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EXHIBIT 2(d)
SOUTHEAST INTERACTIVE TECHNOLOGY FUND I, LLC
A NORTH CAROLINA LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
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TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 "Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 "Additional Investor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 "Adjusted Capital Account Deficit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4 "Advisor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.5 "Advisory Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.6 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.7 "Affiliated Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.8 "Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.9 "Articles" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.10 "Assignee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.11 "Capital Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.12 "Capital Contribution" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.13 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.14 "Consultants" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.15 "Distributions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.17 "Estimated Value Capital Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.18 "Extended Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.19 "Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.20 "Fund Minimum Gain" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.21 "Income" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.22 "Independent Manager" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.23 "Interested Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.24 "Investment Company Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.25 "Investor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.26 "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.27 "Majority" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.28 "Manager" or "Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.29 "Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.30 "Members" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.31 "Member Minimum Gain" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.32 "Member Nonrecourse Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.33 "Member Nonrecourse Deductions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.34 "Memorandum" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.35 "Nonrecourse Deductions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.36 "Nonrecourse Liability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.37 "Portfolio Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.38 "Portfolio Investment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.39 "Share" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.40 "Substituted Investor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.41 "Super Majority in Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.42 "Transfer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.43 "Valuation Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.44 "Withdrawal" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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ARTICLE 2
FORMATION, NAME AND PRINCIPAL PLACE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1 Fund Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Name of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Registered Office, Registered Agent and Principal Place of Business . . . . . . . . . . . . 6
ARTICLE 3
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1 Commencement and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4
PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.1 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5
CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.1 Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.2 Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.3 Minimum Capitalization and Term of Offering . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 6
ALLOCATION OF DISTRIBUTIONS, NET INCOME, NET LOSSES
AND OTHER ITEMS AMONG THE MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.1 Distributions other than in Liquidation of the Fund . . . . . . . . . . . . . . . . . . . . 8
Section 6.2 Distributions in Termination, Dissolution and Liquidation . . . . . . . . . . . . . . . . . 9
Section 6.3 Allocations of Income and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.4 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.5 Curative Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.6 Tax Allocations: Section 704(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.7 Varying Interest in Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.8 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 7
FUND CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.1 Fund Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 8
RIGHTS AND DUTIES OF THE MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.1 Exclusive Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.2 Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.3 Powers and Authority of the Managers . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.4 Compensation from Portfolio Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.5 Managers to Act in Best Interests of Fund . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.6 Limitations on Powers of the Managers . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.7 Removal of a Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.8 Advisory and Management Agreement, Management Fees and Expenses . . . . . . . . . . . . . 18
Section 8.9 No Management by Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.10 Policy with Respect to Investment Opportunities and Conflicts of Interest . . . . . . . . 20
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Section 8.11 Coinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 9
ADDITIONAL INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.1 Additional Capital Contributions and Admission of Additional Investors . . . . . . . . . 21
Section 9.2 Restrictions on Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 10
CONSULTANTS TO THE ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.1 Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.2 Length of Service and Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.3 Meetings, Permitted Activities and Duties . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 11
WITHDRAWAL OF AN INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.1 Withdrawal of an Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 11.2 Time for Payment for Fund Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 11.3 Valuation of Withdrawing Member's Interest . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 12
DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 12.1 No Return of Capital Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 12.2 Managers Not Liable for Return of Capital . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 12.3 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 13
WITHDRAWAL OF MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.1 Assignability of Interest or Withdrawal of a Manager . . . . . . . . . . . . . . . . . . 27
ARTICLE 14
RECORDS, ACCOUNTING AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 14.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 14.2 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 14.3 Tax Accounting Methods; Periods; Elections . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 15
VALUATION OF FUND ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 15.1 Dates of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 15.2 Method of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 16
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.1 Representations and Warranties of Investors . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.2 Indemnification of the Members, Managers and Affiliates . . . . . . . . . . . . . . . . . 30
Section 16.3 Amendment of Operating Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 16.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 16.5 Agreement Binding Upon Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 31
Section 16.6 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 16.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Section 16.8 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 16.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 16.10 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 17
MEETINGS OF INVESTORS AND ELECTION OF MANAGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.1 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.2 Election of Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 17.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 17.4 Initial Board of Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 17.5 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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OPERATING AGREEMENT
OF
SOUTHEAST INTERACTIVE TECHNOLOGY FUND I, LLC
a North Carolina Limited Liability Company
THIS OPERATING AGREEMENT is made and entered into as of the 16th day of
January, 1995, by and among the following persons and entities (the
"Members"):
W. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and E. ▇▇▇ ▇▇▇▇▇ (the "Initial
Members"); and
THE PERSONS AND ENTITIES listed in Exhibit A attached hereto (the
"Investors").
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 "Act" shall mean the North Carolina Limited Liability
Company Act, as in effect in North Carolina, as amended from time to time.
Section 1.2 "Additional Investor" means any individual, corporation,
partnership, trust or other entity who shall be admitted as an Investor
pursuant to Section 9.1.
Section 1.3 "Adjusted Capital Account Deficit" shall mean with
respect to any holder of Shares, the deficit balance, if any, in such holder's
Capital Account as of the end of the relevant fiscal year, after giving effect
to the following adjustments:
(a) Credit to such Capital Account any amounts which such
holder is obligated to restore or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.7041(b)(2) (ii)(d) of the Regulations
and shall be interpreted consistently therewith.
Section 1.4 "Advisor" means Montrose Venture Partners, LLC, or any
successor to Montrose Venture Partners, LLC as administrator and principal
investment advisor to the Fund.
Section 1.5 "Advisory Agreement" means the Advisory and Management
Agreement to be entered into between the Fund and Montrose Venture Partners,
LLC.
Section 1.6 "Affiliate" shall have the meaning set forth in Rule 405,
promulgated pursuant to the Securities Act of 1933, as amended.
Section 1.7 "Affiliated Person" with respect to the Fund shall mean:
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(a) Any person directly or indirectly owning, controlling
or holding with power to vote, five percent (5%) or more of the
Shares;
(b) Any person five percent (5%) or more of whose
outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by the Fund;
(c) Any person directly or indirectly controlling,
controlled by, or under common control with, the Fund;
(d) Any officer, director, partner, or employee of the
Fund; or
(e) Any investment adviser to the Fund or any member of
any advisory board (within the meaning of the Investment Company Act)
of the Fund.
Section 1.8 "Agreement" shall mean this Operating Agreement, as
amended from time to time.
Section 1.9 "Articles" shall mean the Articles of Organization of the
Fund filed with the office of the Secretary of State of North Carolina.
Section 1.10 "Assignee" means a person who has acquired all or a
portion of an Investor's beneficial interest in the Fund but has not become a
Substituted Investor.
Section 1.11 "Capital Account" shall mean with respect to each Member
a financial and tax accounting account maintained and adjusted in accordance
with the Treasury Regulations promulgated under Section 704 of the Code.
Capital Accounts shall be revalued by the Manager in connection with a
revaluation of the Fund's assets in accordance with Regulations Section
1.704-1(b)(2)(iv)(f).
Section 1.12 "Capital Contribution" of a Member as of any date means
the total capital contribution to the Fund which such Member is required to
make for his Fund Interest in the Fund.
Section 1.13 "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor federal revenue law and any final
treasury regulations, revenue rulings, and revenue procedures thereunder.
Section 1.14 "Consultants" means those individuals as described in
Section 10.1.
Section 1.15 "Distributions" shall mean distributions of cash or
other property (and if other property, valued at the fair market value of such
property) made by the Fund to the Members from any source.
Section 1.16 "Estimated Value" means the value of Fund assets as
value is assigned to such assets pursuant to Article 15.
Section 1.17 "Estimated Value Capital Account" means the amount of
any actual cash contribution to the capital of the Fund by a Member, as the
same may be (i) increased from time to time by such Member's allocable share of
the Fund's realized and unrealized income and gains and (ii) decreased by a
Member's distributions (whether in cash or in kind, but if in kind equal to the
Member's share of the Estimated Value of such distributed asset, as that term
is defined in this Agreement), by such Member's share of realized and
unrealized Fund losses and by such Member's share of expenditures of the Fund
which are not deductible or properly chargeable to a capital account of the
Fund. For these
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purposes, realized and unrealized income, gains and losses shall be computed
based on the Estimated Value of the Fund assets and such realized and
unrealized income, gains and losses shall be accounted for so as to prevent
duplication of increases or decreases from allocations of income, gains and
losses previously affecting Estimated Value Capital Accounts.
Section 1.18 "Extended Closing Date" means August 31, 1995.
Section 1.19 "Fund" shall refer to the limited liability company
created under this Agreement and the Articles.
Section 1.20 "Fund Minimum Gain" has the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
Section 1.21 "Income" shall mean the net income (including tax exempt
income) of the Fund or any separately allocable item thereof.
Section 1.22 "Independent Manager" means a Manager or Director of the
Fund who is not an Interested Person with respect to the Fund.
Section 1.23 "Interested Person" with respect to the Fund means any
of the following:
(a) Any Affiliated Person of the Fund;
(b) Any member of the immediate family of any natural
person who is an Affiliated Person of the Fund;
(c) Any Interested Person (as otherwise defined herein)
of any investment advisor to or principal underwriter of the Fund;
(d) Any person or partner or employee of any person who
at any time since the beginning of the last two completed fiscal years
of the Fund has acted as legal counsel to the Fund;
(e) Any broker or dealer registered under the Securities
Exchange Act of 1934 or any Affiliated Person of such a broker or
dealer; and
(f) Any other person whom the Managers determine is an
Interested Person;
provided, however, that no person shall be deemed an Interested Person
of the Fund solely by reason of (A) such person's being a member of
the Fund's Board of Managers or any advisory board (within the meaning
of the Investment Company Act) or an owner of Shares, or (B) such
person's membership in the immediate family of any person specified in
the preceding clause (A).
Section 1.24 "Investment Company Act" means the federal Investment
Company Act of 1940, as amended.
Section 1.25 "Investor" means any person or entity named on
Exhibit A attached hereto and any other individual, corporation, partnership,
trust or other entity who shall be admitted to the Fund as an Additional
Investor or as a Substituted Investor, until any such person shall withdraw
as an Investor
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pursuant to Article 11 or until a Substituted Investor or Investors are
admitted with respect to his entire limited partnership interest.
Section 1.26 "Losses" shall mean the net loss of the Fund or any
separately allocable deduction, including expenditures of the Fund not
deductible in computing its taxable income and not properly chargeable to a
capital account.
Section 1.27 "Majority" when used with respect to a vote or approval
of any action by the Investors means (i) Investors holding more than fifty
percent (50%) of the outstanding Shares or (ii) if less, Investors holding
sixty-seven percent (67%) or more of the outstanding Shares which are present
or represented by proxy at a meeting of Investors, if the holders of more than
fifty percent (50%) of the outstanding Shares are present at such meeting or
represented by proxy.
Section 1.28 "Manager" or "Director" shall refer to any person or
entity which may be admitted to the Fund as a Manager in accordance with this
Agreement until the withdrawal, or cessation of such person or entity as a
Manager hereunder.
