ATM SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN FRANCISCO Document Scanning Lead Sheet Jul28-2016 3:57 pm Case Number: CPF-16-515185 Filing Date: Jul-28-2016 3:50 Filed by: ARLENE RAMOS Image: 05492740 PETITION IN RE: JON SOBERG 001005492740 Instructions: Please place this sheet on top of the document to be scanned.ses cmoto RoR RETTR ER mocap GRICE cers Gregory S. Cavallo (Bar No. 17327 Shopoff Cavallo & Kirsch LLP 601 Montgomery Street, Suite 1110 ‘San Francisco, CA 94111 FILED ‘eiePvone no: 415-984-1975 raxno: 415-984-1978 ‘Superior Coit of Calfornia rronvev ron mora) Petitioner JON SOBERG ty Of San Francisco [SUPERIOR COURT OF CALIFORNIA, COUNTY oF SAN FRANCISCO JUL 28 2016 sraecrcoress: 400 McAllister Street ‘MAiLNG ADDRESS: CLERK,OF COURT crrvavoze cone San Francisco, CA 94102 BY. RANCH NAME ‘Deputy Clerk ‘CASE NAME: JON SOBERG v. ADEO RESSI aka ADEODATO GREGORY RESS!| DICERVIA a Z CIVIL CASE COVER ‘SHEET ‘Complex Case Designation 7 PE 16 Unlimited Limited 5 ee - -515185 (Amount (Amount O) Counter) doind ocr: demanded demanded is Filed with first appearance by defendant exceeds $25,000) _ $25,000 or less) (Cal. Rules of Cour, rule 3.402) err: ems 1-6 below must be completed (see instructions on page 2) 11. Check one box below for the case type that best describes this case’ Auto Tort Contract Provistonally Complex Gv Litigation C1 Auto 22) (C1 Breach of contracttwarranty (06) (Cal. Rules of Court, rules 3.400-3.403) Uninsured motorist (46) () Rule 3740 cotectons 05) L]_ Antitrust Trade regulation (3) (ther PIPDIWD (Personal InjurrPropery [[] Other colecton (8) [constuction etet (1) Damagerongful Death Tort (2 tnaurance coverage (18) [Mess tort (40) [Asbestos (04 i Gearemerstsn Secures tigation 28) EE) Proave tity (24) Rea! Property CO) EnvronmontaToxi tot 20) 1) Mecical mapractce (45) Eminent domaivinverse C)_nsurance coverage claims asing from the (otter uPo WD (23) conderaton (14) above ited provisional complex case Non-PUPDAWD (Other Tort Wrong evicion 38) ‘ypes (48) 1 Business towunai business practice (07) } ote rest property (25) Enforcement of Judgment 1 cotrghs(08) Unlawtu Detainer T_Enforcement figment (20) 11 Defamation 13) commercial 31) Miscellaneous Civil Complaint 1 Frava 16) Residential 32) OC ricoe TE] Intamacnproparty (19) 1 onge es) otter complain (not specfed above) (42) Professional negigence (25) Judicial Review lascallaneous Civil Petition C1 otmer nom PuPBD tor (25) Asset torture (05) Partnership and corporate governance 21) Employment C)_Petition re: arbitration award (11) EJ Other petition (not specified above) (43) ‘Wrong teminatin (36) (1 witotmandate (02) C1 cotmer employment 16) F)_other uit view (9) 2 Thiscase (lis disnot complex under rule 3.400 of the California Rules of Court. Ifthe case is complex, mark the factors requiring exceptional ucicial management a. C1 Large number of separately represented partes d. [] Large number of witnesses b. C)_ Extensive motion practice raising dffcut or novel. C] Coordination with retated actions pending in one or more courts issues that wll be time-cogsuming to resolve in other counties, sates, or counties, rina federal court ©. C) Substantial amount of dogumentary evidence f._]_ Substantial posiudgment judicial supervision Remedies sought (check althat apply): 0.(-] monetary b. (2) nonmonetary; decaratory or injunctive reer c. C] punitive Number of causes of action (speci) This case C] is BY isnot e class action suit If there are any known related cases, file and serve a notice of related case. (You may use form CM-015,) Date: July 28 2016 Gregory S. Cavallo, Attorney for Petitioner » LZ FRE On a (Saar oF FART GR TOBE FOR RY NOTICE + Plaintif must fle this cover sheet withthe frst pape filed in the action or proceeding (except small claims cases or cases fled under the Probate Code, Family Code, or Welfare and Institutions Code). (Cal. Rules of Court, rule 3.220.) Failure to fle may result in sanctions. « File this cover sheet in addition to any cover sheet required by local court rule. « If this case is complex under rule 3.400 et seq. of the Califomia Rules of Court, you must serve a copy of this cover sheet on all other partes to the action or proceeding ‘Unless this is a collections case under rule 3.740 or a complex case, this cover sheet willbe used for statistical purposes only. Moe sot ena =a CIVIL CASE COVER SHEET oa Canoie kyr mor[seen es SA ORIGINA,, arco 4 "ATTORNEY OR PARTY WATHOUT ATTORNEY (Name, State Bar number, and accross) ‘FOR COURT USE ONLY |_Gregory S. Cavallo (Bar No. 173270) ‘Shopoff Cavallo & Kirsch LLP 601 Montgomery Street, Suite 1110 ‘San Francisco, CA 94111 rexemoneo: 415-984-1975 xno, (otras 418-984-1978 une sooness opens: greg@scklegal.com srroRNev Fon ine Petitioner JON SOBERG F D ‘SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN FRANCISCO si | Sout of Calornia smecrAooness- 400 MeAlister Street soni tones JUL 28 2018 cmrvavoar cooe San Francisco, CA 94102 [BRANCH NAME: CLERKOF COURT PETITIONER: JON SOBERG yi Geo RESPONDENT: ADEO RESS! aka ADEODATO GREGORY RESSI DI CERVIA ee PETITIONTO [CONFIRM = [J coRRECT =] VACATE CONTRACTUAL ARBITRATION AWARD ‘Jurisdiction (check all that apply) CO Action is a limited civil case Amount demanded —_[) does not exceed $10,000 Ci exceeds $10,000, but does not exceed $25,000 eee nee CPF~16-5 151.85 | NOTICE: You may use this form to request that the court confirm, correct, or vacate an award in an arbitration conducted Pursuant to an agreement between the parties that is subject to Code of Civil Procedure section 1285 et seq. and that does not involve an attorney-client fee dispute. If you are requesting court action after an attorney-client fee arbitration award, Please read Alternative Dispute Resolution form ADR-10S, Information Regarding Rights After Attorney-Client Fee Arbitration. 1. Petitioner and respondent. Petitioner (name each): Jon Soberg alleges and requests relief against respondent (name each): ‘Adeo Ressi 2. Contractual arbitration, This pettion requests the court o confirm, correct, of vacate an award in an arbitration conducted ‘according to an agreement between the parties that is subject fo Code of Civil Procedure section 1285 et seq, 3, Pending or new action. a. C1 Acourt case is already pending, and this isa petition fled in that action, (i's, proceed to item 4.) ». B_ This pettion commences a new action, so, complete items 3b(1) through 36(4),) (1) Petitioners capacity. Each petioner named in item 1 isan individual, (1 except petitoner (state name and complete one or more ofthe folowing): (@) C) ise corporation qualified todo business in California, ©) Cis anunincorporated entity speci) (©) C1 isarepresentative (specify): (8 © is (pecty ther capacity) (2) Respondent's capacity. Each respondent named in tem 1 is an individual C1 except respondent (state name and compete one or more of the following): (@) Q isabusiness organization, form unknown, (©) is acorporation (©) © isanunincorporated entity (specify) (@ O isarepresentative (specify) (e) C1 1s (specity other capacity) ag tet3 Pengo cera PETITION TO CONFIRM, CORRECT, OR VACATE a nF TE 0%C8 oe sy 15 CONTRACTUAL ARBITRATION AWARD (Alternative Dispute Resolution)| permoner: SOBERG CASE NOMBRE RESPONDENT: RESSI 3.b. (8) Amount or property in dispute. This petition involves a dispute over (check and complete all that apply) (@) [the following amount of money (specity amount: $ 3,500,000.00 (©) Gd property (ifthe dispute involves property, complete both ofthe following): {() consisting of (idently property in dispute): Interest in and debts owed to Expansive Ventures Management LLC (i having a value of (specify value of property in dispute): $ 200,000.00 (4) B21 Venue. This courts the proper court because (check (a) or (b): (@ & thisis the courtin the county in which the arbitration was held. (©) C1 the arbitration was not held exclusively in any county of California, or was held outside of California, and (check one or more ofthe folowing): (this is the court in the county where the agreement was made. i) C1 this is the court in the county where the agreement is to be performed. (ii) C1 the agreement does not specity a county where itis to be performed and was not made in any county in California, and the folowing party resides or has a place of business inthis county (name of party) (v) the agreement does not specify @ county where its to be performed and was not made in any county in California, and no part to this action resides or has a place of business in Califor 4, Agreement to arbitrate. 