\nARTICLE 15 LIMITATION ON LIABILITY; INDEMNIFICATION…………………………….32
\n —————————————-
\n 15.1. Limitation on Members’ Liability……………………………32
\n 15.2. Limitation on Protected Parties’ Liability…………………..32
\n 15.3. Indemnification of the Protected Parties…………………….32
\n 15.4. No Liability for Acts of Agents…………………………….32
\n 15.5. General………………………………………………….33
\n 15.6. Survival…………………………………………………33<\/p>\nARTICLE 16 MISCELLANEOUS…………………………………………………….33
\n ————-
\n 16.1. Special Power of Attorney………………………………….33
\n 16.2. Amendments……………………………………………….33
\n 16.3. Binding Effects; Benefits………………………………….34
\n 16.4. Headings…………………………………………………34
\n 16.5. Counterparts……………………………………………..34
\n 16.6. Grammatical Construction…………………………………..34
\n 16.7. Separability……………………………………………..34
\n 16.8. Waiver…………………………………………………..34
\n 16.9. Entire Agreement………………………………………….35
\n 16.10. Notices…………………………………………………..35
\n 16.11. Insurance………………………………………………..35
\n 16.12. Disclosure of Investment…………………………………..36
\n 16.13. Arbitration………………………………………………36
\n 16.14. Appointment of Executive Agent………………………………37
\n 16.15. Payments on Business Days………………………………….37
\n 16.16. Governing Law……………………………………………..38
\n<\/c><\/s><\/table>\n
APPENDIX A Definitions<\/p>\n
LIMITED LIABILITY COMPANY AGREEMENT<\/p>\n
OF<\/p>\n
MERCK CAPITAL VENTURES, LLC<\/p>\n
LIMITED LIABILITY COMPANY AGREEMENT of Merck Capital Ventures, LLC (the
\n“Company”), dated as of November 27, 2000, by and among Merck-Medco Managed
\n ——
\nCare, L.L.C. (“Merck”), the individuals listed on Part A of Schedule A hereto
\n —– ——————–
\n(the “Other Investor Members” and together with Merck, the “Investor Members”)
\n ———————- —————-
\nand the individuals listed on Part B of Schedule A hereto (the “Carry Members”
\n ——————– ————-
\nand together with the Investor Members, the “Members”).
\n ——-<\/p>\n
WHEREAS, the Company was formed by the filing of a Certificate of
\nFormation with the Secretary of State of the State of Delaware; and<\/p>\n
WHEREAS, the Members desire to enter into this Limited Liability Company
\nAgreement (the “Agreement”) in accordance with the provisions of the Delaware
\n ———
\nLimited Liability Company Act (the “LLC Act”) in order to set forth the rights
\n ——-
\nand obligations of the Members.<\/p>\n
NOW, THEREFORE, the parties hereto hereby agree as follows:<\/p>\n
ARTICLE 1<\/p>\n
DEFINITIONS
\n ———–<\/p>\n
Certain capitalized terms used herein are defined in Appendix A attached
\n ———-
\nhereto and made a part hereof.<\/p>\n
ARTICLE 2<\/p>\n
FORMATION; TERM; FISCAL YEAR
\n —————————-<\/p>\n
2.1. Formation. The Members hereby acknowledge the formation of the
\n ———
\nCompany as a limited liability company pursuant to the LLC Act by virtue of the
\nfiling of a Certificate of Formation with the Secretary of State of the State of
\nDelaware, and confirm and agree to their status as Members of the Company. The
\nMembers hereby execute this Agreement for the purpose of establishing the
\nrights, duties and relationship of the Members.<\/p>\n
2.2. Term. This Agreement shall continue until the Company is dissolved
\n —-
\nand liquidated in accordance with the provisions of Article 12 hereof.<\/p>\n
-1-<\/p>\n
2.3. Fiscal Year. Unless the Board of Managers at any time shall otherwise
\n ———–
\ndetermine or with respect to the last fiscal year of the Company, the fiscal
\nyear of the Company (the “Fiscal Year”) shall end on December 31. The initial
\n ———–
\nFiscal Year shall commence on the date hereof and end on December 31, 2000.<\/p>\n
ARTICLE 3<\/p>\n
NAME AND PLACE OF BUSINESS
\n ————————–<\/p>\n
3.1. Name. The name of the Company shall be, and the business of the
\n —-
\nCompany shall be conducted under the name, “Merck Capital Ventures, LLC”;
\n —————————
\nprovided that such name shall be subject to change, from time to time, by the
\nBoard of Managers.<\/p>\n
3.2. Principal Place of Business. The principal place of business of the
\n —————————
\nCompany shall be at such place as the Board of Managers shall determine from
\ntime to time. The Board of Managers shall notify the Members of any change of
\nthe principal place of business of the Company. The Company may maintain such
\noffice or offices for the transaction of business at such other locations as the
\nBoard of Managers may deem advisable.<\/p>\n
ARTICLE 4<\/p>\n
PURPOSE AND POWERS
\n ——————<\/p>\n
4.1. Purpose. The purpose of the Company is to purchase, invest or
\n ——-
\notherwise acquire or engage in investments of no more than 20% (unless otherwise
\napproved by the Board of Managers) in the equity of (a) Clinical Development
\nEntities and (b) private internet and other private emerging businesses engaged
\nin the businesses of (i) improving the quality and\/or reducing the cost of
\ncommercialization, distribution and delivery of pharmaceuticals and healthcare
\nservices related thereto, or (ii) exploiting data derived therefrom (together
\nwith Clinical Development Entities, “E-Healthcare Companies”) and such other
\n ———————-
\ninvestments in private companies as may be approved by the Board of Managers or
\nare made in accordance with Section 7.1(a) and to engage in any and all
\nactivities that are reasonably related thereto, provided, however, that the
\n ——– ——-
\nCompany may not invest in entities engaged in research based pharmaceutical,
\nvaccine or biotech businesses.<\/p>\n
4.2. Powers. The Company shall have and may exercise all the powers and
\n ——
\nprivileges to the fullest extent permitted by law as are necessary, appropriate
\nor incidental to the conduct, promotion or attainment of the purpose of the
\nCompany, including, without limitation:<\/p>\n
(a) to purchase, sell, possess, transfer, or otherwise deal in, and to
\nexercise all rights, powers, privileges and other incidents of ownership or
\npossession with<\/p>\n
-2-<\/p>\n
respect to, the equity, assets and businesses of E-Healthcare Companies and
\nother investments or of any of their respective successors or assigns;<\/p>\n
(b) to have and maintain one or more offices and, in connection therewith,
\nto rent or acquire office space and furnishings, engage personnel and do such
\nother acts and things as may be necessary or advisable in connection with the
\nmaintenance of such office or offices;<\/p>\n
(c) to open, maintain and close bank accounts and to draw checks or other
\norders for the payment of moneys;<\/p>\n
(d) to enter into, perform and carry out contracts and agreements of every
\nkind necessary or incidental to the accomplishment of the Company’s purpose, and
\nto take or omit to take such other or further action in connection with the
\nCompany’s business as may be necessary or desirable in the opinion of the Board
\nof Managers to further the purpose of the Company;<\/p>\n
(e) to invest such funds as are temporarily not required for Company
\npurposes in short-term high-grade investments selected by the Board of Managers,
\nincluding money market accounts, short-term investment funds, government
\nsecurities, certificates of deposit of commercial banks (domestic or foreign),
\ncommercial paper, bankers’ acceptances and other money market instruments; and<\/p>\n
(f) to carry on any other activities necessary to, in connection with, or
\nincidental to any of the foregoing.<\/p>\n
ARTICLE 5<\/p>\n
CAPITAL CONTRIBUTIONS; MEMBERSHIP INTERESTS
\n ——————————————-<\/p>\n
5.1. Capital Contributions. (a) Merck agrees to contribute to the Company
\n ———————
\nup to $100 million for investments in Portfolio Investments (the “Merck Base
\n ———-
\nCommitment”) as and when called by the Company in accordance with the terms of
\n———-
\nthis Agreement, and to contribute additional amounts to pay certain Fees and
\nExpenses of the Company as set forth in Section 5.1(b), and each Other Investor
\nMember agrees to contribute to the Company in respect of each Portfolio
\nInvestment in which Merck invests the Merck Base Commitment (including without
\nlimitation any follow on Portfolio Investments in a Portfolio Company), an
\namount calculated by multiplying the Ratable Contribution Percentage of such
\nInvestor Member expressed as a decimal multiplied by the lesser of (i) 10% of
\nthe Acquisition Cost of such Portfolio Investment (or follow on Portfolio
\nInvestment as the case may be) or (ii) $1,000,000 (the “Other Investor Members
\n ———————-
\nBase Commitment”), in accordance with the terms of this Agreement (collectively
\n—————
\nwith the Merck contributions, the “Capital Contributions”). Except as specified
\n ———————
\nby this Agreement or as required by applicable law, (i) no Member shall at any
\ntime be required <\/p>\n
-3-<\/p>\n
to make any additional contribution to the capital of the Company or any loans
\nto the Company, (ii) no Investor Member (other than Merck) shall be obligated to
\nmake a Capital Contribution in respect of a Portfolio Investment made or
\ncommitted to be made before the Start Date of such Investor Member or after the
\nEnd Date of such Investor Member, and (iii) the Aggregate Capital Contributions
\nof the Other Investor Members shall not exceed $10 million.<\/p>\n
(b) Capital Contributions shall be called and used (i) during the
\nInvestment Period, to fund Portfolio Investments (including follow on
\ninvestments) and (ii) during the Expenses Period (including both during and
\nafter the Investment Period), to pay all reasonable Fees and Expenses of the
\nCompany.<\/p>\n
(c) Notwithstanding the provisions of Sections 5.1(a) and (b), (i) each
\nInvestor Member’s obligation to fund its Capital Contributions (other than the
\nCapital Contributions set out in Section 5.1(b)(ii)) will expire at the end of
\nthe Investment Period and (ii) Merck’s obligation to fund Capital Contributions
\nin accordance with Section 5.1(b)(ii) will expire at the end of the Expenses
\nPeriod.<\/p>\n
5.2. Notice and Funding of Capital Contributions. (a) On each occasion
\n ——————————————-
\nthat the Company proposes to make an investment in a Portfolio Company in which
\na Capital Contribution is required, the Company shall give to each Investor
\nMember who is eligible to participate in such Capital Contribution a written
\nnotice at least 10 days prior to the date such Capital Contribution is required
\n(a “Funding Notice”) which shall include (i) a brief description of the
\n ————–
\ntransaction (including a reasonable description of the form and structure
\nthereof) or purpose for which such Capital Contributions are required, (ii) the
\naggregate amount of Capital Contributions required and the respective Investor
\nMember’s share thereof, (iii) the date by which such Capital Contributions are
\nrequired to be funded, and (iv) if applicable, the account of the Portfolio
\nCompany to which such Capital Contributions shall be made.<\/p>\n
(b) During the Expenses Period, Merck will contribute to the Company
\nas a Capital Contribution from time to time as may be reasonably required
\namounts sufficient to pay all anticipated Fees and Expenses as provided in the
\nMCV Budget. In addition, from time to time during the Expenses Period, Merck
\nwill contribute to the Company as a Capital Contribution an amount equal to any
\nBreak-Up Expenses or other Fees and Expenses required to be contributed by Merck
\nto the Company in accordance with this Agreement.<\/p>\n
(c) Each Investor Member shall deposit its required Capital
\nContributions, in immediately available funds, in the account of the Company or
\nof the Portfolio Company, as the case requires, within the time period specified
\nin the Funding Notice. If an Investor Member deposits its required Capital
\nContribution later than the last day specified in the Funding Notice, and the
\nCompany incurs any costs or expenses <\/p>\n
-4-<\/p>\n
(including, without limitation, interest expenses) as a result of such late
\ndeposit, then such Investor Member shall pay to the Company an additional amount
\nequal to the amount of such costs and expenses (and such additional amount shall
\nnot be considered Capital Contributions). If an Investor Member shall Default in
\nall or any portion of their contribution obligations as set forth in the Funding
\nNotice, the Company shall give to the other Investor Members (“Non-Defaulting
\n ————–
\nInvestor Members”) a further written notice, which shall include the amount of
\n—————-
\nthe deficiency in the required Capital Contributions. The majority of the
\nNon-Defaulting Investor Members may either, (i) agree to pay the full amount of
\nthe deficiency in the required Capital Contribution (in such proportion as is
\nagreed by such Non-Defaulting Investor Members) or (ii) agree that the Company
\nnot proceed with the Portfolio Investment the subject of the Funding Notice in
\nwhich case, the Company will refund to the Investor Members the full amount of
\nall Capital Contributions made by the Investor Members in respect of such
\nPortfolio Investment.<\/p>\n
5.3. Voting Rights. (a) The Investor Members shall have Membership
\n ————-
\nInterests in the Company in the amounts representing their respective Capital
\nContributions. All such Membership Interests shall be of a single class for
\npurposes of the LLC Act’s voting requirements.<\/p>\n
(b) The Carry Members shall be Members entitled to distributions in
\naccordance with this Agreement. However, except as provided in Sections 5.5(b)
\nand 16.2, the Membership Interests of the Carry Members shall not entitle them
\nto vote on any matter as a Member.<\/p>\n
5.4. No Return of Capital Contributions. Except as provided in Section
\n ———————————-
\n12.4 hereof, no Member is entitled to a withdrawal or return of its Capital
\nContributions to the Company, but each shall look solely to distributions from
\nthe Company for such purpose.<\/p>\n
5.5. Designated Additional Carry Members. (a) At any time and from time to
\n ———————————–
\ntime, Merck or, for so long as Lofberg is Chief Executive Officer of the
\nCompany, Lofberg may propose to the Board of Managers, and the Board of Managers
\nmay designate in accordance with and subject to the provisions of Sections
\n5.5(c) and 6.13, an additional Person as a “Designated Additional Carry Member”.
\n ———————————-
\nUpon designation of a Designated Additional Carry Member, the Board of Managers
\nwill in accordance with the provisions of Section 6.13 specify the Applicable
\nCarried Interest applicable to such Designated Additional Carry Member and such
\nDesignated Additional Carry Member shall be admitted to the Company as a Carry
\nMember; provided, however, that the sum of the Maximum Amount of all Carry
\n ——– ——-
\nMembers shall not exceed 20%. Each Designated Additional Carry Member shall be
\ndeemed a Carry Member for the purposes of this Agreement, and his or her
\ninterest in the LLC and right to distribution shall be subject to all
\nrestrictions imposed upon a Carry Member hereunder.<\/p>\n
-5-<\/p>\n
(b) Upon the designation of a Designated Additional Carry Member as a
\nCarry Member in accordance with Section 5.5(a), the Other Investor Members
\nshall, with the prior written consent of Merck, reallocate the Ratable
\nContribution Percentages of each of the Other Investor Members, provided,
\n ——–
\nhowever, that (i) for so long as Lofberg is the Chief Executive Officer of the
\n——-
\nCompany, the aggregate of all Ratable Contribution Percentages will be 100%, and
\n(ii) if Lofberg ceases to be the Chief Executive Officer, the aggregate of all
\nRatable Contribution Percentages shall not be less than the aggregate of the
\nRatable Contribution Percentages of all of the Carry Members other than Lofberg
\nexisting immediately prior to the time Lofberg ceases to be the Chief Executive
\nOfficer. Upon the allocation of a Ratable Contribution Percentage in accordance
\nwith and subject to the provisions of this Section 5.5(b) and Section 5.5(c) to
\na Designated Additional Carry Member, such Designated Additional Carry Member
\nshall be admitted to the Company as an Investor Member.<\/p>\n
(c) Notwithstanding anything in this Agreement to the contrary, no
\namendment of this Agreement or allocation or reallocation of Membership
\nInterests shall reduce the Carry Interest of any Carry Member or change the
\nRatable Contribution Percentage of any Other Investor Member without the prior
\nwritten consent of the affected Member.<\/p>\n
ARTICLE 6
\n ———<\/p>\n
BOARD OF MANAGERS AND OFFICERS OF THE COMPANY
\n ———————————————<\/p>\n
6.1. Designation of Board of Managers.
\n ——————————–<\/p>\n
(a) Except as otherwise provided in Section 7.1, the management of the
\nCompany’s business shall be vested in a Board of Managers (the “Board of
\n ——–
\nManagers” or the “Board”). The Board shall consist of a number of Managers (the
\n——– —–
\n“Managers”) determined in accordance with this Section 6.1. A Manager need not
\n ——–
\nbe a Member.<\/p>\n
(b) The Board shall consist of up to five Managers as determined by Merck,
\nthe appointment of which shall be determined as follows:<\/p>\n
(i) so long as Lofberg is the Chief Executive Officer of the
\n Company, Lofberg shall be a Manager; and<\/p>\n
(ii) all other Managers shall be designated by Merck from time to
\n time. The initial Managers designated by Merck shall be Judy Lewent, Ken
\n Frazier, Richard Clark and David Anstice.<\/p>\n
(c) The Managers serving on the Board shall not be entitled to receive
\nfees for serving on the Board.<\/p>\n
-6-<\/p>\n
(d) The Board shall elect one of the Managers to act as Chairman (the
\n“Chairman”. The Initial Chairman of the Board of Managers shall be Judy Lewent.
\n ——–<\/p>\n
6.2. Election; Resignation; Removal.
\n ——————————<\/p>\n
(a) Each Manager shall serve from the effective date of his or her
\ndesignation until the effective date of his or her resignation or removal.