Section 1.29 "Member" means any of the Investors, except as expressly
otherwise provided.
Section 1.30 "Members" includes all of the Investors.
Section 1.31 "Member Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Fund Minimum Gain that would result
if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i) of the Regulations.
Section 1.32 "Member Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
Section 1.33 "Member Nonrecourse Deductions" has the meaning set
forth in Section 1.704-2(i)(2) of the Regulations. The amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fund
fiscal year equals the excess, if any, of the net increase, if any, in the
amount of Member Minimum Gain attributable to such Member Nonrecourse Debt
during that fiscal year over the aggregate amount of any distributions during
that fiscal year to the Member that bears the economic risk of loss for such
Member Nonrecourse Debt to the extent such distributions are from the proceeds
of such Member Nonrecourse Debt and are allocable to an increase in Member
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(2) of the Regulations.
Section 1.34 "Memorandum" means the Confidential Private Placement
Memorandum of the Fund dated January 16, 1995.
Section 1.35 "Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(b) and 2(c) of the Regulations. The amount of Nonrecourse
Deductions for a Fund fiscal year equals the excess, if any, of the net
increase, if any, in the amount of Fund Minimum Gain during that fiscal year
over the aggregate amount of any distributions during that fiscal year of
proceeds of a Nonrecourse Liability that are allocable to an increase in Fund
Minimum Gain, determined according to the provisions of Section 1.704-2(c) of
the Regulations.
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Section 1.36 "Nonrecourse Liability" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
Section 1.37 "Portfolio Company" means that term as defined in
Section 4.1.
Section 1.38 "Portfolio Investment" means that term as defined in
Section 4.1.
Section 1.39 "Share" means an Investor's interest in the Fund
representing an agreement to contribute to the capital of the Fund Twenty-Five
Thousand Dollars ($25,000.00). The Agreement additionally provides that Shares
may be sold in certain events pro rata to existing Investors.
Section 1.40 "Substituted Investor" means a person admitted pursuant
to Section 9.2 as the successor to all of the rights of an Investor with
respect to all or any part of his interest in the Fund.
Section 1.41 "Super Majority in Interest" means Investors owning 66
2/3% or more of the Shares owned by all the Investors.
Section 1.42 "Transfer" means any sale, exchange, transfer, gift,
encumbrance, assignment, pledge, mortgage or other hypothecation or other
disposition, whether voluntary or involuntary.
Section 1.43 "Valuation Date" means that term as defined in Section
15.1.
Section 1.44 "Withdrawal" means as to any of W. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ or E. ▇▇▇ ▇▇▇▇▇, or any person or entity succeeding any of them as
Manager, any of the following events:
(a) In the case of an individual, his or her death or
adjudication of incompetency;
(b) In the case of an entity, its dissolution and
commencement of winding up or liquidation; or
(c) The attachment by creditors of the affected person or
entity's interest in the Fund, the assignment by such person or entity
for the benefit of or arrangement with creditors, or the filing of a
bankruptcy petition against such person or entity if such petition is
not set aside within 120 days of filing.
Certain other capitalized terms not defined above shall have the
meanings given such terms in this Agreement.
ARTICLE 2
FORMATION, NAME AND PRINCIPAL PLACE OF BUSINESS
Section 2.1 Fund Formation. The Initial Members hereby agree to
form a limited liability company pursuant to the Act. Promptly upon the
execution hereof, the Managers shall do or cause to be done all such filing,
recording, or other acts as may be necessary or appropriate from time to time
to comply with the requirements of law for the formation and/or operation of a
limited liability company in the State of North Carolina. Each of the
Investors by execution of this Agreement irrevocably constitutes and appoints
the Managers, or any of them, as the true and lawful attorney for such Investor
to make, execute, sign, acknowledge and file any and all of the foregoing
documents in the name, place and stead of said Investor. In the event the
Agreement is to be amended in connection with the
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substitution or addition of an Investor, such an amendment need be signed only
by the Managers, by the Investor to be added or substituted and, in the case of
a substitution, by the assigning Investor; provided, however, nothing shall
permit any assignment by an Investor in violation of this Agreement. Any
amendment to the Articles or any certificate required to be filed pursuant to
the Act shall be filed by the Manager promptly following the event requiring
said amendment. All amendments may be signed either personally or by an
attorney-in-fact.
Section 2.2 Name of Fund. The name of the Fund shall be
Southeast Interactive Technology Fund I, LLC.
Section 2.3 Registered Office, Registered Agent and Principal
Place of Business. The registered office and principal place of business of
the Fund shall be maintained at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the Managers shall designate. The
registered agent at such address shall be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
ARTICLE 3
TERM
Section 3.1 Commencement and Term. The Fund shall have a term
commencing as of the filing of the Articles with the North Carolina Secretary
of State's office (the "Commencement Date") and continuing until the earlier of
the following dates:
(a) Seven years from the date of the filing of the
Articles, but the Managers, in their sole discretion, shall have the
right to extend the initial term of the Fund for up to two additional
two-year periods; and the Managers may further extend the term of the
Fund with the consent of the holders of a majority of the Shares, but
in any event not past December 31, 2014;
(b) The election to terminate by the Managers;
(c) the Withdrawal of W. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or
E. ▇▇▇ ▇▇▇▇▇, or any successor to any of them as Manager, unless the
remaining Managers, if any, and the holders of a majority of the
Shares agree in writing to continue the Fund within ninety (90) days
after the event of Withdrawal; or
(d) The occurrence of any event which under the Act or
any other law, causes the dissolution or termination of a limited
liability company, other than as modified in this Agreement.
ARTICLE 4
PURPOSE
Section 4.1 Purposes. The purposes of the Fund are:
(a) Investing in equity-oriented investment instruments,
such as convertible preferred stock and common stock; investing in
hybrid investment instruments, such as convertible notes; and lending
money or guaranteeing loans for the purposes as herein expressed
(together such investments, loans and guarantees shall be referred to
hereinafter as "Portfolio Investments", and the company in which a
Portfolio Investment is made shall be referred to hereinafter as a
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"Portfolio Company"). Such Portfolio Investments will be in private
transactions in and to, and for the benefit of, new and developing
companies in the interactive information and visual technology
industries with an emphasis on proprietary technologies, related
industries and/or marketable products which work on existing hardware.
To achieve greater profitability, the Fund may also invest, in
accordance with this Agreement, in any growth company (also referred
to hereinafter as a "Portfolio Company" or a "Portfolio Investment")
in which the Managers perceive the opportunity to achieve a high
return on investment through active participation, including leveraged
buyouts of existing companies. The Managers anticipate that such
Portfolio Investments will be made primarily in companies located in a
target region which extends from Washington, D.C. to the Gulf Coast.
In order to maintain a diversified investment strategy, the Fund will
generally follow some or all of the following investment guidelines:
(i) The minimum Portfolio Investment
will be One Million Dollars ($1,000,000) although it is
anticipated that the Fund's investment will be made in phases
based on performance;
(ii) Not more than ten percent (10%) of
the Fund's Portfolio Investment will be invested in any one
company; and
(iii) The Fund will generally seek as
Portfolio Investments companies which have forged business
alliances with strategic Fortune 500 partners or equivalent
leaders in similar industries, although in cases where a
strategic partner is not in place and the company represents
an otherwise valuable investment opportunity, the Fund may
help identify such a partner while providing equity-related
short-term bridge financing in the interim.
The above-stated parameters are guidelines only and shall not
constitute or restrict the Fund from making investments from time to
time that do not adhere strictly to the guidelines so long as the
Managers have determined in good faith that the opportunities and
risks associated with an investment are such that not adhering to the
guidelines would be in the best interests of the Fund. The Fund may
acquire Portfolio Investments in Portfolio Companies and hold such
Portfolio Investments, distribute the Portfolio Investments to the
Investors or sell the Portfolio Investments and reinvest the proceeds,
to the extent permitted hereunder, in the same or other Portfolio
Companies;
(b) To do all things reasonably incidental to the
purposes described above, including executing any and all documents,
agreements, filings and instruments as may in the opinion of the
Managers be necessary or advisable in connection with the affairs and
operations of the Fund and the conduct of the business of the Fund;
(c) To execute, deliver and perform all contracts and
other undertakings and engage in all activities and transactions as
may in the opinion of the Managers be necessary or advisable to carry
out the foregoing objects and purposes;
(d) All such other lawful purposes as the Managers and a
Super Majority in Interest of Investors may agree; and
(e) To have and exercise all the powers available to it
as a limited liability company under the laws of the State of North
Carolina.
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ARTICLE 5
CAPITAL CONTRIBUTIONS
Section 5.1 Manager. Neither the Initial Members nor any Manager
shall be required to contribute any capital to the Fund. Certain of the
Initial Members, the Managers or their Affiliates may advance certain funds to
the Fund for expenses of the Fund incurred prior to the admission of Investors
and will be reimbursed for such expenses at the initial closing of the Fund and
admission of Investors.
Section 5.2 Investor. Each Investor shall contribute at closing,
the aggregate amount opposite its name set forth in Exhibit A attached hereto.
No Investor shall be entitled to interest on his or her Capital Contributions.
Section 5.3 Minimum Capitalization and Term of Offering. The
Managers may hold a closing of the Fund upon the acceptance of subscriptions
for Shares representing aggregate Capital Contributions of at least Ten Million
Dollars ($10,000,000). If less than Twenty-Five Million Dollars ($25,000,000)
in Capital Contributions is received at the initial closing, the Manager may
admit, at an additional closing or closings held not later than the Extended
Closing Date, Additional Investors whose aggregate Capital Contributions shall
not exceed the difference between Twenty-Five Million Dollars ($25,000,000) and
the aggregate Capital Contributions received at all prior closings. Such
Additional Investors shall be admitted to the Fund on the same terms as the
Investors admitted at the initial closing. No Investor may be admitted
subsequent to the Extended Closing Date as provided in Section 9.1 below.
At the initial closing and upon the admission of Investors, each of the Initial
Members will withdraw from the Fund and will receive no distributions or other
consideration therefor, such Initial Members having been admitted only for the
purpose of organizing the Fund. Such withdrawal of the Initial Members shall
not be grounds for dissolution of the Fund.
ARTICLE 6
ALLOCATION OF DISTRIBUTIONS, NET INCOME, NET LOSSES
AND OTHER ITEMS AMONG THE MEMBERS
Section 6.1 Distributions other than in Liquidation of the Fund.
(a) Annual Distributions. Prior to dissolution of the
Fund and provided that no distribution shall be made which would
render the Fund insolvent, impair (within the meaning of Section
6.8(b) hereof) the Estimated Value Capital Account of any Member, or
reduce the Estimated Value Capital Account of any Member below zero
while any other Member's Estimated Capital Value Account is above
zero, the Managers shall distribute (subject to approval by the
Independent Managers) Available Funds no later than ninety (90) days
after the close of each fiscal year. For purposes of this Agreement,
"Available Funds" shall mean the net proceeds from dispositions of
Portfolio Investments during the fiscal year ended immediately
preceding the distribution, and other operating profits of the Fund
accumulated during such fiscal year, after provision for anticipated
operating expenses, management and advisory fees and expenses, working
capital reserves, reserves for other Portfolio Investments which may
require additional capital, and such other costs and expenses as the
Managers deem prudent to make provisions for.
