1
EXHIBIT 10.5
OPERATING AGREEMENT
OF
MINERAL JV, LLC
Dated as of January 13, 1997
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINED TERMS
SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
FORMATION AND TERM
SECTION 2.01 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.04 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.05 Title to Company Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.06 Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY, ETC.
SECTION 3.01 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.02 Powers of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.03 Maintenance of Separate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
CAPITAL CONTRIBUTIONS, DEDICATION OF ASSETS,
CAPITAL ACCOUNTS AND ADVANCES
SECTION 4.01 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.02 Dedication of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.03 Funding Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.04 Additional Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.05 Delinquent Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.06 Status of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.07 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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ARTICLE V
MEMBERSHIP UNITS
SECTION 5.01 Membership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.02 Initial Membership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.03 Additional Membership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI
MANAGING MEMBERS; MEMBERS COMMITTEE;
OFFICERS AND EMPLOYEES
SECTION 6.01 Management by the Managing Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.02 Power of Managing Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.03 Members Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.04 Approval Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.05 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.06 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.07 Company Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.08 No Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.09 Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.10 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII
ALLOCATIONS; TAX MATTERS
SECTION 7.01 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.02 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.03 Curative Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.04 Other Allocation Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.05 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.06 Tax Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
DISTRIBUTION
SECTION 8.01 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8.02 Liquidation Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8.03 Distribution Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8.04 Limitations on Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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ARTICLE IX
BOOKS AND RECORDS; FINANCIAL STATEMENTS
SECTION 9.01 Books and Records; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.02 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE X
TRANSFERABILITY AND ADDITIONAL MEMBERS
SECTION 10.01 General Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 10.02 Recognition of Transfer by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 10.03 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 10.04 Effective Date of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 10.05 Additional Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 10.06 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10.07 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XI
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 11.01 No Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 11.02 Events Causing Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 11.03 Notice of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.04 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.05 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 11.06 Claims of the Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XII
EMPLOYEES
SECTION 12.01 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XIII
MARKETING PRODUCTS;
ENERGY MANAGEMENT PRODUCTS
SECTION 13.01 Energy Commodity Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 13.02 Energy Management Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE XIV
CERTAIN AGREEMENTS
SECTION 14.01 Scope of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 14.02 Compliance with U.S. Foreign Corrupt Practices Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 14.03 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 14.04 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 14.05 TEEM Software Sublicense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XV
LIABILITY AND INDEMNIFICATION
SECTION 15.01 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 15.02 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 15.03 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XVI
MISCELLANEOUS
SECTION 16.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 16.02 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 16.03 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16.04 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16.05 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16.06 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16.07 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16.08 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16.09 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 16.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 16.12 Amendments and Waivers; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 16.13 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 16.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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SCHEDULE 1.01 - Certain Definitions
SCHEDULE 2.01 - Members, Capital Contributions, Addresses and Number of Member Units
SCHEDULE 4.01(a) - Assets to be Contributed and Liabilities to be Assumed (Pacific Enterprises)
SCHEDULE 4.01(b) - Assets to be Contributed and Liabilities to be Assumed (Enova)
SCHEDULE 4.01(c)(i) - Excluded Assets (Pacific Enterprises)
SCHEDULE 4.01(c)(ii) - Excluded Assets (Enova)
SCHEDULE 13.01 - Energy Commodity Products
SCHEDULE 13.02 - Energy Management Products
SCHEDULE 14.01 - Non-Contributed Products
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OPERATING AGREEMENT of MINERAL JV, LLC a
California limited liability company (the "Company"), is made and effective as
of January 13, 1997, among Pacific Enterprises Energy Services, a California
corporation, Ensource, a California corporation, Pacific Enterprises LNG
Company, a California corporation, Energy Alliance I, a California corporation,
Pacific Enterprises Energy Management Services, a California corporation, and
Pacific Energy Leasing Company, a California corporation (collectively, the
"Pacific Enterprises Members"), and Enova Energy, Inc., a California
corporation, and Enova Technologies, a California corporation (collectively,
the "Enova Members" and, together with the Pacific Enterprises Members, the
"Members").