\nExcept as provided in Section 6.2(c) hereof, in the event any Manager ceases to
\nbe a Manager of the Company, whether by resignation or removal as provided in
\nthis Agreement or otherwise, a successor Manager shall be designated by the
\nparties that were entitled, pursuant to Section 6.1(b), to designate the former
\nManager.<\/p>\n
(b) A Manager may resign from his or her position as a Manager at any time
\nupon not less than 10 days’ prior written notice to each of the other Managers
\nand Merck.<\/p>\n
(c) A Manager may be removed only by the parties that designated such
\nManager provided, however that Lofberg shall (unless otherwise determined by the
\n ——–
\nBoard of Managers) be removed as a Manager immediately upon his ceasing to be
\nthe Chief Executive Officer of the Company. The parties requiring the removal of
\na Manager may specify an effective date for such removal; otherwise, all such
\nremovals shall be effective immediately.<\/p>\n
6.3. Board Action. Unless otherwise specified in this Agreement, the Board
\n ————
\nshall act by majority vote of those Managers present at the meeting, with each
\nManager on the Board having one vote.<\/p>\n
6.4. Meetings. The Board may hold regular meetings and in any event
\n ——–
\nquarterly without call or notice at such places and at such times as the Board
\nmay from time to time determine, provided that reasonable notice of the first
\nregular meeting following any such determination is given to Managers absent at
\nthe meeting fixing regular meetings. When called by the Chairman, Chief
\nExecutive Officer or Managers holding a majority of the votes on the Board, the
\nBoard may hold special meetings at such places and times as are designated in
\nthe notice of such special meeting, upon at least seven days’ notice given by
\nthe Secretary or an Assistant Secretary, or by the Officer or Manager calling
\nthe special meeting.<\/p>\n
6.5. Quorum. At any meeting of the Board, the presence of three Managers
\n ——
\nincluding the Chief Executive Officer shall constitute a quorum. Any meeting may
\nbe adjourned from time to time by a majority of votes, whether or not a quorum
\nis present, and the meeting may be held as adjourned upon reasonable notice.<\/p>\n
6.6. Action By Consent. Any action of the Board may be taken without a
\n —————–
\nmeeting if (i) all of the Managers unanimously consent to the action in writing,
\nand (ii)<\/p>\n
-7-<\/p>\n
the written consent is filed with the records of the meetings of the Board.
\nSuch actions by consent shall be treated for all purposes as actions taken at a
\nmeeting.<\/p>\n
6.7. Telephonic Meetings. Managers may participate in a meeting of the
\n ——————-
\nBoard by means of a conference telephone or similar communications equipment,
\nprovided that all Managers participating in the meeting can hear each other at
\nthe same time. Participation by such means shall constitute presence in person
\nat a meeting.<\/p>\n
6.8. Managers as Agents. The Managers, to the extent of the powers set
\n ——————
\nforth herein, are agents of the Company for the purpose of the Company’s
\nbusiness, and the actions of the Managers taken in accordance with such powers
\nshall bind the Company.<\/p>\n
6.9. Powers of the Board.
\n ——————-<\/p>\n
(a) The Board’s powers on behalf and in respect of the Company,
\nsubject to the provisions of this Agreement requiring the approval of the
\nMembers and those powers delegated to Lofberg in accordance with Section 7 of
\nthis Agreement, shall be all powers and privileges permitted to be exercised by
\nmanagers of a limited liability company under the LLC Act, including, without
\nlimitation, (i) Section 18-402 of the LLC Act, (ii) the revocation or
\nsuspension, at any time, of the powers granted to Lofberg or any other Officer
\npursuant this Agreement or otherwise and (iii) the approval of the MCV Budget;
\nprovided, however, that nothing herein shall supersede, limit or otherwise
\n——– ——-
\ninvalidate any action, authorization or resolution of the Members set forth in
\nthis Agreement.<\/p>\n
(b) The Board may delegate any of its powers to the Executive
\nCommittee or, except as otherwise required by Section 6.13, the Investment
\nCommittee. Any powers not delegated by the Board shall remain with the Board.<\/p>\n
6.10. Reimbursement. The Company shall reimburse each Manager and Officer
\n ————-
\nfor all reasonable and necessary out-of-pocket expenses incurred by such Manager
\nor Officer on behalf of the Company according to such terms, as shall be
\napproved by the Board. Such reimbursement shall be treated as an expense of the
\nCompany that shall be deducted in computing Net Profits and shall not be deemed
\nto constitute a distributive share of Net Profits or a distribution or return of
\ncapital to any Manager or Officer that is also a Member.<\/p>\n
6.11. Non-Exclusive Engagement. Subject to Section 7, the services of the
\n ————————
\nManagers to the Company hereunder are not to be deemed exclusive and the
\nManagers shall be free to render similar or other services to others, so long as
\nsuch Managers’ services hereunder are not impaired thereby, and to retain for
\ntheir own use and benefit fees or other moneys payable thereby. The Managers
\nshall not be deemed to be affected with notice of or to be under any duty to
\ndisclose to the Company any fact or thing which <\/p>\n
-8-<\/p>\n
may come to the notice of the Managers in the course of the Managers rendering
\nsimilar services to others, or in the course of its business in any other
\ncapacity, or in any manner whatsoever other than in the course of carrying out
\nits duties hereunder; provided, however, that the Managers shall give notice to
\n ——– ——-
\neach of the Members of any matter that comes to their attention that would
\nreasonably be expected to have a material adverse effect on the Company or the
\nability of the Board of Managers to perform its duties under this Agreement.<\/p>\n
6.12. Officers.
\n ——–<\/p>\n
(a) General. The Board may appoint agents and employees of the
\n ——-
\nCompany who are designated as Officers of the Company. The Officers of the
\nCompany shall include a President, one or more Vice Presidents, a Treasurer and
\na Secretary with the duties and authority described below and such officers,
\nwith such titles, duties and authority as may be approved by the Board from time
\nto time. The same person may hold any number of offices. Each of the Officers
\nshall be agents of the Company. The appointment of Officers shall not limit in
\nany respect the power and authority of the Managers to take any action on behalf
\nof the Company as provided in this Agreement.<\/p>\n
(b) Resignation; Removal. Each Officer shall hold office until his or
\n ——————–
\nher successor shall have been duly elected and shall have qualified, or until
\nhis or her death, or until he or she shall have resigned or have been removed,
\nas hereinafter provided. The Board may remove any Officer so appointed at any
\ntime, with or without Cause, in its absolute discretion.<\/p>\n
(c) President. The President shall be the chief executive officer of
\n ———
\nthe Company, and shall be responsible for the general and active management of
\nthe business of the Company and shall see that all orders and resolutions of the
\nBoard are carried into effect. Except to the extent otherwise provided in this
\nAgreement or in a resolution of the Board of Managers, the President shall have
\nsuch other duties and have such other powers as are similar to those of a
\npresident and chief executive officer of a business corporation organized under
\nthe LLC Act. Lofberg will be the initial President of the Company.<\/p>\n
(d) Vice President. Each Vice President shall perform all such duties
\n ————–
\nas from time to time may be assigned to him by the Board or the President.<\/p>\n
(e) Treasurer. The Treasurer shall have the care and custody of the
\n ———
\nfunds and valuable documents of the Company and shall have oversight and
\nadministrative responsibility for raising and borrowing funds and establishing
\nbanking and similar relationships and, in general, perform all duties incident
\nto the office of Treasurer and such other duties as from time to time may be
\nassigned to him or her by the Board. In the event that any Officer other than
\nthe Treasurer shall be designated as the <\/p>\n
-9-<\/p>\n
Company’s Chief Financial Officer, the Treasurer shall share the foregoing
\npowers and duties with such Chief Financial Officer, and all references herein
\nto the Treasurer shall be deemed to include such Chief Financial Officer of the
\nCompany.<\/p>\n
(f) Secretary. The Secretary shall: (i) keep or cause to be kept in
\n ———
\none or more books provided for the purpose, the minutes of all meetings and
\nconsents of the Board; (ii) see that all notices are duly given in accordance
\nwith the provisions of this Agreement and as required by law; (iii) be custodian
\nof the records of the Company; (iv) see that the books, reports, statements,
\ncertificates and other documents and records required by law to be kept and
\nfiled are properly kept and filed; and (v) in general, perform all duties
\nincident to the office of Secretary and such other duties as from time to time
\nmay be assigned to him or her by the Board.<\/p>\n
(g) Subordinate Officers. The Board from time to time may delegate to
\n ———————
\nany Officers the power to appoint subordinate officers or agents and to
\nprescribe their respective rights, terms of office, authorities and duties. Any
\nsuch Officer may remove any such subordinate officer or agent appointed by him
\nor her, for or without Cause.<\/p>\n
(h) Fiduciary Duties of Officers. Except as otherwise provided
\n —————————-
\nherein, each Officer shall have fiduciary duties of loyalty and care similar to
\nthose of officers of business corporations organized under the General
\nCorporation Law of the State of Delaware.<\/p>\n
6.13. Certain Actions. Without limiting the generality of Section 6.1(a),
\n —————
\nnone of the following actions may be taken by or on behalf of the Company
\nwithout prior approval of the Board or the Executive Committee, including, for
\nso long as Lofberg is the Chief Executive Officer of the Company, the
\naffirmative vote of Lofberg, in the case of any matter described in clauses (g),
\n(h) (i) and (j) and any matter described in clause (k) if the annual
\ncompensation of such employee would exceed $150,000:<\/p>\n
(a) approval of the MCV Budget and expenditures or capital
\ncommitments other than those authorized under Section 7.1 or otherwise contained
\nin the MCV Budget;<\/p>\n
(b) creating, incurring or assuming any indebtedness (including,
\nwithout limitation, any loans by the Members or any of their Affiliates to the
\nCompany) or entering into any guarantees;<\/p>\n
(c) mortgaging or creating any liens on any assets;<\/p>\n
(d) entering into any employment agreement or amending or waiving any
\nprovision of any employment agreement;<\/p>\n
-10-<\/p>\n
(e) selling or disposing of any Portfolio Investment or other
\nmaterial assets;<\/p>\n
(f) commencing or settling any legal actions;<\/p>\n
(g) investing in a Portfolio Investment in an amount exceeding $10
\nmillion or if all Portfolio Investments in the same Portfolio Company would
\nexceed $20 million in the aggregate;<\/p>\n
(h) investing in a Portfolio Investment of any entity that is a
\nClinical Development Entity;<\/p>\n
(i) reviewing and approving or disapproving any changes in investment
\nstrategy and scope;<\/p>\n
(j) reviewing and approving or disapproving the designation of any
\nDesignated Additional Carry Member and the allocation and reallocation of all
\nApplicable Carried Interests and Ratable Contribution Percentages;<\/p>\n
(k) determining the compensation payable to any employee of the
\nCompany, including without limitation, any Designated Additional Carry Members
\nand any employees of Merck or its Affiliates selected to provide services to the
\nCompany in accordance with Section 8.5;<\/p>\n
(l) terminating the designation of any Carry Member or Designated
\nAdditional Carry Member as a Carry Member of the Company (it being understood
\nthat the employer of such Person retains the absolute authority to terminate
\nsuch Person’s employment);<\/p>\n
(m) permitting the Other Investor Members to contribute, in respect
\nof an individual Portfolio Investment, an aggregate amount in excess of the
\nlesser of (A) 10% of the Acquisition Cost or (B) $1,000,000 of a Portfolio
\nInvestment;<\/p>\n
(n) reviewing and approving or disapproving any potential conflicts
\nof interest of the Members;<\/p>\n
(o) reviewing and approving or disapproving any transaction involving
\nthe Company and a Portfolio Company in which any Member, a Manager or their
\nrespective Affiliates has or may have a material interest; or<\/p>\n
(p) reviewing and approving or disapproving any settlement of any
\nclaim with respect to which any Manager, Officer, Members or any Affiliate of
\nany of them intends to seek indemnification pursuant to Section 15.<\/p>\n
-11-<\/p>\n
Notwithstanding any other provision of the Agreement, so long as
\nLofberg is a Member of the Company, if the Company shall take any of the actions
\ndescribed in clauses (a), (b) or (c) of this Section 6.13 without Lofberg’s
\nprior written consent, distributions to the Carry Members shall be calculated
\nwithout giving effect to such actions if the effect of such actions would
\notherwise be to reduce a Carry Member’s return in respect of any Portfolio
\nInvestment.<\/p>\n
6.14. Reliance by Third Parties. Third parties dealing with the Company
\n ————————-
\nmay rely conclusively upon any certificate of the Board of Managers or any
\nOfficer to the effect that it is acting on behalf of the Company. The signature
\nof the Board of Managers or any Officer shall be sufficient to bind the Company
\nin every manner to any agreement or on any document.<\/p>\n
6.15. No Right to Manage. Except as otherwise expressly provided for in
\n ——————
\nthis Agreement or with the consent of the Board of Managers, the Members shall
\nnot have any right to take part in the management of the business, affairs or
\nproperties of the Company or any right or authority to act for or bind the
\nCompany and shall have only the rights and powers expressly granted to the
\nMembers hereunder.<\/p>\n
ARTICLE 7<\/p>\n
RIGHTS AND OBLIGATIONS OF LOFBERG
\n ———————————<\/p>\n
7.1. Powers. For so long as Lofberg is the Chief Executive Officer of the
\n ——
\nCompany and has not had his investment authority revoked or suspended by the
\nBoard of Managers, Lofberg shall have the authority and power on behalf and in
\nrespect of the Company, without the need for approval from the Board of
\nManagers, to:<\/p>\n
(a) make Portfolio Investments in amounts not exceeding $10 million in
\nany one Portfolio Investment and, when aggregated with all other Portfolio
\nInvestments in the same Portfolio Company, not exceeding $20 million; provided,
\n ——–
\n(i) Lofberg shall have consulted with the Board of Managers or the Executive
\nCommittee regarding the timing and accounting implications to Merck of such
\ninvestment to the extent feasible and, in all cases, if the investment, together
\nwith all other Portfolio Investments consummated by the Company in a Quarter
\nwould exceed $15 million, (ii) such Portfolio Investment shall not result in the
\nCompany acquiring in excess of 20% of the equity of a Portfolio Company, and
\n(iii) any Portfolio Investment in a Clinical Development Entity shall require
\napproval of the Board of Managers or Executive Committee following consultation
\nwith Merck Research Laboratories.<\/p>\n
-12-<\/p>\n
(b) incur reasonable Break-Up Expenses and such other Fees and Expenses as
\nare necessary to manage the Portfolio Investments in accordance with the MCV
\nBudget or as otherwise authorized by this Agreement.<\/p>\n
7.2. Consultation with Investment Committee. In the exercise of the powers
\n ————————————–
\nconferred on him by Section 7.1, Lofberg will on a regular basis inform the
\nmembers of the Investment Committee of Portfolio Investments made and proposed
\nto be made and provide members of the Investment Committee with such information
\nwithin the Company’s possession concerning each such Portfolio Investment or
\nproposed Portfolio Investment, as well as such other information within the
\nCompany’s possession as any member of the Investment Committee may request.<\/p>\n
ARTICLE 8<\/p>\n
OTHER AGREEMENTS
\n —————-<\/p>\n
8.1. The Investment Committee and the Executive Committee. (a) The Board
\n —————————————————-
\nof Managers will from time to time appoint an Investment Committee which shall
\nconsist of Lofberg, so long as he is Chief Executive Officer of the Company, and
\nother members of the Board of Managers, Officers of the Company and other
\nPersons, as determined by the Board of Managers. The initial members of the
\nInvestment Committee will be Lofberg, Cooper, Jon Filderman, Richard Kender,
\nPaul Howes and one person designated by Merck. The Board of Managers may remove
\nany member of the Investment Committee at any time. The Investment Committee
\nshall meet as necessary. Members of the Investment Committee may participate in
\nmeetings of the Investment Committee in person, by proxy, or by telephonic
\nconference call in which all participants can hear each other.<\/p>\n
(b) The functions of the Investment Committee will be to consult with and
\nprovide investment advice on proposed investments to the Officers, Board of
\nManagers and the Members, including in regard to any proposed commercial
\narrangements with Merck. To assist the Investment Committee, the Officers of the
\nCompany will review all aspects of each proposed investment including
\nsuitability of investment candidates, results of due diligence, terms of
\nproposed investments, expected synergies and analysis of competitive effects
\nand, following such review, will present such information and analysis to the
\nInvestment Committee for its review.<\/p>\n
(c) Other than as expressly set forth in this Agreement, the
\nrecommendations of the Investment Committee shall be advisory only and shall not
\nobligate the Members or the Board of Managers to act or refrain from acting in
\naccordance therewith. Neither the Investment Committee nor any member thereof,
\nin his or her capacity as such, may act on behalf of or may bind the Company in
\nany manner. The Company shall be responsible for all reasonable out-of-pocket
\nexpenses incurred by <\/p>\n
-13-<\/p>\n
members of the Investment Committee in connection with fulfilling their
\nresponsibilities to the Investment Committee.<\/p>\n
(d) The Board of Managers will from time to time appoint an executive
\ncommittee of not more than 3 Persons which shall consist of members of the Board
\nof Managers, Officers of the Company and other Persons, as determined by the
\nBoard of Managers (the “Executive Committee”), provided, however that, for so
\n ——————- ——– ——-
\nlong as Lofberg is Chief Executive Officer of the Company, he will be a member
\nof the Executive Committee. The initial members of the Executive Committee will
\nbe Lofberg, Judy Lewent and Ken Frazier. Subject to the proviso in the first
\nsentence of this paragraph (d), the Board of Managers may remove any member of
\nthe Executive Committee at any time. The Executive Committee shall meet as
\nnecessary. Members of the Executive Committee may participate in meetings of the
\nExecutive Committee in person, by proxy, or by telephonic conference call in
\nwhich all participants can hear each other.<\/p>\n
(e) The Executive Committee shall have the power and authority to take all
\nactions delegated to it by the Board of Managers.<\/p>\n
8.2. Other Investments. (a) Except as provided in Sections 8.2(b) and (c),
\n —————–
\nno Member may make directly or indirectly, and each Member shall cause its
\nAffiliates and Associates not to make, directly or indirectly, an investment in
\nany E-Healthcare Company, except through its interest in the Company in
\naccordance with the terms of this Agreement, unless and until (i) each Member
\nhas contributed its respective Base Commitment to the Company, (ii) the
\nexpiration of the Investment Period or (iii) Lofberg ceases to be the Chief
\nExecutive Officer of the Company.<\/p>\n
(b) Notwithstanding anything to the contrary in this Agreement, if
\nMerck proposes an investment in an E-Healthcare Company to the Company
\n(including a follow-on investment in a Portfolio Company) and Lofberg rejects
\nsuch proposal or does not approve such proposal within 21 days of its submission
\nto the Investment Committee in the case of an initial investment and 10 Business
\nDays of its submission to the Investment Committee in the case of a follow-on
\ninvestment (such submission to include such information in the possession of
\nMerck that it reasonably believes is necessary to enable the Investment
\nCommittee to make an informed investment decision), Merck or any of its
\nAffiliates or Associates (other than the Company) shall be permitted to make an
\ninvestment in such E-Healthcare Company on terms no more favorable than those
\nrejected by Lofberg.<\/p>\n
(c) Notwithstanding anything to the contrary in this Agreement, Merck
\nand any of its Affiliates and Associates may make any investment in an
\nE-Healthcare Company if such investment together with all previous investments
\nin such E-Healthcare Company, in the aggregate, would exceed $20 million or if
\nit would result in Merck, together with its Affiliates and Associates
\nbeneficially owning in excess of 20% <\/p>\n
-14-<\/p>\n
of the outstanding equity of such E-Healthcare Company, provided, however, that,
\n ——– ——-
\nexcept as provided by paragraph (b), this paragraph shall not permit Merck to
\ninvest in an existing Portfolio Company other than through the Company, unless,
\nupon consummation of such investment, the Company, Merck and all Affiliates and
\nAssociates of Merck would, in the aggregate, beneficially own equity interests
\nrepresenting 50% or more of the voting equity interests of such Portfolio
\nCompany.<\/p>\n
(d) If Merck or any of its Affiliates or Associates (other than the
\nCompany) enters into a binding agreement to make a Control Acquisition (a
\n“Control Acquisition Agreement”), Merck shall, on its own behalf or on behalf of
\n —————————–
\nits Affiliate or Associate that is a party to the Control Acquisition Agreement,
\nhave the absolute right, for a period of 10 Business Days from the date of the
\nControl Acquisition Agreement (and, if applicable, so long as the majority of
\nthe Other Investors has not previously delivered a Put Notice as defined in
\nparagraph (e) below), by giving written notice to the Carry Members (a “Call
\n —-
\nNotice”), to buy all, but not less than all, of the Portfolio Investments in the
\n——
\nrelevant Portfolio Company held by the Company (the “Control Acquisition
\n ——————-
\nInterest”).
