LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT ("Agreement"), is entered
into as of October 15, 1999, by and among the persons listed on Exhibit A
hereto, as members ("Members") of Alliance Venture Management, LLC, a California
limited liability company ("Company" or "LLC").
WHEREAS, the LLC proposes to act as the general partner of Alliance
Ventures I, L.P. and Alliance Ventures II, L.P. and as such to receive a
carried interest in the profits of these limited partnerships; and
WHEREAS, the members desire to provide for series of units to be known as Common
Units, Series A units and Series B units for the purpose of allocating the
carried interest in Alliance Ventures I, L.P. and Alliance Ventures II, L.P.
THE PARTIES AGREE AS FOLLOWS:
1. FORMATION OF LIMITED LIABILITY COMPANY
1.1 FORMATION
The Members have formed the LLC under the laws of the State of California
pursuant to the ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Limited Liability Company Act ("Act") by
causing articles of organization ("Articles of Organization") for the
Company to be filed in the Office of the Secretary of State of California,
and by this Agreement intend to establish rules and regulations governing
its ownership and control.
1.2 NAME AND PRINCIPAL PLACE OF BUSINESS
Unless and until amended in accordance with this Agreement and the Act,
the name of the LLC will be "Alliance Venture Management, LLC" The
principal place of business of the LLC shall be Santa Clara, California,
or such other place or places as the Managers from time to time determine.
1.3 REGISTERED OFFICE AND AGENT FOR SERVICE OF PROCESS
The Company shall maintain a registered office and agent for service of
process as required by Section 17061 of the Act. The registered office
shall be ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, and the agent for
service of process shall be ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or such other place and
person as the Managers may designate.
1.4 AGREEMENT
For and in consideration of the mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Members executing this Agreement hereby
agree to the terms and conditions of this Agreement, as it may from time
to time be amended.
1.5 BUSINESS
The purpose of the LLC is to engage in any lawful act or activity for
which a limited liability company may be organized under the Act. The LLC
shall serve as the general partner of the Partnership, subject to the
terms and conditions of the agreement of limited partnership of the
Partnership.
1.6 DEFINITIONS
Terms not otherwise defined in this Agreement shall have the meanings set
forth in Section 15.
1.7 TERM
The term of the Company shall commence upon the later to occur of:
1.7.1the filing of Articles of Organization for the Company in the
office of the Secretary of State of California; or
1.7.2the execution of this Company Agreement by at least two Members and,
unless the term of the LLC is otherwise extended or sooner terminated
pursuant to the provisions of this Agreement, shall continue until ten
years after the commencement of such term.
Such term may be amended by amendment of this Agreement.
2. MEMBERSHIP; UNITS
2.1 MEMBERS
The Initial Members of the LLC shall be and include each of the persons
whose names are set forth on Exhibit A hereto as of the date of this
Agreement. Exhibit A shall be amended by the Managers as appropriate to
reflect the admission of additional Members or the acquisition by existing
Members of additional Units in the LLC.
2.2 REPRESENTATIONS AND WARRANTIES
Each Member hereby represents and warrants to the LLC and each of the
other Members as follows:
2.2.1PURCHASE ENTIRELY FOR OWN ACCOUNT
The Member is acquiring his interest in the LLC for the Member's own
account for investment purposes only and not with a view to or for
the resale, distribution, subdivision or fractionalization thereof
and has no contract, understanding, undertaking, agreement, or
arrangement of any kind with any Person to sell, transfer or pledge
to any Person his interest or any part thereof nor does such Member
have any plans to enter into any such agreement;
2.2.2INVESTMENT EXPERIENCE
By reason of his business or financial experience, the Member has the
capacity to protect his own interests in connection with the
transactions contemplated hereunder, is able to bear the risks of an
investment in the LLC, and at the present time could afford a
complete loss of such investment;
2.2.3DISCLOSURE OF INFORMATION
The Member is aware of the LLC's business affairs and financial
condition and has acquired sufficient information about the LLC to
reach an informed and knowledgeable decision to acquire an interest
in the LLC;
2.2.4FEDERAL AND STATE SECURITIES LAWS
The Member acknowledges that the interests in the LLC have not been
registered under the Securities Act of 1933 or any state securities
laws, inasmuch as they are being acquired in a transaction not
involving a public offering, and under such laws, may not be resold
or transferred by the Member without appropriate registration or the
availability of an exemption from such requirements. In this
connection, the Member represents that it or he is familiar with SEC
Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act of 1933.
2.3 LLC UNITS
Ownership of the LLC shall be divided into and represented by units of the
LLC ("Units"). The LLC shall be authorized to issue three classes of
units, Common Units, Series A Units and Series B Units. The total number
of Units the LLC is authorized to issue shall be 3,000,000, of which
1,000,000 shall be Common Units, 1,000,000 shall be Series A Units and
1,000,000 shall be Series B Units.
2.4 VOTING RIGHTS OF LLC UNITS
Each Common Unit shall be entitled to one vote per Unit, each Series A
Unit shall be entitled to 10 votes per Unit, and each Series B Unit shall
be entitled to 10 votes per Unit.
2.5 ADDITIONAL MEMBERS, ISSUANCE OF ADDITIONAL UNITS
Additional Persons may be issued Units and admitted to the LLC as Members
upon compliance with the provisions of this Agreement and upon such terms
and conditions as the Managers may determine, provided that:
2.5.1no new class of Units or interests having rights or preferences
senior to those of the existing Units may be issued without the
approval of Members holding a majority of each class of such
outstanding subordinate Units; and
2.5.2the Managers may not issue more than the total number of authorized
Units, without the approval of the Members.
Existing Members may be issued additional Units, upon compliance with the
provisions of this Agreement and upon such terms and conditions as the
Managers may determine, provided that no new class of Units or interests
having rights or preferences senior to those of the existing Units may be
issued without the approval of Members holding a majority of each class of
outstanding subordinate Units, nor may the Managers issue more than the
total number of authorized Units of the LLC without the approval of the
Members.
2.6 ADMISSION OF SUBSTITUTE MEMBERS
Notwithstanding any other provision of this Agreement, no Assignee of
Units of the LLC (including without limitation Permitted Transferees under
Section 12.4 and purchasers pursuant to Section 12.5.6) shall be admitted
as a Substitute Member and admitted to all the rights of the Member who
assigned the Units, without the approval of the Managers. If so admitted,
the Substitute Member shall have all the rights and powers and will be
subject to all the restrictions and liabilities of the Member who
originally assigned the Units. The admission of a Substitute Member shall
not release any Member who previously assigned the Units from liability to
the LLC that may have existed before such substitution. Consents required
hereunder may be given in advance of any transfer by any writing signed by
a Member.
2.7 RESIGNATION OR WITHDRAWAL OF A MEMBER
Except as specifically provided below, and subject to the provisions for
transfer contained in Section 12, no Member may resign, retire or withdraw
from membership in the LLC or withdraw his interest in the capital of the
LLC.
2.8 DISSOCIATION OF A MEMBER
The Bankruptcy, death or Dissolution of a Member will:
2.8.1cause such Member to be dissociated from the LLC (a "Dissociated
Member");
2.8.2terminate the continued membership of such Member in the LLC; and
2.8.3cause a dissolution and winding-up of the LLC pursuant to Section 14
hereof except as expressly provided therein.
Except as set forth above or expressly provided elsewhere in this
Agreement, the death, withdrawal, resignation, expulsion, Bankruptcy or
dissolution of a Member shall not cause a dissolution of the LLC.
2.9 RIGHTS OF DISSOCIATING
In the event any Member becomes a "Dissociated Member":
2.9.1if the dissociation causes a dissolution and winding up of the LLC
under Section 14, the Dissociated Member or its or his legal
representative shall be entitled to participate in the winding up of
the LLC to the same extent as any other Member; and
2.9.2if the dissociation does not cause a dissolution and winding up of
the LLC under Section 14, the Dissociated Member or his or its legal
representative shall be treated as an Assignee unless admitted to the
LLC as a Substitute Member pursuant to Section 2.7.
2.10 RIGHTS OF MEMBERS TO BIND LLC
Except as expressly provided herein no Member shall have the right to bind
the LLC.
3. CONTRIBUTIONS TO CAPITAL
3.1 INITIAL CONTRIBUTIONS
Each Member has contributed cash or property having an agreed-upon Initial
Carrying Value as set forth on Exhibit A hereto, which Exhibit A shall be
revised to reflect any additional contributions made in accordance with
Section 3.3.