WHEREAS, Pacific Enterprises ("Pacific
Enterprises"), Enova Corporation ("Enova") and certain of their Affiliates have
entered into an Agreement and Plan of Merger and Reorganization dated as of
October 12, 1996 (the "Merger Agreement"), pursuant to which such parties will
enter into a business combination, subject to, among certain other conditions,
the approval of the shareholders of Enova at a special meeting (the "Enova
Shareholders Approval") and the approval of the shareholders of Pacific
Enterprises at a special meeting (the "Pacific Enterprises Shareholder
Approval");
WHEREAS, the Members desire to form the Company
under the California Act (as defined below) for the purposes and upon the terms
and conditions set forth herein;
WHEREAS, the Members desire that the Company be
their principal vehicle for the provision of certain natural gas and electric
power marketing services and certain energy management services to third
parties on behalf of the Members upon the terms and conditions set forth
herein; and
WHEREAS, the Members have agreed to contribute
or dedicate certain assets to the Company and to provide the services of
certain personnel;
NOW, THEREFORE, in consideration of the
agreements and obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Members hereby agree as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.01 DEFINITIONS. Each of the
following terms shall have the meaning provided in the Section or Schedule set
forth opposite such term:
TERM SECTION
---- -------
Adjusted Capital Account Schedule 1.01
Adjusted Capital Account Deficit Schedule 1.01
Affiliate Schedule 1.01
Agreement Schedule 1.01
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Appraiser 11.02
Approved Funding Requirements 4.03
Approved Plan 4.03
Articles Schedule 1.01
Asset Value Schedule 1.01
Auditors 9.01
Bankruptcy Schedule 1.01
Business Day Schedule 1.01
California Act Schedule 1.01
Capital Account Schedule 1.01
Capital Contribution Schedule 1.01
Chairman 6.03
Code Schedule 1.01
Company Preamble
Company Business Schedule 1.01
Covered Person Schedule 1.01
CPUC Schedule 1.01
Debt Schedule 1.01
Default Funding Requirements 4.03
Default Plan 4.03
Delinquent Member 4.06
Depreciation Schedule 1.01
Energy Commodity Products 13.01
Energy Management Products 13.02
Enova Recitals
Enova Contributed Assets 4.01(c)
Enova Dedicated Assets 4.02
Enova Initial Membership Units 5.02
Enova Members Preamble
Enova Representatives 6.03
Enova Shareholders Approval Recitals
Excluded Assets 4.01
Fair Market Value 11.02
Fiscal Year Schedule 1.01
Former Member 11.02
GAAP Schedule 1.01
Information 14.04
Initial Plan 4.03
Interest Rate Schedule 1.01
License Agreement 4.01
Liens Schedule 1.01
Liquidating Trustee 11.03
Majority Vote Schedule 1.01
Management Services Agreement 4.01
Managing Members Schedule 1.01
Marketable Securities Schedule 1.01
Marketing Region Schedule 1.01
Member Schedule 1.01
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Member Group Schedule 1.01
Members Preamble
Members Committee 6.03
Membership Interest Schedule 1.01
Membership Unit Schedule 1.01
Merger Agreement Recitals
Net Asset Value Schedule 1.01
Net Profits and Net Losses Schedule 1.01
Non-Contributed Products 14.01
Non-Delinquent Members 4.06
Officers 6.10
Pacific Enterprises Recitals
Pacific Enterprises Contributed Assets 4.01(c)
Pacific Enterprises Dedicated Assets 4.02
Pacific Enterprises Initial Membership Units 5.02
Pacific Enterprises Members Preamble
Pacific Enterprises Representatives 6.03
Pacific Enterprises Shareholders Approval Recitals
Person Schedule 1.01
Products Schedule 1.01
Regulations Schedule 1.01
Regulatory Allocations 7.03
Representatives 6.02
Subsequent Plan 4.03
Subsidiary or Subsidiaries Schedule 1.01
Transfer Schedule 1.01
Transferee Schedule 1.01
ARTICLE II
FORMATION AND TERM
SECTION 2.01 FORMATION. (a) The parties hereto hereby form
and confirm the formation of the Company as a limited liability company under
and pursuant to the provisions of the California Act and all other pertinent
laws of the State of California for the purposes and upon the terms and
conditions hereinafter set forth. The parties hereto agree that the rights,
duties and liabilities of the initial Members and any additional Member
admitted to the Company in accordance with the terms hereof, shall be as
provided in the California Act, except as otherwise provided herein.