\n——–<\/p>\n
(e) If Merck or any of its Affiliates or Associates (other than the
\nCompany) makes a Control Acquisition, the majority of the Other Investors shall
\nhave an absolute right, for a period of 10 Business Days from the date of the
\nControl Acquisition and so long as Merck has not previously delivered a Call
\nNotice, by giving written notice to Merck (the “Put Notice”), to cause the
\n ———-
\nCompany to sell all, but not less than all, of the Control Acquisition Interest
\nto Merck or such Affiliate or Associate.<\/p>\n
(f) Upon delivery of a Call Notice pursuant to Section 8.2(d) or a
\nPut Notice pursuant to Section 8.2(e), Merck or its Affiliate or Associate will
\nbe obligated to purchase from the Company, and the Company will be obligated to
\nsell to Merck or its Affiliate or Associate, all, but not less than all, of the
\nControl Acquisition Interest in exchange for payment of the Control Acquisition
\nPrice.<\/p>\n
(g) The consummation of the purchase of the Control Acquisition
\nInterest pursuant to this section 8.2 will take place (i) in the case of a
\npurchase resulting from the delivery of a Call Notice, to the extent reasonably
\npracticable simultaneously with the closing of the relevant Control Acquisition,
\nand (ii) in the case of a purchase resulting from the delivery of a Put Notice,
\non a date mutually agreeable to the parties but in any event not later than 30
\nBusiness Days following the date of the Put Notice (in each case, the “Purchase
\n ——–
\nDate”). On the Purchase Date, Merck or its Affiliate or Associate shall pay to
\n—-
\nthe Company the Control Acquisition Price against delivery to Merck or its
\nAffiliate or Associate of the Control Acquisition Interest, free and clear of
\nall encumbrances, but without representation or warranty by the Company other
\nthan as to title. The consummation of the sale and purchase under this Section
\n8.2(g) will be a Sale of a Portfolio Investment for the purposes of this
\nAgreement.<\/p>\n
-15-<\/p>\n
(h) Merck and its Affiliates or Associates shall be free to make any
\nand all investments not expressly required by this Agreement to be made in the
\nCompany outside the Company; provided, however, that Merck and its Affiliates
\nand Associates (other than the Company) shall not, following termination of the
\nInvestment Period, make a follow-on investment in which the Company has an
\nexisting Portfolio Investment unless and until it shall have given each Other
\nInvestor Member, by written notice to such Other Investor Member specifying the
\nPortfolio Company to which such follow-in investment relates and the terms and
\nconditions of such follow-on investment (a “Co-Investment Notice”), the right to
\nco-invest, on the same terms and conditions as Merck or its Affiliate or
\nAssociate, an amount equal to (but not less than) the amount such Other Investor
\nMember would have been required to contribute to the Company in respect of the
\nacquisition of such follow-on investment, assuming (1) it were then being made
\nby the Company, (2) the Investment Period had not ended and (3) the $10 million
\nlimit set forth in clause (iii) of the last sentence of Section 5.1 did not
\napply (the “Co-investment Right”). The Co-investment Right of an Other
\nInvestment Member in respect of a follow-up investment shall expire if such
\nOther Investment Member shall not, within 10 Business Days of the delivery of
\nthe Co-Investment Notice to such Member, deliver to Merck written notice
\nirrevocably electing to exercise such Co-investment Right. The Other Investor
\nMembers shall not have any Carry Interest in follow-on investments to which the
\nCo-Investment Right pertains.<\/p>\n
8.3 Certain Other Fees. (a) Each Carry Member covenants that if it or any
\n ——————
\nof its Affiliates or Associates provides any services to, or enters into any
\ntransaction with, a Portfolio Company (or a Person in which the Company is
\nconsidering making a Portfolio Investment if such Person subsequently becomes a
\nPortfolio Company), in which such Carry Member (a “Benefiting Member”) or its
\nAffiliates or Associates receives securities, transaction fees, financing fees,
\ndirector fees, or any other type of fees or any other thing of value
\n(collectively, “Other Fees”), from such Portfolio Company, all such Other Fees
\nwill be deemed to be the property of the Company, will, except as provided in
\nparagraph (c), be promptly conveyed to the Company net of any taxes, if any,
\nassumed to be payable at the Applicable Tax Rate, for which such Benefiting
\nMember or its Affiliates or Associates are liable and, until so conveyed, will
\nbe held in trust for the benefit of the Company.<\/p>\n
(b) Merck covenants that if it or any of its Affiliates or Associates
\nenters into a commercial arrangement with a Portfolio Company (or a Person in
\nwhich the Company is considering making a Portfolio Investment if such Person
\nsubsequently becomes a Portfolio Company), in which Merck or its Affiliates or
\nAssociates receives securities from such Portfolio Company as part of such
\ncommercial arrangement and not for cash (and excluding Warrants Acquired for
\nCash and securities acquired upon the cashless exercise of Warrants Acquired for
\nCash) (“Other Securities”), all such Other Securities will be deemed to be the
\n —————-
\nproperty of the Company, will, except as provided in paragraph (c), be promptly
\nconveyed to the Company net of any taxes, if any, assumed <\/p>\n
-16-<\/p>\n
to be payable at the Applicable Tax Rate, for which Merck or its Affiliates or
\nAssociates are liable and, until so conveyed, will be held in trust for the
\nbenefit of the Company. The acquisition of Other Securities by Merck shall not
\nconstitute a Control Acquisition for purposes of Section 8.2 even if after
\ngiving effect thereto, the Company, Merck and Merck’s Affiliates and Associates
\nwould, in the aggregate, own more than 20% of the outstanding voting equity of a
\nPortfolio Company.<\/p>\n
(c) Each Benefiting Member or Merck, as the case may be, that is required
\nby this Section 8.3 to transfer Other Fees or Other Securities to the Company
\n(the “Transferring Member”), shall use commercially reasonable efforts (at the
\n ——————-
\nCompany’s expense) to obtain all necessary consents and approvals that may be
\nrequired in connection with the transfer of such Other Fees and Other Securities
\nto the Company (“Required Consents”). If a Required Consent is denied or if the
\n —————–
\nTransferring Member has not, for any other reason transferred any Other Fees or
\nOther Securities to the Company as required by this Section 8.3, then the
\nBenefiting Member or Merck, as applicable, shall pay to the Company in cash
\nimmediately on receipt for distribution in accordance with Article 10 an amount
\nor amounts equal to all Net Sale Proceeds upon a Sale of such securities by such
\nBenefiting Member or Merck, as applicable, or their respective Affiliates or
\nAssociates net of any taxes, assumed to be payable at the Applicable Tax Rate,
\nfor which such Benefiting Member or Merck or Affiliates or Associates thereof,
\nas applicable, are liable.<\/p>\n
(d) Notwithstanding anything to the contrary contained in this Agreement,
\nany contributions made to the Company pursuant to this Section 8.3 will not be
\ndeemed Capital Contributions of the Benefiting Member or increase the
\nAcquisition Cost or the Benefiting Member’s share of the Acquisition Cost of the
\nrelated Portfolio Investment. Except as provided in the immediately preceding
\nsentence, all Other Fees and Other Securities shall be deemed to be part of the
\nrelated Portfolio Investments for all purposes of this Agreement and shall be
\ndistributed to the Members to the extent contemplated by and in accordance with
\nArticle 10, except that, until transferred to the Company as required by this
\nSection 8.3, Other Fees and Other Securities (and their acquisition and
\ndisposition) shall not be subject to the provisions of Section 6.13 or 10.2(a),
\n(b) or (c).<\/p>\n
8.4. MCV Budget. (a) At least 30 days but not more than 90 days prior to
\n ———-
\nthe beginning of each Fiscal Year (other than with respect to the 2001 Fiscal
\nYear), the Company will prepare and submit to the Board of Managers for its
\napproval the proposed budget for the following Fiscal Year, showing on a monthly
\nbasis anticipated Fees and Expenses for such Fiscal Year together with any other
\ninformation that the Board of Managers shall require) (the budget, as so
\napproved in accordance with Section 6.13 and this Section 8.4, the “MCV
\n —
\nBudget”). The MCV Budget in respect of the 2001 Fiscal Year shall be prepared
\n——
\nand submitted for approval as soon as reasonably practicable following the date
\nof this Agreement and in any event no later than December 11, 2000.<\/p>\n
-17-<\/p>\n
8.5. Administrative Staff. Merck shall make available to the Company the
\n ——————–
\nfull-time services of (i) up to two employees of Merck or an Affiliate of Merck,
\nas necessary, to act as financial analysts for the Company, and (ii) up to two
\nemployees of Merck or an Affiliate of Merck to support the Company as
\nadministrative staff. So long as he is Chief Executive Officer of the Company,
\nLofberg shall (i) with the consent of the employee and of the employee’s
\nemployer (the “Applicable Employer”), whose consent shall not be unreasonably
\n ——————-
\nwithheld or delayed, be entitled to select the employees seconded to the Company
\npursuant to this Section 8.5, and (ii) be entitled to terminate the secondment
\nof any such employee. Notwithstanding anything in this Agreement to the
\ncontrary, (a) the Applicable Employer retains the right to terminate for Cause
\nthe employment of any employee seconded to the Company, and (b) any costs and
\nexpenses incurred by the Applicable Employer in connection with the employment
\nof seconded employees during the period such person’s services are used by the
\nCompany shall be deemed to be Carry Member Costs for purposes of this Agreement
\nunless otherwise excluded from the definition of Carry Member Costs.<\/p>\n
8.6. Fees and Expenses; Carry Member Costs. The Company shall be
\n ————————————-
\nresponsible for all Fees and Expenses and Carry Member Costs from the end of the
\nExpenses Period and will reimburse Merck and its Affiliates for all such Carry
\nMember Costs incurred by Merck or any of its Affiliates upon receipt of an
\ninvoice from Merck specifying the nature and amount of such Carry Member Costs.<\/p>\n
ARTICLE 9<\/p>\n
ACCOUNTS AND ALLOCATIONS
\n ————————<\/p>\n
9.1. Capital Accounts.
\n —————-<\/p>\n
(a) A separate Capital Account shall be established and maintained for
\neach Member in accordance with Reg. ss.1.704-1(b)(2)(iv). The initial balance of
\neach Member’s Capital Account shall be equal to the amount of cash and the Fair
\nMarket Value of any property (net of any liability secured by such property that
\nthe Company is considered to assume, or take subject to, under Section 752 of
\nthe Code) contributed by such Member as a Capital Contribution to the Company.<\/p>\n
(b) The Capital Account of each Member shall be increased by any Net
\nProfits and gross income items allocated to such Member and any additional
\nCapital Contributions by such Member.<\/p>\n
(c) The Capital Account of each Member shall be reduced by (i) the amount
\nof any distribution of cash or the Fair Market Value of any property (net of any
\nliability secured by such property that the Member is considered to assume or
\ntake subject to Section 752 of the Code) distributed to such Member pursuant to
\nArticle 10 in respect of the Member’s Capital Account (other than distributions
\ntreated as guaranteed <\/p>\n
-18-<\/p>\n
payments within the meaning of Section 707(c) of the Code) when such
\ndistribution is made, and (ii) the Net Losses and items of deduction or expense
\nallocated to such Member including, without limitation, any “partner nonrecourse
\ndeductions” (as defined in Reg. ss. 1.704-2(i)) and any “nonrecourse deductions”
\n(as defined in Reg. ss. 1.704-2(b)) allocated to such Member.<\/p>\n
(d) Except as otherwise provided in this Agreement, whenever it is
\nnecessary to determine the Capital Account of any Member, the Capital Account of
\nsuch Member shall be determined after giving effect to the allocations of Net
\nProfits, Net Losses and other items realized prior or concurrently to such time
\n(including, without limitation, any Net Profits and Net Losses attributable to
\nadjustments to Book Values with respect to any concurrent distribution), and all
\ncontributions and distributions made prior or concurrently to the time as of
\nwhich such determination is to be made.<\/p>\n
(e) In the event that there is a negative balance in the Capital Account
\nof any Member, such Member shall not be obligated to make any additional Capital
\nContributions or otherwise be liable to restore the negative balance to zero.<\/p>\n
9.2. Allocations.
\n ———–<\/p>\n
(a) Allocation of Net Profits and Net Losses.
\n —————————————-<\/p>\n
(i) Net Losses. After giving effect to the special allocations
\n ———-
\n in clauses (b) through (e) hereof, Net Losses (and if necessary, items
\n thereof) for any Fiscal Year (or period) shall be allocated among the
\n Members so as to eliminate the differences between their respective
\n Partially Adjusted Capital Account balances and Target Capital Account
\n balances for such Fiscal Year (or other period).<\/p>\n
(ii) Net Profits. After giving effect to the special
\n ———–
\n allocations in clauses (b) through (e) hereof, Net Profits (and if
\n necessary, items thereof) for any Fiscal Year (or period) shall be
\n allocated among the Members so as to eliminate the differences between
\n their respective Target Capital Accounts balances and Partially Adjusted
\n Capital Account balances for such Fiscal Year (or other period).<\/p>\n
(iii) Limitation on Allocations. Notwithstanding anything to the
\n ————————-
\n contrary contained herein, Net Profits, Net Losses and items thereof
\n arising with respect to a Portfolio Investment shall not be allocated to a
\n Member who has not made a Capital Contribution with respect to such
\n Portfolio Investment (unless such Member has a Carry Interest with respect
\n to such Portfolio Investment).<\/p>\n
(iv) Schedule C illustrates the intent of Section 9.2(a) by way
\n of a <\/p>\n
-19-<\/p>\n
hypothetical example.<\/p>\n
(b) Notwithstanding any other provision of this Agreement, (i) “partner
\nnonrecourse deductions” (as defined in Reg. ss. 1.704-2(i)), if any, of the
\nCompany shall be allocated to the Members that bear the economic risk of loss
\nwithin the meaning of Reg. ss. 1.704-2(i), and (ii) “nonrecourse deductions” (as
\ndefined in Reg. ss. 1.704-2(b)), if any, of the Company with respect to each
\nperiod as it relates to a particular Portfolio Investment shall be allocated
\namong the Members in proportion to their share of the Net Acquisition Cost of
\nsuch Portfolio Investment made by such Members, and to the extent that such
\nnonrecourse deductions do not relate to any particular Portfolio Investment, to
\nthe Members in accordance with the proportion of aggregate Capital Contributions
\nmade by each Member.<\/p>\n
(c) This Agreement shall be deemed to include “qualified income offset,”
\n“minimum gain chargeback” and “partner nonrecourse debt minimum gain chargeback”
\nprovisions within the meaning of Regulations under Section 704(b) of the Code.