1. Date. Petitioner and respondent entered into a written agreement on or about (date): July 24, 2015 b. EJ Attachment. A copy of the agreement is submitted as Attachment 4(b) and incorporated herein by this reference. . Arbitration provision. Paragraph 26 of the agreement provides for arbitration of disputes arising out of the agreement as follows (either copy the arbitration provision in full or summarize the provision): 5, Dispute subject to arbitration. A dispute arose between petitioner and respondent conceming the following matter covered by the agreement to arbitrate (summarize the dispute): Breaches of contract and fiduciary duties by respondent toward petitioner, as a part of efforts to force petitioner out of their 50/50 owned and managed company 6. Arbitrator. The following person was duly selected or appointed as arbitrator (name of each arbitrator) Zela Claiborne, JAMS. 7. Arbitration hearing. The arbitration hearing was conducted as follows (complete both ofthe following): {Date (each date of arbitration): May 16-20 and 27, and June 2, 2016 b. Location (city and state where arbitration was conducted): San Francisco, CA 8, Arbitration award. a. Date of award. The arbitration award was made on (date): July 18, 2016 b. Terms of award. The arbitration award (check one or more of the following): (1) (requires CJ petitioner XJ respondent to pay the other party this amount: $ 3,500,000.00 (2) Q_requires neither party to pay the other anything. @) [J isditferent as to diferent petitioners and respondents. (4) provides (specify other terms or check item 8(c) and attach a copy of the award): ‘See Award attached c. BZ Attachment of Award. A copy of the award is submitted as Attachment 8(¢) 8. Service of award, {The signed award or an accompanying document indicates thatthe award was served on petitioner on (date): b. & Petitioner alleges that a signed copy of the award was actually served on (date): July 18, 2016 ORG Rew aay 72004 PETITION TO CONFIRM, CORRECT, OR VACATE vata CONTRACTUAL ARBITRATION AWARD Iai sa aa snout Ee 6)PETITIONER: SOBERG CASE NMBER RESPONDENT: RESSI 10, Petitioner requests that the court (check all that apply): a. 62 Confirm the award, and enter judgment according to it. b.L) Correct the award and enter judgment according to the corrected award, as follows: (1) The award should be corrected because (check all that apply) (@) (1 _ the amount of the award was not calculated correctly, or a person, thing, or property was not described correctly. (e) (1 _ the arbitrator exceeded his or her authority. (©) (1 _ the award is imperfect as a matter of form. (2) The facts supporting the grounds for correcting the award alleged in iter 10b(1) are as follows (if additional space is required, check here (_] and submit facts on an attachment labeled 10b(2)): (@) The award should be corrected as follows (f additional space is required, check here (_] and describe requested correction on an attachment labeled 106(3)): J Vacate (cancel) the award. (1) The award should be vacated because (check all that apply) (@ (1 the award was obtained by corupton, fraud, or other unfair means. (>) 2) anarbitrator was corrupt. {Gl the misconduct ofa neutral arbitrator substantially prejudiced petitioner's rights. (& [the arbitrator exceeded his orher authority, and the award cannot be faily corrected. (@) © the arbitrator unfaiy refused to postpone the hearing orto hear evidence useful to sete the dispute (0 © anarbitrator felled to disctose within the time for dsclosure a ground for disqualification of which the arbitrator was then aware. (@) C1 anarbitrator should have disqualified himsetf or herself after petitioner made a demand to do so. (2) The facts supporting the grounds for vacating the award alleged in item 100(1) are as follows (if additional space is required, check here] and submit facts on an attachment labeled 10¢(2)): (@) Pettioner Cdces Cl} does not request anew arbitration hearing 4. Award petitioner interest from (date): (1) atthe statutory rate 2 C atrate of % per year. 2.1 Award petitioner costs of suit: (1) Dinthe amount of: $ 2) B according to proot. 1.0) Award petitioner attorney fees incurred in this action (check only if attomey fees are recoverable in this action ‘according to staute or the partes’ agreement) (1) Q inthe amount of $ ) O according o proof 0.1 Award petitioner the following other relief (describe relief requested; if additional space is required, check hore [] and describe ref on an attachment labeled 109) 11, Pages and attachments. Number of pages attached: 37 Date: July 28, 2016 Gregory S. Cavallo, Attorney for Petitioner » hl op Oe oy Fe ceperreeeeeenerne PETITION TO CONFIRM, CORRECT, OR VACATE Paget CONTRACTUAL ARBITRATION AWARD {Alternative Dispute Resolution) coats @)ATTACHMENT 4(b)EXPANSIVE VENTURES MANAGEMENT LLC AMENDED AND RESTATED OPERATING AGREEMENT Tus AMENDED AND RESTATED OPERATING AGREEMENT (the “Agreement”) is made and entered into as of the 24 day of July, 2015 by and among Jon Soberg and Adeo Ressi and each other Person admitted froin time to time as a Member of the Company (collectively, the “Members”), who hereby amend and restated the Operating Agreement, dated December 10,2014, of EXPANSIVE VENTURES MANAGEMENT LLC, a Delaware limited liability company (the “Company”, in accordance with the provisions of the Delaware Limited Liability Company Act, 6 Del. C, §18-101, et sea, as amended (the “Act, as follows: 1, Name. The name of the Company is Expansive Ventures Management LIC, The affairs of the Company shall be conducted under the Company name, or such other name as the Managers (es designated pursuant to paragraph 9 below) may designate from time to time, 2. Purpose. ‘The Company is organized for engaging in any lawful act or activity for which ‘limited liability company may be organized under the laws of the State of Delaware, The Company shall have the power to make and perform all contracts and to engage in all activities and transactions necessary of advisable to carry out the purposes of the Company, and all other powers available to it as a limited liability company under the laws of the State of Delaware, 3. Principal Offices Registered Agent. The principal office of the Company shell be located at such place or places as determined by the Managers from time to time. The name of the registered agent for service of process of the Company and the address of the Company's registered office in the State of Delaware shall be c/o The Corporation Trust Company, 1209 Orange Street, City of Wilmington, New Castle County, Delaware 19801, or such other agent or office in the State of Delaware as designated by the Managers, 4, Term, “The term of the Company commenced upon the date of filing of the Certificate with the Office of the Secretary of State of the State of Delaware. The Company shall be dissolved, and its affairs shall be wound up upon the first to occur f the following: (a) the termination of the legal existence of the last remaining Member of the ‘Company or the occurrence of any other event which terminates the continued membership of the last remaining Member in the Company unless the Company is continued without dissolution io a manner permitted by the Act; (b) the entry ofa decree of judicial dissolution under Section 18-802 of the Act; ot (©)___the written consent of a majority in interest of the Members (determined based on the relative Membership Percentages). 5. Membership Percentages; Capital Contributions of the Members. Each Member initially shall have the “Membership Percentage” listed beside such Member's name on EXHIRIT A hereto, No Member shell be required to contribute capital to the Company without such Member's consent. 6 Allocation of Profit and Loss. All profits and losses of the Company shall be allocated to the Members pro rata in accoréauce with their respective Membership Percentages; provided, however, that the Managers may make special allocations to particular Memb. <0 long as such seas fe 7allocaions are made for any particular fiscal year on or before the due date of the Company's federal income tax return for such fisal year without regard to any extension. Notwithstanding the foregoing, to the extent a Member makes a capital contribution in excess ofthe product ofits Membership Percentage tulipied by the capital contibutions of all Members, such Member shall be allocated items of loss attributable to such excess contribution end items of profit to reverse all such special allocations of loss Distributions and Withdrawals. Distributions of cash, securities or other property may bbe made to each of the Members at such times as approved by the Managers. Such distributions shall be made ratably in proportion to the Member's unreturned capital contributions if the distribution is specified as a retur of capital and otherwise ratably in proportion to their respective net income allocations, except as otherwise approved by the Managers; provided, that no distribution shall be made to Member tothe extent it would violate the Actor any other applicable law. Except as provided herein, no Member may withdraw any amount from such Member's capital account without the consent of the Managers 8 Interest, No interest shall be paid to any Member on account of his, her or its interest in {he capital of, or on account of is, her or its investment in, the Company. 