(b) The name and mailing address of each Member shall be
listed on Schedule 2.01 attached hereto. Each of the Pacific Enterprises
Members and the Enova Members is hereby admitted as a Member of the Company.
Additional Members shall be admitted as Members of the Company in accordance
with Article X. The President, or a designee of the President, shall be
required to update Schedule 2.01 from time to time, as necessary to reflect
accurately the information therein as known by the President, but no such
update shall modify Schedule 2.01 in any manner inconsistent with this
Agreement or the
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California Act. Any amendment or revision to Schedule 2.01 made in accordance
with this Agreement shall not be deemed an amendment to this Agreement for
purposes of Section 16.13. Any reference in this Agreement to Schedule 2.01
shall be deemed to be a reference to Schedule 2.01, as amended and in effect
from time to time.
(c) The President, or a designee of the President, is
hereby designated as an authorized person, within the meaning of the California
Act, to execute, deliver and file, or to cause the execution, delivery and
filing of, any amendments or restatements of the Articles and any other
certificates, notices, statements or other instruments (and any amendments or
restatements thereof) necessary or advisable for the formation of the Company
or the operation of the Company in all jurisdictions where the Company may
elect to do business, but no such amendment, restatement or other instrument
may be executed, delivered or filed unless adopted in a manner authorized by
this Agreement.
SECTION 2.02 NAME. The name of the Company formed hereby is
Mineral JV, LLC. The business of the Company may not be conducted under any
other name unless the parties hereto expressly agree in writing.
SECTION 2.03 TERM. The term of the Company shall commence,
and the Articles shall be filed in the office of the Secretary of State of the
State of California, on the date hereof and shall continue for a term as set
forth in the Articles of Organization, subject to the provisions set forth in
Article XI and applicable law. The existence of the Company as a separate
legal entity shall continue until cancellation of the Articles in the manner
required by the California Act.
SECTION 2.04 PRINCIPAL PLACE OF BUSINESS. The principal
place of business of the Company shall be in Los Angeles, California or such
other place as the Members Committee may determine from time to time, and the
Company shall have other regional offices and operations as the Members
Committee may determine from time to time. The energy commodity trading and
risk management functions of the Company may be located in San Diego County, or
as otherwise determined by the Members Committee. Other functions of the
Company will be located in Los Angeles or in other regional offices, or as
otherwise determined by the Members Committee.
SECTION 2.05 TITLE TO COMPANY PROPERTY. All property of the
Company, whether real, personal or mixed, tangible or intangible, shall be
deemed to be owned by the Company as an entity, and no Member, individually,
shall have any direct ownership interest in such property.
SECTION 2.06 AGENT FOR SERVICE OF PROCESS. The Company's
registered agent for service of process in the State of California shall be as
set forth in the Articles, as the same may be amended by the Members Committee
from time to time.
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ARTICLE III
PURPOSE AND POWERS OF THE COMPANY, ETC.
SECTION 3.01 PURPOSE. The purpose of the Company is to
engage in (a) the Company Business and (b) any and all lawful activities in
accordance with the California Act which the Members Committee deems necessary
or advisable in connection with the Company Business.
SECTION 3.02 POWERS OF THE COMPANY. Subject to the
limitations set forth in this Agreement, the Company will possess and may
exercise all of the powers and privileges granted to it by the California Act,
by any other law or this Agreement, together with all powers incidental
thereto, so far as such powers are necessary or convenient to the conduct,
promotion or attainment of the purpose of the Company set forth in Section
3.01.