\nAccordingly, notwithstanding any other provision of this Agreement, items of
\nincome or gain shall be allocated to the Members on a priority basis to the
\nextent and in the manner required by such provisions.<\/p>\n
(d) Subject to Sections 9.2(b), (c) and (e), if any items of income,
\nexpense or deduction are specially allocated pursuant to Section 9.2(b) or (c),
\nor the allocation of Net Loss or items of deduction or expense is limited by
\nSection 9.2(e), items of income, gain, deduction and expense, in subsequent
\nperiods, shall be specially allocated so that the net cumulative amount of all
\nitems allocated to each Member (taking into account any minimum gain or partner
\nnonrecourse debt minimum gain chargeback that would occur if the Company were to
\nliquidate) shall, to the extent possible, be equal to the amount that would have
\nbeen allocated to such Member without regard to Section 9.2(b), (c) or (e).<\/p>\n
(e) Notwithstanding any other provisions of this Agreement, no allocation
\nof Net Loss or items of deduction or expense shall be made to any Member to the
\nextent that the effect of such allocation would be to cause the Member to have a
\nnegative balance in its Capital Account, after taking into account any
\nadjustments, allocations or distributions described in Reg. ss. 1.704-
\n1(b)(2)(ii)(d)(4), (5) or (6), in excess of the maximum amount of such negative
\nbalance such Member would be obligated (or deemed obligated under the
\nRegulations) to contribute to the Company upon liquidation.<\/p>\n
9.3. Tax Allocations. (a) For tax purposes, all items of income, gain,
\n —————
\nloss, or deduction shall be allocated to the Members in the same manner as they
\nare allocated for purposes of maintaining Capital Accounts; provided, however,
\n ——– ——-
\nthat (i) if the Fair Market Value of any property of the Company differs from
\nits adjusted basis for tax <\/p>\n
-20-<\/p>\n
purposes, then items of income, gain, loss, deduction for tax purposes shall be
\nallocated among the Members in a manner that takes account of both the amount
\nand character of the variation between the adjusted basis of the property for
\ntax purposes and its Fair Market Value in the manner provided for under Section
\n704(c) of the Code using any method or methods determined by the Board of
\nManagers after reasonable consultation with Lofberg and (ii) the Board of
\nManagers may make such adjustments as it deems appropriate, in its discretion
\nafter reasonable consultation with Lofberg, to reflect the economic interests of
\nthe Members in the Company.<\/p>\n
(b) Items of credit shall be allocated among the Members in the manner
\nprovided in Reg.ss. 1.704-1(b)(4)(ii).<\/p>\n
ARTICLE 10<\/p>\n
DISTRIBUTIONS
\n ————-<\/p>\n
10.1. Distributions. (a) Subject to the provisions of this Article 10,
\n ————-
\nAvailable Cash shall be distributed from time to time as the Board of Managers
\nshall determine but not less often than annually; provided, that Available Cash
\n ——–
\narising by reason of the sale by the Company of a Portfolio Investment or by
\nreason of Section 8.3 shall be distributed within 30 days after receipt thereof
\nby the Company in accordance with Section 10.1(b). Pending distribution, all
\nAvailable Cash shall be invested in Short-Term Investments. Subject to this
\nArticle 10, other Company property, less such amounts as the Board of Managers
\ndeems necessary to meet current or future Company costs or obligations, shall be
\ndistributed at such time or times as the Board of Managers deems appropriate,
\nsubject to the restrictions described herein.<\/p>\n
(b) All Available Cash of the Company in respect of a Portfolio
\nInvestment, less, if the Portfolio Investment was Sold, expenses attributable to
\nsuch Sale (the “Proceeds” of such Portfolio Investment) shall be distributed as
\n ——–
\nfollows:<\/p>\n
(i) first, 100% to Merck until it has received an amount equal
\n —–
\n to all Attributable Carry Member Costs and Attributable Fees and Expenses
\n of all Portfolio Investments that have been Sold;<\/p>\n
(ii) second, 100% to the Contributing Members in proportion to
\n ——
\n their share of the Acquisition Cost of that Portfolio Investment until
\n they have received an amount equal to the Net Acquisition Cost of the
\n Portfolio Investment; and<\/p>\n
(iii) thereafter, subject to Section 10.1(c), all remaining
\n ———-
\n Proceeds to the Contributing Members in proportion to their share of the
\n Acquisition <\/p>\n
-21-<\/p>\n
Cost of such Portfolio Investment; provided, however, that
\n ——– ——-
\n Merck’s distribution pursuant to this Section 10.1(b)(iii) shall be
\n reduced by an amount equal to each Carry Member’s Applicable Carried
\n Interest in respect of such Portfolio Investment of Merck’s share of the
\n Proceeds distributable pursuant to this Section 10.1(b)(iii) (before
\n giving effect to this proviso) less the amount, if any, of such Carry
\n —-
\n Member’s Negative Carry Balance and such amount, if any, will be
\n distributed to such Carry Member.<\/p>\n
(c) Notwithstanding the foregoing, if a distribution in respect of a
\nPortfolio Investment is made and a Carry Member’s Applicable Carried Interest in
\nrespect of that Portfolio Investment later increases in accordance with the
\ndefinition of Applicable Carried Interest, the Company shall promptly make an
\nadditional distribution to such Carry Member and\/or Merck shall pay over to such
\nCarry Member an amount (or securities in the case of an in kind distribution)
\nequal to the difference between the distribution such Carry Member would have
\nbeen entitled to receive at the higher Applicable Carried Interest and the
\ndistribution previously made. In connection with any distribution, the Company
\nshall be entitled to withhold and set aside such reserves as the Board of
\nManagers may determine may be required to fund such subsequent retroactive
\nadjustments.<\/p>\n
(d) At the time final distributions are made upon the dissolution of the
\nCompany or upon a Carry Member ceasing to be a Carry Member in respect of all
\nPortfolio Investments, any amounts required to be contributed by such Member to
\nthe Company pursuant to Section 12.4, may be off set by the Company against any
\ndistributions required to be made by the Company to a Member pursuant to Section
\n10.1(b).<\/p>\n
(e) Notwithstanding the foregoing, if the aggregate distributions to a
\nMember during a Fiscal Year, and the three months following such Fiscal Year,
\nwould not otherwise equal or exceed the Tax Liability Amount, then on or prior
\nto the Tax Payment Date, the Company shall distribute the amount of such
\ndeficiency to such Member (the “Tax Distribution”). Tax Distributions shall be
\n —————-
\ntreated as advances on future distributions that would otherwise be made to such
\nMember, so that future amounts otherwise distributable to a Member shall be
\nreduced by the amount of any Tax Distribution. At the election of the Board of
\nManagers, in reasonable consultation with Lofberg, Tax Distributions may be made
\nin quarterly installments during the Fiscal Year.<\/p>\n
(f) Schedule C, illustrates the intent of Section 10.1(b) by way of a
\nhypothetical example.<\/p>\n
10.2. Certain Other Distributions.
\n —————————<\/p>\n
(a) If, at a time when Lofberg is Chief Executive Officer of the Company
\nor, thereafter, if Lofberg’s employment with Merck or an Affiliate of Merck to<\/p>\n
-22-<\/p>\n
act as Chief Executive Officer of the Company is terminated (i) at any time
\nwithout Cause or (ii) for any reason after the second anniversary of this
\nAgreement, a Portfolio Company closes a Qualified IPO and Lofberg recommends to
\nthe Board of Managers no later than 10 Business Days prior to the commencement
\nof the roadshow for such Qualified IPO selling 100% of the Company’s interest in
\nsuch Portfolio Company in such Qualified IPO and the Board of Managers rejects
\nsuch recommendation, then the Company shall distribute 100% of the Portfolio
\nInvestment in the Portfolio Company to the Members in accordance with Section
\n10.1(b), as soon as practicable following the date of such Qualified IPO (or if
\nrequested by the underwriters of such Qualified IPO, following the date the
\nCompany is no longer subject to any lock up restrictions), on the assumption
\nthat such Portfolio Investments were sold for the issue price under the
\nQualified IPO.<\/p>\n
(b) If, at a time when Lofberg is Chief Executive Officer of the Company
\nor, thereafter, if Lofberg’s employment with Merck or an Affiliate of Merck to
\nact as Chief Executive Officer of the Company is terminated (i) at any time
\nwithout Cause or (ii) for any reason after the second anniversary of this
\nAgreement, Lofberg recommends selling 100% of the Company’s Portfolio Investment
\nat the time when the entirety of such Portfolio Investment constitutes
\nMarketable Securities (a “Divestment Proposal”) and the Board of Managers
\n ———- ——–
\nrejects such Divestment Proposal, then<\/p>\n
(A) if the Portfolio Company is a Qualifying Issuer, the Company
\n shall distribute the securities of such Portfolio Company to the Members
\n in accordance with Section 10.1(b) within 10 Business Days following the
\n determination by the Board of Managers of the Fair Market Value of such
\n Portfolio Investments as of the Applicable Valuation Date, on the
\n assumption that such Portfolio Investment was sold for the Fair Market
\n Value determined by the Board of Managers as of the Applicable Valuation
\n Date; and<\/p>\n
(B) in all other cases, the Company shall promptly distribute to
\n the Other Investor Members their pro rata share of the securities of such
\n Portfolio Company (net of securities having a Fair Market Value equal to
\n their share of Attributable Carry Member Costs and Attributable Fees and
\n Expenses, assuming 100% of the Portfolio Investment was distributed in
\n accordance with clause (A) above) and following such distribution the
\n Other Investor Members shall have no further interest (other than as Carry
\n Members) in the portion of the Portfolio Investment retained by the
\n Company.<\/p>\n
(c) If, at a time when Lofberg is Chief Executive Officer of the Company,
\nLofberg recommends to the Board of Managers approval of a Bona Fide Third Party
\nOffer setting forth the price and other material terms of such Bona Fide Third
\nParty <\/p>\n
-23-<\/p>\n
Offer and the Board of Managers rejects such Bona Fide Third Party Offer,
\nthen, at the written request of Lofberg delivered to the Board of Managers
\nwithin 10 Business Days of such rejection, the Members shall be entitled to
\nreceive distributions in respect of their Interests in accordance with Section
\n10.1(b), at the election of the Board of Managers, either in cash or by
\ndistribution in kind within 30 Business Days following the demand by Lofberg, on
\nthe assumption that such Portfolio Investment were sold for the price set forth
\nin the Bona Fide Third Party Offer. Notwithstanding anything to the contrary, if
\na distribution is made pursuant to this Section 10.2(c), the Carry Members will
\nnot, except to the extent provided in Section 10.1(c) be entitled to any further
\ndistributions made by the Company pursuant to Section 10.1(b), or otherwise in
\nrespect of such Portfolio Investment (other than as Investor Members) and their
\nApplicable Carried Interest in respect thereof after the application of this
\nSection 10.2(c) shall be deemed to be zero.<\/p>\n
(d) If a Portfolio Investment has not been liquidated or distributed prior
\nto the tenth anniversary of this Agreement, the Board of Managers shall either
\n(i) cause such Portfolio Investment to be liquidated within 90 days or (ii)
\nvalued in accordance with Section 10.5 as of the Applicable Valuation Date. The
\nMembers shall be entitled to receive distributions in respect of their Interests
\n(A) in accordance with Section 10.1(b) in cash upon the final liquidation of all
\nPortfolio Investments being liquidated in the case of clause (i), and (B) at the
\nelection of the Board of Managers either in cash or by distribution in kind
\nwithin 10 Business Days following delivery by the Third Party Valuation Firm of
\nits report calculating the Fair Market Value of the remaining Portfolio
\nInvestments, on the assumption in such case that each unliquidated Portfolio
\nInvestment were sold for the Fair Market Value set forth in the valuation report
\n(the “Valuation Report”) in the case of clause (ii). Notwithstanding anything to
\n —————-
\nthe contrary, if a distribution is made pursuant to this Section 10.2(d), the
\nCarry Members will not be entitled to any further distributions made by the
\nCompany pursuant to Section 10.1(b) or otherwise in respect of such Portfolio
\nInvestment (other than as Investor Members) and their Applicable Carried
\nInterest in respect thereof after the application of this Section 10.2(d) shall
\nbe deemed to be zero.<\/p>\n
10.3 Distributions in Kind. (a) The Board of Managers shall have
\n ———————
\nauthority, but, except as required by Section 10.2, shall not be required to
\ndistribute in kind any non-cash assets held by the Company.<\/p>\n
(b) In the event of any distribution in kind, the value of the assets
\ndistributed shall be determined as of the Applicable Valuation Date in
\naccordance with Section 10.5 hereof. If the Carry Members will be entitled to
\nreceive a distribution in respect of their Applicable Carried Interests pursuant
\nto Section 10.2(d), the Fair Market Value of the assets to be distributed will
\nbe calculated by a Third Party Valuation Firm in accordance with the methodology
\nset forth in Section 10.5. A “Third Party Valuation Firm” shall mean any
\n ————————–
\nindependent nationally recognized investment banking firm, accounting firm or
\nappraisal firm selected by the Board of Managers and approved by<\/p>\n
-24-<\/p>\n
Lofberg, such approval not to be unreasonably withheld or delayed. The Company
\nshall bear all of the expenses of the Third Party Valuation Firm retained by the
\nCompany.<\/p>\n
(c) Except as required by Section 10.2, no determination by the Board of
\nManagers to obtain a valuation from a Third Party Valuation Firm in
\ncontemplation of an in-kind distribution shall obligate the Company to make any
\nsuch in-kind distribution.<\/p>\n
(d) Investments distributed in kind pursuant to this Agreement shall be
\ndistributed, to the extent reasonably practicable, pro rata to the Members
\nentitled thereto and shall be subject to such conditions and restrictions as are
\nrequired by applicable law or any contractual obligation or as were previously
\nimposed on the Company.<\/p>\n
10.4. Withholding Requirements. (a) Notwithstanding any other provision of
\n ————————
\nthis Agreement, the Board of Managers is authorized to take any action that it
\ndetermines to be necessary or appropriate to cause the Company to comply with
\nany withholding requirements imposed under Section 1446 or any other provision
\nof the Code or state, local or foreign law.<\/p>\n
(b) If the Code or any state, local or foreign law requires that the
\nCompany remit to the Internal Revenue Service (the “IRS”) or any other taxing
\n —
\nauthority any withholding tax with respect to, or for the account of, any Member
\n(in its capacity as a Member), the Board of Managers shall provide notice to
\nsuch Member of such obligation and such Member shall have the opportunity to
\nmake such payment on its own behalf. If such Member fails, or is not otherwise
\nable, to make such payment on its own behalf, the Company shall so remit to the
\nIRS or other taxing authority the full required amount of such withholding tax.