9, Management. (a) The person or persons designated as a manager of the Company (each, a “Manager” and together, the “Managers”) shall have the sole and exclusive right to manage, control, and conduct the affairs of the Company and to do any and all aets on behalf of the Company permitted by applicable law, and each such person shall be a “manager” and “authorized person” within the meaning of the Act. As of the date hereof, Jon Soberg and Adeo Ressi are designated as the Managers of the ‘Company. Except as provided elsewirere in this Agreement, any action to be taken or authorized “by the Managers” of atthe “discretion of the Managers” (or a similar phrase) shall be construed to require the ‘unanimous approval or consent of the Managers. Each Maneger may also be referred to as a “Managing Director,” a “Manager,” of a “Managing Member” of the Company or such other ttle as the Managers may determine, In the event that there are no Managers, approval or consent of the Managers shall be deemed to be effective upon the consent of the Members who hold atleast a majority of the Membership Percentage (®) ‘The management, operation, and policies of the Company are vested exclusively in the Managers. Without limiting the Toregoing, the Managers shall have the specific authority to ‘transfer, assign, pledge, hypothecate, encumber, or otherwise dispose of any asset of the Company. The ‘Managers shall have the power on behalf of, and in the name of, the Company to carry out and implement any and al ofthe objects and purposes of the Company. (6) The Managers may appoint officers of the Company which may inelude, but shall not be limited to: () chief executive officer; (i) president; i) one or more executive Vice presidents or vice presidents; (iv) general counsel; (v) chet investment officer, (vi) secretary; and (. and/or chief financial officer. Subject to the terms of this Agreement, the Managers may delegate ranagement responsibilities to any such officers, and such officers shall have the authority to contrat ‘or, negotiate on behalf of and otherwise represent the interests of the Company as authorized by the Managers in any job description created by the Managers; provided, that any agreement entered into by an officer is entered into inthe ordinary course of the Company's business, as reasonably determined in good faith by the Managers. Unless otherwise determined by the Managers, all officers shall hold office atthe pleasure ofthe Manages oassinv2(4) ‘The Managers may delegate matters to any officer of other employee or consultant of the Company and appoint such persons as en authorized signatory of the Company to enter into on behalf of the Company agreements or arrangements, provided they are entered into in the ordinary course of the Company's business, as reasonably determined in good faith by the Managers. (©) Notwithstanding the foregoing, without the written consent of the Managers, only the Managers shall have the power or authority: () to enter into any agreements or arrangements for the purchase or sale of securities by the Company; (i) to enter into any credit, debt or similar agreement or ‘arrangement 10, No Control by the Members, Other than a Member who is acting in its capacity as a ‘Manager under the terms of this Agreement, the Members shall take no part in the control or management of the Company's business nor shall the Members have any power or authority to aet for or on behalf of the Company. Except as expressly provided herein or as required by law, the Members shall have no right to vote on any Company matters. AL. “Admission of Members. Additional Members may be added to the Company as approved by the Managers. Any such additional Members shall have such Membership Percentages and be required to contribute such capital as may be determined by the Managers, Any such admission shall dilute the existing Members on a pro rata basis unless otherwise determined by the Managers. 12, Removal of Member or Manager. (2) Any Meier shall become a “Former Member" upon such Member's death, withdrawal, bankruptcy, incompetence (as determined by a decree of a court of conupetet jurisdiction), permanent incapacitation (as determined by a competent medical authority), removal (pursuant (0 Paragraph 12(b) or resignation, Ifthe Former Member was also a Manager, the Former Member shell cease t0 be a Manager of the Company immediatly upon becoming a Former Member. Upon the effective date of a Manager's removal, the Manager shall have no further right to act on behalf of the ‘Company as a Manager and shall have no further rights in connection with any vote of the Managers under this Agreement. (b) A Member or Manager may be removed upon the written consent of the Managers or shall be automatically removed upon the occurrence of a Cause event. “Cause” means, with ‘espect to Member or Manager (or the principal of such Member if such Member is an entity), ether (i) ‘ conviction of a felony or other criminal offense involving dishonesty or breach of trust, of (ii) a finding of civil liability in damages, or being permanently or temporarily enjoined by an order, judgment, of eoree of competent jurisdiction, by reason of any act or practice Involving fraud or breach of trust, or (ii) any other final non-appealable conviction fora felony of any sort that involves mare than thirty (30) days of incarceration, (©) The interest of a Former Member may be repurchased by the Company by payment to such Former Member of an amount equal to such Former Member's Capital Account balance, and such Former Member's Membership Percentage shall be reduced to zero (0). ‘No further ineome of ‘any kind shall be allocated to a Member that becomes a Former Member, The Managers may elect to pay such amount to such Former Member in three equal instllments, the first due on the one year anniversary of the effective date of such converstion, the second due on the second anniversary of such canversion, and the third due on the third anniversary of such conversion, (2) __In the event that e Former Member's Membership Percentage is reduced to zero, such Former Member shall no longer have status as a “member” of the Company under the Act or to.any a WEE’ G2rights associated with such status. Furthermore, Former Members will not have any right fo review the books, records, reports or other information ofthe Company including, without imitation this Agreement and the exhibits hereto, as they may be amended from time to time: provided, however, eny Formet Member may, at iis own expense, have an independent public accounting firm of recognized national standing in the United States review the Company's financial statements and such parts of the Agreement as are necessary for purposes of confirming the Former Member's Cepital Account balance onthe date of conversion, (© Upon any reduction of the Membership Percentage of a Former Member pursuant to this paragraph 12, the Membership Percentages of all remaining Members who are Managers shall be proportionately Increased based on the relative Membership Percentages of such remaining “Members and EXHIBIT A to the Agreement shall be amended to reflect such changes. 13, Salaries, Each employee or consultant ofthe Company may receive such compensation cor bonus from the Company as determined from time to time by the Managers. 14, Transfer. No Member shall sell, assign, pledge, mortgage, or otherwise dispose of or transfer his, her or its membership interest in the Company, directly or indirectly, without the written consent of the Managers. Any such permitted transferee shall be adnited as « member ofthe Company mn of & counterpart to this Agreement; such admission will be deemed to occur immediately prior othe transfer. Ifthe transfer of Member's interest in the Company is required by the ‘operation of law (including, without limitation, the transfer of a Member's interest to such Member's former spouse), unless otherwise determined by the Manager, (a) the transferee shall receive only the economic rights associstod with that interest and shall not be admitted to the Company as a Member nor have any rights to participate in the affeits ofthe Company as a Member, and (b) such transfer shall not, in and of itself, affect such Member's status as a Member and/or Manager. 