SECTION 3.03 MAINTENANCE OF SEPARATE EXISTENCE. The Company
shall do all things necessary to maintain its limited liability company
existence separate and apart from each Member and any Affiliate of any Member,
including holding regular meetings of the Members and maintaining its books and
records on a current basis separate from that of any Affiliate of the Company
or any other Person, and shall not commingle the Company's assets with those of
any Affiliate of the Company or any other Person. In furtherance, and not in
limitation, of the foregoing, the Company shall not:
(a) Authorize or permit any Person other than the
President to act on its own behalf with respect to matters (other than
matters customarily delegated to others under powers of attorney) for
which a limited liability company's members or managing member would
customarily be responsible;
(b) Fail (i) to maintain or cause to be maintained by an
agent under the Company's control physical possession of all its books
and records, (ii) to maintain capitalization adequate for the conduct
of its business, (iii) to account for and manage all of its
liabilities separately from those of any other Person, including
payment by it of administrative expenses and taxes, other than income
taxes, from its own assets, or (iv) to identify or cause to be
identified separately all of its assets from those of any other
Person;
(c) Except as contemplated by Section 4.04, commingle, or
permit the commingling of, its funds with the funds of any Member or
any Affiliate of any Member or use its funds for other than the
Company's uses; or
(d) Except as contemplated by Section 4.04, maintain, or
permit the maintenance of, joint bank accounts or other depository
accounts to which any Member would have independent access.
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ARTICLE IV
CAPITAL CONTRIBUTIONS, DEDICATION OF ASSETS,
CAPITAL ACCOUNTS AND ADVANCES
SECTION 4.01 CAPITAL CONTRIBUTIONS. (a) Pacific
Enterprises. In exchange for the Pacific Initial Membership Units, the Pacific
Enterprises Members hereby agree (i) to make a Capital Contribution of
$5,000,000 on the date hereof, (ii) if required in accordance with the terms
thereof, to make a cash Capital Contribution pursuant to paragraph (e) below,
(iii) to contribute the assets and liabilities set forth on Schedule 4.01(a)(i)
to the Company on the first day of the month immediately following the month in
which occurs the later of the date of the Enova Shareholders Approval and the
date of the Pacific Enterprises Shareholder Approval, (iv) to assign all its
rights and obligations in the contracts listed on Schedule 4.01(a)(i) to the
Company on the first day of the month immediately following the month in which
occurs the later of the date of the Enova Shareholders Approval and the date of
the Pacific Enterprises Shareholder Approval, (v) in the event any Pacific
Enterprises Member shall acquire any of the assets or execute any of the
contracts set forth on Schedule 4.01(a)(ii), to contribute such assets or
assign such contracts to the Company effective as of the fifth Business Day
after the date such asset is acquired, or such contract is executed, by a
Pacific Enterprises Member, (vi) to enter into an intellectual property license
agreement dated and effective as of the date hereof (a "License Agreement"),
and (vii) to enter into a management services agreement dated and effective as
of the date hereof (a "Management Services Agreement"). Assets to be
contributed pursuant to clauses (iii), (iv) and (v) above shall be free of any
Liens, and upon the effective date of such contribution as set forth on
Schedule 4.01(a), without any further action on the part of any Member, the
Company shall have full legal title in such assets.
(b) Enova. In exchange for the Enova Initial Membership
Units, the Enova Members hereby agree (i) to make a Capital Contribution of
$5,000,000 on the date hereof, (ii) if required in accordance with the terms
thereof, to make a cash Capital Contribution pursuant to paragraph (e) below,
(iii) to contribute the assets and liabilities set forth on Schedule 4.01(b)(i)
to the Company on the first day of the month immediately following the month in
which occurs the later of the date of the Enova Shareholders Approval and the
date of the Pacific Enterprises Shareholder Approval, (iv) to assign all its
rights and obligations in the contracts listed on Schedule 4.01(b)(i) to the
Company on the first day of the month immedately following the month in which
occurs the later of the date of the Enova Shareholders Approval and the date of
the Pacific Enterprises Shareholder Approval, (v) in the event any Enova Member
shall acquire any of the assets or execute any of the contracts set forth on
Schedule 4.01(b)(ii), to contribute such assets or assign such contracts to the
Company effective as of the fifth Business Day after the date such asset is
acquired or such contract is executed by an Enova Member (vi) to enter into a
License Agreement, and (vii) to enter into a Management Services Agreement.
Assets to be contributed pursuant to clauses (iii), (iv) and (v) above shall be
free of any Liens, and upon the effective date of such contribution as set
forth on Schedule 4.01(b), without any further action on the part of any
Member, the Company shall have full legal title in such assets.
