERSHIP STATUS.
(a) Except to the extent otherwise set forth in a notice provided to
the Company, each Member hereby represents that at least one of the following
statements with respect to such Member is true and will continue to be true
throughout the period during which such Member holds an Interest;
(i) Such Member is not a partnership, grantor trust or S
corporation for Federal income tax purposes;
(ii) With regard to each Beneficial Owner of such Member, the
principal purposes for the establishment and/or use of such Member do not
include avoidance of the 100 partner limitation set forth in Treasury
Regulation Section 1.7704-l(h)(l)(ii); or
(iii) With regard to each Beneficial Owner of such Member, not
more than 75 percent of the value of such Beneficial Owner's interest in such
Member is attributable to such Member's Interest.
(b) In the event that a Member's representation pursuant to Section
10.11(a) shall at any time fail to be true, or the information set forth in a
notice provided by such Member to the Company pursuant to Section 10.11(a) shall
change, such Member shall promptly (and in any event within 10 days) notify the
Company of such fact and shall promptly thereafter deliver to the Company any
information regarding such Member and its Beneficial Owners reasonably requested
by counsel to the Company for purposes of determining the number of the
Company's "partners" within the meaning of Treasury Regulation Section.
1.7704-l(h).
(c) Each Member hereby acknowledges that the Managing Members will
rely upon such Member's representations, notices and other information as set
forth in this Section 10.11 for purposes of determining whether proposed
Transfers of Interests may cause the Company to be treated as a "publicly traded
partnership" within the meaning of Section 7704 of the Code and that failure by
a Member to satisfy its obligations under this Section 10.11 may cause the
Company to be treated as a corporation for Federal, State or local tax purposes.
10.12 DISPUTE RESOLUTION.
(a) FORM AND VENUE. Except as otherwise specifically provided in
this Agreement, any controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon an award arising in
connection therewith may be entered in any court of competent jurisdiction. Any
arbitration, mediation, court action, or other adjudicative proceeding arising
out of or relating to this Agreement shall be held in Chicago, Illinois, or, if
such proceeding cannot be lawfully held in such location, as near thereto as
applicable law permits.
(b) FEES AND COSTS. The prevailing party or parties in any
arbitration, mediation, court action, or other adjudicative proceeding arising
out of or relating to this Agreement shall be reimbursed by the
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party or parties who do not prevail for their reasonable attorneys, accountants
and experts fees and related expenses (including reasonable charges for in-house
legal counsel and related personnel) and for the costs of such proceeding. In
the event that two or more parties are deemed liable for a specific amount
payable or reimbursable under this Section 10.12(b), such parties shall be
jointly and severally liable therefor.
10.13 REMEDIES FOR BREACH OF THIS AGREEMENT.
(a) GENERAL. Except as otherwise specifically provided in this
Agreement, the remedies set forth in this Agreement are cumulative and shall not
exclude any other remedies to which a Person may be lawfully entitled.
(b) SPECIFIC PERFORMANCE. Without limiting the rights and remedies
otherwise available to the Company or any Member, each Member hereby: (i)
acknowledges that the remedy at law for damages resulting from its default under
Section 3, 6.10, 6.11 or 10.12 is inadequate; and (ii) consents to the
institution of an action for specific performance of its obligations in the
event of such a default.
(c) PENALTY PROVISIONS. Each Member hereby acknowledges that
certain provisions of this Agreement provide for specified penalties in the
event of a breach of this Agreement by a Member. Each Member hereby agrees that
the penalty provisions of this Agreement are fair and reasonable and, in light
of the difficulty of determining actual damages, represent a prior agreement
among the Members as to appropriate liquidated damages.
(d) EXERCISE OF DISCRETION BY THE MANAGING MEMBERS. In determining
what action, if any, shall be taken against a Member in connection with such
Member's breach of this Agreement, the Managing Member shall seek to obtain the
best result (as determined by such Managing Member in its sole and absolute
discretion) for the Company.
10.14 TIMING. All dates and times specified in this Agreement are of the
essence and shall be strictly enforced. Except as otherwise specifically
provided in this Agreement, all actions that occur after the Close of Business
on a given day shall be deemed for purposes of this Agreement to have occurred
at 9:00 a.m. on the following day. In the event that the last day for the
exercise of any right or the discharge of any duty under this Agreement would
otherwise be a day that is not a business day, the period for exercising such
right or discharging such duty shall be extended until the Close of Business on
the next succeeding business day.
10.15 STATUS UNDER THE ACT. This Agreement is the "limited liability
company agreement" of the Company within the meaning of Section 18-101(7) of
the Act.