18, Other Business. The Member and any person or entity affliated with the Member, may ‘engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits thereftom by virtue of this Agreement, 16. Payments in Liquidation. The assets of the Company shall be distributed in liquidation of the Company in the following order: (@) to the creditors of the Company (other than the Members) in satisfaction of the liabilities of the Company, in the order of priority established by law, either by payment or the reasonable provision for payment thereof, (b) to the Members, in repayment of any loans made to, or other debts owed by, the Company to such Members; and (©) to the Members in accordance with their respective shares of Company profit nd loss pursuant to paragraph 6 above. 17, Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware es applied 10 agreements among the residents of such state made and to be performed entirely within such stat. 18,__Limitation of Liability of the Managers und the Members. Except as requited by law, neither the Managers nor the Members, in their eapacitis es such, shall be bound Yee nor be personallyliable for, the expenses, liabilities, oF obligations of the Company in excess of their respective capital ‘contributions to the Company, 19. Other Instraments and Acts, Each of the Managers and the Members agree to execute any other instruments and to perform any other acts thal are or may be necessary or appropriate to effectuate and carry on the Company. 20, Binding Agreement, This Agreement shal be binding upon the transferees, successors, assigns, and legal representatives of the Managers and the Members 21 Amendment. ‘This Agreement may be amended only with the written consent of the Members who hold atleast a majority of the Membership Percentages. 22 Severability, Each provision of this Agreement shall be considered severable, and if for any reason any provision or provisions herein are determined tobe invalid, unenforcexble or illegal under ‘any existing or future law, such invalidity, unenforceability or ilegality shall not impair the operation of ‘or affect those portions of this Agreement tat are valid, enforeeable and legel. 23, Entire Agreement. This Agreement constitutes the full, complete, and final agreement of the Managers and the Members and supersedes all prior agreements emong the Managers and the ‘Members with respect to the Company. 24, —_Exeulpation, To the full extent permitted by applicable law, no Manager or Member shall be Fable 10 any Member or Manager of any person who has an interest in the Company, for any ‘conductor actions oF for failure not to act, except for conduct, actions or inactions determined by a court of competent jurisdiction (or arbitrator) not to have been undertaken in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on the Member by this Agreement 25. Indemnification, The Company agrees to indemnify, out ofthe assets of the Company only, the Managers and the Memiers (each such Person, an “Indemnified Part") to the fullest extent permitted by law and to save and hold them harmless ftom and in respect ofall (8) reasonable fees, costs, and expenses paid in connection with or resulting fiom any claim, action, or demand against any Indenmified Party that arises out of or in any vay relate to the Company, its properties, business, or affairs and (b) such claims, actions, and demands and any losses or damages resulting from such elsims, actions, and demands, including amounts paid in settlement or compromise (if recommended by attorneys for the Company) of any such claim, ection or demand; provided, however, that this indemnity shell not extend to conduct or inaction not undertaken in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on the Indemnified Party by this Agreement. Expenses incurred by any Indemnified Party in defending a claim or proceeding covered by tis paragraph shall be paid by the Company in advance of the final disposition of such claim or proceeding provided that the Indemnified Party (i) uses his or her diligent good faith efforts to seck indemnification from all other sources, (ii) undertakes to repay such amount if such Indemnified Party receives indemnifieation from other sources, and (li) undertakes to repay such amount if i is ultimately determined that such Indemnified Party was not entitled to be indemnified, The foregoing right of indemnification shall inure to the benefit of the executors, administrators, personal representatives, successors or assigns of each Indemmified Party. The Managers may make, exccute, record and file on their own behalf and on behalf of the Company all instruments end other documents (including one or more separate indemnification agreements between the Company end individual Indemmified Parties) that the Managers deem necessary or appropriate in order to extend the benefit of the provisions of this paragraph to the Indemnified Parties. The Managers mey separately agree to indemnify employees, ses ME 7consultants, agents or other persons who provide services to the Company pursuant to separate indemnification agreements between such persons and the Company and upon the terms set forth in such separate indemnification agreements 26. Arbitration. Any claim, dispute, or controversy of whatever nature arising out of or relating o this Agreement (including any other agreement(s) contemplated hereunder), including, without limitation, any action or claim based on tort, contrac, or statute (Including any claims of breach or violation of statutory or common [aw protections from discrimination, harassment and hostile working environment), or concerning the interpretation, effect, termination, validity, performance and/or breach of this Agreement, shall be resolved by final and binding arbitration before a single arbitrator selected from and administered by JAMS Inc. (or its successor) in accordance with its then existing comprehensive arbitration rules or procedures. ‘The arbitration shell be held in Palo Alto, California. BY AGREEING TO THIS BINDING ARBITRATION PROVISION, THE PARTIES UNDERSTAND THAT THEY ARE WAIVING CERTAIN RIGHTS AND PROTECTIONS WHICH MAY OTHERWISE BE AVAILABLE IF A CLAIM BETWEEN THE PARTIES WERE DETERMINED BY LITIGATION IN COURT, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO SEEK OR OBTAIN CERTAIN TYPES OF DAMAGES PRECLUDED BY THIS PARAGRAPH, THE RIGHT TO A JURY TRIAL, CERTAIN RIGHTS OF APPEAL, AND A RIGHT TO INVOKE FORMAL RULES OF PROCEDURE AND EVIDENCE. The arbitrator shal: (8) have the authority to compel adequate discovery for the resolution ofthe dispute and to award such relief as would otherwise be available under applicable law in court proceeding: and (b) issue a written statement signed by the arbitrator regarding the disposition of cach claim and the relief if any, awarded as to each claim, the reasons for the award, and the arbitrator's essential findings and conclusions on which the award is based. 27, Name and Mark, (a) __ Bach Member and Manager, on behalf of itself and its affiliates (I) acknowledges ‘and agrees that the Company has the exclusive ownership and right to use the name and service mark “Expansive” and “Expansive Ventures” together with any associated logotype and website address and any other name or service mark that is assigned to the Company (the "Name and Mark”) as well as any associated goodwill, (ii) acknowledges and agrees thet the Company retains all rights, title, claim and interest to use the Name and Mark in the United States of America, Canada, countries in the European Community and any other countries in which the Company may develop rights, and (ii) hereby releases the Company from any and all claims that such Member or Manager or thelr respective affiliates has, or has ever had, in respect of the Name and Mark and such goodwill or a right 1o compensation with regerd thereto. Bach Member and Manager, on behalf of itself and its affiliates, hereby completely transfers and assigns to the Company any and all of such Member's, Manager's and affiliates’ right, ttle and interes and tothe Name and Mark and any associated goodwill as well as any rights, benefits or interests therefrom (including any actual or potential claims against the Company or against any of its affiliated investment funds or management entities). For