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(c) Excluded Assets. The assets to be contributed by
each of the Pacific Enterprises Members (the "Pacific Enterprises Contributed
Assets") and the Enova Members (the "Enova Contributed Assets"), as set forth
on Schedule 4.01(a) and Schedule 4.01(b), respectively, shall exclude the
assets set forth on Schedule 4.01(c)(i) with respect to the Pacific Enterprises
Members and their Affiliates, and Schedule 4.01(c)(ii) with respect to the
Enova Members and their Affiliates (the "Excluded Assets") and not withstanding
any other provision of this Agreement, none of the Excluded Assets shall be
deemed Contributed Assets or Dedicated Assets. All assets owned by the Pacific
Enterprises Members and the Enova Members, that are not listed on Schedule
4.01(c)(i) or 4.01(c)(ii), respectively, shall be deemed Pacific Enterprises
Contributed Assets or Enova Contributed Assets, as the case may be, and shall
be deemed to have been contributed pursuant to Section 4.01(a)(iii) or Section
4.01(b)(iii), as the case may be.
(d) Assumption of Liabilities. The Company hereby agrees
to assume, effective as of the first day of the month immediately following the
month in which occurs the later of the date of the Enova Shareholders Approval
and the date of the Pacific Enterprises Shareholders Approval, all liabilities
set forth on Schedule 4.01 and further agrees to indemnify and hold harmless,
in accordance with the provisions of Section 15.02, the Members from any
losses, damages or claims arising or resulting from such liabilities.
Effective upon the assignment of contracts to the Company pursuant to clauses
(iv) or (v) of each of paragraphs (a) or (b) above, the Company agrees to
perform all obligations under each such contract and to indemnify and hold
harmless, in accordance with the provisions of Section 15.02, the contributing
Member and its Affiliates for any losses, damages or claims arising from any
failure to perform such obligations. The Company further agrees to assume,
and, in accordance with the provisions of Section 15.02, indemnify and hold
harmless the contributing Member and its Affiliates from any and all losses,
damages or claims resulting from obligations or liabilities pursuant to any
such contracts (i) existing on the effective date of the assignment of such
contract or (ii) in respect of or arising out of events occurring after the
effective date of such assignment.
(e) Asset Valuation. The Asset Value of the assets to be
contributed to the Company, and liabilities to be assumed by the Company, will
be the Asset Value of such assets and liabilities as set forth for each asset
and liability on Schedule 4.01 or determined as of the date such assets are
contributed, or liabilities assumed, in accordance with the valuation
methodology set forth for each asset or liability on Schedule 4.01 or, if not
so set forth, as determined in good faith by Majority Vote of the Members
Committee; provided, however, that in the event that the Members Committee, by
Majority Vote, is unable to determine the Asset Value of such assets or
liabilities within 60 days after the date hereof, in the case of assets or
liabilities listed on Schedule 4.01(a)(i) or Schedule 4.01(b)(i), or within
five business days of the date of contribution or assumption, in the case of
assets or liabilities listed on Schedule 4.01(a)(ii) or Schedule 4.01(b)(ii),
the Asset Value shall be determined by a nationally recognized investment
banking firm, accounting firm or valuation firm selected by the contributing
Member Group from a list of three such firms provided by the other Member Group
and the fees and expenses of such firm shall be borne by the Company.
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Upon the final determination of the Asset Value of any asset or liability
listed on Schedule 4.01, such schedule shall be amended to include such Asset
Value. Upon any cash or asset contribution, or liability assumption, pursuant
to clauses (i) through (iii) below, the Capital Accounts of each of the Members
within a Member Group shall be adjusted to reflect the Net Asset Value of the
assets and cash contributed by, and liabilities assumed from, each of such
Members relative to the aggregate Net Asset Value of the assets and cash
contributed by, and liabilities assumed from, such Member's Member Group.
(i) After all of the assets and liabilities set forth on
Schedule 4.01(a)(i) and 4.01(b)(i) are contributed to or assumed by
the Company and have been valued, the Member Group that contributed
assets, liabilities and cash that in the aggregate have a lesser Net
Asset Value than the aggregate Net Asset Value of the cash and assets
contributed by, and liabilities assumed from, the other Member Group
shall contribute additional cash equal to such shortfall. Such cash
contribution shall be made no later than the first day of the month
immediately following the month in which occurs the later of the date
the Pacific Shareholders Approval is obtained and the date the Enova
Shareholders Approval is obtained.