10.16 PARTNERSHIP FOR TAX PURPOSES ONLY. As set forth in Section 2.1, the
Members hereby form the Company as a limited liability company under the Act.
The Members expressly do not intend hereby to form a partnership except insofar
as the Company may be treated as a partnership solely for tax purposes.
10.17 MISCELLANEOUS. No failure or delay by any party in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof; any actual waiver shall be contained in a writing signed by the party
against whom enforcement of such waiver is sought. This Agreement shall not be
construed for or against any party by reason of the authorship or alleged
authorship of any provisions hereof or by reason of the status of the
respective parties. Each Member hereby specifically consents to the selection
of all other Members admitted to the Company pursuant to the terms of this
Agreement.
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-----------------------------------------
SECTION 11
ADDITIONAL WARRANTIES AND OBLIGATIONS
-----------------------------------------
11.1 ADDITIONAL WARRANTIES OF ANDROSOLUTIONS, INC. AndroSolutions, Inc.
hereby warrants that Exhibit 3 is a list of all patents and pending patent
applications owned or controlled by AndroSolutions, Inc., Dr. Gary W. Neal,
their affiliates or beneficiaries that relate to the design, development,
manufacturing, and use of products containing prostaglandin E and/or other
vasodilators for the treatment of female sexual dysfunction, and that
AndroSolutions, Inc. is the lawful owner of the inventions claimed therein.
11.2 ADDITIONAL WARRANTIES OF VIVUS, INC. VIVUS, Inc. hereby warrants that
Exhibit 4 is a list of all patents and pending patent applications owned or
controlled by VIVUS, Inc. or its affiliates that relate to the design,
development, manufacturing, and use of products containing prostaglandin E
and/or other vasodilators for the treatment of female sexual dysfunction, and
that VIVUS, Inc. is the lawful owner of the inventions claimed therein.
11.3 DEFINITIVE AGREEMENTS. Nothing in this Agreement, the Licensing
Agreement or the Supply Agreement (as defined below) will impair AndroSolutions,
Inc.'s or VIVUS, Inc.'s right to independently acquire, license, develop for
itself, or have others develop for it, intellectual property and technology
performing similar functions as the Patent Rights or to market and distribute
products based on such other intellectual property and technology.
11.4 PRESS RELEASE AND INITIAL PUBLICATION. The parties shall issue a
joint press release within ninety (90) days of execution of this agreement. [*]
11.5 JOINT PRODUCT DEVELOPMENT COMMITTEE. Within one month of the
execution of this Agreement, VIVUS, Inc. and ASI will form a Joint Product
Development Committee to review the direction of the development and testing of
Products through the filing of an NDA, and to make recommendations accordingly.
The Joint Product Development Committee shall include one (1) representative
from ASI and such representatives of VIVUS, Inc. as VIVUS, Inc. deems
appropriate to comply with VIVUS, Inc.'s obligations under the License
Agreement. The Joint Product Development Committee shall meet at least
semi-annually, or more frequently as agreed by the Joint Product Development
Committee, at such location as these parties agree, and will otherwise
communicate regularly by telephone, electronic mail, facsimile or video
conference. The first meeting of the Joint Product Development Committee shall
occur within forty-five (45) days after the execution of this Agreement.
11.6 ROYALTY-FREE RIGHT AND LICENSE. ASIVI grants to ASI a royalty-free
right and license to use the ASIVI Technology solely in connection with
research, development, testing, studies, and patient care, and in the
preparation of applications, registrations, amendments, supplements and other
filings with the FDA, foreign health regulatory agencies or other U.S. or
foreign governmental agencies, and to authorize third parties to conduct such
activities on ASI's behalf. ASIVI's "grant of rights" under this Section 11.6 is
not a grant of any rights to ASI under any Investigational New Drug application
of ASIVI or VI and the exercise of the rights granted in this Section 11.6 will
not result in any liability "of ASIVI or VI", and ASI agrees to indemnify ASIVI
and VI to the extent of any such liability. The right and license set forth in
this Section 11.6 is independent of the
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option and conditional license grant set forth in Sections 2.1 through 2.3 of
that certain Manufacture and Supply Agreement between VIVUS, Inc. and
AndroSolutions, Inc. of even date herewith, and shall survive the expiration or
termination of that Agreement.
11.7 INTELLECTUAL PROPERTY ANALYSIS. To the extent that VI's or ASI's "FSD"
IP discloses, claims, and/or relates to subject matter other than the design,
development, formulation, manufacturing and/or use of products containing
prostaglandin E and/or other vasodilators for the treatment of FSD, all rights
in and to such VI and ASI FSD IP shall be retained by VI or ASI, respectively.