purposes of maintaining the Members’ espitel accounts, the fiir market value of the Name and Mark and associated goodwill, as of the date hereof and in connection with any release or transfer deseribed in this paragraph shall be deemed to be zero dollars (60.00). (b) With regard to those aspects of paragraph (a) above that constitute a release of clas, each Member and Manager acknowledges that such Member or Manager has had the opportunity to seek legel counsel and, if such Member or Manager is a resident in the State of California, such Member or Manager is familiar with the provisions of Califomnia Civil Code Section 1342, which provides a fliows | Ma: / # essaA GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR, Bach Member and Manager who is resident in the State of California hereby expressly waives any rights such Member oF Manager may have under such Civil Code Section. Each Member and Manager hereby ‘cxpressly waives any rights such Member or Manager may have under any applicable statute or common {c) The Members and Managers specifically intend that the Company shall license ‘he Name and Mark to affiliated entities of the Company on a royalty-free basis, 28, _No Employment or Other Implied Rights. Each Member and Manager hereby agrees that (2) this Agreement is not intended 10 confer any rights of employment by the Company to such Member or Manager and that nothing herein shall be construed as an agreement of employment and (b) seahing herein shall be construed to establish i) any ownership interest or other tight to participate in any ther entity aflited with the organization doing business using the Name and Mark or any derivation thereof or (i) any express or implied partnership between such Member or Manager and any other entity afitated with the organization doing business using the Name and Mark or any derivation thereof oy ary Of ‘their respective partners, members, directors, shareholders, manegors, employees, agents or representatives {THe REMAINDER OF THs PAGE INTENTIONALLY LETT BLANK; SIGNATURE PAGE FOLLOWS) 93333652IN WITNESS WHEREOF, the partes have executed this Amended and Restated Operating Agreement as of the date first written above, MANAGERS: Stonswwas Pace Tome xnav VoeTURES MANAOEAENT LLC AMINO AKO RESTATED OreRATING AGREEMENT[EXPANSIVE VENTURES MANAGEMENT LLC ExwIBIT A, SCHEDULE OF MEMBERS MEMBERSHIP [NAME AND ADDRESS. PERCENTAGE ees Jon Soberg, 50.00% 3337 El Camino Real Palo Alto, CA 94306 Adeo Ressi 50.00% 3337 El Camino Real Palo Alto, CA 94306 ToraL: 100.00% a iossans 2ATTACHMENT 8(c)JAMS ARBITRATION CASE No. 1100082762 Jon Soberg Claimant and Adeo Ressi Respondent FINAL AWARD Gregory S. Cavallo Shopoff Cavallo & Kirsch LLP 601 Montgomery Street, Suite 1110 San Francisco, CA 94111 greg@scklegal.com Phone: 415.984.1975 Counsel for Claimant John D. Pernick Bergeson, LLP 2033 Gateway Place, Suite 300 San Jose, CA 95110 ipernick@be-law.com Phone: 408.291.6200 Counsel for RespondentTHE UNDERSIGNED ARBITRATOR, having been designated in accordance with the parties’ arbitration agreement in Section 26 of the “Expansive Ventures Management LLC Amended and Restated Operating Agreement” dated July 24, 2015 (the “LLC Agreement”), and with the Procedural and Scheduling Order of January 15, 2016, and having examined the submissions, proof and allegations presented, and having received and considered the oral testimony of witnesses, hereby renders this Final Award as follows: L INTRODUCTION AND PROCEDURAL STATEMENT This arbitration arises out of a dispute between the two general partners of a venture capital firm known as Expansive Ventures (“EV”). Jon Soberg (“Soberg”) and Adeo Ressi (“Resi”) started the firm and owned and managed it as 50/50 partners. EV was established in April 2014 and, by December of that year, had its first close. By the summer of 2015, at the time of the second close, the firm appeared to be doing very well since it had secured $40 million in capital commitments from limited partners and also had four promising investments in portfolio companies. Although the partners had had some minor disagreements up to this point, it was at the time of the second close in July 2015 that it became apparent that their relationship was seriously frayed. Soberg claims that Ressi was angling to push himout of the firm and take over EV. Ressi denies this but, in fact, was involved in a series of covert activities designed to undermine Soberg and eventually squeeze him out of the firm. In this arbitration, Soberg makes claims for breaches of both fiduciary duty and contract and argues that Ressi should be liable for damages and should be removed as manager and member of EV. Ressi asserts various affirmative defenses, asserts that Soberg has suffered no recoverable damage, and argues for dissolution of EV*. The parties’ arbitration provision is found in Section 26 of the LLC Agreement (Ex. 106) and the proceeding is governed by the JAMS Comprehensive Arbitration Rules and Procedures, effective July 1, 2014. The merits of the case are to be decided pursuant to Delaware law and the FAA. In February 2016, counsel for Ressi filed a Motion for an Order Compelling Claimant Soberg to authorize the advancement of defense costs to indemnify Ressi. For the reasons outlined in Prehearing Order No. 2, that Motion was granted,” A determination on the issue of whether Respondent Ressi is entitled to * As discussed during closing arguments, there was not sufficient evidence to support Respondent's assertions of possible breaches of contract involving SpaceX, Kreditech, and ADF. ? The Arbitrator issued two other prehearing orders: Order #3 allowed counsel for Soberg to file a Second Amended Statement of Claims pursuant to JAMS Rule 10; Order #4 deniedindemnification is based on the findings set forth here and included in this Final Award Arbitration hearings were held in the San Francisco office of JAMS on May 16-20 and May 27, and expert testimony for both sides was presented on June 2, 2016. Counsel submitted closing briefs on June 13 and gave closing arguments at the JAMS office on June 15, 2016. The following witnesses testified at the hearings: Jon Soberg, Adeo Ressi, Jun Hong Heng’, Susan Boehnlein of Kranz & Associates, Sunwoo Hwang of Sixup (via Skype), and expert witnesses John O'Conner, and Gregory Nachtwey. Both parties offered documentary evidence at the hearings and that evidence was admitted. At the end of the last hearing day, both sides stated that they had no further evidence to offer. i FACTS The following is a statement of those facts found by the Arbitrator to be true and necessary to the Award. To the extent that this recitation differs from any Soberg’s request for forensic IT access to Ressi's computers and cloud-based email accounts and to EV’s cloud servers as overbroad and invasive ° Mr. Heng was represented during his testimony by Lucy Wang of Morgan Lewis.party's position, that is the result of determinations as to credibility, determinations of relevance, burden of proof considerations, and the weighing of evidence, both oral and written Jon Soberg and Adeo Ressi both live in Palo Alto and had known each other for a six or seven years before they began discussing forming a venture capital firm. When the two met in late 2013 and began discussion of forming a new fund, Soberg was a junior partner at Blumberg Capital, his first venture capital job after obtaining a Wharton degree, and Ressi was running his global incubator firm called Founder's Institute (“FI”). They worked on the concept for a number of months, with Soberg and others donating their time to make preparations. Ressi was busy running Fl but said he was willing to work approximately half time on the new venture and Soberg, who wanted to be an owner rather than an employee, was to. spend all of his time on the new firm By April 2014, Soberg had left Blumberg Capital, and he and Ressi had established a firm they decided to call Expansive Ventures. Pursuant to their agreements, they were both general partners and 50/SO owners and managers. All decisions regarding the management of the business partnership required theirunanimous agreement.