(ii) After (A) all of the contracts that have been entered
into with customers set forth on Schedule 4.01(a)(ii)(1) and
4.01(b)(ii)(1), (4) or (5) as of June 30, 1997 and (B) any assets set
forth on Schedule 4.01(b)(ii)(2) or (3) acquired by any Enova Member
on or prior to June 30, 1997, are contributed to the Company and have
been valued, the Member Group that contributed assets that in the
aggregate have a lesser Asset Value than the aggregate Asset Value of
the assets contributed by the other Member Group shall contribute
additional cash equal to such shortfall. Such cash contribution shall
be made no later than July 15, 1997.
(iii) Within five Business Days after (A) in the event any
such contract is entered into by any Enova Member after June 30, 1997,
a contract on Schedule 4.01(b)(ii)(5) is assigned to the Company, or
(B) the date on which any other asset is contributed to the Company by
a Member at the request of the Members Committee, after an agreement
has been reached between the Member and the Members Committee that
such asset should be contributed, the non-contributing Members Group
will then make a cash contribution to the Company equal in value to
the Asset Value of the assets contributed by the contributing Member.
The Pacific Enterprises Members acknowledge that the Enova Members may make
future contributions of the nature set forth on Schedule 4.01(b) and the Enova
Members acknowledge that the Pacific Enterprises Members may make future
contributions of the nature set forth on Schedule 4.01(a). All such future
contributions will be treated in the manner described in this paragraph.
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(f) Further Assurances. The parties agree that the Enova
Members or the Pacific Members, as the case may be, shall use all good faith
reasonable efforts to obtain any consent, approval or authorization necessary
or desirable to effect the assignment of any contract listed on Schedule
4.01(a) or Schedule 4.01(b), respectively, prior to the date such contract is
scheduled to be assigned to the Company. In the event such consent,
authorization or approval is not obtained prior to such date, the Member Group
that was to assign such contract will cooperate with the Company, prior to the
expiration of the Company, in attempting to obtain such consent, approval or
authorization as promptly thereafter as practicable. If such consent, approval
or authorization cannot be obtained, the Member Group that was to assign such
contract will use all good faith reasonable efforts to provide the Company with
the rights and benefits of the affected contract for the term of such contract,
and, if the Member Group that was to assign such contract provides such rights
and benefits, the Company shall assume the obligations and burdens thereunder,
as if such contract is assigned pursuant to Section 4.01(a) or Section 4.01(b),
respectively.
(g) Members Assets. The Pacific Enterprises Members
hereby represent to the Enova Members and the Enova Members hereby represent to
the Pacific Enterprises Members that the assets to be contributed by each of
Pacific Enterprises and Enova, as set forth on Schedule 4.01(a) and Schedule
4.01(b), respectively, together with the Excluded Assets as set forth on
Schedule 4.01(e)(i) and 4.01(e)(ii), respectively, include all the properties,
assets and rights owned by the Pacific Enterprises Members and the Enova
Members, and that the Pacific Enterprises Members and the Enova Members,
respectively, have caused all their assets to be maintained in accordance with
good business practice, and all their assets are in good operating condition
and repair and are suitable for the purposes for which they are used and
intended.
SECTION 4.02 DEDICATION OF ASSETS. (a) Pacific Enterprises.
The Pacific Enterprises Members hereby agree to make available to the Company
on a non-exclusive basis, to the extent requested by the Members Committee (i)
for the term of the Company, such assets, facilities and services as the
Members Committee may reasonably request and (ii) from the date hereof through
the first day of the month immediately following the month in which occurs the
later of the date of the Enova Shareholder Approval and the date of the Pacific
Enterprises Shareholder Approval, each asset set forth on Schedule 4.01(a), at
any time and in the manner requested by the Members Committee (such assets,
facilities and services being the "Pacific Enterprises Dedicated Assets"). The
Company shall have no right to the earnings or other financial results of any
such dedicated assets.