Counsel for ASI and VI and the parties will cooperate in good faith to prepare
appropriate agreements and, if necessary, continuation or divisional
applications to facilitate the parties' retention of such rights.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MANAGING MEMBERS:
VIVUS, INC.
a Delaware corporation
By:
/s/ Leland Wilson
----------------------------
Name: Leland Wilson
Title: President/Chief Executive Officer
ANDROSOLUTIONS, INC.,
a Tennessee Corporation
By:
/s/ Gary Neal, M.D.
---------------------------
Name: Gary Neal, M.D.
Title: President
NON-MANAGING MEMBERS:
None as of February 29, 2000
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SCHEDULE A
MEMBER INFORMATION
NAME AND CONTACT INFORMATION ALLOCATION PERCENTAGE CAPITAL COMMITMENT
- ---------------------------- --------------------- ------------------
MANAGING MEMBERS:
VIVUS, Inc. 50% $2,500 and the
1172 Castro Street contribution of property
Mountain View, CA 94040 as described on attached
Attn: Leland F. Wilson, President Schedule A-1 and
Telephone: (650) 934-5200 contributed pursuant
Facsimile: (650) 934-5356 to that certain
Technology Assignment
Agreement of even date
herewith attached
hereto as Exhibit 1.
AndroSolutions, Inc. 50% $2,500 and the
200 Fort Sanders West Blvd., contribution of
Suite 309 property as described
Knoxville, TN 37922 on attached Schedule A-2
Attn: Gary W. Neal, M.D., and contributed pursuant
President to that certain Technology
Telephone: (423) 531-5991 Assignment Agreement of
Facsimile: (423) 531-6550 even date herewith
attached hereto as
Exhibit 2.
1
35
SCHEDULE A-1
DESCRIPTION OF PROPERTY CONTRIBUTED TO ASIVI, LLC BY VIVUS, INC.
- - [*]
- - [*]
- - [*]
- - [*]
SA-1
36
SCHEDULE A-2
DESCRIPTION OF PROPERTY CONTRIBUTED TO ASIVI, LLC BY ANDROSOLUTIONS, INC.
Matter No. Title Ending Date App. No. Pat. No. Priority date
Issue Date
- --------------------------------------------------------------------------------------------------
[*] [*] [*] [*]
[*] [*] [*] [*] [*]
[*] [*] [*] [*] [*]
[*] [*] [*] [*]
37
EXHIBIT 1
TECHNOLOGY ASSIGNMENT AGREEMENT
ASSIGNMENT
VIVUS, Inc., a Delaware corporation having offices at 1172 Castro Street,
Mountain View, CA 94040 ("VIVUS"), for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, hereby assigns, sells
and transfers to ASIVI, LLC, a Delaware limited liability company, with offices
at 1172 Castro Street, Mountain View, CA 94040, and its successors, assigns and
legal representatives, all hereinafter referred to as the "Assignee":
1. its entire right, title and interest in and to any and all patents
and pending patent applications relating to, inter alia, the design,
development, manufacturing, and use of products containing prostaglandin E
and/or other vasodilators for the treatment of female sexual dysfunction, as
specified on Exhibit A hereto (the "FSD IP");
2. the full and complete right to file patent applications in the name
of the Assignee, its designee, or in the name of VIVUS as the Assignee, or its
designee's election, on the aforesaid FSD IP, in all countries of the world;
3. the entire right, title and interest in and to any Letters Patent
which may issue thereon in the United States or in any country, and any
renewals, revivals, reissues, reexaminations and extensions thereof, and any
patents of confirmation, registration and importation of the same; and
4. the entire right, title and interest in all Convention and Treaty
Rights of all kinds thereon, including without limitation all rights of
priority in any country of the world, in and to the above FSD IP.
VIVUS hereby authorizes and requests the competent authorities to grant and
to issue any and all such Letters Patent in the United States and throughout the
world to Assignee of the entire right, title and interest therein, as fully and
entirely as the same would have been held and enjoyed by VIVUS had this
assignment, sale and transfer not been made.
VIVUS further agrees at any time to execute and to deliver upon request of
Assignee such additional documents, if any, as are necessary or desirable to
secure patent protection on said FSD IP, throughout all countries of the world,
and otherwise to do the necessary acts to give full effect to and to perfect the
rights of Assignee under this Assignment, including the execution, delivery and
procurement of any and all further documents evidencing this assignment,
transfer and sale as may be necessary or desirable.
VIVUS hereby covenants that no assignment, sale, agreement or encumbrance
has been or will be made or entered into which would conflict with this
assignment.