Distributions pursuant to this Section 6.1(a) shall
be made to the Investors pro rata in the proportions in which Income
and gains for such fiscal year have been allocated to them, and in the
absence of any Income, in accordance with their ownership of Shares.
All cash
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or other liquid assets of the Fund not distributed pursuant to this
Section 6.1(a) may be retained in the Fund and if retained shall be
available for reinvestment in accordance with the purposes of the
Fund.
(b) Other Distributions. Subject to the distribution
provisions set forth in Section 6.1(a), the Managers in their sole and
absolute discretion prior to dissolution of the Fund may, but shall
not be obligated to, distribute such assets of the Fund, whether in
cash or in kind, as it may from time to time deem advisable; provided
that no distribution shall be made which would render the Fund
insolvent, impair (within the meaning of Section 6.8(b) hereof) the
Estimated Value Capital Account of any Member or reduce the Estimated
Value Capital Account below zero while any other Member's Estimated
Capital Value Account is above zero.
Section 6.2 Distributions in Termination, Dissolution and
Liquidation. Upon the Fund's termination and dissolution, all property of the
Fund, after payment of liabilities and expenses incurred (or reasonably
estimated to be incurred) in the winding up of the Fund's affairs shall be
distributed in liquidation of the Fund to the Members as follows:
(a) First, to the Investors to the extent necessary,
taking into account all prior distributions, for the return of their
Capital Contributions; and
(b) Thereafter, to all Investors in accordance with their
positive Capital Account balances. For purposes hereof, all in kind
distributions shall be valued at the Estimated Value. Any amounts
withheld for expenses in dissolution of the Fund and thereafter not
needed for such purposes shall be distributed as set forth above.
Section 6.3 Allocations of Income and Losses.
Income and Losses for each calendar year, or fraction thereof, as the
case may be, shall be allocated to the Members (and for purposes of this
Article 6, the term "Member" shall include Investors and any holder of Shares
whether or not such holder has been admitted to membership in the Fund) as
follows:
(a) Income. After giving effect to the special
allocations set forth in Sections 6.4 and 6.5 hereof, Income for each
calendar year, or fraction thereof, shall be allocated to the Members
in accordance with their ownership of Shares.
(b) Losses. After giving effect to the special
allocations set forth in Sections 6.4 and 6.5 hereof, Losses for each
calendar year, or fraction thereof, shall be allocated in the
following order and priority:
(i) Except as provided in Section
6.3(b)(ii) hereof, Losses shall be allocated to the Members in
accordance with their ownership of Shares.
(ii) The Losses allocated pursuant to
Section 6.3(b)(i) hereof shall not exceed the maximum amount
of Losses that can be so allocated without causing any Member
to have an Adjusted Capital Account Deficit at the end of any
fiscal year. In the event some but not all of the Members
would have Adjusted Capital Account Deficits as a consequence
of an allocation of Losses pursuant to Section 6.3(b)(i), the
limitation set forth in this Section 6.3(b)(ii) shall be
applied on a Member by Member basis so as to allocate the
maximum permissible Loss to each Member under Section
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1.704-1(b)(2)(ii)(d) of the Regulations. Any Losses in excess
of the limitations set forth in this Section 6.3(b)(ii) shall
be allocated in accordance with Section 6.3(b)(i).
Section 6.4 Special Allocations. The following special
allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 6, if there is a net decrease in Fund
Minimum Gain during any Fund fiscal year, each Member shall be
specially allocated items of Fund income and gain for such year (and,
if necessary, subsequent years) in an amount equal to the greater of
(i) the portion of such Member's share of the net decrease in Fund
Minimum Gain, determined in accordance with Regulations Section
1.704-2(g), that is allocable to the disposition of Fund property
subject to Nonrecourse Liabilities, determined in accordance with
Regulations Section 1.704-2(f), or (ii) if such Member would otherwise
have an Adjusted Capital Account Deficit at the end of such year, an
amount sufficient to eliminate such Adjusted Capital Account Deficit.
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Section 1.704-2(f) of the Regulations.
This Section 6.4(a) is intended to comply with the minimum gain
chargeback requirement in such Section of the Regulations and shall be
interpreted consistently therewith. To the extent permitted by such
Section of the Regulations and for purposes of this Section 6.4(a)
only, each Member's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to this Article 6
with respect to such fiscal year and without regard to any net
decrease in Member Minimum Gain during such fiscal year.
(b) Member Minimum Gain Chargeback. Notwithstanding any
other provision of this Article 6 except Section 6.4(a), if there is a
net decrease in Member Minimum Gain attributable to a Member
Nonrecourse Debt during any Fund fiscal year, each Member who has a
share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5),
shall be specially allocated items of Fund income and gain for such
year (and, if necessary, subsequent years) in an amount equal to the
greater of (i) the portion of such Member's share of the net decrease
in Fund Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4), or
(ii) if such Member would otherwise have an Adjusted Capital Account
Deficit at the end of such year, an amount sufficient to eliminate
such Adjusted Capital Account Deficit. Allocations pursuant to the
previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with
Section 1.704-2(i)(4) of the Regulations. This Section 6.4(b) is
intended to comply with the minimum gain chargeback requirement in
such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this Section 6.4(b), each Member's
Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to this Article 6 with respect to such
fiscal year, other than allocations pursuant to Section 6.4(a) hereof.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Fund
income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by
the Regulations, the Adjusted Capital Account Deficit of such Member
as quickly as possible, provided that an allocation pursuant to this
Section 6.4(c) shall be made if and only to the extent that such
Member would have an Adjusted Capital Account Deficit after
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all other allocations provided for in this Article 6 have been
tentatively made as if this Section 6.4(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has
a deficit Capital Account at the end of any Fund fiscal year that is
in excess of the sum of (i) the amount such Member is obligated to
restore, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially
allocated items of Fund income and gain in the amount of such excess
as quickly as possible, provided that an allocation pursuant to this
Section 6.4(d) shall be made if and only to the extent that such
Member would have a deficit Capital Account in excess of such sum
after all other allocations provided for in this Article 6 have been
tentatively made as if Section 6.4(c) hereof and this Section 6.4(d)
were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for
any fiscal year or other period shall be allocated to the Members in
the same proportion as Losses are allocated pursuant to Section
6.3(b)(i).
(f) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions for any fiscal year or other period shall be
specially allocated to the Member who bears the economic risk of loss
with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i).
(g) Section 754 Adjustment. To the extent an adjustment
to the adjusted tax basis of any Fund asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
Section 6.5 Curative Allocations.
(a) The "Regulatory Allocations" consist of the "Basic
Regulatory Allocations," as defined in Section 6.5(b) hereof, the
"Nonrecourse Regulatory Allocations," as defined in Section 6.5(c)
hereof, and the "Member Nonrecourse Regulatory Allocations," as
defined in Section 6.5(d) hereof.
(b) The "Basic Regulatory Allocations" consist of (i)
allocations pursuant to the last sentence of Section 6.3(b) (ii)
hereof, and (ii) allocations pursuant to Sections 6.4(c), 6.4(d), and
6.4(g) hereof. Notwithstanding any other provision of this Agreement,
other than the Regulatory Allocations, the Basic Regulatory
Allocations shall be taken into account in allocating items of income,
gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other items and the
Basic Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to each such Member if the Basic
Regulatory Allocations had not occurred. For purposes of applying the
foregoing sentence, allocations pursuant to this Section 6.5(b) shall
only be made with respect to allocations pursuant to Section 6.4(g)
hereof to the extent the Managers reasonably determine that such
allocations will otherwise be inconsistent with the economic agreement
among the parties to this Agreement.
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(c) The "Nonrecourse Regulatory Allocations" consist of
all allocations pursuant to Sections 6.4(a) and 6.4(e) hereof.
Notwithstanding any other provision of this Agreement, other than the
Regulatory Allocations, the Nonrecourse Regulatory Allocations shall
be taken into account in allocating items of income, gain, loss, and
deduction among the Members so that, to the extent possible, the net
amount of such allocations of other items and the Nonrecourse
Regulatory Allocations to each Member shall be equal to the net amount
that would have been allocated to each such Member if the Nonrecourse
Regulatory Allocations had not occurred. For purposes of applying the
foregoing sentence (i) no allocations pursuant to this Section 6.5(c)
shall be made prior to the Fund fiscal year during which there is a
net decrease in Fund Minimum Gain, and then only to the extent
necessary to avoid any potential economic distortions caused by such
net decrease in Fund Minimum Gain, and (ii) allocations pursuant to
this Section 6.5(c) shall be deferred with respect to allocations
pursuant to Section 6.4(e) hereof to the extent the Managers
reasonably determine that such allocations are likely to be offset by
subsequent allocations pursuant to Section 6.4(a) hereof.
(d) The "Member Nonrecourse Regulatory Allocations"
consist of all allocations pursuant to Sections 6.4(b) and 6.4(f)
hereof. Notwithstanding any other provision of this Agreement, other
than the Regulatory Allocations, the Member Nonrecourse Regulatory
Allocations shall be taken into account in allocating items of income,
gain, loss, and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other items and the
Member Nonrecourse Regulatory Allocations to each Member shall be
equal to the net amount that would have been allocated to each such
Member if the Member Nonrecourse Regulatory Allocations had not
occurred. For purposes of applying the foregoing sentence (i) no
allocations pursuant to this Section 6.5(d) shall be made with respect
to allocations pursuant to Section 6.5(f) relating to a particular
Member Nonrecourse Debt prior to the Fund fiscal year during which
there is a net decrease in Fund Minimum Gain attributable to such
Member Nonrecourse Debt, and then only to the extent necessary to
avoid any potential economic distortions caused by such net decrease
in Member Minimum Gain, and (ii) allocations pursuant to this Section
6.5(d) shall be deferred with respect to allocations pursuant to
Section 6.4(f) hereof relating to a particular Member Nonrecourse Debt
to the extent the Managers reasonably determine that such allocations
are likely to be offset by subsequent allocations pursuant to Section
6.4(b) hereof.
(e) The Managers shall have reasonable discretion, with
respect to each Fund fiscal year, to (i) apply the provisions of
Sections 6.5(b), 6.5(c), and 6.5(d) hereof in whatever order is likely
to minimize the economic distortions that might otherwise result from
the Regulatory Allocations, and (ii) divide all allocations pursuant
to Sections 6.5(b), 6.5(c), and 6.5(d) hereof among the Members in a
manner that is likely to minimize such economic distortions.
(f) Any income, gain, loss, or deduction realized as a
direct or indirect result of the issuance of a Fund interest by the
Fund to a Member (the "Issuance Items") shall be allocated among the
Members so that, to the extent possible, the net amount of such
Issuance Items, together with all other allocations under this
agreement to each Member, shall be equal to the net amount that would
have been allocated to each such Member if the Issuance Items had not
been realized.