(b) Enova. The Enova Members hereby agree to make
available to the Company, to the extent requested by the Members Committee (i)
for the term of the Company, such assets, facilities and services as the
Members Committee may reasonably request and (ii) from the date hereof through
the first day of the month immediately following the month in which occurs the
later of the date of the Enova Shareholder Approval and the date of the Pacific
Enterprises Shareholder Approval, each asset set forth on Schedule 4.01(b), at
any time in the manner requested by the Members Committee (such
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assets, facilities and services being the "Enova Dedicated Assets"). The
Company shall have no right to the earnings or other financial results of any
such dedicated assets.
(c) Compensation. The Company shall pay the relevant
Enova Member, in the case of Enova Dedicated Assets, or the relevant Pacific
Enterprises Member, in the case of Pacific Enterprises Dedicated Assets, an
amount for the use of such assets based on the actual cost to the relevant
Member of providing the use of such assets or, if applicable, the affiliate
transfer pricing policies established by Enova, in the case of Enova Dedicated
Assets, or Pacific Enterprises, in the case of Pacific Enterprises Dedicated
Assets. Within five Business Days of the last day of each month, each of Enova
and Pacific Enterprises shall notify the Company in writing of the compensation
due for the use of Enova Dedicated Assets or Pacific Enterprises Dedicated
Assets, respectively, during the preceding month. Should the Company not pay
said sum, or any part thereof, within 30 calendar days from the date of the
monthly invoice (i) interest at the Interest Rate shall be additionally due and
owing on the unpaid balance from the date past due and (ii) the Member Group to
which such sum is owed shall, effective 30 days following the delivery of
written notice, have no further obligation pursuant to this Section 4.02 to
make available to the Company any assets, facilities or services until such
unpaid balance plus all accrued interest shall have been paid; provided,
however, that no Member shall be relieved of any of its obligations pursuant to
this Section 4.02 if, following the delivery of written notice pursuant to this
clause (ii) but prior to 30 days following such delivery, the Company shall
deliver to the relevant Member written notice setting forth in reasonable
detail why the Company in good faith believes no unpaid amount is owed pursuant
to this Section 4.02. The Company shall notify Pacific Enterprises or Enova,
as the case may be, of any billing items in question. Enova or Pacific
Enterprises will research the items in question and resolve any differences
with each Enova Member and Pacific Enterprises Member. In the event any amount
that was paid by the Company was not properly owed, then within 30 days after
the delivery of such notice, the Company shall be reimbursed that amount with
interest at the Interest Rate from the date the original payment was received
until the adjustment was refunded. Upon the termination of this Agreement,
Enova and Pacific Enterprises will xxxx the Company for the actual costs
incurred since the last billing under the terms and conditions mentioned above.
(d) Audit Rights. Each of Pacific Enterprises and Enova
reserves the right to designate its own employee representative, or its
contracted representative, who shall have the right to audit and to examine any
cost, payment, settlement, or supporting documentation charged to the Company
pursuant to Section 4.02(c) in respect of any Enova Dedicated Assets, in the
case of Pacific Enterprises, or any Pacific Dedicated Assets, in the case of
Enova. Any such audit shall be undertaken at the expense of the party
requesting such audit at reasonable times and in conformance with generally
accepted auditing standards. The Company, Pacific Enterprises and Enova each
agree to fully cooperate with any such audit. The right to audit shall extend
during the term of this Agreement and for a period of one year following the
date of final payment. Each of Pacific Enterprises and Enova, and their
respective Affiliates, agrees to retain all necessary records/documentation for
one year or such longer period as may be required by order, law, regulation or
rule after the year to
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which they pertain. Enova or Pacific Enterprises, as the case may be, and the
Company will be notified in writing of any exception taken as a result of an
audit. After agreement has been reached by both parties, Enova or Pacific
Enterprises, as the case may be, will refund the agreed upon amount plus
interest to the Company within 30 days (or, alternatively, with prior written
approval of the Company, deduct the dollar amount from the next invoice
submitted to the Company). In the event agreement is not reached within 30
days of delivery of the notice referred to above, the matter shall be referred
to the Auditors who shall decide such matter within 60 days of such referral.
The fees of the Auditors in connection with such matter shall be paid by the
party against which the Auditors decide. Interest will be computed at the
Interest Rate from the date the payment or offset was made.