3.2 ISSUANCE OF UNITS
In exchange for the Initial Contribution of the Members, the Members shall
be issued that number and class of Units set forth opposite their names on
Exhibit A.
3.3 ADDITIONAL CONTRIBUTIONS
Except as set forth in Section 2.5 above, no Member shall be permitted or
required to make any additional contribution to the capital of the LLC
without the consent of the Managers and the Members.
3.4 INTEREST
No Member shall be entitled to any interest with respect to its or his
contributions to or share of the capital of the LLC.
4. ACTION BY MEMBERS
4.1 MEETINGS OF MEMBERS
All meetings of the Members for the election of Managers shall be held in
the City of Santa ▇▇▇▇▇, State of California, at such place as may be
fixed from time to time by the Managers, or at such other place within the
State of California as shall be designated from time to time by the
Managers and stated in the notice of the meeting. Meetings of Members for
any other purpose may be held at such time and place, within or without
the State of California, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof. Members may participate in
a meeting of the members by means of conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
4.2 ANNUAL MEETINGS
4.2.1Annual meetings of Members, commencing with the year 1999, shall be
held on such date and at such time as shall be designated from time
to time by the Managers and stated in the notice of the meeting, at
which they shall elect a board of Managers, and transact such other
business as may properly be brought before the meeting.
4.2.2Written notice of the annual meeting stating the place, date and hour
of the meeting shall be given to each Member entitled to vote at such
meeting not less than 10 nor more than 60 days before the date of the
meeting.
4.3 SPECIAL MEETINGS
4.3.1Special meetings of the Members, for any purpose or purposes, may be
called by the Managers and shall be called at the request in writing
of any Member. Such request shall state the purpose or purposes of
the proposed meeting.
4.3.2A special meeting of the Members for the election of a new Board of
Managers may be called by any Member entitled to vote thereon, within
90 days after the date on which such Member has acquired Units of the
LLC.
4.3.3Written notice of a special meeting stating the place, date and hour
of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than 10 nor more than 60 days before
the date of the meeting, to each Member entitled to vote at such
meeting.
4.3.4Business transacted at any special meeting of Members shall be
limited to the purposes stated in the notice.
4.4 MEMBERSHIP LIST
The Person who has charge of the Unit Register of the LLC shall prepare
and make, at least ten days before every meeting of Members, a complete
list of the Members entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each Member and the number of
Units registered in the name of each Member. The list may be examined by
any Member, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days before the meeting. The
list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any Member who is
present.
4.5 QUORUM
4.5.1The holders of a majority of the Units issued and outstanding and
entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum at all meetings of the Members for the
transaction of business except as otherwise provided by statute. If,
however, a quorum is not present or represented at any meeting of the
Members, the Members entitled to vote thereat, present in person or
represented by proxy, may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum
is present or represented. Upon resumption of an adjourned meeting,
any business may be transacted that might have been transacted before
the meeting was adjourned. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given
to each Member entitled to vote at the meeting.
4.5.2Except as otherwise provided herein, when a quorum is present at any
meeting, the vote of the Members holding a majority of the Units
present in person or by proxy shall decide any question brought
before the meeting, except that the Board of Managers shall be
elected as if the LLC were a California corporation and the Members
were shareholders voting for the election of a board of directors and
except to the extent that the express provision of the statutes, the
Articles of Organization, or this Agreement require a different vote.
4.6 VOTING RIGHTS
Each Member shall at every meeting of the Members be entitled to one vote
in person or by proxy for each Unit, but no proxy shall be voted after
three years from its date, unless the proxy expressly provides for a
longer period. Members entitled to vote shall vote as a single class.
Neither the assigning Member nor an Assignee of Units shall have any right
to a vote with respect to any assigned Units. No Member who has assigned
all of its or his Units (collectively, "Former Members") shall have any
right to vote on any matter. A Member who has assigned some, but not all,
of its or his Units shall be treated as a Member and entitled to a vote on
all matters to the extent of its or his retained Units. No Assignee of
Units shall have the right to consent, approve or vote on any matters
unless such Assignee has become a Substitute Member pursuant to Section
2.6.
4.7 ACTION WITHOUT MEETING
Any action required to be taken at any annual or special meeting of
Members, or any action which may be taken at any annual or special meeting
of Members, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by Members holding outstanding Units having not
less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all Units entitled to vote
thereon were present and voted. Accordingly, except to the extent
expressly provided otherwise in this Agreement, any action or item
requiring the approval of the Members, the consent of the Members, the
affirmative vote of the Members or the like, shall in the absence of an
annual or special meeting of the Members, require the approval, consent,
vote or the like of those Members that hold at least a majority in number
of the outstanding Units that are held by all Members at such time. Prompt
notice of the taking of any action without a meeting by less than
unanimous written consent shall be given to those Members who have not
consented in writing.
5. MANAGEMENT AND RESTRICTIONS
5.1 MANAGEMENT BY MANAGERS
Except for situations in which the approval of the Members is required by
statute or this Agreement, the LLC shall be managed and controlled by the
Managers acting as a Board of Managers. The Board of Managers may exercise
all powers of the LLC and do all such lawful acts and things as are not by
statute, the Articles of Organization or this Agreement, directed or
required to be exercised or done by the Members. It is intended that the
powers and authority of the Board of Managers shall be substantially the
same as the powers and authority of a board of directors of a corporation
formed under the laws of the State of California. Notwithstanding the
above, the Managers may not authorize any investment by the Partnerships
in any entity in which Alliance Venture Management has an equity interest,
and may not permit to be done any of the following without the approval of
the Members:
5.1.1Any act or thing that the Act or this Agreement requires to be
approved, consented to or authorized by the Members;
5.1.2Voluntarily cause the dissolution of the LLC;
5.1.3Compromise the liability of any Member for capital contributions or
for excessive distributions pursuant to Section 11.5; or
5.1.4Sell all or a significant part of the LLC assets, or engage in any
material recapitalization or merger.
5.2 NUMBER; VACANCIES
The Members shall determine, at each annual meeting and at any special
meeting called for the purpose of electing Managers, the number of
Managers. Initially there shall be three Managers. Except for the initial
Managers, the Managers shall be elected by the Members. Managers shall
hold office until the next meeting, whether annual or special at which
Managers are elected and such duly elected Managers are qualified.
Managers may but need not be Members. The Members hereby elect N. ▇▇▇▇▇▇▇
▇▇▇▇▇, C.N. Reddy and ▇.▇. ▇▇▇▇▇▇▇▇▇ as the initial Managers. Vacancies
and newly created Managerships resulting from any increase in the
authorized number of Managers may be filled by a majority of the Managers
then in office, though less than a quorum, or by a sole remaining Manager,
and the Managers so chosen shall hold office until the next election of
Managers and until their successors are duly elected and qualified, unless
sooner displaced. If there are no Managers in office, then each Member
shall serve as a Manager until the next election of Managers hereunder.
5.3 MEETINGS OF MANAGERS
The Board of Managers of the LLC may hold meetings, both regular and
special, either within or without the State of California. Regular
meetings of the Board of Managers may be held without notice at times and
places determined by the Board. Special meetings shall be called by any
Manager. Members of the Board of Managers, or any committee designated by
the Board of Managers may participate in a meeting of the Board of
Managers or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting. At all meetings of the Board
of Managers, a majority of the Managers shall constitute a quorum for the
transaction of business. Notwithstanding the presence at a meeting of a
quorum, all actions of the Board of Managers shall require the approval of
a majority of all Managers, except as may be otherwise specifically
provided by statute or this Agreement. If a quorum is not present at any
meeting of the Board of Managers, the Managers present thereat may adjourn
the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
5.4 ACTION WITHOUT MEETING
Any action required or permitted to be taken at any meeting of the Board
of Managers or of any committee thereof may be taken without a meeting, if
all members of the Board of Managers or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Managers or committee.
5.5 COMMITTEES
The Board of Managers may designate one or more committees, each committee
to consist of one or more of the Managers. The Board may designate one or
more Managers as alternate members of any committee, who may replace any
absent or disqualified Manager at any meeting of the committee. Upon
disqualification of a Manager of a committee, the Manager or Managers
thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another
Manager to act at the meeting in the place of any such absent or
disqualified Manager. Any such committee, to the extent provided in the
resolution of the Board of Managers, shall have and may exercise all the
powers and authority of the Board of Managers in the management of the
business and affairs of the LLC; but no such committee shall have the
power or authority to amend the Articles of Organization, adopt an
agreement of merger or consolidation, recommend to the Members the sale,
lease or exchange of all or substantially all of the LLC's property and
assets, recommend to the Members dissolution of the LLC or revocation of a
dissolution, take any action requiring a vote of 2/3 of the Managers or
amend this Agreement; and, unless the resolution expressly so provides, no
such committee shall have the power or authority to declare a distribution
or to authorize the issuance of Units. Such committee or committees shall
have such name or names as may be determined from time to time by the
Board of Managers. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Managers when required.