Section 6.6 Tax Allocations: Section 704(c). In the event of a
contribution of property other than cash to the Fund, income, gain, loss and
deduction with respect to such contributed property shall be shared among the
Members for tax purposes so as to take account of the variation between the
basis of the property to the Fund and its fair market value at the time of
contribution in accordance with section
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704(c) of the Code. In the event the value of Fund assets is adjusted in
accordance with Section 1.6 hereof and Regulations Section 1.704-1(b)(iv)(f),
subsequent allocations of income, gain, loss and deductions with respect to
such assets shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its book value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
Section 6.7 Varying Interest in Fund. Allocations to any Member
whose Interest changes during a Fund fiscal year or to any Member who is a
Member for less than a full Fund fiscal year shall be made in accordance with
Section 706(d) and the Treasury Regulations promulgated thereunder to take into
account the Member's varying Interest in the Fund during the Fund fiscal year.
Section 6.8 Miscellaneous.
(a) Income and Losses of the Fund shall be allocated (but
for tax purposes, only realized net income, gains and losses shall be
allocated to Capital Accounts), as of each Valuation Date, as of the
date of the admission of any Additional Investor pursuant to Section
9.1, upon the withdrawal of any Investor pursuant to Section 11.1 and
as of each other time otherwise required by this Agreement.
(b) The Managers shall not be personally obligated to
contribute cash or other assets to the Fund to restore Capital
Accounts, Adjusted Capital Account Deficits, or impaired Estimated
Value Capital Accounts of Investors either during the term of the Fund
or upon liquidation. The Estimated Value Capital Account of a Member
shall be deemed to be impaired when it is less than (after taking into
account any distribution) the amount of Capital Contributions made by
such Member, minus the value of all distributions (valued as of the
date of distribution in accordance with this Agreement) whether in
cash or in kind, made to such Member pursuant to this Agreement.
(c) Each Member shall share in the Income and Losses of
the Fund allocated to all Members in the ratio that the number of
Shares owned by such Member bears to the number of issued and
outstanding Shares. The profit and loss sharing ratios among Members
shall be appropriately readjusted as of the date of the admission of
any Additional Investor pursuant to this Agreement, upon the
withdrawal of any Investor pursuant to Section 11.1 and as of each
other time otherwise required by this Agreement.
ARTICLE 7
FUND CONTRACTS
Section 7.1 Fund Contracts. Except as otherwise provided herein,
all contracts undertaken by the Fund shall be approved by the Managers and
executed by any Manager. The Members shall promptly execute (with
acknowledgement, if required) at the request of the Manager, any and all
instruments necessary or appropriate to ratify or confirm the authority of the
Managers hereunder. So long as the Fund is required to be registered under the
Investment Company Act, any contract or renewal thereof pursuant to which any
person undertakes regularly to serve as an investment advisor of or principal
underwriter for the Fund must be approved by the vote of a majority of Managers
who are not parties to such contract or Interested Persons of any party to the
contract, cast in person at a meeting called for the purpose of voting on such
approval.
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ARTICLE 8
RIGHTS AND DUTIES OF THE MANAGERS
Section 8.1 Exclusive Control. Subject to the terms and
provisions of this Agreement, the Managers shall have exclusive management and
control of the affairs of the Fund and shall have the power and authority to do
all things necessary or appropriate to carry out the purposes of the Fund. In
the Memorandum and other communications with Investors and others, the Managers
may be referred to as "Directors." For their services to the Fund, Managers
who are not Interested Persons may receive reasonable compensation therefor as
determined by the Board of Managers, and any Manager shall be entitled to be
reimbursed for any expenses enumerated in Section 8.8(c) which such Manager may
have paid on behalf of the Fund, to the extent provided herein. Except as
otherwise set forth in this Agreement, as to any action of the Fund, the vote
of a majority of the Managers shall control.
Section 8.2 Duties. The Managers will diligently and faithfully
devote such time and effort as may be reasonably required in the management,
supervision, and administration of the business of the Fund and operations of
the Fund in accordance with applicable law and Section 4.1 of this Agreement.
Without limiting the generality of the Managers' duties and obligations
hereunder, the Managers, either themselves or through contracts with other
parties, including without limitation the Advisor, including (to the extent
permitted by applicable law and regulations) Affiliates or other related
parties or entities, will cause the Fund to (i) provide office space for the
Fund, (ii) provide personnel for the analysis of, investment in and liquidation
from investment opportunities, (iii) maintain the books and records of the Fund
and make semi-annual progress and portfolio reports to the Members, (iv)
generally provide all overhead and required support for the Fund not identified
in this Agreement as the obligation and expense of the Fund, and (v) have a
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Fund, whether or not in its immediate possession or control, and the
Managers shall not employ nor permit another to employ such funds or assets in
any manner except for the benefit of the Fund.
So long as the Fund is required to be registered under the Investment
Company Act, the Managers will use their best efforts to operate the Fund in
compliance with the provisions of such Act and the rules and regulations
promulgated thereunder.
The Managers will use their best efforts to cause the Fund not to make
any investment, incur any liability, or take any action which would result in
the realization of "unrelated business taxable income" by a tax-exempt Investor
within the meaning of section 512 of the Code.
Section 8.3 Powers and Authority of the Managers. The Managers
shall have full power, authority and duty (except as otherwise provided
herein):
(a) To do such acts and incur such expenses on behalf of
the Fund as may be necessary or advisable in connection with the
conduct of the Fund affairs, specifically including doing acts and
incurring expenses necessary to (i) evaluate the management of a
proposed Portfolio Company, (ii) assess the technology of the proposed
Portfolio Company and the market for its product, (iii) monitor
Portfolio Investments, (iv) sponsor forums or seminars to market
interactive information and visual technologies and other related
technologies to targeted industries and (v) assist in the management
and development of Portfolio Companies by serving on or designating
employees, advisors, or partners of the Managers to serve on Boards of
Directors of such Portfolio Companies or otherwise;
(b) To engage such agents, attorneys, accountants,
custodians, and any other financial advisors and consultants as may be
necessary or advisable for the affairs of the Fund;
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(c) To receive, buy, sell, exchange, trade and otherwise deal
in and with securities and other property of the Fund;
(d) To open, conduct and close cash accounts with brokers
on behalf of the Fund and to pay the customary fees and charges
applicable to transactions in all such accounts;
(e) To open, maintain and close bank accounts and
custodial accounts for the Fund and to draw checks and other orders
for the payment of money;
(f) To file, on behalf of the Fund, all required local,
state and federal tax returns and other documents relating to the
Fund, and if in the best interests of the Fund, cause the Fund to make
or revoke if permissible, any of the elections referred to in Section
108, 709, 754 and 1017 of the Code or any similar provisions enacted
in lieu thereof;
(g) To cause the Fund to purchase or bear the cost of any
insurance covering the potential liabilities of any person indemnified
under Section 16.2;
(h) To commence or defend litigation that pertains to the
Fund or any Fund assets, provided that the Fund shall not bear the
expenses of any litigation which arose as a result of bad faith, gross
negligence or willful misconduct of an party indemnified under this
Agreement except in accordance with Section 16.2 hereof;
(i) To amend this Agreement by revising Exhibit A to reflect
the name and Capital Contributions of each Investor upon the addition
or withdrawal of an Investor pursuant to this Agreement;
(j) Subject to the other provisions of this Agreement, to
enter into, make and perform such contracts, agreements and other
undertakings, and to do such other acts, as it may deem necessary or
advisable for, or as may be incidental to, the conduct of the business
contemplated by the Article 4, including, without in any manner
limiting the generality of the foregoing, contracts, agreements,
undertakings and transactions with any Member or with any other
person, firm or corporation having any business, financial or other
relationship with any Member or Members; provided however, such
transactions with such persons and entities shall be on terms no less
favorable to the Fund than are generally afforded to unrelated third
parties in comparable transactions;
(k) To sign or endorse in its own capacity on behalf of
the Fund any contracts, deeds, mortgages, deeds of trust, notes, stock
or other security certificates or other documents or instruments;
(l) To respond or cause a response to be made as soon as
practicable to all inquiries received from Investors concerning the
operations and affairs of the Fund and supervise and coordinate all
communications between the Fund and the Investors;
(m) Subject to the provisions of this Agreement and
applicable law, including without limitation the Investment Company
Act and rules promulgated thereunder, to receive, along with
affiliates of the Managers, the Advisor and its consultants,
investment advisory fees, directors' fees or other compensation from
Portfolio Companies;
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(n) To cause the Fund to pay to the Advisor a fee in the
amount of one percent (1%) of Capital Contributions in return for its
services in assisting the Initial Members in structuring and
organizing the Fund;
(o) To cause the Fund to enter into an Advisory and
Management Agreement with the Advisor providing for the delegation to
the Advisor of (i) responsibility for day-to-day management of the
Fund; and (ii) responsibility for the investment activities of the
Fund, in return for the management fees and compensation described in
the Memorandum and set forth in such Advisory and Management
Agreement; to be reduced as provided in such agreement and in Section
8.8;
(p) To engage Interstate/▇▇▇▇▇▇▇ ▇▇▇▇ Corporation or its
affiliates to market the Shares, and to pay a commission of five
percent (5%) upon the sales of Shares to Investors;
(q) To engage Sovereign Advisers, Inc. to manage the idle
cash of the Fund, and to pay a quarterly fee of at the rate of
one-half of one percent per annum of the funds under management to
Sovereign Advisors, Inc.;
(r) To engage First Union National Bank, N.A., or other
national banking association to serve as escrow agent for the offering
of Shares and as custodian of the Fund's securities and investment
assets;
(s) To determine or approve distributions to Investors;
and
(t) To determine the value of Fund assets or approve the
valuations proposed by the Advisor.
Section 8.4 Compensation from Portfolio Companies. Subject to
applicable law, the Managers and their consultants and affiliates may receive
consulting and investment advisory or investment banking fees, fees for serving
on the boards of directors, and other compensation for services rendered to
companies in which the Fund has invested, provided that all or a portion of
such fees shall be remitted or credited to the Fund as provided in Section
8.10(d).
Section 8.5 Managers to Act in Best Interests of Fund. In
carrying out their duties and exercising their powers hereunder, the Managers
shall exercise reasonable skill and care and use their best judgment and shall
act at all times in what they deem to be the best interests of the Investors
and, in the case of any conflict between the best interests of the Managers and
the best interests of the Investors, the Managers shall not, any other
provisions hereof to the contrary notwithstanding, act in a manner inconsistent
with the best interests of the Investors or inconsistent with this Agreement.
Further, subject to the preceding sentence, the Managers shall not be liable,
responsible or accountable in damages or otherwise to any Investor or holder of
Shares for any acts performed or omitted by it in good faith and within the
scope of this Agreement. More specifically, but without limiting the
generality of the preceding sentence, the Managers shall not be liable for good
faith mistakes of judgment or losses due to such mistakes of any employee,
broker or other agent of the Fund. Each Manager shall, however, be liable for
his or her actions to the extent they are attributable to gross negligence, bad
faith, willful misconduct and/or fraud.