\nAny amount so remitted shall be credited against any distributions that would
\notherwise be made to such Member during such period or thereafter and any excess
\nof the amount so remitted over amounts so credited against distributions shall
\nbe treated as a recourse demand loan from the Company to the Member. For so long
\nas the Company is not dissolved and the Member remains a Member, unless
\notherwise paid, such loan shall be payable by credit against the first amounts
\nthat would otherwise be distributed to such Member (with any such payment being
\nallocated first to accrued and unpaid interest through the date of such payment)
\nbut may be prepaid in Cash by the Member, in whole or any part, at any time.<\/p>\n
10.5. Valuations. To the extent the assets of the Company, or any portion
\n ———-
\nthereof, are required to be valued for any purpose, including without limitation
\nthe calculation of distributions in respect of the Applicable Carried Interests,
\nsuch valuation shall be made by the Third Party Valuation Firm in the case of
\nSections 10.2(d) and 12.3(c) and in all other cases by the Board of Managers in
\naccordance with the following:<\/p>\n
(a) In determining the Fair Market Value on a given date of
\npublicly-traded securities for which market quotations are readily available (i)
\nany securities traded on a national securities exchange shall be valued at the
\naverage of the last trade <\/p>\n
-25-<\/p>\n
prices for the twenty Business Days prior to the valuation date on which trading
\nin such securities actually occurred on the exchange where they are primarily
\ntraded or, if the securities are not traded on such valuation date, then for the
\ntwenty Business Days prior to the immediately preceding date on which such
\nsecurities were traded on which trading in such securities actually occurred,
\nand (ii) any securities traded in the over-the-counter market shall be valued at
\nthe average of the closing bid prices last quoted for the twenty Business Day
\nperiod prior to the valuation date by NASDAQ or, if not quoted by NASDAQ, at the
\naverage last quote prices for the twenty Business Days prior to such valuation
\ndate on which trading in such securities actually occurred as quoted in a
\nrecognized list for over-the-counter securities or, if the securities are not
\nquoted on such valuation date (but are actively quoted in such recognized list),
\nthen for the twenty Business Days prior to the immediately preceding date on
\nwhich such securities were quoted on which trading in such securities actually
\noccurred; provided, that in the case of any publicly-traded securities, the
\n ——–
\ndetermination of Fair Market Value shall be adjusted downward to the extent that
\nthe Board of Managers or the Third Party Valuation Firm, as the case may be,
\nreasonably determines trading restrictions, block positions, thin trading or
\nother similar matters would materially adversely affect the realizable value of
\nsuch securities.<\/p>\n
(b) The Fair Market Value of all other securities or other assets of the
\nCompany shall be reasonably determined by the Board of Managers or the Third
\nParty Valuation Firm, as the case may be, acting in good faith based on, among
\nother things, public market comparables, private market transactions,
\nindependent appraisals and discounted cash flow analyses.<\/p>\n
(c) Liabilities shall be determined based upon GAAP by the Board of
\nManagers or the Third Party Valuation Firm, in consultation with the Board of
\nManagers and the Carry Members. The Board of Managers or the Third Party
\nValuation Firm, in consultation with the Board of Managers, as the case may be,
\nmay in its discretion provide reserves for estimated accrued expenses,
\nliabilities or contingencies, (including for the purpose specified in Section
\n10.1(c)) even if such reserves are not required by GAAP. If such reserves are
\nlater reversed, the amounts released shall be distributed to the Member or
\nMembers who would have been entitled to receive distributions of such amounts if
\nthe reversed portion of the reserve had not been established.<\/p>\n
ARTICLE 11<\/p>\n
TRANSFER OF MEMBERSHIP INTERESTS
\n ——————————–<\/p>\n
11.1. Transfers. (a) Subject to Section 11.1(b) and (c), no Member may
\n ———
\nsell, transfer, assign, pledge, hypothecate or otherwise dispose of (“Transfer”)
\nall or any part of its Membership Interests in the Company (including, without
\nlimitation, its right to <\/p>\n
-26-<\/p>\n
receive a share of profits, losses and other allocations and distributions of
\nthe Company). Any purported Transfer of any interest in the Company in violation
\nof this Article 11 shall be null and void.<\/p>\n
(b) Notwithstanding the provisions of Section 11.1(a), Merck shall be
\npermitted to Transfer its interests in the Company to any direct or indirect
\nwholly owned subsidiary of Merck & Co., Inc., provided that such transferee has
\nagreed in writing with the Company to be bound by the provisions of this
\nAgreement as a Member.<\/p>\n
(c) Notwithstanding the provisions of Section 11.1(a), each Other Investor
\nMember and Carry Member shall be permitted to grant participations in such
\nMember’s Membership Interests to his or her heirs or to a Family Trust for
\nestate planning purposes, but no such participant shall have any rights as a
\nMember or any consent rights under this Agreement.<\/p>\n
11.2. Ownership of Membership Interests. The Company and the Board of
\n ———————————
\nManagers shall be entitled to treat the record owner of any Membership Interests
\nas the absolute owner thereof in all respects until such time as a written
\ninstrument evidencing the Transfer of such Membership Interests has been
\nreceived by the Board of Managers and recorded on the books of the Company.<\/p>\n
ARTICLE 12<\/p>\n
WITHDRAWAL; DISSOLUTION AND LIQUIDATION
\n —————————————<\/p>\n
12.1. Withdrawal of Members. (a) Except as expressly provided for in
\n ———————
\nArticle 11, no Member may withdraw from the Company.<\/p>\n
(b) A Member shall be deemed to have withdrawn from the Company upon an
\nEvent of Bankruptcy of such Member or any dissolution or liquidation of such
\nMember.<\/p>\n
12.2. Events of Dissolution. The Company shall be dissolved upon the
\n ———————
\nearliest to occur of the following: (a) an Event of Bankruptcy of the Company;
\n(b) at the election of Merck if Lofberg shall cease to be the Chief Executive
\nOfficer of the Company or (c) the unanimous approval of the Investor Members to
\ndissolve the Company for any reason, including without limitation following the
\ndisposition of all Portfolio Investments.<\/p>\n
12.3. Liquidation. If the Company is dissolved pursuant to Section 12.2,
\n ———–
\nthe Board of Managers (or any liquidating trustee appointed by the Board of
\nManagers or, in the event of a dissolution pursuant to Section 12.2(b), a
\nliquidating trustee appointed by Merck) shall (i) promptly file any notice,
\npublish any advertisement or take any other<\/p>\n
-27-<\/p>\n
action required under applicable law to effect such dissolution, (ii) commence
\nto wind up the affairs of the Company and liquidate the assets of the Company
\nand (iii) apply and distribute the proceeds of such liquidation and any
\nundistributed cash no later than the end of the Fiscal Year following the Fiscal
\nYear in which such liquidation occurs in accordance with the terms hereof and in
\nthe following order of priority:<\/p>\n
(a) First, to pay and discharge, or make provisions or establish reserves
\nfor, the claims of all creditors of the Company and to pay the expenses of
\nliquidation;<\/p>\n
(b) Second, to establish such reserves as the Board of Managers or
\nliquidating trustee deems reasonably necessary for any contingent or unforeseen
\nliabilities or obligations of the Company; such reserve may be paid over by the
\nBoard of Managers or liquidating trustee to any attorney-at-law, or other party
\nacceptable to the Board of Managers or liquidating trustee, as escrow agent to
\nbe held for disbursement in payment of any such liabilities or obligations and,
\nat the expiration of such period as shall be deemed advisable by the Board of
\nManagers or liquidating trustee, for distribution of the balance in the manner
\nhereinafter provided in this Section 12.3; and<\/p>\n
(c) Third, to make distributions to the Members in accordance with Section
\n10.1(b) (including, without limitation, applying the valuation methodology set
\nout in Section 10.5 in relation to distributions in kind, if any).<\/p>\n
12.4. Return of Excess Distributions to Investor Members. If, at the time
\n ————————————————–
\nfinal distributions are made upon the dissolution of the Company or upon a Carry
\nMember ceasing to have an Applicable Carried Interest in any outstanding
\nPortfolio Investments, after giving effect to all distributions to that Carry
\nMember calculated pursuant to Sections 10.1(b), 10.1(c) and 12.3, but before
\ngiving effect to this Section 12.4, such Carry Member will have received an
\nExcess Carry Amount, such Carry Member shall contribute to the Company, without
\ninterest, for distribution to Merck, an amount that equals the Excess Carry
\nAmount, reduced by the amount of federal, state, local and foreign tax
\nobligations borne by such Carry Member with respect to the Excess Carry Amount
\nas reasonably determined by such Carry Member (it being acknowledged and agreed
\nthat in making such determination such Carry Member shall assume that such
\namounts were earned by an individual paying income taxes at the Carry Member’s
\nApplicable Tax Rate), and increased by the actual federal, state, local and
\nforeign tax benefits realized by such Carry Member or its beneficial owners with
\nrespect to the repayment of any amount pursuant to this Section 12.4 as
\nreasonably determined by such Carry Member (it being acknowledged and agreed
\nthat in making such determination such Carry Member shall (i) assume that such
\namounts were paid by an individual paying income taxes at the Carry Member’s
\nApplicable Tax Rate, (ii) shall include any tax benefits realized by such Carry
\nMember in connection with receiving a reduced distribution pursuant to Section
\n10.1(d)) and (iii) shall only be deemed actually used after all other applicable
\ntax benefits that could have been used by such Carry Member have <\/p>\n
-28-<\/p>\n
been deemed to be used; provided, however, that for the purposes of computing
\nsuch benefits, (a) any securities received by the Carry Member as a distribution
\nfrom the Company and held by such Carry Member shall be marked to market, and
\n(b) the gain or loss, as the case may be, with respect to such securities, shall
\nbe taken into account in determining the tax benefits realized by such Carry
\nMember as if such securities had been sold in fully taxable transactions.<\/p>\n
ARTICLE 13<\/p>\n
TAX MATTERS; CERTAIN REPRESENTATIONS OF MEMBERS<\/p>\n
13.1. Designation of Tax Matters Member. Merck is hereby designated as
\n ———————————
\nthe “tax matters partner” (in such capacity, the “Tax Matters Member”) under
\n ——————
\nSection 6231(a)(7) of the Code to manage, at the cost and expense of the
\nCompany, administrative tax proceedings conducted at the Company level by the
\nIRS with respect to Company matters. The Members are specifically directed and
\nauthorized to take whatever steps the Tax Matters Member, in its sole discretion
\ndeems necessary or desirable to perfect such designation, including, without
\nlimitation, filing any forms or documents with the IRS and taking such other
\naction as may from time to time be required under Regulations and cooperating
\nwith the Tax Matters Member in connection with any tax audit, investigation or
\nlitigation.<\/p>\n
13.2. Tax Returns. The Tax Matters Member shall cause to be prepared
\n ———–
\nand filed, after reasonable consultation with Lofberg and at the cost and
\nexpense of the Company, all necessary Company tax returns, and the Members (and
\ntheir Affiliates) shall prepare their tax returns consistently with such Company
\ntax returns.<\/p>\n
13.3. Taxable Year. The taxable year of the Company shall be the
\n ————
\ncalendar year or such other year as may be reasonably determined by the Board of
\nManagers.<\/p>\n
13.4. Tax Elections. All tax elections required or permitted to be
\n ————-
\nmade under the Code and any applicable state, local or foreign tax law shall be
\nmade in the discretion of the Tax Matters Member after reasonable consultation
\nwith Lofberg, and any decision with respect to the treatment of Company
\ntransactions on the Company’s federal, state, local or foreign tax returns shall
\nbe made in such manner as may be approved by the Tax Matters Member after
\nreasonable consultation with Lofberg. Each of the Carry Members shall file a
\ntimely election in accordance with the rules set forth in Reg. (S)1.83-2,
\nwith respect to his or her receipt of the Carry Interest.<\/p>\n
13.5. Certain Representations of Members. (a) Each Member, severally
\n ———————————-
\nand not jointly, as to itself only, hereby represents, warrants and acknowledges
\nto the Company and the other Members as follows:<\/p>\n
-29-<\/p>\n
(i) Such Member has full power and authority to execute
\n and deliver this Agreement and to carry out its obligations
\n hereunder in accordance with the terms and provisions hereof. The
\n execution, delivery and performance of this Agreement and the
\n consummation of the transactions contemplated hereby have been
\n duly authorized by all requisite action, corporate or otherwise,
\n on the part of such Member.<\/p>\n
(ii) Such Member is a “United States person” within the
\n meaning of Section 7701(a)(30) of the Code.<\/p>\n
(iii) Such Member is acquiring its Membership Interests
\n solely for investment, for such Member’s own account and not with
\n a view to, or for resale in connection with, the distribution or
\n other disposition thereof.<\/p>\n
(iv) Such Member has not pledged, hypothecated or
\n encumbered his or her Membership Interest or entered into any
\n agreement to do so.<\/p>\n
(b) Each Member acknowledges that its Membership Interests may
\nbe construed as “securities” for purposes of federal, state or local securities
\nlaws or regulations. Each Member further acknowledges and represents that it has
\nbeen advised that the membership interests of the Company have not been
\nregistered under the Securities Act of 1933, as amended.<\/p>\n
(c) Each Member acknowledges and represents that it is
\nexperienced in evaluating companies such as the Company, is able to fend for
\nitself in the transactions contemplated by this Agreement, has such knowledge
\nand experience in financial and business matters as to be capable of evaluating
\nthe merits and risks of its investment, and has the ability to bear the economic
\nrisks of its investment. Each Member further represents that it has had access,
\nduring the course of the transactions and prior to its purchase of Membership
\nInterests, to all such information as it deemed necessary or appropriate (to the
\nextent the Company possessed such information or could acquire it without
\nunreasonable effort or expense) and that it has had, during the course of the
\ntransactions and prior to its purchase of Membership Interests, the opportunity
\nto ask questions of, and receive answers from, the Company concerning the terms
\nand conditions of the offering and to obtain additional information (to the
\nextent the Company possessed such information or could acquire it without
\nunreasonable effort or expense) necessary to verify the accuracy of any
\ninformation furnished to it or to which it had access.<\/p>\n
(d) Each Member acknowledges and represents that it understands
\nthat the Membership Interests may not be sold, transferred or otherwise disposed
\nof without registration under the 1933 Act or an exemption therefrom, and that
\nin the absence of an effective registration statement covering the Membership
\nInterests or an available<\/p>\n
-30-<\/p>\n
exemption from registration under the 1933 Act, the Membership Interests must be
\nheld indefinitely.<\/p>\n
(e) Each Member acknowledges and represents that it understands
\nthat no public market now exists for any of the securities issued by the Company
\nand that there is no assurance that a public market will ever exist for the
\nMembership Interests.<\/p>\n
ARTICLE 14<\/p>\n
BOOKS OF ACCOUNT; REPORTS
\n ————————- <\/p>\n
14.1. Books of Account. The Board of Managers shall keep, or
\n —————-
\ncause to be kept, accurate and complete records and books of account of all
\ntransactions of the Company. The Company books and records shall be maintained
\nat the principal place of business of the Company and shall be available for
\ninspection and examination, for a proper purpose and at reasonable times during
\nusual business hours, by Members or their respective duly authorized
\nrepresentatives. Except as otherwise expressly provided in this Agreement, such
\ninformation shall not be disclosed to third parties and shall be used for
\nCompany purposes only.<\/p>\n
14.2. Reports to Members. As promptly as practicable following
\n ——————
\nthe end of each Fiscal Year, the Board of Managers shall cause to be prepared
\nand mailed to each Member a report setting forth as of the end of such Fiscal
\nYear (i) the assets and liabilities of the Company, (ii) the Net Profit and Net
\nLoss of the Company and (iii) such Member’s Capital Account balance and the
\nmanner of calculation thereof. After the end of each Fiscal Year, the Board of
\nManagers shall cause to be prepared and delivered, as promptly as practicable, a
\nfederal income tax form K-1 for each Member.<\/p>\n
14.3. Final Accounting. Following the date on which the Company
\n —————-
\nis dissolved and liquidated pursuant to Article 12, an independent accounting
\nfirm selected by the Board of Managers shall commence to take an account of the
\naffairs and financial transactions of the Company and shall prepare a statement
\nsetting forth the financial position of the Company as of the close of business
\non the date the dissolution and liquidation of the Company is completed pursuant
\nto Article 12 establishing reasonable reserves for contingencies, showing the
\namount of each Member’s share of the profits or losses of the Company through
\nsuch date and stating each Member’s Capital Account balance on such date.<\/p>\n
-31-<\/p>\n
ARTICLE 15<\/p>\n
LIMITATION ON LIABILITY; INDEMNIFICATION
\n —————————————-<\/p>\n
15.1. Limitation on Members’ Liability. Except as otherwise
\n ——————————–
\nrequired by the LLC Act, the debts, obligations and liabilities of the Company,
\nwhether arising in contract, tort or otherwise, shall be solely the debts,
\nobligations and liabilities of the Company, and none of the Members or any
\nManagers or Officers appointed pursuant to Article 6 hereof (collectively, the
\n“Protected Parties”) shall be obligated personally for any such debt, obligation
\n —————–
\nor liability of the Company solely by reason of being a Member, Manager or
\nOfficer, or by reason of participating in the management of the Company. The
\nfailure of the Company to observe any formalities or requirements relating to
\nthe exercise of its powers or management of its business or affairs under the
\nLLC Act or this Agreement shall not be grounds for imposing personal liability
\non the Members for liabilities of the Company.<\/p>\n
15.2. Limitation on Protected Parties’ Liability. None of the
\n ——————————————
\nProtected Parties shall have any liability to the Company or to any other Member
\nor to any shareholders, members, principals, officers, directors or employees of
\nany other Member for any Damages claimed by reason of any act or omission to act
\non behalf of the Company or otherwise in connection with this Agreement,
\nprovided that this release from liability shall not apply to the extent that
\nsuch action or failure to act has been found by a final judgment of a court of
\ncompetent jurisdiction to have constituted gross negligence or willful
\nmisconduct.<\/p>\n
15.3. Indemnification of the Protected Parties. The Company shall
\n —————————————-
\nindemnify and hold harmless the Protected Parties for any Damages incurred by
\nany of them by reason of any act or omission or alleged act or omission arising
\nout of the activities of the Protected Parties in connection with this
\nAgreement, any Portfolio Investment, or the Company provided that this
\nindemnification shall not apply to the extent that such action or failure to act
\nhas been found by a final judgment of a court of competent jurisdiction to have
\nconstituted gross negligence or willful misconduct of the applicable Protected
\nParties, or with respect to which indemnification is not obtainable under the
\nsecurities laws of the United States or any other law. If the foregoing
\nindemnity is unavailable to any Protected Party, then the Company shall
\ncontribute to the maximum extent permitted by law to the amount paid or payable
\nby the Protected Party.<\/p>\n
15.4. No Liability for Acts of Agents. None of the Protected
\n ——————————-
\nParties shall be liable for any act or omission of any third party with respect
\nto the Company as long as the same is retained by the Board of Managers in good
\nfaith and with reasonable care and diligence.<\/p>\n
-32-<\/p>\n
15.5. General. (a) The termination of any proceeding by settlement shall
\n ——-
\nnot, of itself, create a presumption that a Protected Party acted in a manner
\nwhich constituted gross negligence or willful misconduct. The right of any
\nProtected Party to the indemnification provided herein shall be cumulative with,
\nand in addition to, any and all rights to which such Protected Party may
\notherwise be entitled by contract or as a matter of law or equity and shall
\nextend to its successors.<\/p>\n
(b) All judgments against the Company and a Protected Party, with respect
\nto which a Protected Party is entitled to indemnification, shall first be
\nsatisfied from Company assets to the extent available.<\/p>\n
(c) To the extent that insurance from third parties has been obtained and
\nis available in respect of any Damages, the Board of Managers will use its best
\nefforts to have such Damages paid out of the proceeds of such insurance rather
\nthan having the Company make any payments pursuant to the indemnification
\nobligations contained herein; provided, however, that if such proceeds are not
\n ——– ——-
\nreadily available, the Board of Managers shall cause the Company to pay such
\nDamages, in which event the Company will be entitled to reimbursement therefor
\nout of the proceeds of insurance when and if obtained.<\/p>\n
15.6. Survival. The provisions of this Article 15 shall survive the
\n ——–
\ntermination of this Agreement and the dissolution and liquidation of the
\nCompany.<\/p>\n
ARTICLE 16<\/p>\n
MISCELLANEOUS
\n ————-<\/p>\n
16.1. Special Power of Attorney. Each Member hereby irrevocably makes,
\n ————————-
\nconstitutes and appoints the Board of Managers, and such other Person or Persons
\nas the Board of Managers may designate, with full power of substitution, its
\ntrue and lawful representative and attorney-in-fact (acting in such capacity,
\nthe “Attorney-in-Fact”), in the name, place and stead of such Member, with the
\n —————-
\npower from time to time to make, execute, sign, acknowledge, swear to, verify,
\ndeliver, record, file and\/or publish: (a) all certificates and other instruments
\nwhich the Board of Managers may deem appropriate, to form, qualify or continue
\nthe Company as a limited liability company in the State of Delaware, and all
\nother jurisdictions in which the Company conducts or plans to conduct business
\nand to change the name of the Company; (b) all conveyances and other instruments
\nwhich the Board of Managers may deem appropriate to reflect the dissolution and
\ntermination of the Company pursuant to the terms hereof, including any writing
\nrequired by the LLC Act to cancel the Company; and (c) a certificate of assumed
\nname and such other certificates and instruments as may be necessary under the
\nfictitious or assumed name statutes from time to time in effect in the State of
\nDelaware, and all other jurisdictions in which the Company conducts or plans to
\nconduct business. <\/p>\n
-33-<\/p>\n
This power-of-attorney is a special power-of-attorney and is coupled with an
\ninterest in favor of the Attorney-in-Fact and as such (i) shall be irrevocable,
\nand (ii) may be exercised for such Member by a facsimile signature of the
\nAttorney-in-Fact.<\/p>\n
16.2. Amendments. This Agreement may not be amended without the written
\n ———-
\nconsent of each of the following: (i) Merck, and (ii) the Executive Agent;
\nprovided, however, that no amendment to this Agreement shall (A) reduce the
\n——– ——-
\ndistributions to which a Member is entitled under this Agreement or extend the
\ntime for making such distributions or the form or currency in which such
\ndistributions are made or adversely affect the rights of such Member under
\nSection 5.5(c), 8.3 or 12.4, without the consent of each Member affected
\nthereby, or (B) adversely affect the rights of Lofberg under Article 7 or
\nSection 5.5, 6.1(b)(i), 6.4, 6.5, 6.13, 8.1(d), 8.5, 9.3(a), 10.2(a), (b) or
\n(c), 13.2, 13.4 or this Section 16.2 of the Agreement, without Lofberg’s consent
\nor (C) adversely affect the rights of the Other Investor Members under Section
\n8.2(d) through (h) without the consent of the majority of the Other Members.<\/p>\n
16.3. Binding Effects; Benefits. This Agreement shall be binding upon and
\n ————————-
\ninure to the benefit of the Members hereto and their legal representatives and
\npermitted successors, as applicable. No Person, other than the Members, shall be
\nentitled to any benefits under this Agreement, except as otherwise expressly
\nprovided herein.<\/p>\n
16.4. Headings. The article, section and other headings of this Agreement
\n ——–
\nare for reference purposes only and shall not affect the meaning or
\ninterpretation of this Agreement.<\/p>\n
16.5. Counterparts. This Agreement may be executed in any number of
\n ————
\ncounterparts, each of which shall be deemed to be an original and all of which
\ntogether shall be deemed to be one and the same agreement.<\/p>\n
16.6. Grammatical Construction. Whenever the context may require, any
\n ————————
\npronouns used herein shall include the corresponding masculine, feminine and\/or
\nneuter forms, and the singular form of nouns and pronouns shall include the
\nplural and vice versa.<\/p>\n
16.7. Separability. Any term or provision of this Agreement which is
\n ————
\ninvalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
\nineffective to the extent of such invalidity or unenforceability without
\nrendering invalid or unenforceable the remaining terms or provisions of this
\nAgreement or affecting the validity or enforceability of any of the terms or
\nprovisions of this Agreement in any other jurisdiction.<\/p>\n
16.8. Waiver. No waiver of any breach or condition of this Agreement shall
\n ——
\nbe deemed to be a waiver of any other subsequent breach or condition, whether of
\nlike or different nature.<\/p>\n
-34-<\/p>\n
16.9. Entire Agreement. Other than the employment agreements of even date
\n —————-
\nherewith between Merck and Lofberg and Merck and Cooper and the Former
\nAgreements referred to therein, this Agreement constitutes the entire agreement
\namong the parties hereto and supersedes any prior agreements, understandings and
\narrangements, oral or written, among the parties hereto.<\/p>\n
16.10. Notices. (a) Any notice or other communication in connection with
\n ——-
\nthis Agreement may be made in writing delivered personally or by courier, or
\nsent by facsimile transmission (with confirmation slip showing receipt at
\ncorrect number) or by certified or registered mail and shall be addressed to the
\nintended recipient at its address or number initially specified as follows:<\/p>\n
if to the Board of Managers:<\/p>\n
Merck Capital Ventures, LLC
\n c\/o Merck & Co. Inc.