5.6 REMOVAL OF MANAGERS
Any Manager or the entire Board of Managers may be removed, with or
without cause, by the holders of a majority of Units entitled to vote at
an election of Managers.
5.7 COMPENSATION OF MANAGERS
The Managers may be paid their expenses, if any, of attendance at each
meeting of the Board of Managers and may be paid a fixed sum for
attendance at each meeting of the Board of Managers or a stated salary as
Manager. No such payment shall preclude any Manager from serving the LLC
in any other capacity and receiving compensation therefor. Members of
special or standing committees may be allowed like compensation for
attending committee meetings.
5.8 AMENDMENT OF ARTICLES OF ORGANIZATION OR AGREEMENT
The Managers shall have the duty and authority to amend the Articles of
Organization or this Agreement as and to the extent necessary to reflect
any and all changes or corrections necessary or appropriate as a result of
any action taken by the Members or Managers in accordance with the terms
of this Agreement.
6. NOTICES
6.1 NOTICES
Whenever notice is required to be given to any Member by the Act, the
Articles of Organization or this Agreement, it shall be given in writing,
by mail, addressed to such Member at his address as it appears on the
records of the LLC with postage thereon prepaid, and shall be deemed given
when it is deposited in the United States mail. Notice to Members may also
be given by telegram or facsimile.
6.2 WAIVER OF NOTICE
A Member may waive notice, provided that the waiver is in writing signed
by the Member whether before or after the notice is required to be given.
7. OFFICERS
7.1 OFFICERS
The Managers may create such offices and elect such officers as they deem
appropriate. Any number of offices may be held by the same person. The
duties of such officers shall be established from time to time by the
Managers. Initially, N. ▇▇▇▇▇▇▇ ▇▇▇▇▇ is appointed Chairman of the Board
of Managers, ▇.▇. ▇▇▇▇▇▇▇▇▇ is appointed President, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is
appointed Secretary, until their resignation or replacement by the
Managers.
8. UNIT CERTIFICATES
8.1 CERTIFICATES
Every Member of the LLC shall be entitled to have a certificate, signed by
two officers, certifying the class and number of Units owned by it or him.
8.2 REPLACEMENT CERTIFICATES
The Managers may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the LLC
alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificates of stock to
be lost, stolen or destroyed. When authorizing issuance of a new
certificate or certificates, the Managers may, in their discretion and as
a condition precedent to the issuance thereof, require the owner of the
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as they shall require
and/or to give the LLC a bond in such sum as they may direct as indemnity
against any claim that may be made against the LLC with respect to the
certificates alleged to have been lost, stolen or destroyed.
8.3 TRANSFERS
Upon surrender to the LLC of a certificate for Units duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the LLC, provided that the transfer is
in compliance with the terms of this Agreement, to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
8.4 UNIT REGISTER
In order that the LLC may determine the Members entitled to notice of or
to consent, approve or vote on any matter, or the Members or Assignees
entitled to receive payment of any distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful
action, the Managers shall fix, in advance, a record date, which shall not
be more than 60 nor less than ten days before the date of such action or
event.
8.5 RIGHTS OF REGISTERED OWNER
The LLC shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of Units to receive dividends and
vote, and to hold liable for calls and assessments a person registered the
LLC shall not be bound to recognize any equitable or other claim to or
interest in such Units on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided
by the laws of California.
8.6 LEGENDS
Each certificate prepared by the LLC shall bear such legends as the
Managers determine to be necessary to comply with applicable securities
laws or to preserve the enforceability of any agreement, including this
Agreement, to which the LLC may be a party.
9. ACCOUNTING AND RECORDS
9.1 FINANCIAL AND TAX REPORTING
The LLC shall prepare its financial statements in accordance with
generally accepted accounting principles as from time to time in effect
and shall prepare its income tax information returns using such methods of
accounting and tax year as the Managers deem necessary or appropriate
under the Code and Treasury Regulations.
9.2 SUPERVISION; INSPECTION OF BOOKS
Proper and complete books of account and records of the business of the
LLC (including those books and records identified in Section 18-305 of the
Act) shall be kept under the supervision of the Managers at the LLC's
principal office and at such other place as designated by the Managers.
The Managers shall give notice to each Member of any change in the
location of the books and records. The books and records shall be open to
inspection, audit and copying by any Member, or his designated
representative, upon reasonable notice at any time during business hours
for any purpose reasonably related to the Member's interest in the LLC.
Any information so obtained or copied shall be kept and maintained in
strictest confidence except as required by law.
9.3 RELIANCE ON RECORDS AND BOOKS OF ACCOUNT
Any Member or Manager shall be fully protected in relying in good faith
upon the records and books of account of the LLC and upon such
information, opinions, reports or statements presented to the LLC by its
Managers, any of its Members, officers, employees or committees, or by any
other person, as to matters the Managers or Members reasonably believes
are within such other person's professional or expert competence and who
has been selected with reasonable care by or on behalf of the LLC,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits or losses of the LLC or any
other facts pertinent to the existence and amount of assets from which
distributions to members might properly be paid.
9.4 ANNUAL REPORTS
The annual financial statements of the LLC shall be audited and reported
on as of the end of each Fiscal Year by a firm of independent certified
public accountants selected by the Managers, provided that the Managers
may waive the requirement of an audit at any time and for any reason. A
copy of the annual report shall be transmitted to the Members within 90
days after the end of each Fiscal Year.
9.5 TAX RETURNS
The Managers shall, within 90 days after the end of each Fiscal Year, file
a Federal income tax information return and transmit to each Member a
schedule showing such Member's distributive share of the LLC's income,
deductions and credits, and all other information necessary for such
Members to timely file their Federal income tax returns. The Managers
similarly shall file, and provide information to the Members regarding,
all appropriate state and local income tax returns.
9.6 TAX MATTERS PARTNER
▇.▇. ▇▇▇▇▇▇▇▇▇ shall serve as the "Tax Matters Partner" (within the
meaning of Code Section 6231) until a successor is designated by the
Managers.
10. ALLOCATIONS
10.1 ALLOCATION OF NET INCOME OR NET LOSS
For each Accounting Period, Net Income or Net Loss of the LLC, or items
thereof, other than Net Income attributed to or resulting from the Carried
Interests from Alliance Ventures I and Alliance Ventures II, shall be
allocated to the Members in proportion to their ownership of outstanding
Common Units. Any Net Income or Net Loss attributed to or resulting from
the Carried Interest from Alliance Ventures I shall be allocated to the
Members in proportion to their ownership of outstanding Series A Units.
Any Net Income or Net Loss attributed to or resulting from the Carried
Interest from Alliance Ventures II shall be allocated to the Members in
proportion to their ownership of outstanding Series B Units.
10.2 OTHER ALLOCATIONS; QUALIFIED INCOME OFFSET; PROPHYLACTIC OFFSET
MINIMUM-GAIN CHARGEBACK Notwithstanding the provisions of Section 10.1,
the following special allocations shall be made in the following order set
forth below. Terms appearing in quotes in this Section 10.2 are as defined
in Treasury Regulations Section 1.704-2, and that regulation shall govern
determinations required by the rules set forth in this Section 10.2.
10.2.1 All "nonrecourse deductions" shall be allocated among the holders
of Common Units in proportion to their ownership of outstanding
Common Units from time to time during such period.
10.2.2 All "partner nonrecourse deductions" shall be specially allocated
to the Members who bear the economic risk of loss with respect to the
"partner nonrecourse debt" to which such "partner nonrecourse
deductions" are attributable.
10.2.3 Except as otherwise provided in Treasury Regulations Section
1.704-2(f), if there is a net decrease in "partnership minimum gain"
during any Fiscal Year, each Member shall be specially allocated
items of LLC income and gain for such Fiscal Year (and, if necessary,
future Fiscal Years) in an amount equal to such Member's share of the
net decrease. This Section 10.2.3 is intended to comply with the
minimum gain chargeback requirements of Treasury Regulations Section
1.704-2 and shall be interpreted accordingly.