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Section 8.6 Limitations on Powers of the Managers.
(a) The Managers, without the prior written consent or
ratification of all of the Members, shall have no authority to:
(i) Do any act in contravention of this
Agreement or the Act;
(ii) Do any act which would make it
impossible to carry on the ordinary business of the Fund; or
(iii) Possess Fund property for other than
a Fund purpose or the benefit of the Fund, or commingle the
funds of the Fund with the funds of any other person.
(b) Without the consent of a Super Majority in Interest,
the Managers may not:
(i) Admit a person as a Member of the
Fund except as provided in this Agreement;
(ii) Permit the Fund to redeem or
repurchase Shares except as may otherwise be provided in this
Agreement;
(iii) Cause the Fund to transact business
with the Managers or any Affiliate of the Managers for goods
and services required in the conduct of the Fund's business
(except otherwise authorized in this Agreement) unless the
following conditions have been compiled with:
(A) The transaction is on terms
competitive with those that may be obtained from
persons who are not Affiliates;
(B) Any and all such transactions are
disclosed to all Members;
(C) Any goods or services provided by
the Managers or their Affiliates to the Fund are
pursuant to a written contract which sets forth the
goods and services to be provided and the
compensation to be paid, and is terminable without
cause or penalty upon sixty (60) days notice; and
(D) The transaction shall comply with
all applicable law, including without limitation the
Investment Company Act and rules promulgated
thereunder;
(iv) Invest in real estate (although the
Fund may invest in Portfolio Companies that own real estate as
an incident to the conduct of their ordinary business), oil
and gas, other natural resources, financial institutions or
stage, movie or television shows; or
(v) Take any action which would cause
the Fund to be treated as other than a partnership for federal
income tax purposes.
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(c) In addition, without the consent of a Super Majority
in Interest, neither the Managers nor any principal or partner of the
Managers shall organize and commence placement of investment funds of
another limited liability company, partnership or other entity with a
purpose similar in substance to the purpose of the Fund or be a
manager or general partner in any such entity until such time as the
total contributions to the capital of the Fund have been invested in
Portfolio Investments or committed for investment in Portfolio
Investments. Provided, however, that the prohibitions of this
subsection (c) shall not apply to Independent Managers.
(d) Without the consent of a Majority of Investors, the
Managers may not:
(i) Cause the Fund to change its
classification as a closed-end company under the Investment
Company Act;
(ii) Cause the Fund to borrow money,
issue senior securities, underwrite securities issued by other
persons, purchase or sell real estate or commodities or make
loans to other persons, except in each case in accordance with
the recitals of policy contained in the Memorandum or in its
registration statement filed under the Investment Company Act;
(iii) Cause the Fund to deviate from its
policy in respect of concentration of its investments in the
interactive media industry, deviate from any investment policy
which is stated in the Memorandum or the Fund's registration
statement under the Investment Company Act to be a fundamental
policy changeable only by vote of Investors, or deviate from
any other policy stated in the Memorandum or such registration
statement to be a fundamental policy; or
(iv) Cause the Fund to change the nature
of its business so as to cease to be an investment company
(provided, however, that this clause shall not prevent the
Fund from terminating or abandoning its registration as an
investment company under the Investment Company Act if in the
opinion of the Managers such registration is no longer
required by the Investment Company Act).
Section 8.7 Removal of a Manager. At any time other than at an
annual meeting of Investors, a Super Majority of Investors shall have the right
to remove any Manager from its role as manager, but only for breach of
fiduciary duty, gross negligence, willful misconduct and/or fraud. At the
annual meeting of Investors, all Managers shall be subject to election by
majority vote of Investors as provided herein.
Section 8.8 Advisory and Management Agreement, Management Fees
and Expenses.
(a) The Fund will enter into an Advisory and Management
Agreement (the "Advisory Agreement") with the Advisor providing for
the delegation to the Advisor of the day-to-day administration of the
Fund and the responsibility, subject to the authority of the Managers,
for the investment activities of the Fund, including without
limitation investigation and due diligence with respect to potential
investments, decisions regarding investments in securities of
Portfolio Companies, the exercise of any management rights the Fund
may have with respect to Portfolio Companies, and the sale or other
disposition of investments in Portfolio Companies. The Advisory
Agreement will provide for the payment to the Advisor, as full payment
for management and advisory services rendered as Advisor, for
facilities supplied hereunder and as
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full reimbursement for all expenses set forth in Section 8.8(b),
beginning with the first full year of operations of the Fund,
compensation at an annual rate of up to five percent (5%) of the net
asset value of the Fund as follows: (i) two and one-half percent
(2.5%) of the net asset value of the Fund as of the immediately
preceding Valuation Date, payable on a monthly basis, and (ii) two and
one-half percent (2.5%) of the net asset value of the Fund as of the
immediately preceding Valuation Date, deferred and payable out of
twenty percent (20%) of profits otherwise distributable to Investors
as provided in the Advisory Agreement. The management fee for the
first year or part thereof of the Fund will be in the amount of two
and one-half percent (2.5%) of Capital Contributions, prorated for the
portion of the year following the initial closing of the offering of
interests in the Fund. Such management fee will be prorated for any
later Fund year which is not a full year based on the ratio of the
number of days for which the Fund was in existence during the year to
the total number of days in the year. The portion of the management
fee described in clause (i) above will be reduced to two percent
(2.0%) of the net asset value of the Fund upon the formation of a new
venture capital fund by W. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or E. ▇▇▇
▇▇▇▇▇. One Hundred percent (100%) of any director's fees, and fifty
percent (50%) of consulting fees paid to W. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, or E. ▇▇▇ ▇▇▇▇▇ by Portfolio Companies will be remitted to the
Fund to offset Fund expenses.
(b) The Advisory Agreement will provide that the Advisor
shall pay out of the management fee described in Section 8.8(a), and
the Fund shall not be obligated to pay, the normal general overhead
and administrative operating expenses related to the Fund's investment
activities, including: salaries and fringe benefits of professional,
administrative, clerical, bookkeeping and secretarial personnel of the
Advisor; office rental; general travel and entertainment expenses;
office equipment, fire and theft insurance, heat, light, cleaning,
power, water and utilities of any office space maintained by the
Advisor on its own behalf or on behalf of the Fund.
(c) The Fund shall pay for the following items:
organization and offering expenses of the Fund, including the five
percent (5%) commission on the sale of Shares payable to the Selling
Agent and a fee equal to one percent (1%) of Capital Contributions
payable to the Advisor as an organizational fee; an ongoing cash
management fee payable to Sovereign Advisers, Inc. in the amount of
one-half of one percent per annum of funds managed; normal operating
expenses which are directly related to the Fund's investment
activities, including: stationery, postage, long distance telephone
calls, telexes, facsimile and copying expenses; direct expenses
incurred in investigating investment opportunities; travel and
entertainment expenses; dues and charges to join or participate in
national or regional associations related to the targeted industries;
costs of periodicals relating to the targeted industries; fees and
expenses of consultants; marketing expenses (including the costs of
sponsoring forums or seminars to market interactive multimedia,
virtual reality and other related technologies to targeted industries;
fees of attorneys, accountants, custodians, financial advisors and
certain fees of consultants (as contemplated in the Memorandum),
including Affiliates of the Fund or of the Managers (but fees to such
related parties shall be governed by Section 8.6(b)(iii)) and expenses
of the Fund's advisors and consultants; commissions, banking,
brokerage, registration and private placement fees; transfer, capital
and other taxes, duties and costs incurred in selling Portfolio
Investments; and insurance premiums, indemnifications, costs of
litigation and other extraordinary expenses. In many cases it is
anticipated that expenses of making or selling Portfolio Investments
may be paid or reimbursed to the Fund by the Portfolio Companies or
the purchasers of such Portfolio Investments.
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Section 8.9 No Management by Investors. The Investors shall not
take part in the management or control of the Fund business or have any right
or authority to act for the Fund or to vote on matters other than the matters
set forth in this Agreement.
Section 8.10 Policy with Respect to Investment Opportunities and
Conflicts of Interest. Each Member agrees, subject to the limitations of
Sections 8.1, 8.2, 8.5, 8.6 and 8.10(b) and (c), that any other Member, the
Managers and their Affiliates, and the Advisor may engage in or possess an
interest in other business ventures of every kind or description, independently
or with others, including, but not limited to management of other venture
capital funds, investment in, financing, acquisition and disposition of
securities, investment and management counseling, brokerage services, or
serving as officers of any corporation, partners of any partnership, or
trustees of any trust, whether or not any such activities may conflict with any
interest of the Fund or any of the other Members. In addition, subject to
applicable law, the Managers and their Affiliates may perform various services
for the Fund's Portfolio Companies, including, but not limited to, investment
banking, merger and acquisition assistance, real estate and equipment leasing,
and serving as officers, directors and agents of Portfolio Companies and
receive compensation therefor; subject, however, to the provision that one
hundred percent (100%) of all directors' fees and fifty percent (50%) of
compensation for professional services will be remitted to the Fund. The
parties hereto expressly agree that neither the Fund nor the Members shall have
any rights in or to such activities, or any profits derived therefrom. Without
in any way limiting the foregoing:
(a) Except as provided in Section 8.10(b) and 8.10(e),
the Members, the Managers, and their respective partners, officers,
directors and Affiliates shall not have any obligation or
responsibility to disclose or refer any of the investment
opportunities obtained through activities contemplated by this Section
8.10 to the Fund or the Members.
(b) Subject to applicable law, including without
limitation the Investment Company Act and rules promulgated
thereunder, the Managers and the Advisor may cause the Fund to invest
funds in any business or entity in which the Managers or the Advisor
or any Affiliate of the Managers or the Advisor or any consultant
holds beneficially any equity ownership; provided however, that:
(i) In the case of an investment in any
business or entity which immediately prior to such investment
is controlled by all of the Managers, as control ("Control")
is determined under Rule 405 promulgated under the Securities
Act of 1933, the Managers must obtain prior written consent
from a Super Majority of the Investors prior to making the
investment;
(ii) In the case of an investment in any
business or entity which immediately prior to such investment
is controlled by some, but not all, of the Managers or
Affiliates of the Managers, as control ("Control") is
determined under Rule 405 promulgated under the Securities Act
of 1933, the investment must be approved by all of the
Managers that do not have any beneficial interest in such
business or entity.
(c) Subject to applicable law, including without
limitation the Investment Company Act and rules promulgated
thereunder, the Managers or their Affiliates may invest personally in
any business or entity in which the Fund holds beneficially any equity
ownership provided that such investment does not result in control of
such business or entity by such person or any combination of such
persons.
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(d) One hundred percent (100%) of directors' fees and
fifty percent (50%) of all consulting fees otherwise payable to the
Advisor or its members from any Portfolio Company, which fees were
generated subsequent to the time of commencement of the Fund's
investment in such Portfolio Company, must be remitted to the Fund.