* Their goal was to raise $100 million and invest the money in start-up companies after doing careful due diligence. The partners worked with counsel to formalize documents outlining their agreements regarding the new firm. They entered into the management Agreement in July 2015 (“LLC Agreement,” Ex. 106) and a Limited Partnership Agreement in December 2015 (Ex. 9). ° Prior to entering formal agreements, the company had its first close in December 2014 with approximately $20 million in committed capital. Ressi had hoped for an earlier close, but Soberg pointed out that it takes longer to raise money that Ressi anticipated, Soberg expected it to take 12-18 months of hard work (Ex. 1). Ressi had counted on Fl for deal flow but Soberg also wanted to look for larger deals, and he traveled nationally as well as internationally in search of them (Ex. 5) While Ressi continued to spend a lot of his time with Fl, Soberg focused on developing EV. “ Expansive Ventures Management LLC, a Delaware LLC, is the General Partner of Expansive Ventures Fund |, LP., a Cayman Islands exempted limited partnership, the entity that holds the investments of the limited partners. 5 at first, EV was formed with only preliminary documentation prepared by Wilson Sonsini and Soberg was the only member of the management entity. The July and December 2015 documents modified that to reflect the true intention of the parties to be 50/50 members and co-managers. At some point, EV moved its business from Wilson Sonsini to Cooley.At the hearings of this case, Ressi took the view that the partners’ first big disagreement was in late September. However, there were many disagreements before that time. Early on, it appeared that the two had different goals for the firm. Ressi wanted to continue spending a lot of his time on Fi despite concerns of the EV limited partners (Ex. 5). Soberg put all of his time and energy in on EV and looked beyond the small deals that might be available through Fl (Exs. 38 and 40). By 2015, Soberg sourced and the partners had agreed to invest in four portfolio companies: Honest Dollar, Super Home, Park Jockey, and SixUp. As early as April 2015, the partners had disagreements over travel expenses. Soberg testified that he was a frugal traveler and that Ressi spent much more on luxury travel (Ex. 45). Also, in June, Soberg explained that he expected normal salaries to begin to be paid. This tension between the partners is partly explained by the fact that Ressi was paid for his work at Fl while Soberg now relied on his work at EV to make a living and had not yet been paid a “livable salary” (Ex. 69). ‘At the time of the second close in July 2015, the general partners had their first major disagreements. The fund had made four promising investments and had reached the $40 million dollar level in capital commitments from limited partners. That meant that EV was guaranteed $1 million a year in management fees for the first 5 years and $500,000 for the next five. Soberg had been traveling onbusiness and vacation since the end of June. Ressi was working on the close with Kranz & Associates, the firm that served as EV's compliance officer and handled back-office matters like accounting, taxes, paying bills, making payments for investments, reporting to the limited partners, and so forth. The Kranz firm is experienced and works with many venture capital firms in Silicon Valley. Up to this point, Soberg had been the main contact with Kranz and had not had problems. Apparently, Kranz made some minor mistakes at the time of the close and Ressi “went ballistic and took over the process” (Ex. 407)*. While Ressi threatened to fire Kranz for making mistakes, Soberg pointed out the fact that they are “more than competent” and had been very helpful to EV in the past. Soberg was also concerned about the fact that Ressi was making unilateral management decisions without keeping him in the loop: “We need to talk badly when | get back. We need to run this fund as a partnership and that isn’t happening now” (Ex. 99). At this time, the partners had other disagreements. For example, Ressi wanted to spend more money on a customized IT system, something that would benefit Ft as well as EV; wanted to include more portfolio companies from the Fl network; © Ressi had warned Kranz against making any mistakes because “people in this close are captains of industry and billionaires” (Ex. 408).wanted to make Jun Hung Heng ’ a 15% owner, with majority decision-making power; and wanted to save the remaining management funds even though year- end funds would be taxed as income whether saved or paid as a bonus. Soberg disagreed on these points but continued to work with Ressi in the hope that they could talk and work out some of these issues. But Ressi’s real goal is shown in a note to his wife, Cindy, dated July 14, 2015: “| need to take more control of Expansive” (Ex.96). Then, when Soberg was traveling on business in September and early October, Ressi took actions clearly designed to drive Soberg out of EV. The record shows that he and Mr. Heng secretly read all of Soberg’s email, that Ressi tried to bring Mr. Heng in as a 15% managing partner so that the two of them could outvote Soberg, that Ressi changed the EV web page to show that Soberg had a new and limited role and that Heng had been promoted, that he locked Soberg out of the office while at the same time Fl was charging rent to EV for the space, that he told the LP's that Soberg was dishonest, that he blocked salaries and access to the Silicon Valley Bank (“SVB”) accounts (Ex. 215), that he spent fund money without 7 Jun Hung Heng had been working with EV and there had been discussions of making him an owner. There were also discussions of paying him a salary. Soberg actually preferred bringing on another candidate (Ex. 46). But Soberg and Ressi had never reached a final, written ‘agreement on a role for Jun (Ex. 49) and there was no evidence of an oral agreement, either.Soberg’s agreement, that he used EV money to develop a trademark that was, really for Fl, and so forth. Understandably, Soberg objected to being locked out when he was still a 50% partner and while EV was still paying rent to Fl for the space (Ex. 432). In mid-September, Soberg introduced Heng to CSC and asked Heng to take the lead on this potential investment (Ex. 149). Heng told Ressi about his conversations with Soberg, claiming that Soberg asked him to misrepresent the origin of this investment. The significance of this claim was blown far out of proportion by Ressi and appeared to be simply a misunderstanding, not a le. Soberg merely asked Heng to take the lead on this one. Nevertheless, Heng’s statements gave rise to a flurry of exaggerated accusations. Ressi wrote: "You have lied to my face. You have asked Jun to lie. Own up to it and stop lying” (Ex. 172). Instead of discussing the situation with his partner, Ressi made accusations Then, Ressi even requested counsel to add unusual “clauses about honesty” to the firm agreements (Exs. 189 and 174). In an email of October 30, he states that “ying is a cancer that kills the souls of the afflicted” (Ex. 282). The accusations about lying were not supported by the evidence and appeared to be just another step toward justifying the takeover of EV and removal of Soberg. In late September, Ressi imperiously stated that Soberg could not return to the office 10until he apologized for the alleged lie: “You do not need to return to the office until (1) you own up to your behavior and (2) sincerely apologize” (Ex. 172). Ressi’s attempt to take over the EV bank accounts without Soberg’s knowledge or permission is further evidence of his aggressive and covert efforts to take over the firm. On September 30, Ressi had asked SVB to make him “sole administrator” and the bank had responded by saying they were making sure Soberg “cannot approve any wires or Bill Pay transactions” (Ex. 197). But Ressi had concerns that, if SVB got wind of disputes within the partnership, the bank would freeze the EV accounts and end the loan. He wrote to Soberg about his conversations with Lorie at the bank: “| denied that there are any problems” (Ex. 218). In response to a question about whether he agreed, Soberg responded, “I don’t think | can answer your question about whether there is an issue with the partnership until you restore the partnership” (Ex. 218). Then, on October 2, Ressi wrote to one of the LP’s, Antonio Kanahuati, that they planned to make Heng a partner and “move Jon Soberg into a new role” (Ex 211). Further, he wrote to Ernest Lee with the same message (Ex. 213). There was conflicting testimony about whether this information also was sent to the other LP's, 1In November 2015, there were inquiries from the limited partners regarding the lack of updates on the investments and concern was expressed that the EV website had not been working properly for months (Ex. 292). Later, Ressi arranged to have visitors to the EV website sent to the Fl site instead. While Soberg testified about many similar actions that are covered in detail in the arbitration testimony