10.2.4 Except as otherwise provided in Treasury Regulations Section
1.704-2(i)(4), if there is a net decrease in "partner nonrecourse
debt minimum gain" attributable to a "partner nonrecourse debt"
during any Fiscal Year, each Member who has a share of such "partner
nonrecourse debt minimum gain" shall be specially allocated items of
LLC income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to that share. This
Section 10.2.4 is intended to comply with the minimum gain chargeback
requirements of Treasury Regulations Section 1.704-2 and shall be
interpreted accordingly.
10.2.5 If a Member's capital account has an Unadjusted Excess Negative
Balance at the end of any Fiscal Year, the Member will be reallocated
items of LLC income and gain for such Fiscal Year (and, if necessary,
future Fiscal Years) in the amount necessary to eliminate such
Unadjusted Excess Negative Balance as quickly as possible.
10.2.6 If a Member unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4) through (d)(6), items of LLC income and gain
shall be specially allocated to the Member to eliminate any Excess
Negative Balance in such Member's Capital Account (determined after
application of Section 10.2.5) created thereby as quickly as
possible. This Section 10.2.6 is intended to constitute a "qualified
income offset" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted accordingly.
10.2.7 A Member shall not be allocated any item of LLC loss or deduction
to the extent the allocation would cause the Member's capital account
to have an Excess Negative Balance.
10.2.8 The allocations set forth in the preceding provisions of this
Section 10.2 (hereinafter, the "Regulatory Allocations") are intended
to comply with certain requirements of the Treasury Regulations. It
is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset with other Regulatory
Allocation or with special allocations of other items of LLC income,
gain, loss or deduction pursuant to this Section 10.2(h). Therefore,
notwithstanding any other provision of this Agreement (other than the
provisions governing the Regulatory Allocations) the Board of
Managers shall make such offsetting special allocations of LLC
income, gain, loss or deduction in whatever manner it determines
appropriate, to the end that each Member's Capital Account balance
should equal the balance the Member would have had if the Regulatory
Allocations were not part of this Agreement and all LLC items were
allocated pursuant to Section 10.1. In exercising its discretion
under this Section 10.2.8, the Board of Managers shall take into
account future Regulatory Allocations under Sections 10.2.3 and
10.2.4 above that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 10.2.1 and
10.2.2 above.
10.2.9 For purposes of this Section 10.2, "Excess Negative Balance" shall
mean the excess of the negative balance in a Member's Capital Account
(computed with any adjustments which are required by Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)) over the amount the Member
is obligated to restore to the LLC (computed under the principles of
Treasury Regulations Section 1.704-1(b)(2)(ii)(c)) inclusive of any
addition to such restoration obligation pursuant to application of
the provisions of Treasury Regulations Section 1.704-2 or any
successor provisions thereto.
10.2.10 For purposes of this Section 10.2, "Unadjusted Excess Negative
Balance" shall have the same meaning as Excess Negative Balance,
except that the Unadjusted Excess Negative Balance of a Member shall
be computed without effecting the reductions to such Member's Capital
Account described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d).
10.3 SPECIAL TAX PROVISIONS
10.3.1 PARTNERSHIP STATUS
The Members expect and intend that the LLC shall be treated as a
partnership for all federal income tax purposes and each Member and
the Managers agree that they:
10.3.1.1 will not on any federal, state, local or other tax return
take a position, and shall not otherwise assert a position,
inconsistent with such expectation and intent; or
10.3.1.2 do any act or thing that could cause the LLC to be treated
as other than a partnership for federal income tax purposes.
10.3.2 TAX ALLOCATIONS
Except as otherwise provided in this Section 10 or required by the
Code and Treasury Regulations, items of income, gain, loss or
deduction recognized for income tax purposes shall be allocated in
the same manner that the corresponding items entering into the
calculation of Net Income and Net Loss are allocated pursuant to this
Agreement.
10.3.3 SECTION 704(C) ADJUSTMENTS
In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, items of income, gain, loss and deduction with respect to
an asset, if any, contributed to the capital of the LLC shall, solely
for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property
to the LLC for federal income tax purposes and its fair market value
upon contribution to the LLC.
10.3.4 If the Carrying Value of any asset is adjusted pursuant to the
terms of this Agreement, subsequent allocations of income, gain, loss
and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset to the LLC for
federal income tax purposes and its Carrying Value in the same manner
as under Code Section 704(c) and the Regulations thereunder.
10.3.5 SECTION 754 ELECTION
A Section 754 election may be made for the LLC at the sole discretion
of the Managers. In the event of an adjustment to the adjusted tax
basis of any LLC asset under Code Section 734(b) or Code Section
743(b) pursuant to a Section 754 election, subsequent allocations of
tax items shall reflect such adjustment consistent with the Treasury
Regulations promulgated under Sections 704, 734 and 743 of the Code.
10.3.6 ALLOCATIONS UPON TRANSFERS OF LLC INTERESTS If during an Accounting
Period, a Member ("Transferring Member") transfers Units to another
person, items of Net Income and Net Loss, together with corresponding
tax items, that otherwise would have been allocated to the
Transferring Member with regard to such Accounting Period shall be
allocated between the Transferring Member and the transferee in
accordance with their respective Units during the Accounting Period
using any method permitted by Section 706 of the Code and selected by
the Board of Managers.
11. DISTRIBUTIONS
11.1 DISTRIBUTIONS TO PREFERRED AND COMMON UNITS
The holders of the outstanding Series A Units shall receive all
distributions from the LLC resulting from the Carried Interest from
Alliance Ventures I and the holders of the outstanding Series B Units
shall receive all distributions from the LLC resulting from the Carried
Interest from Alliance Ventures II and the holders of the outstanding
Common Units shall receive all other distributions from the LLC.
11.2 ALLOCATION OF DISTRIBUTIONS AMONG HOLDERS OF UNITS
All distributions by the LLC to holders of Series A Units, Series B Units
and Common Units shall be made in proportion to the holders' ownership of
such outstanding Units at the time of the distribution.
11.3 MANDATORY TAX DISTRIBUTIONS
In order to permit holders of Units to pay taxes on their allocable share
of the taxable income of the LLC, the Managers shall cause the LLC to
distribute, not later than February 28 of each year, to each holder of a
Unit an amount equal to the excess, if any, of:
11.3.1 the product of the aggregate net taxable income of the LLC
determined on a cumulative basis for all Accounting Periods that has
been allocated to such holder (and any predecessor holder) computed
without regard to any basis adjustments under Section 743(b) of the
Code of such Unit multiplied by 0.45; over
11.3.2 all amounts previously distributed to such holder and any
predecessor holder;
the decimal fraction in these Sections 11.3.1 and 11.3.2 shall be adjusted
to the extent necessary (as determined in good faith by the Managers from
time to time) to reflect any change in the higher of the maximum rate of
tax imposed on individual taxpayers resident in California under the Code
or the laws of the State of California and the maximum rate of tax imposed
on corporate taxpayers doing business in California under the Code or the
laws of the State of California. Any distributions made with respect to
Series A Units and Series B Units pursuant to this Section 11.3 shall
reduce on a dollar-for-dollar basis the distributions required or
permitted to be made with respect to such Units pursuant to any other
provision of this Agreement.
11.4 DISCRETIONARY DISTRIBUTIONS
In addition to the distributions provided for in Sections 11.1, 11.2 and
11.3, at any time that there are no Series A Units and Series B Units
outstanding, the Managers may, in their sole discretion, make additional
distributions to the holders of outstanding Common Units in such amounts
and at such times as they shall from time to time determine.
11.5 RESTRICTION ON DISTRIBUTIONS AND WITHDRAWALS
11.5.1 The LLC shall not make any distribution to the holders of Units
unless immediately after giving effect to the distribution, all
liabilities of the LLC, other than liabilities to Members on account
of their interest in the LLC and liabilities as to which recourse of
creditors is limited to specified property of the LLC, do not exceed
the fair value of the LLC assets, provided that the fair value of any
property that is subject to a liability as to which recourse of
creditors is so limited shall be included in the LLC assets only to
the extent that the fair value of the property exceeds such
liability.
11.5.2 Except as otherwise required by law no holder of Units shall be
liable to the LLC for the amount of a distribution received provided
that, at the time of the distribution, such holder of Units did not
know that the distribution was in violation of Section 11.5.1. A
Member which receives a distribution in violation of Section 11.5.1,
and which knows at the time of the distribution that the distribution
violated such condition, shall be liable to the LLC for the amount of
the distribution.
11.6 NO OTHER WITHDRAWALS
Except as otherwise expressly provided for in this Agreement no
withdrawals or distributions shall be required or permitted.