This provision shall not apply to any salary or similar compensation
paid to any individual for service to a Portfolio Company as an
employee or contractor if the employment or contract relationship was
established prior to the Fund's investment in the Portfolio Company.
(e) Before the time of any investment in securities
within the scope of the Fund's purpose by any Manager or Affiliate of
a Manager, whose investment is on the personal behalf of such person,
such person shall bring to the attention of the Managers his intention
to make such investment and shall provide information necessary to
enable the Managers to consider causing the Fund to invest in such
investment. Such person may make such investment only (i) as a
co-investment with the Fund subject to this Agreement and applicable
law or (ii) after the Fund has given such person notice that it does
not intend to invest in such securities.
(f) The parties hereto hereby waive, and covenant not to
▇▇▇ on the basis of, any law (statutory, common law or otherwise)
respecting the rights and obligations of the Members inter se which is
or may be inconsistent with this Section 8.10.
Section 8.11 Coinvestment. Subject to applicable law, the
Managers and their Affiliates, and any Consultant to the Advisor may coinvest
with the Fund, provided the Fund has obtained its desired investment position.
ARTICLE 9
ADDITIONAL INVESTORS
Section 9.1 Additional Capital Contributions and Admission of
Additional Investors.
(a) Except as provided in this Section 9.1, no additional
Shares shall be sold by the Fund following the filing of the Articles
in the office of the North Carolina Secretary of State.
(b) The parties hereto authorize the Managers, without
further approval of the Members, to offer and sell additional Shares
through the Extended Closing Date (and as limited by Section 5.3) and
to admit as Investors persons purchasing such interests ("Additional
Investors") subject to the following terms:
(i) The Members' Capital Contributions
(including those of Additional Investors) do not exceed
$25,000,000 in the aggregate;
(ii) The Managers may refuse to admit any
person or persons as Additional Investors for any reason
whatsoever;
(iii) The offerings and sales of Shares
shall terminate on the Extended Closing Date, if not earlier
terminated;
(iv) The additional requirements set
forth in Section 9.1(c) shall be satisfied; and
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(v) Each Additional Investor investing
pursuant to this Section 9.1(b) shall make a contribution to
the capital of the Fund for his Share(s) in the manner
provided in Section 5.2.
If during any taxable year of the Fund there is a change in any
Member's interest in the Fund, each Member's distributive share of any
item of income, gain, loss, deduction or credit of the Fund of such
taxable year, notwithstanding anything in this Agreement to the
contrary, shall be determined as provided in Section 706(d) of the
Code to take into account the varying interests of the Members in the
Fund during such taxable year.
(c) The sale of Shares and the admission of persons as
Investors pursuant to Section 9.1(b) must comply with the following
conditions:
(i) Each purchaser of one or more Shares
or fractional Shares shall have executed and filed with the
Fund a subscription agreement substantially similar to the
form executed by other Investors, together with such other
documents and instruments as the Managers may deem necessary
or desirable to effect the investment, including, but not
limited to, execution of a signature page or other document
making such person a party to and bound by the provisions of
this Agreement;
(ii) Offers and sales made pursuant to
Section 9.1(b) hereof shall not (i) require registration under
Section 5 of the Securities Act of 1933, as amended, (ii)
cause the Fund to be terminated under Section 708 of the
Code; or (iii) violate this Agreement; and
(d) Upon the admission of any Additional Investor
pursuant to this Section the Managers shall amend this Agreement by
revising Exhibit A to reflect the name and capital contributions of
each Additional Investor.
(e) The admission of Investors pursuant to this Section
9.1 shall not be cause for dissolution of the Fund.
(f) An Additional Investor shall be treated as any other
Investor of the Fund for all purposes of this Agreement, including the
allocations of cash distributions and profits and losses to be made
under Article 6 of this Agreement. Allocations to any Member whose
interest changes during a Fund fiscal year or to any Member who is a
Member for less than a full Fund fiscal year shall be made in
accordance with Section 706(d) and the Treasury Regulations
promulgated thereunder to take into account the Member's varying
interest in the Fund during the Fund fiscal year.
Section 9.2 Restrictions on Assignments.
(a) No Investor may transfer all or any portion of such
Investor's Shares without the prior written consent of the Managers,
which may be withheld in the Managers' absolute discretion.
(b) In addition to the restriction in Section 9.2(a), no
transfer of any Investor's Shares shall be valid or effective unless
such transfer will not:
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(i) Constitute a violation of the
registration provisions of the Securities Act of 1933, as
amended, or the registration provisions of any applicable
state securities provisions, or violate the Agreement;
(ii) Violate any federal or state laws or
the rules and regulations of any federal or state governmental
agency applicable to such transfer;
(iii) After such transfer, cause the Fund
to be classified other than as a partnership for federal
income tax purposes; or
(iv) When taken together with other prior
transfers, result in a "termination" of the Fund for federal
income tax purposes.
The transferring Investor must give the Managers written notice of his
or her desire to transfer his or her Shares or part thereof and either
(A) an opinion of counsel to such transferring Investor satisfactory
in form and in substance to counsel for the Fund with respect to the
matters referred to in clauses (i)-(iv) above, or (B) sufficient
information to allow counsel to the Fund to make the determination
that the proposed transfer will not result in the consequences
referred to in clauses (i)-(iv) above (any expenses from such
determination to be paid by the transferring Investor).
(c) Each of the Investors agrees with all other Members that
he or she will not make any transfer of his or her Shares which will
violate this Section 9.2, and any such purported transfer shall be
invalid and of no effect. In the event of any transfer permitted by
this Section which shall result in multiple ownership of any Shares,
the Managers may require one or more trustees or nominees to be
redesignated to represent a portion of or the entire interest
transferred for the purpose of receiving all notices which may be
given and all payments which may be made under this Agreement, and for
the purpose of exercising the rights which the transferor as an
Investor had pursuant to the provisions of this Agreement.
(d) Notwithstanding any other provision hereof, any
successor shall be bound by the provisions hereof. Prior to
recognizing any transfer in accordance with this Section, the Managers
may require the transferring Investor to execute and acknowledge an
instrument of assignment in form and substance satisfactory to the
Managers and may require the Assignee to exercise or waive his right
to make any payments of the transferring Investor's Capital
Contribution (where applicable) and to assume all obligations of the
assigning Investor. An Assignee shall be entitled to the allocations
and distributions attributable to the interest assigned to him or her
and to transfer and assign such interest in accordance with the terms
of this Agreement; however, an Assignee who is not a Member at the
time of transfer shall not be entitled to the other rights of an
Investor until he or she becomes a Substituted Investor.
Notwithstanding the above, the Fund and the Managers shall incur no
liability for allocations and distributions made in good faith to the
transferring Member until the written instrument of assignment has
been received by the Fund and recorded on its books and the effective
date of the assignment has passed.
(e) No Assignee of an Investor shall become a Substituted
Investor without the prior written consent of the Managers, which may
be withheld in the Managers' absolute discretion. The transferring
Investor and the Assignee shall also execute and acknowledge any
instrument or instruments as the Manager may deem necessary or
desirable to effect such admission and the Assignee shall accept,
adopt and approve in writing all of the terms and provisions of this
Agreement.
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(f) In the event of any Transfer or attempted Transfer of
any Investor's Shares in violation of the provisions of this Section
9.2, without limiting any other rights of the Fund, the Managers shall
have the right to require the withdrawal of such Investor (or his or
her successors in interest) from the Fund. In the event of such
withdrawal, the withdrawing Investor shall be paid for his or her
Shares in accordance with the provision for payment of withdrawing
Investors as set forth in Sections 11.1(b) and 11.2.
(g) In the event that any regulation adopted under the
Employee Retirement Income Security Act of 1974 ("ERISA") or any
similar legislation shall require any Investor to divest itself of its
interest in the Fund prior to dissolution of the Fund, or in the event
that a regulatory agency or a court shall determine that, pursuant to
such regulations, an Investor's continued investment in the Fund is
contrary to law, then the Managers, on a best efforts basis, will seek
a buyer or buyers for the interest held by such Investor.
(h) The transfer of an Investor's interest or any part
thereof and the admission of a Substituted Investor shall not be cause
for dissolution of the Fund.
ARTICLE 10
CONSULTANTS TO THE ADVISOR
Section 10.1 Consultants. The Managers shall be solely
responsible for the management, policies and operations of the Fund, provided
that the administration of the Fund and the management of the investment
activities of the Fund will be delegated to the Advisor pursuant to the
Advisory Agreement. It is anticipated that the Advisor will establish
relationships with persons who are leaders in their technical and business
fields ("Consultants") who will provide the Advisor with guidance and insight
into the technologies and strategic positioning of targeted investment
companies. Persons may be added or removed as Consultants from time to time by
the Advisor as it deems appropriate in its sole discretion. The Advisor will
be solely responsible for the administration of investment opportunities, all
investment and sale decisions, and the monitoring of and rendering of
assistance to Portfolio Companies, as well as all financial, reporting,
administrative, overhead support and other activities for the Fund and the
Advisor.
Section 10.2 Length of Service and Removal. Each Consultant shall
serve at the pleasure of the Advisor and any Consultant may be removed with or
without cause at any time by the Advisor.
Section 10.3 Meetings, Permitted Activities and Duties.
(a) It is anticipated that the Advisor will consult, discuss
and analyze general investment trends, the Portfolio Investments and
proposed Portfolio Investments with its Consultants as it deems
appropriate in order to utilize each Consultant's particular
expertise.
(b) Subject to applicable law, the Consultants are
permitted to serve as consultants or directors to any business or
entity in which the Fund holds beneficially any equity ownership.
(c) Neither the Advisor nor the Managers shall be
obligated to accept or take action with respect to any recommendation
of the Consultants, and no such recommendation shall affect the
rights, obligations or liabilities of any Member under this Agreement.
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(d) In his or her capacity as a Consultant, no such
member shall take part in the management or control of the Fund
business, and shall have no authority to act for the Fund.
(e) The Advisor may consult from time to time with individual
Consultants with respect to Portfolio Investments and prospective
Portfolio Investments.
(f) It is anticipated that the Advisor will pay certain
compensation to its Consultants, expected to be in the amount of
twenty percent (20%) of the accrued portion of its management fee, out
of the management fees received by the Manager under the Advisory
Agreement. The eligibility requirements for Consultants shall be left
to the discretion of the Advisor and its agreements or other
arrangements with Consultants.
(g) The Consultants serve as consultants to the Advisor
and not to the Fund or any of its Members. No Consultant shall be
entitled to direct compensation from the Fund for acting in such
capacity. The Advisor shall retain sole discretion, subject to the
ultimate authority of the Managers with respect to the investment of
the funds of the Fund, as to whether to accept or reject the advice of
its Consultants, and to add or terminate Consultants. No Investor
should consider any Consultant as his or her investment advisor.
ARTICLE 11
WITHDRAWAL OF AN INVESTOR
Section 11.1 Withdrawal of an Investor.