\n 1 Merck Drive
\n Whitehouse Station, NJ 08889
\n Fax No.: (908) 735 1244
\n Attn: Ken Frazier<\/p>\n
if to the Members:
\n at the addresses set forth in Schedule A.<\/p>\n
(b) The addresses specified above may be changed by either party at any
\ntime in writing delivered to the other party in accordance with this Section
\n16.10. Any such notice is deemed to be given as follows: (i) if in writing and
\ndelivered in person or by courier, on the date when it is delivered; (ii) if by
\nfacsimile, when received at correct number (proof of which shall be an original
\nfacsimile transmission confirmation slip or equivalent); or (iii) if sent by
\ncertified or registered mail (airmail, if overseas) or the equivalent (return
\nreceipt requested), on the date that mail is delivered or its delivery is
\nattempted, unless the date of that delivery (or attempted delivery) or that
\nreceipt, as applicable, is not a working day in the recipient’s city or that
\ncommunication is delivered (or attempted) or received, as applicable, after the
\nclose of business on a working day in the recipient’s city in which case that
\ncommunication shall be deemed given and effective on the first following day
\nthat is a working day in the recipient’s city.<\/p>\n
16.11. Insurance. The Board of Managers may cause the Company to purchase
\n ———
\nand maintain, at the expense of the Company, insurance on behalf of the Company
\nor its Members or any Officer, Manager or agent of the Company against any
\nliability asserted against any of them or incurred by any of them in any such
\ncapacity or <\/p>\n
-35-<\/p>\n
arising out of their status as such, whether or not the Company would have the
\npower to indemnify any of them against such liability under the provisions of
\nthis Agreement.<\/p>\n
16.12. Disclosure of Investment. The Company and each of the Members
\n ————————
\nagree, and each Member and the Board of Managers will use reasonable best
\nefforts to procure that any Portfolio Company in which the Company is to make a
\nPortfolio Investment will agree, that, from the date hereof, no public release
\nor announcement concerning the transactions contemplated by this Agreement,
\nincluding without limitation, the formation of the Company and the consummation
\nof a Portfolio Investment in a Portfolio Company (or the contemplation thereof),
\nshall be issued by any party without the prior consent of Merck in its sole
\ndiscretion except (i) as such release or announcement may be required by
\n ——
\napplicable securities law or the rules or regulations of the United States
\nSecurities and Exchange Commission, (ii) if a Portfolio Company reasonably
\nconsiders that such a public release or announcement is in the best interests of
\nthe Portfolio Company, in which case the party required or electing to make the
\nrelease or announcement shall make its reasonable best efforts to allow Merck
\nreasonable time to comment on such release or announcement in advance of such
\nissue or (iii) if such public release or announcement does not include a
\nreference to Merck or any of its Affiliates or to the Merck name.<\/p>\n
16.13. Arbitration. (a) Except for determinations of whether Protected
\n ———–
\nParties are entitled to a release from liability or indemnification in
\naccordance with Sections 15.2 and 15.3, any controversy, dispute or claim
\narising under this Agreement or any breach thereof shall be settled by
\narbitration conducted in accordance with this Section 16.13 in the County of New
\nYork, in accordance with the then existing rules of the American Arbitration
\nAssociation, and judgment upon any award rendered by the arbitrator may be
\nentered by any United States federal or state court having jurisdiction thereof,
\nprovided that the foregoing shall not limit the Company’s right to seek an
\ninjunction or other equitable relief. Any such arbitration shall be conducted by
\na single arbitrator, and, in the case of any dispute with respect to accounting
\nissues, the arbitrator (the “Arbitrator”) shall be a partner of a “Big Five”
\n ———-
\naccounting firm other than the Company’s accountants. If the parties are unable
\nto agree upon an arbitrator within 5 Business Days of any Member requesting the
\nappointment thereof, then an arbitrator shall be appointed in accordance with
\nthe rules of the American Arbitration Association. The parties intend that this
\nagreement to arbitrate be valid, enforceable and irrevocable and that any
\ndetermination reach pursuant to the foregoing procedure shall be final and
\nbinding on the parties absent fraud. Each party shall bear their own costs and
\nexpenses of any such arbitration and all of the fees and expenses of the
\narbitrator shall be paid as to 50% by Merck and 50% by the other parties to the
\nArbitration in proportion to their respective Maximum Amounts.<\/p>\n
(b) A party seeking to enforce its rights pursuant to this Section 16.13
\nshall submit to the Arbitrator, with a copy sent to all other Members to the
\ndispute, a <\/p>\n
-36-<\/p>\n
notice of the existence of the dispute and a brief description of the action
\ngiving rise to the dispute (such submission, a “Dispute Notice”).
\n ————–<\/p>\n
(c) No later than the close of business on the second Business Day
\nfollowing submission of the Dispute Notice to the Arbitrator, representatives of
\nthe relevant Members shall meet in person or by teleconference with the
\nArbitrator and at such meeting the Arbitrator shall determine the process by
\nwhich the dispute (including scheduling presentations to him) shall be resolved
\nwithin 20 Business Days following submission of the Dispute Notice to him
\n(subject to extension for good cause). The relevant Members shall provide the
\nArbitrator with all the information the Arbitrator deems necessary within the
\ntime period specified by the Arbitrator.<\/p>\n
(d) The Arbitrator shall deliver a written report to the relevant
\nMembers and a copy to the Company of his determination as to the dispute by the
\ntenth Business Day following submission of the Dispute Notice to him (subject to
\nextension for good cause). Such report shall set forth the basis for such
\ndetermination and shall constitute an arbitral award that is final, binding and
\nunappealable under the Federal Arbitration Act, 9 U.S.C. (S)(S) 1 et seq. (the
\n“FAA”).
\n —<\/p>\n
16.14. Appointment of Executive Agent. Until his successor as Executive
\n ——————————
\nAgent shall have been designated in the manner hereafter provided and, in any
\nevent, for so long as he is the Chief Executive Officer of the Company, Lofberg
\nshall act as the sole agent (the “Executive Agent”) for each Carry Member and
\neach Other Investor Member (collectively, the “Non-Merck Members”) and shall,
\n —————–
\nexcept as provided in Sections 5.5(c), 16.2 and this Section 16.14 be authorized
\nto exercise all rights of the Non-Merck Members hereunder. Except as provided in
\nSections 5.5(c), 16.2 and this Section 16.14, the Executive Agent will have sole
\npower and authority to take any action on behalf of the Non-Merck Members
\npursuant to this Agreement, including delivering any notice or granting any
\nwaiver or consent hereunder, and Merck shall be entitled to rely on any action
\ntaken by the Executive Agent as being taken on behalf of any or all of the Non-
\nMerck Members as the case requires. Except as provided in Sections 5.5(c), 16.2
\nand this Section 16.14, the rights of the Non-Merck Members under this Agreement
\nshall be exercised only by the Executive Agent on behalf of such Non-Merck
\nMembers and no such Non-Merck Member shall be separately authorized to exercise
\nany such rights. Any notice required to be delivered to any Non-Merck Member
\nshall be deemed delivered if delivered to the Executive Agent. If Lofberg ceases
\nto be Chief Executive Officer of the Company, a majority of the Carry Members
\nmay from time to time, by written notice to the Company and Merck, appoint a
\nreplacement Executive Agent, who shall serve as Executive Agent until replaced
\nas provided in this sentence.<\/p>\n
16.15. Payments on Business Days. Any payment required to be made
\n ————————-
\nhereunder on a day which is not a Business Day shall be made on the next
\nsucceeding Business Day.<\/p>\n
-37-<\/p>\n
16.16. Governing Law. This Agreement shall be governed by and construed
\n ————-
\nboth as to validity and enforceability in accordance with the laws of the State
\nof Delaware, without regard to the conflict of laws provisions thereof.<\/p>\n
[Remainder of Page is Intentionally Blank]<\/p>\n
-38-<\/p>\n
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
\nthe date first above written.<\/p>\n
Merck-Medco Managed Care, L.L.C.<\/p>\n
By: ________________________________________
\n Name:
\n Title:<\/p>\n
—————————————-
\n Per G.H. Lofberg<\/p>\n
—————————————
\n James Cooper<\/p>\n
-39-<\/p>\n
APPENDIX A
\n ———-<\/p>\n
DEFINITIONS
\n ———– <\/p>\n
-1-<\/p>\n
As used in the foregoing Agreement, the following terms shall have the
\nmeanings set forth below:<\/p>\n
“Acquisition Cost” means the amount of Capital Contributions invested
\n —————-
\nin a Portfolio Investment, excluding any Fees and Expenses incurred in
\nconnection therewith.<\/p>\n
“Affiliate” means, with respect to any Person, any other Person,
\n ———
\ndirectly or indirectly, through one or more intermediaries, controlling,
\ncontrolled by, or under common control with such Person. The term “control,” as
\nused in the immediately preceding sentence means, with respect to any Person,
\nthe possession, directly or indirectly, of the power to direct or cause the
\ndirection of the management or policies of the controlled Person.<\/p>\n
“Agreement” shall have the meaning set forth in the Recitals.
\n ———<\/p>\n
“Applicable Carried Interest” means:
\n —————————<\/p>\n
(a) with respect to Lofberg, (i) from the date of this Agreement to
\nthe first anniversary of this Agreement, 0%, (ii) from and after the first
\nanniversary of this Agreement to the second anniversary of this Agreement, 6%,
\nand (iii) thereafter, 12%;<\/p>\n
(b) with respect to Cooper, (i) from the date of this Agreement to
\nthe first anniversary of this Agreement, 0%, (ii) from and after the first
\nanniversary of this Agreement to the second anniversary of this Agreement,
\n1.25%, and (iii) thereafter, 2.5%;<\/p>\n
(c) with respect to any other Carry Member, as determined by the
\nBoard of Managers and set forth in a resolution of the Board, provided, however,
\nthat the Applicable Carried Interest of a Carry Member shall be 0% in respect of
\nany Portfolio Investment:<\/p>\n
(1) made or committed to be made by the Company prior to the Start
\n Date for such Carry Member; or<\/p>\n
(2) made by the Company after the End Date for such Carry Member,
\n and provided further, that:<\/p>\n
(A) in the case of a Carry Member whose employment by Merck or any
\n of its Affiliates is terminated without Cause, or as a result of
\n such Carry Member’s Death or Disability or, in the case of
\n Lofberg, if Lofberg terminates his employment with the Company
\n for Good Reason, the Applicable Carried Interest of such Carry
\n Member in respect of any Portfolio Investment made on or after
\n the Start Date and on or before the End Date for such Carry
\n Member, shall be such<\/p>\n
-1-<\/p>\n
Carry Member’s Maximum Amount; and<\/p>\n
(B) in the case of a Carry Member whose employment by Merck or any of
\n its Affiliates is terminated for any reason other than the
\n reasons set out in paragraph (A) of this definition, the
\n Applicable Carried Interest of such Carry Member in respect of
\n any Portfolio Investment made on or after the Start Date and on
\n or before the End Date for such Carry Member, shall be the
\n Applicable Carried Interest in effect at the End Date for such
\n Carry Member.<\/p>\n
“Applicable Employer” shall have the meaning set forth in Section 8.5.
\n ——————-<\/p>\n
“Applicable Portfolio Investment” is defined in the definition of
\n ——————————-
\nNegative Carry Balance.<\/p>\n
“Applicable Tax Rate” in respect of a Member, means that Member’s
\n ——————-
\nmarginal tax rate for the applicable Fiscal Year, taking into account, where
\napplicable, the deductibility of state and local taxes paid for federal tax
\npurposes, such Member’s eligibility for a lower rate on long-term capital gains,
\nand any preferential rate or exemption to which such Member is actually
\nentitled.<\/p>\n
“Applicable Valuation Date” means:
\n ————————-<\/p>\n
(a) in the case of Section 10.2(b), the 20\/th\/ Business Day following
\nthe date the Divestment Proposal is recommended to the Board of Managers by
\nLofberg; and<\/p>\n
(b) in the case of Section 10.2(d), a date mutually agreed to by the
\nMembers, or if no valuation date is agreed upon, December 31, 2010.<\/p>\n
“Associate” has the meaning set forth in Rule 12b-2 under the
\n ———
\nSecurities Exchange Act of 1934.<\/p>\n
“Attorney-in-Fact” shall have the meaning set forth in Section 16.1.
\n —————-<\/p>\n
“Attributable Carry Member Costs” shall mean, with respect to any
\n ——————————-
\nPortfolio Investment, an amount equal to the cumulative previously unrecovered
\nCarry Member Costs incurred during the Expenses Period multiplied by a fraction,
\n(x) the numerator of which is the Acquisition Cost of such Portfolio Investment
\nand (y) the Denominator of which is (i) the aggregate Acquisition Costs of all
\nPortfolio Investments less (ii) the aggregate Acquisition Costs of Portfolio
\nInvestments that have been Sold other than such Portfolio Investment.<\/p>\n
“Attributable Fees and Expenses” shall mean, with respect to any
\n ——————————
\nPortfolio Investment, an amount equal to the cumulative previously unrecovered
\nFees and Expenses of the Company incurred during the Expenses Period which were
\nfunded by a<\/p>\n
-2-<\/p>\n
Capital Contribution of Merck multiplied by a fraction, (x) the numerator of
\nwhich is the Acquisition Cost of such Portfolio Investment and (y) the
\nDenominator of which is (i) the aggregate Acquisition Costs of all Portfolio
\nInvestments less (ii) the aggregate Acquisition Costs of Portfolio Investments
\nthat have been Sold other than such Portfolio Investment.<\/p>\n
“Available Cash” means Cash which is available in the accounts of the
\n ————–
\nCompany and not reserved to make any payments due and owing by the Company or
\notherwise reserved by the Board of Managers, in its reasonable discretion, for
\nFees and Expenses, operations, or contingencies of the Company.<\/p>\n
“Base Commitment” shall mean, as to Merck, the Merck Base Commitment
\n —————
\nand, as to each Other Investor Member, an amount equal to the Other Investor
\nMembers Base Commitment multiplied by such Other Investor Member’s Ratable
\nContribution Percentage.<\/p>\n
“Benefiting Member” has the meaning set forth in Section 8.3(a).