12. TRANSFER OF MEMBERSHIP
12.1 TRANSFER
Any Member or Assignee may Transfer any portion of its or his Units only
if:
12.1.1 the transferor shall have complied with the Right of First
Refusal imposed by Section 12.5 hereof;
12.1.2 the Assignee shall have agreed in writing to assume all of the
obligations of the assignor with respect to the Units assigned
(including the obligations imposed hereunder as a condition to any
transfer); and
12.1.3 the Managers in their sole discretion have consented to such
Transfer and shall have concluded (which conclusion may be based upon
an opinion of counsel satisfactory to them) that such assignment or
disposition will not:
12.1.3.1 result in a violation of the Securities Act of 1933 as
amended, or any other applicable statute of any jurisdiction;
12.1.3.2 result in a termination of the LLC for Federal or state
income tax purposes or result in (or materially increase the
risk of) the LLC being treated as a publicly traded partnership
or otherwise taxable as a corporation for Federal income tax
purposes; or
12.1.3.3 result in a violation of any law, rule or regulation by the
Member, the Assignee, the LLC or the other Members.
For purposes of this Section 12.1 the phrase "publicly traded partnership"
shall have the meaning set forth in Section 7704(b) and 469(k) of the
Code.
12.2 TRANSFER VOID
Any purported Transfer of Units in contravention of this Section 12 shall
be void and of no effect to, on or against the LLC, any Member, any
creditor of the LLC or any claimant against the LLC.
12.3 RIGHTS OF ASSIGNEES
The Assignee of Units has no right to vote or to participate in the
management of the business and affairs of the LLC or to become a Member.
The Assignee is only entitled to receive distributions and to be allocated
the Net Income and Net Loss (and items thereof) attributable to the Units
transferred to the Assignee.
12.4 ADMISSION OF PERMITTED TRANSFEREES
Notwithstanding Section 12.5 below, the Units of any Member shall be
transferable free from any Right of First Refusal if:
12.4.1 the transfer occurs by reason of or incident to the death, or
divorce, of the transferor Member;
12.4.2 the transferee is a Permitted Transferee, and such Permitted
Transferee agrees in writing to be bound by the terms and conditions
of this Agreement as fully as if it were an original signatory
hereto.
A "Permitted Transferee" is any member of such Member's immediate family
including, in the case of the divorce of a Member from his or her spouse,
such spouse. A Permitted Transferee will be admitted as a Substitute
Member only in accordance with Section 2.5 hereof. Units transferred
pursuant to the death of a Member shall be subject to the provisions of
Section 2.9 (relating to Dissociated Members) whether or not transferred
to a Permitted Transferee.
12.5 RIGHT OF FIRST REFUSAL
12.5.1 GRANT
The LLC is hereby granted the right of first refusal ("First Refusal
Right"), exercisable in connection with any proposed Transfer of
Units.
12.5.2 NOTICE OF INTENDED DISPOSITION
In the event a Member desires to accept a bona-fide third-party offer
for the Transfer of any or all of the Member's Units (Units subject
to such offer to be hereinafter called "Target Units"), such Member
shall promptly:
12.5.2.1 deliver to the LLC written notice ("Disposition Notice") of
the terms and conditions of the offer, including the purchase
price and the identity of the third-party offeror; and
12.5.2.2 Provide satisfactory proof that the disposition of the
Target Units to such third-party offeror would not be in
contravention of the provisions set forth in Section 12.1.
12.5.3 EXERCISE OF RIGHT
The LLC (or its assignees) shall, for a period of 25 days following
receipt of the Disposition Notice, have the right to repurchase all,
but not less than all, of the Target Units specified in the
Disposition Notice upon the same terms and conditions specified
therein or upon terms and conditions which do not materially vary
from those specified therein. Such right shall be exercisable by
delivery of written notice ("Exercise Notice") to the transferor
Member before the end of the 25-day exercise period.
12.5.4 VALUATION
If the purchase price specified in the Disposition Notice is payable
in property other than cash or evidences of indebtedness, the LLC (or
its assignees) may pay the purchase price in cash equal to the value
of such property. If the Member and the LLC (or its assignees) cannot
agree on such cash value within ten (10) days after the LLC's receipt
of the Disposition Notice, the valuation shall be made by an
appraiser of recognized standing selected by the Member and the LLC
(or its assignees) or, if they cannot agree on an appraiser within 20
days after the LLC's receipt of the Disposition Notice, each shall
select an appraiser of recognized standing and the two appraisers
shall designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the Member and the LLC. The
closing shall then be held on the later of:
12.4.4.1 the fifth business day following delivery of the Exercise
Notice; or
12.4.4.2 the fifth business day after such cash valuation shall have
been made.
12.5.5 EXERCISE OF RIGHTS
If the right of the LLC is exercised with respect to all the Target
Units specified in the Disposition Notice, then the LLC, its
assignees and/or the Members (as the case may be) shall effect the
purchase of the Target Units, including payment of the purchase
price, on the same payment terms specified in the Disposition Notice;
and the selling Member shall deliver to the LLC the certificates
representing the Target Units to be repurchased, each certificate to
be properly endorsed for transfer. The closing shall then be held on
the later of:
12.5.5.1 sixty (60) days following delivery of the Disposition
Notice; or
12.5.5.2 the fifth business day after any necessary valuation shall
have been made.
12.5.6 NON-EXERCISE OF RIGHT
In the event the LLC or its assignees do not exercise their purchase
rights in accordance with this Section 12.5, the selling Member shall
have a period of 30 days thereafter in which to sell or otherwise
dispose of the Target Units to the third-party offeror identified in
the Disposition Notice upon terms and conditions (including the
purchase price) no more favorable to such third-party offeror than
those specified in the Disposition Notice; provided, however, that
any such sale or disposition must not be effected in contravention of
the provisions of Section 12.1. If the Member does not effect such
sale or disposition of the Target Units within the specified 30-day
period, the LLC's First Refusal Right shall continue to apply to any
subsequent disposition of the Target Units by Member.
12.5.7 RECAPITALIZATION/MERGER
12.5.7.1 In the event of any Unit stock split, recapitalization or
other transaction affecting the LLC's outstanding Units without
receipt of consideration, then any new, substituted or
additional securities or other property which is by reason of
such transaction distributed with respect to the Units shall be
immediately subject to the LLC's First Refusal Right hereunder,
but only to the extent the Units are at the time covered by such
right.
12.5.7.2 In the event of:
12.5.7.2.1 a merger or consolidation in which the LLC is not
the surviving entity;
12.5.7.2.2 a sale, transfer or other disposition of all or
substantially all of the LLC's assets;
12.5.7.2.3 a reverse merger in which the LLC is the surviving
entity but in which the LLC's outstanding voting securities
are transferred in whole or in part to a person or persons
other than those who held such securities immediately
before the merger; or
12.5.7.2.4 any transaction effected primarily to change the
State in which the LLC is organized, or to create a
holding company structure,
the LLC's First Refusal Right shall remain in full force and
effect and shall apply to the new capital stock or other
property received in exchange for the Purchased Units in
consummation of the transaction, but only to the extent the
Purchased Units are at the time covered by such right.
12.6 MARITAL DISSOLUTION OR LEGAL SEPARATION
12.6.1 GRANT
In connection with the dissolution of the marriage or the legal
separation of any Member, the LLC shall have the right ("Special
Purchase Right"), exercisable at any time during the 30-day period
following the LLC's receipt of the required Dissolution Notice under
Section 12.6.2, to purchase from the Member's spouse, in accordance
with the provisions of Section 12.6.3 any or all Units which are or
would otherwise be awarded to such spouse incident to the dissolution
of marriage or legal separation in settlement of any community
property or other marital property rights such spouse may have or
obtain in the Units. The Special Purchase Right shall not apply to
any Units retained by the Member.
12.6.2 NOTICE OF DECREE OR AGREEMENT
Each Member shall promptly provide the LLC with written notice
("Dissolution Notice") of:
12.6.2.1 the entry of any judicial decree or order resolving the
property rights of the Optionee and the Optionee's spouse in
connection with their marital dissolution or legal separation;
or
12.6.2.2 the execution of any contract or agreement relating to the
distribution or division of such property rights.
The Dissolution Notice shall be accompanied by a copy of the actual
decree of dissolution or settlement agreement between the Optionee
and the Optionee's spouse which provides for the award to the spouse
of Units in settlement of any community property or other marital
property rights such spouse may have in such Units.