(a) An Investor may not withdraw from the Fund in whole
or in part prior to dissolution of the Fund, except with the written
consent of the Managers.
(b) In the event an Investor withdraws with the written
consent of the Managers, and subject to applicable law, the interest
of such Investor shall be withdrawn in its entirety and such
Investor's Shares shall be deemed cancelled, and the withdrawing
Investor will receive an amount equal to his or her Estimated Value
Capital Account as of the most recent Valuation Date as determined in
Section 15.2, (less the value of distributions made to him or her by
the Fund since such Valuation Date), payable as provided in Section
11.2. The Managers shall have absolute discretion to make the
distribution in respect of the interest of any withdrawing Investor in
cash or, at the option of the Managers, in kind, subject to Section
6.1(b). Any portion of distributions made to a withdrawing Investor
in kind or pursuant to this, Section 11.1(b), shall be made ratably in
proportion to the value that each security then held by the Fund,
determined pursuant to Section 15.2, bears to the value of the Fund's
assets as of the Section 15.1 Valuation Date; provided however, that
the Managers may make a fair nonratable distribution in kind to any
withdrawing Investor with the written consent of the withdrawing
Investor and the consent of two-thirds (2/3) in interest of the
nonwithdrawing Investors, and provided further that the Managers may
withhold from distribution any securities the distribution of which
would, in the Managers' judgment, cause hardship to the issuer or its
parent.
(c) Except as provided in Section 11.2, the withdrawing
Investor shall not share in the profits and losses of the Fund after
withdrawal from the Fund, and Exhibit A to this Agreement shall be
revised by the Managers to reflect such withdrawal. As of the date of
such Member's withdrawal, the withdrawing Investor's Capital
Contribution for all purposes of this agreement shall be reduced to
zero. Each remaining Investor shall thereafter share in the income,
gains, and losses of the Fund attributable to the Investors as a group
in the proportion that the
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number of Shares owned by such Investor bears to the total number of
remaining issued and outstanding Shares.
(d) Withdrawal of an Investor shall not be cause for
dissolution of the Fund.
Section 11.2 Time for Payment for Fund Interests. Any Member or
representative thereof who shall become entitled or required to withdraw from
the Fund or be paid the value of his or her Fund Interest pursuant to this
Agreement shall be paid without interest as expeditiously as possible without
causing hardship to the Fund. Except as provided below, distributions shall be
completed to the extent possible within six (6) months from the accrual of the
right to be paid, and in any event one-half (1/2) of such distribution shall be
completed no later than six (6) months after accrual of the right to be paid,
and the remainder shall be distributed no later than two (2) years from said
date. Notwithstanding the above, no distribution will be made which would
render the Fund insolvent, impair (within the meaning of Section 6.8(c) hereof)
the Estimated Value Capital Account of any Member, or reduce the Estimated
Value Capital Account of any Member below zero while any Member's Estimated
Value Capital Account is above zero.
Section 11.3 Valuation of Withdrawing Member's Interest. The
valuation of the total amount of Fund assets attributable to an Investor
withdrawing pursuant to Section 11.1 hereof shall be as of the most recent
Valuation Date prior to (A) the date the Managers receive said Investor's
request to withdraw, or (B) in the case of an Investor required to withdraw
pursuant to Section 9.2(vi), as of the date of Transfer. The Managers shall
notify the withdrawing Investor in writing of such valuation at the later of
(A) the date the Managers consent to such withdrawal pursuant to Section 11.1,
or (B) the date the Managers furnish the statement of value for such valuation
date to all Investors provided for by Section 15.2.
ARTICLE 12
DISSOLUTION
Section 12.1 No Return of Capital Contribution. No Investor shall
have the right to the return of his or her capital in the Fund except as
provided in Sections 6.1 and 6.2 or upon withdrawal of an Investor in
accordance with Section 11.1.
Section 12.2 Managers Not Liable for Return of Capital. No
Manager shall be personally liable for the return of Capital Contributions of
Investors.
Section 12.3 Dissolution.
(a) The Fund shall be dissolved upon the occurrence of an
event described in Section 3.1, unless the Fund is continued in
accordance with the terms set forth in Section 3.1.
(b) Upon dissolution of the Fund, its business and affairs
shall be liquidated in an orderly manner. The Members acknowledge
that it may not be possible to wind down the affairs of the Fund
immediately after dissolution of the Fund since immediate liquidation
of the assets of the Fund may be neither possible nor in the best
interests of the Members. Accordingly, the Members agree that upon
dissolution the Fund may remain in existence for up to two (2) years
to permit an orderly winding down of the Fund's affairs and to
maximize the proceeds of liquidation.
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(c) Anything to the contrary herein notwithstanding, the
Managers may, subject to Section 6.2, distribute ratably in kind, upon
dissolution, any assets of the Fund, but such distribution shall not
occur until all liabilities of the Fund, including liabilities owing
to any Members, have been satisfied.
ARTICLE 13
WITHDRAWAL OF MANAGERS
Section 13.1 Assignability of Interest or Withdrawal of a Manager.
No Manager shall voluntarily withdraw as Manager (except that Independent
Managers may withdraw at any time) or admit a new Manager to the Fund without
the written consent of the holders of a majority of the Shares.
ARTICLE 14
RECORDS, ACCOUNTING AND REPORTS
Section 14.1 Books and Records. The Managers shall keep or cause
to be kept books and records pertaining to the Fund's business showing all of
its assets and liabilities, receipts and disbursements, realized profits and
losses, Capital Accounts, and Estimated Value Capital Accounts and all
transactions entered into by the Fund. Such books and records of the Fund
shall be kept at its principal office, and all Members and their
representatives shall at all reasonable times have free access thereto for the
purpose of inspecting or copying the same.
Section 14.2 Reports.
(a) As promptly as possible after the close of each
quarter, the Managers shall cause a progress and portfolio report of
the Fund (in such detail as the Manager may determine, but at a
minimum summarizing new Portfolio Investments and, so long as the Fund
is registered under the Investment Company Act, the information
required to be furnished to Investors by such Act) to be furnished to
each Member.
(b) As promptly as possible after the close of each
fiscal year of the Fund, the Managers shall cause audited financial
statements to be prepared for the Fund as of the end of each such
year. Such financial statements shall be prepared by a firm of
certified public accountants of national standing that the Managers
shall in their sole judgment employ at the Fund's expense. Within
ninety (90) days after the close of the fiscal year of the Fund, a
copy of a set of the financial statements, including the report of
such certified public accountants, shall be furnished to each Member
and shall include, as of the end of such fiscal year:
(i) A statement of the assets and
liabilities of the Fund;
(ii) A statement of operations setting
forth the net loss or net profit of the Fund; and
(iii) A statement of changes in the
financial position of the Fund.
The audited financial statements shall be accompanied by an overview
prepared, or caused to be prepared, by the Managers of all investments
held by the Fund.
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(c) In addition, the Managers shall cause such certified
public accountants to supply within ninety (90) days of the close of
the fiscal year of the Fund all other information necessary to enable
each Member to prepare his or her income tax returns, and the Managers
shall in a timely manner supply such other information as each Member
may reasonably request for the purpose of enabling such Member to
comply with any reporting requirements imposed by any governmental
agency or authority.
(d) As promptly as possible after the close of each
fiscal year of the Fund, the Managers will prepare or cause to be
prepared and furnished to each Member a statement of the net asset
value of the Fund as of the most recent Valuation date, in accordance
with Article 15 hereof.
Section 14.3 Tax Accounting Methods; Periods; Elections. The Fund
shall keep its financial accounting records (and the audited financial
statements shall be prepared) utilizing the same methods used to report its
income for income tax purposes. Unless otherwise provided in this Agreement,
the determination of whether to utilize the cash or accrual method of
accounting, whether to utilize accelerated cost recovery or another method of
depreciation, and the selection among any other allowable, alternative tax
accounting methods or principles shall be made by the Managers and shall be
those methods and principles which are determined by it to be in the best
interests of the Fund. The Fund's annual financial accounting and tax
accounting period shall be the calendar year, unless another accounting period
is required by the Code. The Managers may cause the Fund to make any election
allowable to the Fund under the Code, including elections under Section 754 of
the Code with respect to Fund distributions described in Section 734 of the
Code and with respect to transfers of Fund Interests described in Section 743
of the Code.
ARTICLE 15
VALUATION OF FUND ASSETS
Section 15.1 Dates of Valuation. The Managers shall value the
Fund assets (the "Estimated Value") as of December 31 of each year (the
"Valuation Date"), until such time as all of the assets of the Fund shall have
been distributed or liquidated, and shall also value any asset which is
distributed in kind as of the date of distribution of such asset. The Managers
shall also value the Fund assets as of the dissolution date of the Fund. In
determining the value of the Fund assets, no value shall be placed on the
goodwill or name of the Fund, or the office records, files, statistical data or
any similar intangible assets of the Fund not normally reflected in the Fund's
accounting records, but there shall be taken in consideration any amounts to be
received, including items of income earned but not received, expenses incurred
but not yet paid, liabilities fixed or contingent, prepaid expenses to the
extent not otherwise reflected in the books of account, and the value of
options or commitments to purchase securities pursuant to agreements entered
into on or prior to such valuation date.
Section 15.2 Method of Valuation. Determination of value of
securities made for any purpose under this Agreement shall be based on all
relevant factors including without limitation, type of security, marketability,
restrictions on disposition, subsequent purchases of the same or similar
securities by other investors, pending mergers or acquisitions, and current
financial position and operating results. Any determination of the value of
securities made pursuant to this Section 15.2 shall be generally made as
follows:
(a) Marketable securities listed on a national securities
exchange will be valued at the last sales price on the date of
valuation, or in the absence of a sale on such date, at the last bid
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price on the date of valuation, unless the investment is subject to
restrictions which warrant a discount.
(b) Marketable securities traded in the over-the-counter
market and reported on the National Association of Securities Dealers'
Automated Quotations ("NASDAQ") System will be valued at the closing
bid price as reported by such system, unless the investment is subject
to restrictions which warrant a discount.
(c) Marketable securities other than those reported on the
NASDAQ System will be valued at the most recent sale price for such
security, unless the investment is subject to restrictions which
warrant a discount.
(d) All other securities will be valued at cost or on a
basis consistent with any subsequent equity-related transactions with
third parties which give independent substantiation to any change in
values.
(e) The Managers' valuation of Fund assets shall be
conclusive and binding on all Members; provided however, that (i) any
valuations which pursuant to the Advisory Agreement are used to
calculate the net asset value of the Fund for purposes of determining
the Advisor's compensation, must be approved by all Independent
Managers; and (ii) if a Super Majority in Interest objects to any
valuation, the Managers shall attempt to determine an alternative
value. If the Managers and a Super Majority in Interest cannot agree
on an alternative value, the valuation shall be submitted to
arbitration by an appraiser selected by the senior ranking officer of
the National Association of Venture Capitalists. If the National
Association of Venture Capitalists shall cease to exist or shall fail
to select an appraiser, such contested valuation shall be submitted to
arbitration in Durham County, North Carolina in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
then in effect, except that to be qualified, an arbitrator must have
substantial experience with investing in and making evaluations of
early stage companies. The determination of the arbitrators with
respect to such contested valuation shall be binding on all Members.