\n —————– <\/p>\n
“Board of Managers” and “Board” shall have the meaning set forth in
\n —————– —–
\nSection 6.1.<\/p>\n
“Bona Fide Third Party Offer” means a bona fide offer by a third party
\n —————————
\nthat is not an Affiliate or Associate of the Company or any Member to acquire
\nthe Company’s entire interest in a Portfolio Company for cash, which offer:<\/p>\n
(a) shall not be subject to financing, due diligence or other
\ncontingencies that in the reasonable judgment of the Board of Managers create a
\nreasonable risk of delay or failure provided, however, that this paragraph (a)
\nshall not apply in respect of an offer that otherwise satisfies the definition
\nfrom an offeror who is bound by a customary confidentiality agreement with a
\nPortfolio Company if Merck unreasonably prevents such third party from
\nperforming customary due diligence investigations;<\/p>\n
(b) shall include evidence reasonably satisfactory to Board of the
\nofferor’s ability to pay the purchase price;<\/p>\n
(c) shall not include surviving representations and warranties or
\nindemnities (other than in respect of title); and<\/p>\n
(d) shall not be subject to post-closing purchase price adjustments
\nor earn-outs.<\/p>\n
“Book Value” means:
\n ———-<\/p>\n
(a) with respect to any asset, the asset’s adjusted basis for federal<\/p>\n
-3-<\/p>\n
income tax purposes, except that, in accordance with the rules set forth in
\nReg. (S) 1.704-1(b)(iv)(f):<\/p>\n
(i) The initial Book Value of the assets of the Company as of the
\n date of the contribution or deemed contribution shall be their respective
\n gross Fair Market Values at such time as reasonably determined by the Board
\n of Managers;<\/p>\n
(ii) The Book Value of any asset distributed or deemed distributed by
\n the Company to any Member shall be adjusted immediately prior to such
\n distribution to equal its gross Fair Market Value at such time as
\n reasonably determined by the Board of Managers;<\/p>\n
(iii) The Book Values of all Company assets may be adjusted in the
\n discretion of the Board of Managers to equal their respective gross Fair
\n Market Values, as reasonably determined by the Board of Managers as of:<\/p>\n
(1) The date of the acquisition of an additional interest in the
\n Company by any new or existing Member in exchange for a
\n Capital Contribution to the Company; or<\/p>\n
(2) Any distribution in liquidation of the Company, or the
\n distribution by the Company to a retiring or continuing
\n Member of money or other assets of the Company in reduction
\n of such Member’s Membership Interest in the Company;<\/p>\n
(iv) Any adjustments to the adjusted basis of any asset of the
\n Company pursuant to Sections 734 or 743 of the Code shall be taken into
\n account in determining such asset’s Book Value in a manner consistent with
\n Reg. (S) 1.704-1(b)(2)(iv)(m); and<\/p>\n
(v) If the Book Value of an asset has been determined pursuant to
\n clauses (i) through (iv) above, to the extent permitted under the Income
\n Tax Regulations, such Book Value shall thereafter be adjusted in the same
\n manner as would the asset’s adjusted tax basis for federal income tax
\n purposes, except that depreciation and amortization deductions shall be
\n computed based on the asset’s Book Value as so determined, and not on the
\n asset’s adjusted tax basis in a manner consistent with Reg. (S) 1.704-
\n 1(b)(2)(iv)(g)(3) or 1.704-3(d)(2), as applicable; and<\/p>\n
(b) with respect to any liability, at a given time, the amount of such
\nliability to the extent:<\/p>\n
-4-<\/p>\n
(i) reflected in the basis of any asset;<\/p>\n
(ii) previously or currently deductible in computing Net
\n Profit, Net Loss or items of income, deduction or expense for Capital
\n Account maintenance purposes; or<\/p>\n
(iii) otherwise previously taken into account for Capital
\n Account maintenance purposes.<\/p>\n
“Break-Up Expenses” means all expenses incurred by the Company in
\n —————–
\nconnection with any Portfolio Investment that is not consummated, provided (a) a
\nterm sheet and letter of intent for such Portfolio Investment has been approved
\nby the Board of Managers or (b) such Portfolio Investment does not require
\napproval of the Board of Managers and has been approved by Lofberg.<\/p>\n
“Business Day” means any day excluding Saturday, Sunday and any day
\n ————
\nwhich shall be in the City of New York a legal holiday or a day on which banking
\ninstitutions are authorized by law or other government action to close.<\/p>\n
“Capital Account” means, with respect to any Member, the capital
\n —————
\naccount of such Member maintained pursuant to Section 9.1, including all
\nadditions and subtractions thereto, pursuant to this Agreement.<\/p>\n
“Capital Contributions” shall have the meaning set forth in Section
\n ———————
\n5.1(a).<\/p>\n
“Carry Distributions” shall mean all amounts distributed to the Carry
\n ——————-
\nMembers pursuant to the proviso in Section 10.1(b)(iii).<\/p>\n
“Carry Interest” shall mean the interest of the Carry Members in
\n ————–
\ndistributions made or to be made by the Company under this Agreement.<\/p>\n
“Carry Members” has the meaning set forth in the Preamble and includes
\n ————-
\nany person who is designated as a Carry Member pursuant to Section 5.5.<\/p>\n
“Carry Member Costs” means all costs and expenses (excluding severance
\n ——————
\ncosts of terminated employees (other than Carry Members) and the initial costs,
\nsuch as headhunter’s fees and relocation expenses, of hiring new employees to
\nreplace employees seconded to the Company) incurred by Merck or any of its
\nAffiliates (other than the Company) in connection with the employment of any
\nperson who is seconded to the Company pursuant to this Agreement or is a Carry
\nMember or Designated Additional Carry Member, during the period that such person
\nis employed to provide such services or be such Carry Member or Designated
\nAdditional Carry Member, including, without limitation, any base compensation,
\nany overtime compensation, any bonus and any compensation related expenses and
\nthe amount of any other employee benefits (including <\/p>\n
-5-<\/p>\n
welfare and pension benefits) in the amount (equal to 36% of the base salary
\nplus overtime of such person) billed by Merck or its Affiliates to the relevant
\nbusiness division of the entity that employs such employee.<\/p>\n
“Cash” when capitalized means money and cash equivalents.
\n —-<\/p>\n
“Cause” shall have the meaning set forth in the applicable employment
\n —–
\nagreement between the entity employing the Carry Member and the Carry Member or,
\nif there is no employment agreement, shall mean (i) the continued failure by the
\nCarry Member to substantially perform the Carry Member’s duties with the Company
\n(other than any such failure resulting from the Carry Member’s incapacity due to
\nphysical or mental illness), (ii) the Carry Member’s engaging in conduct which
\nis demonstrably and materially injurious to the Company or any of its
\nAffiliates, monetarily or otherwise, (iii) the conviction of the Carry Member
\nfor the commission of (A) a felony or (B) any other crime involving moral
\nturpitude, (iv) the Carry Member’s material violation of any employment policies
\nor applicable codes of conduct of the Company, Merck or an Affiliate of Merck ,
\nor (v) a material breach by the Carry Member of any employee covenants to which
\nsuch an Carry Member is subject.<\/p>\n
“Certificate of Formation” means the limited liability certificate of
\n ————————
\nthe Company and any amendments thereto.<\/p>\n
“Clinical Development Entity” means any private emerging entity
\n —————————
\nengaged in innovative ways to manage documentation and information processing,
\nphysician and patient recruitment, information analysis, communications and site
\nmanagement all with the goal of shortening pharmaceutical development time
\nframes and\/or lowering pharmaceutical development costs. Nothing in this
\ndefinition shall restrict the Company’s power to invest in entities otherwise
\nsatisfying the definition of E-Healthcare Companies under clause (b) of the
\ndefinition of such term in Section 4.1.<\/p>\n
“Code” means the Internal Revenue Code of 1986, as in effect on the
\n —-
\ndate of this Agreement and as amended thereafter from time to time.<\/p>\n
“Company” shall have the meaning set forth in the Preamble.
\n ——-<\/p>\n
“Contributing Member” means, in respect of a Distributing Investment,
\n ——————-
\neach Investor Member who contributed to the Acquisition Cost of such
\nDistributing Investment.<\/p>\n
“Control Acquisition” means any cash investment prior to termination
\n ——————-
\nof the Investment Period (including by way of the cashless exercise of Warrants
\nAcquired for Cash) by Merck or any of its Affiliates or Associates (other than
\nthe Company) in a Portfolio Company in which the Company has an existing
\nPortfolio Investment that (i) is rejected or not approved by Lofberg within the
\nperiod specified in Section 8.2(b) and<\/p>\n
-6-<\/p>\n
(ii) upon the consummation of which, the Company, Merck and Merck’s Affiliates
\nand Associates would, in the aggregate, own more than 20% of the outstanding
\nvoting equity of the Portfolio Company.<\/p>\n
“Control Acquisition Interest” shall have the meaning set forth in
\n —————————-
\nSection 8.2(d).<\/p>\n
“Control Acquisition Price” of a Control Acquisition Interest means
\n ————————-
\nthe same consideration per share (or equity equivalent) paid or to be paid by
\nMerck or the applicable Affiliate or Associate under the related Control
\nAcquisition Agreement.<\/p>\n
“Cooper” means James Cooper.
\n ——<\/p>\n
“Damages” means any and all losses, damages, expenses and liabilities
\n ——-
\nwhether joint or several, including, without limitation, those losses, damages,
\nexpenses and liabilities (including reasonable attorneys’ fees) arising under or
\nconnected with the securities laws of the United States, or any other provision
\nof statutory law, common law, or other applicable law of any jurisdiction.<\/p>\n
“Death” shall mean the death of the Carry Member.
\n —– <\/p>\n
“Designated Additional Carry Member” shall have the meaning set forth
\n ———————————-
\nin Section 5.5(a).<\/p>\n
“Disability” shall have the meaning set forth in the applicable
\n ———-
\nemployment agreement between the entity employing the Carry Member and the Carry
\nMember, or if there is no employment agreement, a Carry Member shall be
\nconsidered to be disabled after he or she has been unable fully to perform his
\nor her duties as an employee of the Company (as determined in good faith by the
\nBoard of Managers), with reasonable accommodation as required by law, by reason
\nof physical or mental illness for 180 days during any 360 day period.<\/p>\n
“Distributing Investment” means, in respect of each distribution under
\n ———————–
\nSection 10.1(b), the Portfolio Investment whose Sale gives rise to such
\ndistribution.<\/p>\n
“E-Healthcare Companies” shall have the meaning given to it in Section
\n ———————-
\n4.1 of the Agreement.<\/p>\n
“employee of the Company” or “employees” means any employee of Company
\n ———————–
\nor Merck or an Affiliate of Merck who provides services to the Company under the
\nterms of this Agreement.<\/p>\n
“End Date” means the earlier of (i) the date the applicable Carry
\n ——–
\nMember’s employment with Merck or an Affiliate of Merck is terminated and (ii)
\ndate the applicable Carry Member’s designation as a Carry Member is terminated
\nby the Board of<\/p>\n
-7-<\/p>\n
Managers pursuant to Section 6.13(l), in each case for any reason, except that
\nthe End Date shall be the 90\/th\/ day following such termination date in respect
\nof a Portfolio Investment initiated prior to such termination date and
\nconsummated on or before such 90th day if the applicable Carry Member’s
\nemployment or designation as a Carry Member is terminated without Cause or by
\nreason of the Carry Member’s Death or Disability.<\/p>\n
“Event of Bankruptcy” means, with respect to any Person, (i) the
\n ——————-
\nfiling of a voluntary petition seeking liquidation, reorganization, arrangement
\nor readjustment, in any form, of its debts under Title 11 of the United States
\nCode or any other federal or state insolvency law, or the filing of an answer
\nconsenting to or acquiescing in any such petition; (ii) the making of any
\ngeneral assignment for the benefit of its creditors, or the admission in writing
\nof its inability to pay debts as they become due; (iii) the expiration of 30
\ndays after the filing of an involuntary petition under Title 11 of the United
\nStates Code, an application for the appointment of a receiver for the assets of
\nsuch Person, or an involuntary petition seeking liquidation, reorganization,
\narrangement or readjustment of its debts under any other federal, state or
\nforeign insolvency law, provided that the same shall not have been vacated, set
\naside or stayed within such 30-day period; (iv) the appointment of a receiver,
\nliquidator, assignee, custodian, trustee, sequestrator, or other similar agent
\nfor the Person or for any substantial part of the Person’s assets or property;
\nand (v) the ordering of the winding up or liquidation of the Person’s affairs.<\/p>\n
“Excess Carry Amount” means, with respect to each Carry Member, an
\n ——————-
\namount, determined on an aggregate basis for all Portfolio Investments in which
\nsuch Carry Member has or had a Carry Interest, equal to such amount, if any, by
\nwhich its Carry Distributions exceed the product of (i) the highest Applicable
\nCarried Interest of such Carry Member in respect of any Portfolio Investment,
\nand (ii) the Net Profit Amount of all Portfolio Investments in which such Carry
\nMember has or had a Carry Interest.<\/p>\n
“Exchange” means (i) a United States national, regional, or local
\n ——–
\nsecurities exchange (ii) a foreign securities exchange or (iii) an interdealer
\nquotation system that regularly disseminates firm buy or sell quotations by
\nidentified brokers or dealers (including, without limitation, NASDAQ).<\/p>\n
“Executive Agent” shall have the meaning set forth in section 16.14.
\n —————<\/p>\n
“Executive Committee” shall have the meaning set forth in Section
\n ——————-
\n8.1(d).<\/p>\n
“Expenses” shall mean, collectively, the Organizational Expenses and
\n ——–
\nthe Operating Expenses.<\/p>\n
“Expenses Period” means the period commencing on the date of this
\n —————
\nAgreement and ending on the third anniversary thereof.<\/p>\n
-8-<\/p>\n
“Fair Market Value” shall mean, as to any non-cash property of the
\n —————–
\nCompany, the fair market value thereof as determined pursuant to Section 10.5 of
\nthe Agreement.<\/p>\n
“Family Trust” in respect of any Person means any trust, partnership,
\n ————
\nlimited liability company or other entity, the beneficiaries, partners, members
\nor other equity owners of which (as the case may be), comprise solely members of
\nthat Person’s family, by blood or marriage.<\/p>\n
“Fees and Expenses” shall mean, collectively, the Break-Up Expenses,
\n —————–
\nthe Organizational Expenses and the Operating Expenses.<\/p>\n
“Fiscal Year” shall have the meaning set forth in Section 2.3.
\n ———– <\/p>\n
“Funding Notice” shall have the meaning set forth in Section 5.2(a).
\n ————–<\/p>\n
“Good Reason” shall mean the termination by Lofberg of his employment
\n ———–
\nas Chief Executive Officer of the Company following the revocation or suspension
\nof any of the powers granted to Lofberg pursuant to Section 7 of this Agreement
\n(other than in connection with the termination of Lofberg for Cause).<\/p>\n
“GAAP” means the United States generally accepted accounting
\n —-
\nprinciples.<\/p>\n
“Investment Committee” shall mean a committee appointed by the Board
\n ——————–
\nof Managers in accordance with Section 8.1 of the Agreement.<\/p>\n
“Investment Period” shall mean the period beginning on the date of
\n —————–
\nthis Agreement and ending on the earlier of (i) the date that all of the Merck
\nBase Commitment has been invested or committed for investment in Portfolio
\nInvestments and Merck has advised the Executive Agent in writing that it does
\nnot intend to make any further investments, (ii) the second anniversary of the
\ndate of this Agreement or (iii) the termination thereof pursuant to Section 12.2<\/p>\n
“Investor Members” shall have the meaning set forth in the Preamble
\n —————-
\nand includes any person who is designated as an Investor Member pursuant to
\nSection 5.5.<\/p>\n
“LLC Act” shall have the meaning set forth in the Recitals.
\n ——-<\/p>\n
“Lofberg” means Per G. H. Lofberg.
\n ——-<\/p>\n
“MCV Budget” has the meaning set forth in Section 8.4.
\n ———- <\/p>\n
“majority of the Carry Members” means Carry Members holding a
\n —————————–
\nmajority of the Carry Interests in respect of a Portfolio Investment, assuming
\nsuch Portfolio <\/p>\n
-9-<\/p>\n
Investment were incurred on the date of determination and all unvested Carry
\nInterests were then vested.<\/p>\n
“majority of the Non-Defaulting Investor Members” means Non-Defaulting
\n ———————————————–
\nInvestor Members providing a majority by monetary value of the Capital
\nContributions in respect of a Portfolio Investment.<\/p>\n
“majority of the Other Members” means Other Investor Members having a
\n —————————–
\nmajority of the Other Investor Interests in the applicable Portfolio Investment.<\/p>\n
“Marketable Securities” means securities that (i) are listed and
\n ———————
\ntraded on a national securities exchange or listed for quotation on the National
\nAssociation of Securities Dealers, Inc. Automated Quotation System National
\nMarket System, or registered or otherwise transferable under Rule 144 under the
\nSecurities Act of 1933, as amended without any waiting period or volume
\nrestrictions applicable to the Members, (ii) are not subject to any “lock-up” or
\nother contractual restrictions on transfer and (iii) either (A) are not subject
\nto any limitations on sale or transfer under the Securities Act of 1933, as
\namended or relevant state blue sky or similar foreign laws or (B) are covered by
\na registration rights agreement pursuant to which (1) the Company has presently
\nexercisable registration rights covering 100% of the securities held by the
\nCompany in the applicable Portfolio Investment, (2) Lofberg has recommended in
\nwriting to the Board of Managers that such registration rights be exercised, and
\n(3) the Board of Managers shall have failed to request registration of such
\nregistrable securities within 30 days of Lofberg’s recommendation unless the
\nfailure to request such registration was based upon the Board’s determination,
\nafter due inquiry of the Portfolio Company, that there was a reasonable
\nlikelihood the Portfolio Company would exercise deferral or blackout rights if
\nthe Company were to exercise such registration rights.<\/p>\n
“Maximum Amount” means the maximum Applicable Carried Interest of a
\n ————–
\nCarry Member which is, (a) in respect of Lofberg, 12%, (b) in respect of Cooper,
\n2.5% and (c) in respect of any other Carry Member, the maximum Applicable
\nCarried Interest of such Carry Member as specified in the determination of the
\nBoard of Managers and set forth in the applicable resolution of the Board.<\/p>\n
“Members” shall have the meaning set forth in the Preamble.