12.6.3 EXERCISE OF SPECIAL PURCHASE RIGHT
The Special Purchase Right shall be exercisable by delivery of
written notice ("Purchase Notice") to the Member and the Member's
spouse within 30 days after the LLC's receipt of the Dissolution
Notice. The Purchase Notice shall indicate the number of the Units to
be purchased by the LLC, the date such purchase is to be effected
(such date to be not less than five business days, nor more than 10
business days, after the date of the Purchase Notice), and the amount
which the LLC proposes to pay for such Units. If the Member's Spouse
does not agree to the amount proposed to be paid by the LLC, then the
price to be paid shall be the fair market value of the Units
determined as set forth in the remainder of this Section and the
purchase shall occur ten business days following the completion of
such valuation, provided that if the fair market value is greater
than 110% of the purchase price set forth in the Purchase Notice, the
LLC shall have the right to withdraw such Notice. The fair market
value of the Units shall be the value agreed to by the Member's
Spouse or its or his legal representative and the LLC. If such person
and the LLC are unable to agree to a value, within 10 days after the
notice of election to purchase the Units has been given, the fair
market value shall be established by an appraiser of recognized
standing selected by the Member's Spouse or his or its legal
representative and the LLC, or, if they cannot agree on an appraiser
within 20 days after the expiration of the aforementioned ten-day
period, each shall select an appraiser of recognized standing and the
two appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of the fair market
value. The cost of determining the fair market value shall be paid by
the LLC.
13. INDEMNIFICATION AND LIMITATION OF LIABILITY
13.1 INDEMNIFICATION
13.1.1 To the fullest extent permitted by the Act and by law, the
Managers, Members, the partners, members or shareholders of any
Member, if such Member is organized as a partnership, limited
liability company or corporation, respectively, and the partners,
shareholders, controlling persons, officers, Managers and employees
of any of the foregoing (herein referred to as "Indemnitees") shall,
in accordance with this Section 13.1 be indemnified and held harmless
by the LLC from and against any and all loss, claims, damages,
liabilities joint and several, expenses, judgments, fines,
settlements and other amounts arising from any and all claims
(including reasonable legal expenses), demands, actions, suits or
proceedings (civil, criminal, administrative or investigative) in
which they may be involved, as a party or otherwise, by reason of
their management of, or involvement in, the affairs of the LLC, or
rendering of advice or consultation with respect thereto, or which
relate to the LLC, its properties, business or affairs, if such
Indemnitee acted in good faith and in a manner such Indemnitee
reasonably believed to be in, or not opposed to, the best interests
of the LLC, and with respect to any criminal proceeding, had no
reasonable cause to believe the conduct of such Indemnitee was
unlawful. The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that the
Indemnitee did not act in good faith and in a manner which the
Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the LLC or that the Indemnitee had reasonable cause to
believe that the Indemnitee's conduct was unlawful (unless there has
been a final adjudication in the proceeding that the Indemnitee did
not act in good faith and in a manner which the Indemnitee reasonably
believed to be in or not opposed to the best interests of the LLC; or
that the Indemnitee did have reasonable cause to believe that the
Indemnitee's conduct was unlawful).
13.1.2 The LLC may also indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending, or
completed action by or in the right of the LLC to procure a judgment
in its favor by reason of the fact that such Person is or was an
officer, employee or agent of the LLC, against expenses actually or
reasonably incurred by such Person in connection with the defense or
settlement of such action, if such Person acted in good faith and in
a manner such Person reasonably believed to be in, or not opposed to,
the best interests of the LLC, except that indemnification shall be
made in respect of any claim, issue or matter as to which such Person
shall have been adjudged to be liable for misconduct in the
performance of the Person's duty to the LLC only to the extent that
the court in which such action or suit was brought, or another court
of appropriate jurisdiction, determines upon application that,
despite the adjudication of liability, but in view of all
circumstances of the case, such Person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem
proper. To the extent that the Person has been successful on the
merits or otherwise in defense of any proceedings referred to herein,
or in defense of any claim, issue or matter therein, the Person shall
be indemnified by the LLC against expenses actually and reasonably
incurred by the Person in connection therewith. Notwithstanding the
foregoing, no Person shall be entitled to indemnification hereunder
for any conduct arising from the gross negligence or willful
misconduct or reckless disregard in the performance of the Person's
duties under this Agreement.
13.1.3 Expenses (including attorneys' fees) incurred in defending any
proceeding under Sections 13.1.1 or 13.1.2 may be paid by the LLC in
advance of the final disposition of such proceeding upon receipt of
an undertaking by or on behalf of the Indemnitee or Person to repay
such amount if it shall ultimately be determined that the Indemnitee
or Person is not entitled to be indemnified by the LLC as authorized
hereunder.
13.1.4 The indemnification provided by this Section 13.1 shall not be
deemed to be exclusive of any other rights to which any Person may be
entitled under any agreement, or as a matter of law, or otherwise,
both as to action in a Person's official capacity and to action in
another capacity.
13.1.5 The Managers shall have power to purchase and maintain insurance on
behalf of the LLC, the Managers, officers, employees or agents of the
LLC and any other Indemnitees at the expense of the LLC, against any
liability asserted against or incurred by them in any such capacity
whether or not the LLC would have the power to indemnify such Persons
against such liability under the provisions of this Agreement.
13.2 LIMITATION OF LIABILITY
Notwithstanding anything to the contrary herein contained, the debts,
obligations and liabilities of the LLC shall be solely the debts,
obligations and liabilities of the LLC; and no Manager or Member shall be
obligated personally for any such debt, obligation or liability of the LLC
solely by reason of being a Manager or Member of the LLC.
14. TERMINATION
14.1 TERMINATION
The LLC shall be dissolved, its assets disposed of and its affairs wound
up upon the first to occur of the following:
14.1.1 the expiration of its stated term;
14.1.2 the affirmative vote of Members holding 80% of the Units
entitled to vote thereon;
14.1.3 the death, Bankruptcy or Dissolution of a Member ("Dissolution
Event"), unless the holders of Units representing a majority of votes
(determined pursuant to Section 2.4) continues the business of the
LLC within 90 days following the occurrence of any such event,
pursuant to Section 14.2 below; or
14.1.4 the entry of a decree of judicial dissolution under the Act.
14.2 CONTINUANCE OF THE LLC
Notwithstanding the foregoing provisions of Section 14.1, upon the
occurrence of a Dissolution Event, if there are at least two remaining
Members, the holders of Units representing a majority of votes (determined
pursuant to Section 2.4) may avoid dissolution of the LLC and elect within
90 days after a Dissolution Event to continue the business of the LLC on
the same terms as this Agreement. Expenses incurred in the continuance of
the LLC shall be deemed expenses of the LLC.
14.3 AUTHORITY TO WIND UP
The Managers shall have all necessary power and authority required to
marshal the assets of the LLC, to pay its creditors, to distribute assets
and otherwise wind up the business and affairs of the LLC. In particular,
the Managers shall have the authority to continue to conduct the business
and affairs of the LLC insofar as such continued operation remains
consistent, in the judgment of the Managers, with the orderly winding up
of the LLC.
14.4 WINDING UP AND CERTIFICATE OF CANCELLATION
The winding up of the LLC shall be completed when all debts, liabilities
and obligations of the LLC have been paid and discharged or reasonably
adequate provision therefor has been made, and all of the remaining
property and assets of the LLC have been distributed to the Members. Upon
the completion of winding up of the LLC, a Certificate of Cancellation
shall be filed with the Office of the Secretary of State of California.
14.5 DISTRIBUTION OF ASSETS
Upon dissolution and winding up of the LLC, the affairs of the LLC shall
be wound up and the LLC liquidated by the Managers. Pursuant to such
liquidation the assets of the LLC shall be sold unless the Members shall
consent to a distribution in kind of the assets. If the Members do not
consent to a distribution in kind but the Managers determine that an
immediate sale would be financially inadvisable, they may defer sale of
the LLC assets for a reasonable time. If any assets are distributed in
kind, then they shall be distributed on the basis of the fair market value
thereof as determined by appraisal, and shall be deemed to have been sold
at such fair market value for purposes of the allocations under Section
10. Unless the Members otherwise agree, if any assets are to be
distributed in kind, they shall be distributed to the Members, as
tenants-in-common, in undivided interests in proportion to distributions
to which the Members are entitled under this Section 14.5. The assets of
the LLC, whether cash or in kind shall be distributed as follows in
accordance with the Act:
14.5.1 to creditors of the LLC in the order of priority provided by
law; and
14.5.2 the Members and Assignees in accordance with the positive balances
in their Capital Accounts, after adjustment for allocations of income
and loss realized during the year of dissolution, and except as
specifically provided in Sections 3 and 11, no Member or Assignee
shall have any obligation at any time to repay or restore to the LLC
all or any part of any distribution made to it from the LLC in
accordance with this Sections 14.5 or 11 or to make any additional
contribution of capital to the LLC.