ARTICLE 16
MISCELLANEOUS
Section 16.1 Representations and Warranties of Investors. Each
Investor, by execution of this Agreement, represents and warrants to every
other Member and to the Fund:
(a) That he, she or it is acquiring the Shares for
purposes of investment only, for his or her own account and not with
the view to resell or to distribute the same or any part thereof, and
that no other person has any interest in such Investor's interest or
in the rights of such Investor hereunder other than as a stockholder
in or partner of such Investor;
(b) That he, she or it is an "accredited investor" as
defined in Rule 501 of Regulation D of the Securities Act of 1933, as
amended; and
(c) That he, she or it has had the opportunity to ask
questions of and receive answers from the Managers and persons
authorized to act on behalf for the Fund concerning the terms of this
investment.
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Section 16.2 Indemnification of the Members, Managers and
Affiliates. All Members, each Manager and the Affiliates of each such Manager,
and each Consultant to the Advisor, shall be the persons and entities
("Persons") entitled to indemnification as hereinafter provided in this
Section. Any Person entitled to indemnification shall be indemnified to the
fullest extent permitted by law by the Fund against any cost, expense
(including attorneys' fees), judgment and/or liability reasonably incurred by
or imposed upon such Person in connection with any action, suit or proceeding
(including any proceeding before any administrative or legislative body or
agency) to which such Person may be made a party or otherwise involved or with
which such Person shall be threatened by reason of being or having been
associated with the Fund; provided however, that no Person shall be so
indemnified with respect to any matter as to which such Person shall have been
adjudicated to have acted in gross negligence, bad faith, engaged in reckless
actions which evidenced a conscious disregard for the consequences of those
actions, or committed willful misconduct or fraud. Any indemnification
hereunder shall be made by the Fund only as authorized in the specific case
upon a determination that indemnification of the Person is proper in the
circumstances because such Person has met the applicable standard of conduct
set forth above. The right of indemnification granted by this Section 16.2
shall be in addition to any rights to which the Person seeking indemnification
may otherwise be entitled and shall inure to the benefit of the successors,
assigns, executors or administrators of the Members. Each Person indemnified
hereunder shall each have the right to select his, her or its own attorney upon
a reasonable showing by such Person that counsel for the Fund cannot adequately
represent such Person's interests; provided however, if indemnification of two
or more Persons results or may result from a common matter, then such Persons
shall be required to use the same counsel, except in the event of a conflict of
interest of such counsel. Subject to Section 8.5, no Person entitled to
indemnity hereunder shall satisfy any right of indemnity or reimbursement
granted in this Section 16.2, or to which they may be otherwise entitled,
except out of the assets of the Fund, and no Member shall be personally liable
with respect to any such claim for indemnity or reimbursement. Any obligation
to an indemnified Person under this Section shall be deemed, until paid, a debt
of the Fund to such Person, and shall be repaid in full before any
distributions (or further distributions) are made to Members pursuant to any of
the provisions of this Agreement. The indemnification hereunder shall not
extend to the tax consequences resulting to any Person from his investment in
or association with the Fund.
Section 16.3 Amendment of Operating Agreement. This Agreement may
be amended, in whole or in part, by the Managers with the written consent of a
Super Majority in Interest, provided that (i) the Managers must give prior
written notice of any proposed amendment to all Members, which notice sets
forth the text of the proposed amendment; (ii) no amendment shall be adopted
without the consent of all such Members which would (A) cause the Fund to cease
to be a limited liability company under the Act, (B) extend the term of the
Fund (except as otherwise permitted herein), (C) substantially limit or expand
the Managers' power hereunder or otherwise materially increase Investors'
obligations or diminish their rights hereunder or (D) provide for amendment to
this Section 16.3; and (iii) no approval of the Investors shall be required to
amend the Agreement upon admission of Additional or Substituted Investors.
Section 16.4 Notices. Notices which may or are required to be
given hereunder by any party to another shall be in writing and deposited in
the United States mail, certified or registered, return receipt requested,
postage prepaid, or given by telex or telegram, addressed to the respective
parties at their addresses set forth on Exhibit A hereto in the case of the
Investors and set forth as the address of the principal office of the Fund in
the case of the Managers or to such other addresses as may be designated by any
party hereto by notice addressed to the Fund in the case of the Investors and
to the individual Investors in the case of the Managers. Notices to and from
Investors with foreign addresses shall be given by telex and confirmed in
writing. Notices shall be deemed to have been given when
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deposited in the United States mail within the Continental United States or
transferred by telex or telegram.
Section 16.5 Agreement Binding Upon Successors and Assigns.
Except as herein otherwise specifically provided, this Agreement shall inure to
the benefit of and shall be binding upon the heirs, executors, administrators
or other representatives, successors and assigns of the respective parties
hereto.
Section 16.6 Fiscal Year. The fiscal year of the Fund shall be
the calendar year, unless the Managers in their sole discretion and with the
prior approval of the Internal Revenue Service consents to another fiscal
year-end, or unless the Managers, after consultation with their advisors,
determine that a different fiscal year-end is required by the Code.
Section 16.7 Governing Law. This Agreement and the rights of the
Members hereunder, shall be governed by and construed in accordance with the
laws of the State of North Carolina. In the event any Investor decides to
institute legal action arising our of a dispute under the terms of this
Agreement, such action shall be instituted only in a court of competent
jurisdiction in the State of North Carolina. If the Fund is the party
instituting such action, the Investor against whom such action is instituted
agrees to submit to the personal jurisdiction of such Court.
Section 16.8 Attorney's Fees. In the event any Member brings
legal action to enforce any provisions of this Agreement, the Member or Members
(or Fund) who do not prevail in such legal action shall pay the prevailing
Member or Members the reasonable attorneys' fees or costs of the prevailing
Member or Members which have been incurred in such action.
Section 16.9 Consents. Any and all consents, agreements or
approvals provided for or permitted by this Agreement shall be in writing and a
signed copy thereof shall be filed and kept with the books of the Fund.
Section 16.10 Other.
(a) All references to the masculine herein shall include
the neuter and the feminine.
(b) The captions and titles preceding the text of each
Section hereof shall be disregarded in the construction of the
Agreement.
(c) This Agreement may be executed in counterparts, each
of which shall be deemed to be an original hereof.
ARTICLE 17
MEETINGS OF INVESTORS AND ELECTION OF MANAGERS
Section 17.1 Meetings.
(a) An annual meeting of Investors shall be held on the
second Wednesday in May of each year, beginning with May 8, 1996, or
at such other time as shall be determined by the Managers, for the
following purposes:
(i) The election of the Board of Managers;
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(ii) The approval of certain advisory agreements;
(iii) The selection of the Fund's certified public
accountants; and
(iv) The transaction of such other business as may
come before the meeting.
(b) Special meetings of the Investors for any purpose may
be called by the Managers and shall be called by the Managers upon
receipt of a request in writing signed by the holders of fifty percent
(50%) or more of the Shares. Such request shall state the purpose of
the proposed meeting and the matters proposed to be acted upon at the
meeting. Such meeting shall be held in Durham, North Carolina at such
place as may be designated by the Managers, or, if called upon the
request of other Investors, a place within North Carolina as
designated by such other Investors.
(c) A notice of any such meeting shall be given either
personally or by mail, not less than (5) days nor more than fifty
(50) days before the date of the meeting, to each Investor at such
Investor's address as set forth on Exhibit A. Such notice shall
state the purpose or purposes of the meeting. If the meeting is
adjourned to another time or place, and if any announcement of the
adjournment of time or place is made at the meeting, it shall not
be necessary to give notice of the ajourned meeting except to those
Investors not in attendance at the meeting. The presence in person
or by proxy of Investors holding more than fifty percent (50%) of
the outstanding Shares shall constitute a quorum at all meetings of
the Investors which shall be the number of Investors required for
any meeting; provided, however, that if there be no such quorum,
Investors holding a majority of the Shares so present or so
represented may adjourn the meeting from time to time, until a quorum
shall have been obtained. No notice of the time, place, or purpose of
any meeting of Investors need be given to any Investor who attends
in person or is represented by proxy (except when the Investor
attends a meeting for the express purpose of objecting at the
beginning of the meeting is not transaction of any business on the
ground that the meeting is not lawfully called or convened), or to
any Investor entitled to such notice who, in writing (executed and
filed with the records of the meeting, either before or after the
time thereof) waives such notice.
(d) For the purpose of determining the Investors entitled
to vote on, or to vote at, any meeting of the Company or any
adjournment thereof, the Managers may fix, in advance, a date as the
record date for any such determination of Investors. Such date shall
not be less than five (5) days nor more than fifty (50) days before
any such meeting.
(e) Each Investor may authorize any person or persons to
act for him by proxy in all matters in which an Investor is entitled
to participate, whether by waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the
Investor or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Investor executing it.
(f) Unless otherwise provided herein with respect to a
particular matter, the affirmative vote of a Majority of Investors
shall be required to carry any motion properly before the Investors.
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Section 17.2 Election of Managers. At the annual meeting of
Investors, the Investors shall elect the members of the Board of Managers. The
persons receiving the highest number of votes shall be deemed to have been
elected, provided, however, that at least forty percent (40%) of the members of
the Board of Managers must be Independent Managers. The term of each Manager
shall expire at the next annual meeting of Investors following the Manager's
election or upon such Manager's death, resignation or removal as provided
herein.
Section 17.3 Vacancies. Except as otherwise provided by law, any
vacancy occurring in the Board of Managers may be filled by the affirmative
vote of a majority of the remaining Managers. If a vacancy must be filled by
an Independent Manager to meet the requirement herein that at least 40% of the
Managers be Independent Managers, such vacancy may be filled only by a person
who has been selected and proposed for election by a majority of the remaining
Independent Managers, and except in the case of a vacancy occurring as a result
of the death, disqualification or bona fide resignation of an Independent
Manager, must be elected by the Investors as provided herein.
Section 17.4 Initial Board of Managers. Until the first annual
meeting of Investors, the Board of Managers shall consist of the following
individuals:
W. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ (Independent Manager)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Independent Manager)
Section 17.5 Action by Written Consent. Any action of the
Investors may be taken without a meeting upon the written consent of the
Investors holding a number of Shares sufficient to approve such action at a
duly called meeting of Investors; provided, however, that notwithstanding
anything herein to the contrary an amendment to this Agreement shall be made
only upon the unanimous written consent of the Investors, or approval by a
Super Majority of Investors at a duly called meeting of Investors.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
Initial Members:
______________________________
W. ▇▇▇▇ ▇▇▇▇▇▇
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________
E. ▇▇▇ ▇▇▇▇▇
[Adoption by Investors made by separate Subscription Agreements]
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EXHIBIT A
Names and Addresses of Investors
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