\n ——-<\/p>\n
“Membership Interest” means the interests of the Members in the
\n ——————-
\nCompany.<\/p>\n
“Merck Base Commitment” shall have the meaning set forth in Section
\n ———————
\n5.1(a).<\/p>\n
“Negative Carry Balance” means, with respect to a Carry Member, such
\n ———————-
\nCarry Member’s Applicable Carried Interest of the amount, if any (without
\nduplication of Portfolio Investments sold concurrently for a gain), by which (i)
\nthe sum of Merck’s share<\/p>\n
-10-<\/p>\n
of the Acquisition Costs of all Portfolio Investments in which the Carry Member
\nhad a Carry Interest and that have been previously Sold, or are being Sold
\nconcurrently with the Sale for which the Negative Carry Balance is to be
\ncalculated, since the last Sale of a Portfolio Investment in which such Carry
\nMember received a distribution of Carry Interest pursuant to Section
\n10.1(b)(iii) (the “Applicable Portfolio Investments”) exceeds (ii) all amounts
\n ——————————–
\ndistributable to Merck pursuant to Section 10.1(b)(ii) or (iii) with respect to
\nthe Applicable Portfolio Investments before reducing such amounts by the amounts
\ndistributed as Carry Distributions to the Carry Members pursuant to Section
\n10.1(b)(iii). For purposes of this definition, if a Carry Member’s Carry
\nInterest increases in accordance with the definition of Applicable Carried
\nInterest, the Negative Carry Balance of such Carry Member shall be recomputed
\nusing the new higher percentage.<\/p>\n
“Net Acquisition Cost” shall mean, with respect to any Portfolio
\n ——————–
\nInvestment, the Acquisition Cost of such Portfolio Investment reduced by the
\ncumulative amount of distributions under Section 10.1(b)(ii) with respect to
\nsuch Portfolio Investment.<\/p>\n
“Net Profit” and “Net Loss” mean, respectively, for any period the
\n ———- ——–
\ntaxable income and taxable loss of the Company for the period as determined for
\nfederal income tax purposes, provided that for purposes of determining Net
\nProfit and Net Loss and items of gross income, deductions and expenses and not
\nfor income tax purposes: (i) there shall be taken into account any tax exempt
\nincome of the Company; (ii) any expenditures of the Company which are described
\nin Section 705(a)(2)(B) of the Code or which are deemed to be described in
\nSection 705(a)(2)(B) of the Code pursuant to Regulations under Section 704(b) of
\nthe Code shall be treated as deductible expenses; (iii) if any Company asset has
\na Book Value which differs from its adjusted tax basis as determined for federal
\nincome tax purposes, income, gain, loss and deduction with respect to such asset
\nshall be computed based upon the asset’s Book Value rather than its adjusted tax
\nbasis in such manner as provided in the Regulations; (iv) items of gross income
\nor deduction allocated pursuant to Section 9.2(b)-(d) shall be excluded from the
\ncomputation of Net Profit and Net Loss; (v) there shall be taken into account
\nany separately stated items computed under Section 703(a) of the Code; and (vi)
\nif the Book Value of any Company asset is adjusted pursuant to clauses (ii) –
\n(iv) of the definition thereof, the amount of such adjustment shall be taken
\ninto account in the taxable year of adjustment as gain or loss from the
\ndisposition of such asset for purposes of computing Net Profit and Net Loss.<\/p>\n
“Net Profit Amount” shall mean in respect of a Carry Member an amount
\n —————–
\nequal to the excess of (i) the aggregate amount of all distributions made to
\nMerck pursuant to Sections 10.1(b)(ii) and (iii) and the Carry Members pursuant
\nto the proviso in Section 10.1(b)(iii) in respect of all Portfolio Investments
\nin which such Carry Member has or had a Carry Interest, provided, however, that
\n ——– ——-
\nin relation to those Portfolio Investments for which a deemed distribution under
\nSection 10.2(c) has occurred, the price <\/p>\n
-11-<\/p>\n
set forth in the Bona Fide Third Party Offer will be deemed to be the amount of
\nthe distribution in respect of that Portfolio Investment for the purposes of
\nsentence (i) of this definition, over (ii) the aggregate amount of Acquisition
\nCosts contributed by Merck with respect to such Portfolio Investments.<\/p>\n
“Net Sales Proceeds” means Cash payments (including any Cash received
\n ——————
\nby way of deferred payment pursuant to, or by amortization of, a note receivable
\nor otherwise, as and when so received) received upon the Sale of Other Fees or
\nOther Securities, net of any bona fide direct costs incurred in connection with
\nsuch sale, including, without limitation, brokers’ fees, legal fees and expenses
\nand investment banking fees (but excluding any income taxes) reasonably
\nestimated to be payable as a result of any gain recognized in connection
\ntherewith.<\/p>\n
“Non-Merck Members” shall have the meaning set forth in Section 16.14.
\n —————–<\/p>\n
“Officers” shall have the meaning set forth in Section 6.12.
\n ——–<\/p>\n
“Operating Expenses” shall mean all costs and expenses relating to the
\n ——————
\nCompany’s activities, investments and business (to the extent not borne or
\nreimbursed by a Portfolio Company), including, without limitation, (i) all costs
\nand expenses attributable to acquiring, holding and disposing of the Company’s
\ninvestments (including, without limitation, interest on money borrowed by the
\nCompany or on behalf of the Company, legal fees and expenses, travel expenses,
\nregistration expenses and brokerage, finders’, custodial and other fees), (ii)
\nlegal, accounting, auditing, consulting and other costs and expenses directly
\nrelating to the ongoing activities of the Company (including, without
\nlimitation, travel expenses, expenses associated with the preparation of
\nfinancial statements, valuation reports, tax returns and forms K-1), (iii)
\nexpenses of the Board of Managers and Investment Committee that the Company is
\nrequired to pay, (iv) costs, expenses and liabilities of the Company (including,
\nwithout limitation, litigation and indemnification costs and expenses, judgments
\nand settlements), (v) the payment of the salaries of all of the employees of the
\nCompany (if any), (vi) rental and other office expenses of the Company and (vii)
\nall out-of-pocket fees and expenses incurred by the Company or its members,
\nofficers and employees (without duplication) whether prior to or after the date
\nhereof directly relating to investment and disposition opportunities for the
\nCompany not consummated (including, without limitation, legal, travel,
\naccounting, auditing, engineering, consulting and other fees and expenses of
\nadvisors and experts, financing commitment and investment banking fees, and
\nprinting).<\/p>\n
“Organizational Expenses” shall mean all costs actually incurred in
\n ———————–
\norganizing the Company, including, without limitation, all fees, costs and
\nexpenses in connection with the planning, negotiation, execution and delivery of
\nthis Agreement and the organization and offering of interests in the Company
\n(including, without limitation, travel, planning, printing and attorneys’ and
\naccountants’ fees and expenses).<\/p>\n
-12-<\/p>\n
“Other Fees” shall have the meaning set forth in Section 8.3(a).
\n ———-<\/p>\n
“Other Investor Members Base Commitment” shall have the meaning set
\n ————————————–
\nforth in Section 5.1<\/p>\n
“Other Securities” shall have the meaning set forth in Section 8.3(b).
\n —————-<\/p>\n
“Partially Adjusted Capital Account” means, with respect to any Member
\n ———————————-
\nand any Fiscal Year (or period), the Capital Account of such Member at the
\nbeginning of such Fiscal Year (or period), adjusted for all contributions and
\ndistributions during such year (or period) and all special allocations pursuant
\nto Sections 9.2(b), (c), (d) and (e) with respect to such Fiscal Year (or
\nperiod), but before giving effect to any allocations of Net Profit or Net Loss
\nwith respect to such Fiscal Year (or period).<\/p>\n
“Person” means any natural person, corporation, membership, trust,
\n ——
\npartnership, limited liability company, association or other entity.<\/p>\n
“Portfolio Company” shall mean any Person that is the issuer of a
\n —————–
\nPortfolio Investment (other than a Short-Term Investment).<\/p>\n
“Portfolio Investment” shall mean an investment made by the Company,
\n ——————–
\ndirectly or by or through an entity created for the purpose of making such
\ninvestment, in a Portfolio Company, including, without limitation, through the
\nacquisition of assets, capital stock, partnership interests, equity securities,
\nequity related securities, joint venture interests, undivided interests, leasing
\ninterests, limited liability company interests or convertible or other
\ninvestment interests, or any combination thereof, or securities or interests
\nconvertible into or exchangeable for any of the foregoing, including, without
\nlimitation, any business transaction in which the Company or an entity created
\nfor the purpose of making such investment acquires a Portfolio Company or
\ninterest therein by tender offer, takeover bid, merger, leveraged buyout, open
\nmarket purchase, private placement or otherwise and including any of the
\nforegoing received in exchange for or upon conversion of a Portfolio Investment
\nin connection with the merger or consolidation or other business combination of
\na Portfolio Company with or into another Person.<\/p>\n
“Proceeds” shall have the meaning set forth in Section 10.1(b).
\n ——–<\/p>\n
“Public Float” means the aggregate Fair Market Value of the common
\n ————
\nstock of an issuer held by Persons who are not Affiliates of such issuer.<\/p>\n
“Purchase Date” shall have the meaning set forth in Section 8.2(g).
\n ————-<\/p>\n
“Qualified IPO” means a bona fide underwritten public offering,
\n ————-
\npursuant to an effective registration statement under the Securities Act of
\n1933, of the common stock of a Portfolio Company in which the underwriters
\nrepresent in writing that they are<\/p>\n
-13-<\/p>\n
prepared to include in such public offering the Company’s entire interest in
\nsuch Portfolio Company.<\/p>\n
“Qualifying Issuer” means any Portfolio Company whose common stock is
\n —————–
\ntraded on a national securities exchange or on the Nasdaq Stock Market having
\n(i) a Public Float of at least $500 million or (ii) an average daily trading
\nvolume for the 20 Business Days prior to the date Lofberg presents a Divestment
\nProposal to the Board of Managers of at least 25% of the Company’s interest in
\nsuch Portfolio Company.<\/p>\n
“Quarter” means any consecutive three month period.
\n ——-<\/p>\n
“Ratable Contribution Percentage” means the proportion of the total
\n ——————————-
\nobligation of the Other Investor Members to make Capital Contributions
\nattributable to each Other Investor Member expressed as a percentage which shall
\ninitially be the percentages set out in Schedule B of this Agreement but which
\nmay be amended from time to time in accordance with Section 5.5.<\/p>\n
“Reg.(S)” shall mean a section of the Regulations.
\n ——-<\/p>\n
“Regulations” shall mean the Treasury regulations from time to time
\n ———–
\nissued pursuant to, and in effect under, the Code.<\/p>\n
“Required Consents” shall have the meaning set forth in Section
\n —————–
\n8.3(c).<\/p>\n
“Sale” or “Sold” means the sale, liquidation or other disposition of a
\n —- —-
\nPortfolio Investment for cash or the distribution in kind of a Portfolio
\nInvestment; provided that (i) if a Portfolio Investment is partially sold or
\ndistributed in kind, only the portion so sold or distributed shall be treated as
\na “Sold” Portfolio Investment and (ii) if a Portfolio Investment is exchanged
\nfor securities, the Portfolio Investment shall not be treated as a “Sold”
\nPortfolio Investment.<\/p>\n
“Section 705(a)(2)(B) Expenditure” shall mean an expenditure described
\n ——————————–
\nin Section 705(a)(2)(B) of the Code which is neither deductible in computing
\ntaxable income nor properly chargeable to capital accounts and any expenditure
\nconsidered to be an expenditure described in Section 705(a)(2)(B) of the Code
\npursuant to Regulations under Section 704(b) of the Code.<\/p>\n
“Short-Term Investments” shall mean: (i) negotiable instruments or
\n ———————-
\nsecurities (whether certificated or uncertificated) which evidence (A)
\nobligations of or fully guaranteed by the United States of America, (B) time
\ndeposits in, or bankers’ acceptances or certificates of deposit issued by, any
\ndepository institution or trust company organized under the laws of the United
\nStates of America or any state thereof, subject to supervision and examination
\nby United States or state banking or depository institution authorities and
\nhaving, to the knowledge of the Carry Members at the time<\/p>\n
-14-<\/p>\n
such investment is made or committed, reported capital and surplus in excess of
\n$250,000,000, and (c) commercial paper having a maturity of less than 180 days
\nand having, at the time of the investment or commitment to invest therein, a
\nrating from Moody’s Investors Service, Inc. or Standard & Poor’s Corporation of
\nP-1 or A-1, respectively; and (ii) demand deposits in any depository institution
\nor trust company referred to in (i)(B) above.<\/p>\n
“Start Date” means, in respect of Lofberg and Cooper, the date of this
\n ———-
\nAgreement, and in respect of any Designated Applicable Carry Member, the date
\nsuch Designated Applicable Carry Member is designated pursuant to section 5.5 or
\nsuch other date after such designation as may be specified by the Board of
\nManagers in a resolution of the Board.<\/p>\n
“Target Capital Account” means, with respect to any Member and any
\n ———————-
\nFiscal Year (or period), an amount (which may be either a positive or a deficit
\nbalance) equal to the hypothetical distribution such Member would receive
\npursuant to clause (i) below, minus the hypothetical contribution such Member
\nwould be required to make pursuant to clause (ii), and minus the Member’s share
\nof the Company’s partnership minimum gain, and minus the Member’s share of the
\nCompany’s partner nonrecourse debt minimum gain, all computed immediately prior
\nto the hypothetical sale described in clause (i) below.<\/p>\n
(i) The hypothetical distribution to a Member at any time is
\n equal to the amount that would be received by such Member
\n if all of the Company’s assets were sold for an amount of
\n cash equal to their Book Values, all Company liabilities
\n were satisfied to the extent required by their terms
\n (limited, with respect to each nonrecourse liability or
\n “partner nonrecourse debt” (as defined in Reg.(S) 1.704-
\n 2(b)(4)) to the Book Value of the Company assets securing
\n each such liability), and the net assets of the Company,
\n including any amount returned to the Company pursuant to
\n Section 12.4, were distributed in full to the Members
\n pursuant to Section 12.3(c) hereof upon liquidation of the
\n Company.<\/p>\n
(ii) The hypothetical contribution by a Member is equal to the
\n amount that such Member would be obligated to contribute
\n pursuant to Section 12.4 upon the hypothetical sale
\n described in clause (i) above in liquidation of the
\n Company.<\/p>\n
“Tax Distribution” shall have the meaning set forth in Section
\n —————-
\n10.1(e).<\/p>\n
-15-<\/p>\n
“Tax Liability Amount” with respect to a Member for a Fiscal Year,
\n ——————–
\nshall equal the product of (i) the Applicable Tax Rate, times (ii) the amount of
\nthe Company’s taxable income allocated to such Member with respect to such
\nFiscal Year.<\/p>\n
“Tax Matters Member” shall have the meaning set forth in Section 13.1.
\n ——————<\/p>\n
“Tax Payment Date” with respect to a Fiscal Year shall mean March 31st
\n —————-
\nof the year following such Fiscal Year.<\/p>\n
“Transfer” shall have the meaning set forth in Section 11.1(a).
\n ——– <\/p>\n
“Transferring Member” shall have the meaning set forth in Section
\n ——————-
\n8.3(c).<\/p>\n
“Warrants Acquired for Cash” means warrants or options acquired for
\n ————————–
\ncash consideration if such warrants, after giving effect to the cash purchase
\nprice and no other consideration, were not in-the-money at the date of
\nacquisition. Warrants acquired in connection with a cash investment in other
\nsecurities (a “Unit Investment”) shall be deemed Warrants Acquired for Cash if
\n —————
\nsuch Unit Investment is a financing transaction for a cash purchase price made
\non arm’s length terms.<\/p>\n
-16-<\/p>\n
Schedule A
\n ———-<\/p>\n
Part A – Investor Members:<\/p>\n
1. Merck-Medco Managed Care, L.L.C.
\n c\/o Merck & Co. Inc.
\n 1 Merck Drive
\n Whitehouse Station, NJ 08889
\n Fax No.: (908) 735-1244
\n Attention: Ken Frazier<\/p>\n
2. Per G. H. Lofberg
\n 63 East 92\/nd\/ Street
\n New York, NY 10128
\n Fax No.: (212) 423-3034<\/p>\n
3. James Cooper
\n 8 Lambert Lane
\n Upper Saddle River, NJ 07458
\n Fax No.: (201) 327-2671<\/p>\n
Part B – Carry Members:<\/p>\n
1. Per G. H. Lofberg
\n 63 East 92\/nd\/ Street
\n New York, NY 10128
\n Fax No.: (212) 423-3043<\/p>\n
2. James Cooper
\n 8 Lambert Lane
\n Upper Saddle River, NJ 07458
\n Fax No.: (201) 327-2671<\/p>\n
-1-<\/p>\n
Schedule B
\n ———-<\/p>\n
Contribution Schedule<\/p>\n
—————————————————-
\n Lofberg 82.75%
\n —————————————————-
\n Cooper 17.25%
\n —————————————————-<\/p>\n
-1-<\/p>\n
Schedule C
\n ———- <\/p>\n
Illustration of Distributions and Allocation of Net Profits and Losses<\/p>\n
[See attached Distribution Example]<\/p>\n
-2-<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8190],"corporate_contracts_industries":[9407],"corporate_contracts_types":[9573,9576],"class_list":["post-41643","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-merck---co","corporate_contracts_industries-drugs__pharma","corporate_contracts_types-formation","corporate_contracts_types-formation__llc"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41643"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41643"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41643"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}