and in Claimant's briefs, three will be detailed here as examples. First, Ressi claimed that Soberg was dishonest and even might not be able to be trusted with the firm’s money. He contacted counsel to request that some “honesty” language be included in their agreements (Ex. 174). Also, later he contacted SVB with his concerns enough times so that the accounts were finally frozen. However, there was no evidence presented at the hearings to support claims of Soberg’s dishonesty and certainly none to show that Soberg had taken or would take money that was not his. Ressi claims to have been in a panic over mishandling of accounts but actually introduced no substantive evidence that panic was warranted. His assertions of Soberg’s wrongdoing were based on speculation and appeared to be exaggerated and unsupported by the evidence. Ressi’s true motive in making these claims is set forth in a September 26" note to Yoichiro Taku (“Taku”), an attorney at Wilson Sonsini, formerly counsel to EV: “lam thinking to offer Jon the nice way or the hard way to leave the firm when he 2returns on October 5" from one of his many frivolous trips.” He was secretly plotting to expel Soberg from the firm, asserting: “Expansive Ventures will be a much better run organization without the presence of Jon Soberg, and we will have an opportunity to really change the world. . . “(Ex. 186). Second, beginning in the summer of 2015, Ressi had soured the relationship with Kranz to such an extent that Kranz eventually withdrew from the account Susan Boehnlein, a CPA and the CFO of Kranz, had worked well with Soberg but testified that she was unable to work with Adeo Ressi. She said that, beginning in August, Ressi wanted a weekly cash analysis and became “very fixated on the expenses,” insisting that nothing go out without his signature (Tr. 525-529). By October, she wrote that Ressi was accusing Soberg of stealing but that she did not believe it (Tr. 531; Ex. 402). She was not sure she could work with Ressi because he was difficult and often raised his voice, used vulgar language, and had “no qualms bashing those he does not like. . . (Tr. 537-8; Ex. 403). She went on to testify about how Ressi asked for a list of outstanding payables and then drained the EV accounts in October without Soberg’s approval (Tr. 545-6; Exs. 405 and 410). Finally, she wrote to her boss, Mr. Kranz: “Mike, the ironic thing is that he has done what he accused Jon of trying to do, . .drain the accounts the way he wants” (Tr. 551-2). Further, she wrote to CEO Deborah Kranz to say she wanted to Bstop working with Ressi: “I really don’t feel comfortable working with someone who is not trustworthy” and was concerned about Ressi’s “pattern of escalating behavior” that had been going on since July (Tr. 552; Ex. 403). CEO Deborah Kranz wrote on November 13, 2015, that the firm had withdrawn from the EV account “due to the non-professional language and treatment of our staff by Adeo” (Ex. 292) Third, the testimony of Sunwoo Hwang of SixUp reinforced the view of Ressi as underhanded. Hwang testified that Soberg, who had up to this point served on the SixUp board, brought “tremendous value add” (Tr. 604). Working behind Sobere’s, back while draining the accounts, Ressi sent another $400,000 to SixUp. Hwang stated that he did not want further EV investment and returned the money (Tr. 606). In an email dated October 8, 2015, Ressi was informed that Sunwoo would not accept the $400,000 on behalf of SixUp “until the situation at Expansive is, resolved” (Ex. 259). Ressi also tried to replace Soberg on the SixUp board but Hwang did not allow him to do so, writing: “Jon Soberg will be attending the board meeting tomorrow because he is a board member. ..” (Tr. 610; Ex. 259). Then Ressi unilaterally withdrew EV’s representation on the board. 4Soberg had been traveling on business and then, on October 3 and 4, attended a family wedding in New Mexico. Ressi wrote to him, told him to enjoy the wedding, and assured him that they would talk about their issues on his return. On October 2, 2015, right before their meeting that was set for October 5, he wrote: “Have some fun. Enjoy the wedding. We have a meeting next week. Let's discuss everything then. ..” (Ex. 215) However, these messages were simply a way of trying to lull Soberg into a calm while carrying out a plan to “starve him out nicely” and squeeze him out of EV just a few days later (Ex. 203). As he wrote to former EV attorney at Wilson Sonsini, Mr. Taku, the day before the meeting with Soberg: “Let’s start tough and he will negotiate.” Meanwhile, apparently unaware of the fact that Ressi had been plotting with Mr. Taku, Soberg set a confidential meeting for October 5 with Mr. Taku to discuss the best way to handle his issues with Ressi. Upon his arrival at the law firm, Soberg was not allowed to meet with Mr. Taku. Instead, he was shocked to be ushered into a room for a surprise meeting with Ressi and Heng. This was an ambush, not a meeting. Rather than discussing their problems and potential 15solutions, Ressi read his “script” to Soberg (Ex. 222).® The script blamed all of the EV problems on Soberg, stated that Ressi would approve no more capital calls and investments, and represented that there was not even enough money left in the accounts to close out 2015. He added that EV would be viewed as a “failure in the eyes of some of the most important entrepreneurs, investors and billionaires worldwide.” The script is a shocking display of bullying tactics and a significant indicator of Ressi’s motives and failure to treat his partner with fairness and dignity. Ressi’s testimony at the hearings regarding the script was less than credible, In order to induce Soberg to step down and sign a separation agreement that had been drafted by Mr. Taku, Ressi offered him a small payment along with a promise to list him as a firm founder and give him a positive reference to continue working with venture capital (Ex. 223). Ressi added: “Over 80% of limited partners are either my friends or my business acquaintances. Most of them have never met you nor spoken to you. In the last couple of weeks, | have spoken to them, and they support my vision for the fund.” He went on, “Do you want to be part of the * Ressi failed to produce the document to his attorney in discovery and it did not come to light until the Wilson Sonsini document production, just a few days before Ressi’s deposition, Counsel for Claimant complained about Ressi’s failure to fulfil his duties in discovery. There was no indication, however, that Ressi’s attorney was anything other than professional during discovery and thereafter. 16highly visible failure that will impact your career, or take a founding credit in something that may go on to be relevant?” Ressi treated his 50% partner with extraordinary distain and used hardball tactics. Despite the fact that their issues had been brewing since the summer, there was no evidence that he ever sat down with Soberg in an attempt to work out their differences. There also was no reason that Ressi could not agree with Soberg that they should complete the fund and then move on. It appears that they would have been fully invested in another 6-9 months. Instead, he decided to work toward unfairly removing Soberg from EV and depriving him of his 50% management control as well as his share of fees and carry. Ressi now claims that EV became a deadlocked entity that could not move forward with business and therefore should undergo dissolution. But it was Ressi who refused to discuss appropriate solutions short of forcing out his partner and Ressi who caused the deadlock based on his unfounded and unproven suspicions. Notably, after the October 5 meeting, even though the terms of the script gave Soberg until October 15 to make a decision, Ressi harassed Soberg with emails and calls urging him to hurry up and decide to leave or the offer would be reduced or withdrawn. Ressi wrote the next day, on October 6 at 9:16 AM that at “every hour on the hour until noon PST today starting at 10:00 AM PST, we will revise the vSoberg Transition Agreement to you, until it becomes no offer with a wind down scenario at noon PST” (Ex. 239). Then, at 11:43 AM that same morning, Ressi wrote, “| assume you want to dissolve the fund based on your lack of responses. In 20 minutes, all deals are off the table” (Ex. 238). At 3:10 PM that day, Ressi wrote to Soberg and even copied Soberg’s wife: “You have violated multiple conditions under which we offered you the initial Soberg Transition Agreement from the fund.” He went on to claim that Soberg was in breach of contract