The distributions in this Section 14.5 shall be made when dissolution
occurs, or, if later, within 90 days following the event triggering the
dissolution. The LLC shall terminate when all of its assets have been sold
and/or distributed and all of its affairs have been wound up.
14.5 TERMINATION OF A MEMBER'S ASSOCIATION WITH THE LLC
Should a Member no longer have an association with the LLC (as defined
herein), the LLC shall have the right, but not the obligation, to
repurchase all shares of the LLC owned by the Member, upon demand and at
the price originally paid by the Member for those shares. An "association
with the LLC" shall be defined as being an employee or consultant of the
LLC, the Partnerships, or Alliance Semiconductor Corporation (including
its subsidiaries, and parent, if any).
15. DEFINITIONS
The following terms shall have the meanings set forth for purposes of this
Agreement:
15.1 ACCOUNTING PERIOD shall mean for each Fiscal Year the period beginning on
the 1st of January and ending on the 31st of December; provided however,
that the first Accounting Period shall commence on the date of formation
of the LLC and shall end on December 31, 1999; and provided, further, that
a new Accounting Period shall commence on any date on which an Additional
or Substituted Member is admitted to the LLC or a Member ceases to be a
Member for any reason.
15.2 ACT shall have the meaning set forth in Section 1.1.
15.3 ADDITIONAL MEMBER shall mean a Member admitted as a Member after the date
this Agreement becomes effective.
15.4 CAPITAL ACCOUNT shall mean, with respect to any Member, a separate account
maintained by the LLC with respect to such Member in accordance with the
following provisions:
15.4.1 The Capital Account of each Member shall be increased by:
15.5.1.1 the amount of money and the fair market value of any
property contributed to the LLC by such Member (net of any
liabilities secured by such property that the LLC is considered
to assume or hold subject to for purposes of Section 752 of the
Code),
15.5.1.2 such Member's share of Net Income (or items thereof) and
other items of LLC income and gain allocated to it pursuant to
this Agreement, and
15.5.1.3 the amount of liabilities of the LLC assumed by such Member
or (to the extent not taken into account under Section 15.5.1.2
above) and any other amounts required by Treasury Regulation
Section 1.704-1(b), provided that the Board of Managers
determines that such increase is consistent with the economic
arrangement among the Members as expressed in this Agreement;
and
15.4.2 shall be decreased by:
15.4.2.1 the amount of money and the agreed fair market value of any
property distributed by the LLC to such Member pursuant to the
provisions of this Agreement (net of any liabilities secured by
such property that such Member is considered to assume or hold
subject to for purposes of Section 752 of the Code),
15.4.2.2 such Member's share of Net Loss (or items thereof) and other
items of LLC loss and deduction allocated to it pursuant to this
Agreement, and
15.4.2.3 the amount of liabilities of such Member assumed by the LLC
(to the extent not taken into account under 15.4.2.1 above) and
any other amounts required by Treasury Regulation Section
1.704-1(b), provided that the Board of Managers determines that
such decrease is consistent with the economic arrangement among
the Members as expressed in this Agreement.
15.5 AGREEMENT shall mean this LLC Agreement as the same shall be amended from
time to time.
15.6 ARTICLES OF ORGANIZATION shall have the meaning set forth in Section 1.1.
15.7 ASSIGNEE shall mean a transferee or a Permitted Transferee of a Units who
has not been admitted as a Substitute Member.
15.8 BOARD OF MANAGERS shall have the meaning set forth in Section 5.1.
15.9 BANKRUPTCY shall mean with respect to any Person that a petition shall
have been filed by or against such Person as a "debtor" and the
adjudication of such Person as a bankrupt under the provisions of the
bankruptcy laws of the United States of America shall have commenced, or
that such Person shall have made an assignment for the benefit of its
creditors generally or a receiver shall have been appointed for
substantially all of the property and assets of such Person.
15.10 CAPITAL CONTRIBUTION of a Member shall mean that amount of capital
actually contributed by the Member to the LLC pursuant to Section 3
hereof.
15.11 CARRIED INTEREST FROM ALLIANCE VENTURES I, L.P. shall mean the LLC's
right to receive (as general partner of Alliance Ventures I, L.P.) 15%
of Net Profits from Portfolio Investments as set forth at Sections 3.2
and 3.3 of the Alliance Ventures I, L.P. Partnership Agreement.
15.12 CARRIED INTEREST FROM ALLIANCE VENTURES II, L.P. shall mean the LLC's
right to receive (as general partner of Alliance Ventures II, L.P.) 15%
of Net Profits from Portfolio Investments as set forth at Sections 3.2
and 3.3 of Alliance Ventures II, L.P. Partnership Agreement.
15.13 CARRYING VALUE means, with respect to any LLC asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
15.13.1 The initial Carrying Value of any asset contributed by a Member to
the LLC shall be the agreed-upon fair market value of the asset upon
contribution, as determined by the contributing Member and the LLC.
The initial Carrying Values of the assets contributed to the LLC as
Capital Contributions are set forth on Exhibit A hereto.
15.13.2 In the discretion of the Board of Managers, the Carrying Values of
all LLC assets may be adjusted to equal their respective fair market
values, as determined by the Board of Managers, and the resulting
unrecognized gain or loss allocated to the Capital Accounts of the
Members as though such assets had been sold for their respective fair
market values as of the following times:
15.13.2.1 the acquisition of an additional interest in the LLC by
any new or existing Member in exchange for more than a de
minimis capital contribution; and
15.13.2.2 the distribution by the LLC to a Member of more than a de
minimis amount of LLC assets, unless all Members receive
simultaneous distributions of either undivided interests in the
distributed property or identical LLC assets in proportion to
their interests in the LLC.
15.13.3 The Carrying Values of all LLC assets shall be adjusted to equal
their respective fair market values, as determined by the Board of
Managers, and the resulting unrecognized gain or loss allocated to
the Capital Accounts of the Members as though such assets had been
sold for their respective fair market values as of the following
times:
15.13.3.1 the date the LLC is liquidated within the meaning of
Treasury Regulation Section 1.704-1 (b)(2)(ii)(g); and
15.13.3.2 the termination of the LLC pursuant to the provisions of
this Agreement.
15.13.4 The Carrying Values of LLC assets shall be increased or decreased
to the extent required under Treasury Regulation Section
1.704-1(b)(2)(iv)(m) in the event that the adjusted tax basis of LLC
assets is adjusted pursuant to Code Sections 732, 734 or 743.
15.13.5 The Carrying Value of a LLC Asset that is distributed (whether in
liquidation of the LLC or otherwise) to one or more Members shall be
adjusted to equal its fair market value, as determined by the Board
of Managers, and the resulting unrecognized gain or loss allocated to
the Capital Accounts of the Members as though such asset had been
sold for such fair market value.
15.13.6 The Carrying Value of a LLC asset shall be adjusted by the
depreciation, amortization or other cost recovery deductions, if any,
taken into account by the LLC with respect to such asset in computing
Net Income or Net Loss.
15.14 CODE shall mean the Internal Revenue Code of 1986, as amended.
15.15 DISSOCIATED MEMBER shall have the meaning given that term in Section 2.9.
15.16 DISSOLUTION of a Member that is not a natural person shall mean that such
Member has terminated its existence, whether partnership or corporate,
wound up its affairs and dissolved; provided, however, that a change in
the membership of any Member that is a general partnership shall not
constitute "Dissolution" hereunder, whether or not the Member is deemed
technically dissolved for partnership law purposes, so long as the
business of the Member is continued.
15.17 DISSOLUTION EVENT shall mean the death or dissolution of a Member, the
occurrence of which terminates the Member's continued membership in the
LLC and results in the dissolution of the LLC under the Act unless the
holders of Units representing a majority of votes (determined pursuant to
Section 2.4) agree otherwise pursuant to Section 14.2.
15.16 FISCAL YEAR shall mean the period from January 1 to December 31 of each
year, or as otherwise required by law.
15.17 INCOMPETENCY of a person shall mean that such person shall have been
judged incompetent or insane by a decree of a court or administrative
tribunal of appropriate jurisdiction.