VIVUS further covenants that it will, upon request by Assignee, provide
Assignee promptly with all pertinent facts and documents relating to said FSD IP
and said Letters Patent and legal equivalents as may be known and accessible to
VIVUS, and will testify as to the same in any interference, litigation or
proceeding related thereto and will promptly execute and deliver to Assignee or
its legal representatives any
38
and all papers, instruments or affidavits required to apply for, obtain,
maintain, issue and enforce said application, said FSD IP and said Letters
Patent and said equivalents thereof which may be necessary or desirable to carry
out the purposes thereof.
VIVUS, INC.
Date: 2/29/00 By: /s/ Leland F. Wilson
------- --------------------------
Leland F. Wilson
President/Chief Executive Officer
ASIVI, LLC
Date: 2/29/00 By: /s/ Leland F. Wilson
------- --------------------------
VIVUS, Inc.
Managing Member
Leland F. Wilson
President/Chief Executive Officer
Date: March 1, 2000 By: /s/ Gary W. Neal
------------- --------------------------
AndroSolutions, Inc.
Managing Member
Gary W. Neal, M.D.
President
3
39
EXHIBIT A
DESCRIPTION OF PROPERTY CONTRIBUTED TO ASIVI, LLC BY VIVUS, INC.
- - [*]
- - [*]
- - [*]
- - [*]
40
EXHIBIT 2
TECHNOLOGY ASSIGNMENT AGREEMENT
ASSIGNMENT
AndroSolutions, Inc., a Tennessee corporation with offices at Suite 309,
200 Fort Saunders West Blvd., Knoxville, TN 37922 ("AndroSolutions"), for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby assigns, sells and transfers to ASIVI, LLC, a Delaware
limited liability company, with offices at 1172 Castro Street, Mountain View, CA
94040, and its successors, assigns and legal representatives, all hereinafter
referred to as the "Assignee":
1. its entire right, title and interest in and to any and all patents and
pending patent applications relating to, inter alia, the design, development,
manufacturing, and use of products containing prostaglandin E and/or other
vasodilators for the treatment of female sexual dysfunction, as specified on
Exhibit A hereto (the "FSD IP");
2. the full and complete right to file patent applications in the name
of the Assignee, its designee, or in the name of AndroSolutions, Inc. as the
Assignee, or its designee's election, on the aforesaid FSD IP, in all countries
of the world;
3. the entire right, title and interest in and to any Letters Patent
which may issue thereon in the United States or in any country, and any
renewals, revivals, reissues, reexaminations and extensions thereof, and any
patents of confirmation, registration and importation of the same; and
4. the entire right, title and interest in all Convention and Treaty
Rights of all kinds thereon, including without limitation all rights of
priority in any country of the world, in and to the above FSD IP.
AndroSolutions hereby authorizes and requests the competent authorities to
grant and to issue any and all such Letters Patent in the United States and
throughout the world to Assignee of the entire right, title and interest
therein, as fully and entirely as the same would have been held and enjoyed by
AndroSolutions had this assignment, sale and transfer not been made.
AndroSolutions further agrees at any time to execute and to deliver upon
request of Assignee such additional documents, if any, as are necessary or
desirable to secure patent protection on said FSD IP, throughout all countries
of the world, and otherwise to do the necessary acts to give full effect to and
to perfect the rights of Assignee under this Assignment, including the
execution, delivery and procurement of any and all further documents evidencing
this assignment, transfer and sale as may be necessary or desirable.
AndroSolutions hereby covenants that no assignment, sale, agreement or
encumbrance has been or will be made or entered into which would conflict with
this assignment.
AndroSolutions further covenants that it will, upon request by Assignee,
provide Assignee promptly with all pertinent facts and documents relating to
said FSD IP and said Letters Patent and legal equivalents as may be known and
accessible to AndroSolutions, and will testify as to the same in any
interference, litigation or proceeding related thereto and will promptly execute
and deliver to Assignee or its legal representatives any and all papers,
instruments or affidavits required to apply for, obtain, maintain,
41
issue and enforce said application, said FSD IP and said Letters Patent and said
equivalents thereof which may be necessary or desirable to carry out the
purposes thereof.
ANDROSOLUTIONS, INC.
Date: By:
------------------- ------------------
Gary W. Neal, M.D.
President
ASIVI, LLC
Date: 2/29/00 By: /s/ Leland F. Wilson
------------------- --------------------
VIVUS, Inc.
Managing Member
Leland F. Wilson
President/Chief Executive
Officer
Date: March 1, 2000 By: /s/ Gary W. Neal
------------------- --------------------
AndroSolutions, Inc.
Managing Member
Gary W. Neal, M.D.
President
3
42
EXHIBIT A
DESCRIPTION OF PROPERTY CONTRIBUTED TO ASIVI, LLC BY ANDROSOLUTIONS, INC.
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