and, if he failed to remedy the breaches, the LP’s would be informed (Ex. 242) Earlier that day, when Soberg had asserted his need to be on calls with EV, Ressi wrote: “You do not need to be on calls. You have until noon. Then, the wind down begins. No exceptions. Stop these stupid games. | am not going to play them anymore, and you will be sued personally by Jun, myself and others as soon as today” (Ex. 226) In response to these heavy-handed bullying tactics, Soberg sought counsel and decided to file for arbitration on November 20, 2015. Ill, DETERMINATIONS ON THE CLAIMS 1. Ressi Breached His Fiduciary Duties to Soberg 18Under Delaware law, LLC members like Ressi and Soberg owe fiduciary duties of care and loyalty pursuant to Section 18-1104 of the Delaware Limited Liability Company Act. CMS Investment Holdings, LLC v. Castle, C.A. No. 9468-VCP (Del. Ch. June 23, 2015). As shown above, Ressi breached his fiduciary duties when he changed the office locks, deprived Soberg of access to firm assets, prevented Soberg from accessing the SVB accounts, told the LP’s and other business associates that Soberg had a reduced role in the firm, blocked salaries, drained fund money from the accounts without input from Soberg, refused to conduct company business, and so on. Ressi’s script threatened Soberg with the failure of the firm and damage to his reputation among other things. But Ressi not only made threats; he also took direct action to damage EV and Soberg.® Through these and other actions, Ressi attempted to unfairly squeeze Soberg out of EV and take over the fund. Soberg was entitled to a high degree of loyalty from Ressi. Ressi schemed to squeeze out Soberg and deprive him of his interest in the ° Ressi’s actions went beyond the mere threats discussed in Paige Capital Management, LLC v. Lerner Capital Fund, LLC, C.A. No. 5502-CS (Del. Ch. Aug. 8, 2011). 196 Del. C. sec eliminate the i EV fund he had worked so hard to build. Ressi breached his fiduciary duties to EV and Soberg. Ressi Breached the Expansive LLC Agreement Section 9(b) of the LLC Agreement (Ex.106) requires General Partners Soberg and Ressi to make management decisions unanimously. They are 50/50 partners and the Agreement does not specify a way break a tie if there is one. Each of the acts described above, such as draining the accounts and locking Soberg out of the office, were taken unilaterally by Ressi and are breaches of contract Ressi failed to confer with Soberg about many management decisions in order to further his own interests at the expense of Soberg and EV, Ressi breached the LLC Agreement and also, by these acts, breached the implied covenant of good faith and fair dealing under Delaware law.” Ressi shall be Removed from EV for Cause and become a Former Member n 18-1101 (c) states that “the limited liability company agreement may not implied contractual covenant of good faith and fair dealing.” Ressi has offered the exculpation clause in the contract (section 24) as a defense. However, that clause does not apply to “conduct, actions, or inactions determined by a court. . . (or arbitrator) not to have been undertaken in good faith on behalf of the Company,” as here. 20Pursuant to Section 12(b) of the LLC Agreement, Ressi is to be removed as manager and member for cause: “A Member or Manager. . .shall be automatically removed upon the occurrence of a Cause event. “Cause” means. . .a finding of civil liability in damages. . .by reason of any act or practice involving fraud or breach of trust.” Following his removal, Ressi shall be a “Former Member” and his interest or capital account balance may be repurchased by the Company pursuant to Section 12 of the LLC Agreement (Ex. 106)."* Ressi is liable for a breach of trust and a breach of his fiduciary duties by his actions set forth above, including cutting off salaries and health benefits, misappropriating funds and draining the EV account, and preventing Soberg’s access to EV offices and computer systems. . Ressi |s Not Entitled to Indemnity for Legal Fees and Costs The LLC Agreement provides that indemnity “shall not extend to conduct or inaction not undertaken in good faith on behalf of the Company...” ™ After issuance of this Award, counsel for Respondent filed a timely Motion for Correction pursuant to JAMS Rule 24(j). Counsel for Claimant filed a timely response. Because the amount of Respondent's capital account originally included in the Award may be a computational error, that amount is deleted from the award and the parties are instructed to follow the contractual procedure for determining the correct figure. 2In view of the findings set forth in this Final Award, Ressi must return money that was advanced for his legal fees and costs to EV totalling $140,712.40." 5. Soberg Shall Manage EV Going Forward Soberg has been managing the Fund since October 2015 and shall continue to do so, operating in the best interests of the LP’s as is his duty. Soberg has agreed to forgo management fees for this work but will be entitled to the carry on the remaining investments in the Fund Pursuant to the terms of the contract. Further, the approximately $5.5 million that was just paid to EV from the Honest Dollar investment is in the SVB and is to be distributed to the LP’s pursuant to the process set forth in the contracts. 6. Ressi is Liable for Damage to Soberg’s Reputation Ressi has done great damage Soberg’s reputation, including demeaning him in communications to the LP’s and portfolio companies and demoting him on the EV website. But Ressi’s greatest damage to Soberg’s reputation was causing the failure of the EV fund. Ressi’s deliberate actions--refusing to make any further capital calls, * Counsel submitted figures for amounts advanced for Ressi's fees and costs and are in agreement that this amount is $140,712.40. 2refusing to make additional investments in new deals, and emptying the accounts—were aimed at shutting down EV. in his script, Ressi discussed the reputational damage he had caused, stating that “Expansive Ventures will be a failure in the eyes of some of the most important entrepreneurs, investors and billionaires worldwide. We will be a failure no matter how well the portfolio does.” Ressi continues threatening that, if Soberg would not sign the unfavorable terms set forth in the separation agreement presented on October 5, 2015, he would be “part of the highly visible failure that will impact [his] career.” But these were not only threats; by this time, the damage already had been done. While it would have been possible for Ressi to agree to wrap up this fund and avoid this damage, he refused to do so. The law allows “broad discretion” in determining the amount of such damages. Grossman v. Goemans, 631 F. Supp. 972 (D.D.C. 1986). Expert Mr. O'Connor estimated the amount at $5,000,000 to $10,000,000, or $1,000,000 per year for 5-10 years. While that amount may be excessive, the amount of $1,000,000 is reasonable under these circumstances. 2IV. DAMAGES Soberg has claimed four kinds of damages: lost income from management fees, lost carried interest opportunity, damage to reputation, and punitive damages 1. Lost Income from Management Fees This claim is granted. Ressi is to pay Soberg $2,500,000 in fees. Soberg’s claim for $3,000,000 in fees is reduced to reflect the uncertainties of the EV budget for salaries and expenses 2. Lost Carried Interest This claim is denied as speculative. However, Ressi is to be removed as a General Partner and Soberg is entitled to the entire carry going forward. 3. Reputational Damage This claim is granted. Ressi is to pay Soberg $1,000,000 in reputational damages. 4, Punitive Damages This claim is denied. No punitive damages are awarded. 24AWARD For the reasons set forth above, the Arbitrator’s Final Award is as follows: 1. Ressi is to pay Soberg $2,500,000 to compensate him for the loss of management fees. 2. Soberg’s claim for lost carried interest is denied as speculative. 3. Ressi is to be removed as a General Partner of EV. EV is to repay his capital account balance. 4, The entire carry going forward is awarded to Soberg. 5. Ressi is to pay Soberg $1,000,000 for damages to Soberg’s reputation. 256. Ressi is not entitled to indemnification for legal fees and expenses and is ordered to reimburse EV for the fees and costs advanced in the amount of $140,712.40. 7. No punitive damages are awarded. This Final Award is in full and complete settlement and satisfaction of any and all claims submitted in this arbitration and any other claim not specifically addressed herein is deemed denied. Dated: July 7, 2016 eG Co Zela G. Claiborne, Arbitrator 26