15.18 INITIAL CONTRIBUTION shall have the meaning set forth in Section 3.1.
15.19 MARKETABLE SECURITY shall refer to a security that is (a) registered under
the Securities Act, (b) traded on a national securities exchange or
over-the-counter, (c) currently the subject of an issuer-filed Securities
Act registration statement, (d) a direct obligation of, or an obligation
guaranteed as to principal and interest by, the United States, a
certificate of deposit maturing within one year or less issued by an
institution insured by the Federal Deposit insurance Corporation, or a
similar security, or (e) transferable pursuant to SEC Rule 144.
15.20 MEMBERS shall mean all Members of the LLC, including Substitute Members,
and Additional Members, but does not include Assignees.
15.21 NET INCOME OR NET LOSS shall mean the net book income or loss of the LLC
for any relevant period. The net book income or loss of the LLC shall be
computed in accordance with Federal income tax principles under the method
of accounting elected by the LLC for Federal income tax purposes, and as
otherwise adjusted by:
15.21.1 including as income or deductions, as appropriate, any tax-exempt
income and related expenses that are neither properly included in the
computation of taxable income nor capitalized for Federal income tax
purposes;
15.21.2 including as a deduction when paid or incurred (depending on the
LLC's method of accounting) any amounts utilized to organize the LLC
or to promote the sale of (or to sell) an interest in the LLC, except
that amounts for which an election is properly made by the LLC under
Section 709(b) of the Code shall be accounted for as provided
therein;
15.21.3 including as a deduction any losses incurred by the LLC in
connection with the sale or exchange of property notwithstanding that
such losses may be disallowed to the LLC for Federal income tax
purposes under the related party rules of the Code (including Code
Sections 267(a)(1) or 707(b));
15.21.4 calculating the gain or loss on disposition of LLC assets and the
depreciation, amortization or other cost- recovery deductions, if
any, with respect to LLC assets by reference to their Carrying Value
rather than their adjusted tax basis; and
15.21.5 excluding as an item of income, gain, loss or deduction any items
allocated pursuant to Section 10.2 of this Agreement.
15.22 PARTNERSHIPS shall mean Alliance Ventures I, L.P., a California limited
partnership and Alliance Ventures II, L.P., a California limited
partnership.
15.23 PERMITTED TRANSFER shall have the meaning set forth in Section 12.4
hereof.
15.24 PERSON shall mean a natural person, partnership (whether general or
limited and whether domestic or foreign), LLC, foreign limited liability
company, trust, estate, association, corporation, custodian, nominee or
any other individual or entity in its own or representative capacity.
15.25 SUBSTITUTE MEMBER shall mean an Assignee who has been admitted to all the
rights of membership pursuant to this Agreement.
15.26 TRANSFER shall mean any transfer, sale, encumbrance, mortgage, assignment
or other disposition.
15.27 TREASURY REGULATIONS shall mean regulations issued pursuant to the Code.
15.28 UNIT REGISTER shall have the meaning set forth in Section 8.4.
16. MISCELLANEOUS
16.1 AMENDMENT
This Agreement may be amended only with the consent of the Members;
provided however, that no amendment that adversely affects the rights of
one class of Units in a manner different than that of another class of
Units shall be effective against any holder of such adversely affected
Units who has not consented thereto.
16.2 POWER OF ATTORNEY
By signing this Agreement, each Member designates and appoints the
Managers as its or his true and lawful attorney, in his name, place and
▇▇▇▇▇, to make, execute, sign and file such instruments, documents or
certificates which may from time to time be required by the laws of the
United States of America and the State of California and any political
subdivision thereof or any other state or political subdivision in which
the LLC shall do business to carry out the purposes of this Agreement,
except where such action requires the express approval of the Members
hereunder. Such attorney is not hereby granted any authority on behalf of
the undersigned Members to amend this Agreement except that as attorney
for each of the undersigned Members, the Managers shall have the authority
to amend this Agreement and the LLC's Articles of Organization as may be
required to give effect to the transactions below following any necessary
approvals or consents of the Members:
16.2.1 extensions of the term of the LLC;
16.2.2 admissions of additional Members;
16.2.3 transfer of a Member's Units;
16.2.4 withdrawals or distributions; and
16.2.5 contributions of additional capital.
The Managers shall provide to the Members copies of all documents executed
pursuant to the power of attorney contained in this Section 16.2.
16.3 WITHHOLDING TAXES
16.3.1 The LLC shall at all times be entitled to make payments with
respect to any Member or Assignee in amounts required to discharge
any obligation of the LLC to withhold or make payments to any
governmental authority with respect to any federal, state, local or
other jurisdictional tax liability of such Member or Assignee arising
as a result of such Member or Assignee's interest in the LLC. To the
extent each such payment satisfies an obligation of the LLC to
withhold with respect to any distribution to a Member or Assignee on
which the LLC did not withhold or with respect to any Member's or
Assignee's allocable share of the income of the LLC, each such
payment shall be deemed to be a loan by the LLC to such Member or
Assignee (which loan shall be deemed to be immediately due and
payable) and shall not be deemed a distribution to such Member or
Assignee. The amount of such payments made with respect to such
Member or Assignee, plus interest, on each such amount from the date
of each such payment until such amount is repaid to the LLC at an
interest rate per annum equal to the prime rate, from time to time in
effect, of the Bank of California, San Francisco, California, shall
be repaid to the LLC by:
16.3.1.1 deduction from any cash distributions made to such Member
or Assignee pursuant to this Agreement;
16.3.1.2 deduction from any non-cash distributions made to such
Member or Assignee; or
16.3.1.3 earlier payment by such Member or Assignee to the LLC, in
each case as determined by the Managers in their sole
discretion.
The Managers may, in their discretion, defer making distributions to
any Member or Assignee owing amounts to the LLC pursuant to this
Section 16.3 until such amounts are paid to the LLC and shall in
addition exercise any other rights of a creditor with respect to such
amounts.
16.3.2 Each Member or Assignee agrees to indemnify and hold harmless the
LLC and the Managers and each of the Members, from and against any
liability for taxes, interest or penalties that may be asserted by
reason of the failure to deduct and withhold tax on amounts
distributable or allocable to said Member or Assignee. Any amount
payable as indemnity hereunder by a Member or Assignee shall be paid
promptly to the LLC upon request for such payment from the Managers,
and if not so paid, the Managers and the LLC shall be entitled to
claim against and deduct all such amounts from the Capital Account
of, or from any distribution due to, the affected Member or Assignee.
16.4 FURTHER ASSURANCES
The parties agree to execute and deliver any further instruments or
documents and perform any additional acts that are or may become necessary
to effectuate and carry on the LLC created by this Agreement.
16.5 BINDING EFFECT
Subject to the restrictions on transfer set forth in Section 12, this
Agreement shall be binding on and inures to the benefit of the Members and
their respective transferees, successors, assigns and legal
representatives.
16.6 GOVERNING LAW
This Agreement shall be governed by and construed under the laws of the
State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
16.7 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties with
respect to the subject matter herein.
16.8 ARBITRATION
Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled by arbitration in Santa ▇▇▇▇▇ or San
Mateo County, California in accordance with the rules then obtaining, of
the American Arbitration Association regarding commercial arbitration.
Judgment upon the award rendered may be entered into any court having
jurisdiction thereof. The losing party shall bear the costs and expenses
of such arbitration.
16.9 COUNTERPARTS
This Agreement may be executed in one or more counterparts with the same
force and effect as if each of the signatories had executed the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
as of the date first above written.
Members:
By: /s/ N.▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ C.N. Reddy
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signature signature
N. ▇▇▇▇▇▇▇ ▇▇▇▇▇ C.N. Reddy
--------------------------------- -------------------------------
printed name printed name
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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signature signature
▇.▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------- -------------------------------
printed name printed name
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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signature
▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
printed name
Alliance Semiconductor
Corporation
By: /s/ N.▇▇▇▇▇▇▇ ▇▇▇▇▇
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signature of authorized
representative
N. ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
printed name
President and CEO
---------------------------------
title
Exhibit A
Members and Unit Holdings
Member Number of Units Initial Carrying Value
-------------------------------------------------------------------------------
Alliance Semiconductor 10,000 Common Units $2,500.00
Corporation
N. ▇▇▇▇▇▇▇ ▇▇▇▇▇ 10,000 Series A Units $2,500.00
10,000 Series B Units $2,500.00
C.N. Reddy 10,000 Series A Units $2,500.00
10,000 Series B Units $2,500.00
▇.▇. ▇▇▇▇▇▇▇▇▇ 10,000 Series A Units $2,500.00
10,000 Series B Units $2,500.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 632 Series A Units $158.00
1000 Series B Units $250.00
▇▇▇▇▇ ▇▇▇▇▇▇▇ 421 Series A Units $105.25
764 Series B Units $191.00