SECTION 4.03 FUNDING REQUIREMENTS. Within 30 Business Days
after the date hereof, the Members shall prepare and agree upon projected
expenditure schedules and a projected profit and loss statement for the Company
through the Fiscal Year ending December 31, 1997 (the "Initial Plan"). The
Initial Plan, among other things, shall include a schedule setting forth the
cash Capital Contributions that will be required from the Members to fund the
operations of the Company in each Fiscal Year, through the Fiscal Year ending
on December 31, 1997. Beginning for the Fiscal Year ending December 31, 1998,
and for each subsequent Fiscal Year, not later than 30 days prior to the
beginning of such Fiscal Year, the Members Committee shall approve projected
expenditure schedules and a projected profit and loss statement for such Fiscal
Year (each, a "Subsequent Plan"). Each Initial Plan and any Subsequent Plan is
referred to as an "Approved Plan". Each Approved Plan shall be in a form
substantially similar to the Initial Plan. The amount of Capital Contributions
set forth in an Approved Plan as being required of the Members to fund the
Company is referred to as the "Approved Funding Requirements". If the Members
Committee cannot agree on a Subsequent Plan for the Company with respect to any
Fiscal Year, the Members shall fund the operations of the Company (each, a
"Default Plan") in the amount requested by the Company reasonably necessary to
fund the day-to-day operations of the Company and satisfy obligations of the
Company as they arise (the "Default Funding Requirements").
SECTION 4.04 ADDITIONAL FUNDING. (a) In the event that the
Members Committee determines that additional capital or credit support is
required by the Company, it will be funded through any or a combination of the
following mechanisms at the option of the Members Committee:
(i) through revolving credit facilities or other credit
support from third parties (such as banks);
(ii) through intercompany advances or other credit support
from the Members or their Affiliates; or
(iii) through additional Capital Contributions by the
Members.
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(b) In the event that such funding is made in the form of
intercompany advances or other committed credit support from a Member, the
Company shall notify each Member of the cash advances to be made or credit
support to be provided pursuant to this Section 4.04 by delivering a written
notice to each Member in accordance with Section 16.01 specifying (i) the
aggregate amount of cash advances or credit support required at such time and
(ii) the amount of cash advances to be made or credit support to be provided by
such Member which amount shall be the product of (A) the aggregate amount of
cash advances or credit support to be made and (B) a fraction, the numerator of
which shall be the aggregate number of Membership Units owned by such Member
and the denominator of which shall be the number of outstanding Membership
Units. The cash advances to be made by each Member shall be made in such
amount as is specified in such notice in immediately available funds by wire
transfer or other similar means to a bank account designated by the Company in
such notice prior to the close of business on the fifth Business Day following
the date of delivery of such notice. The Member shall be compensated for such
advances on an annual basis for the duration of that support by the payment of
an interest charge based upon the Interest Rate.
(c) In the event that such funding is made in the form of
additional Capital Contributions by the Members, the Members making such
Capital Contributions shall receive additional Membership Units in the same
proportion to the aggregate number of outstanding Membership Units at the time
of such additional Capital Contribution as the amount of such additional
Capital Contribution bears to the aggregate amount of the Members' Capital
Account balances as of the date of such additional Capital Contribution;
provided, however, that in the event that either Member Group's aggregate
Capital Account balance is less than $1,000,000, such Member Group's aggregate
Capital Account balance will be deemed to be equal to $1,000,000 for purposes
of this Section 4.04(c). In the event an additional Capital Contribution shall
not be in cash, but shall be in the form of assets, the amount of such
additional Capital Contribution shall be the Asset Value of such assets as
determined in good faith by Majority Vote of the Members Committee; provided,
however, that in the event that the Members Committee, by Majority Vote, is
unable to determine the Asset Value of such assets within 60 days after the
date such assets are contributed to the Company pursuant to this Section
4.04(c), the Asset Value shall be determined by a nationally recognized
investment banking firm, accounting firm or valuation firm selected by the
contributing Member from a list of three such firms provided by the Managing
Member that is not an Affiliate of such Member and the fees and expenses of
such firm shall be borne by the Company.
SECTION 4.05 DELINQUENT MEMBERS. If any Member fails to
contribute timely all or any portion of any monetary sum that it has agreed to
contribute in respect of Capital Contributions pursuant to the provisions of
this Article IV within 45 days following notice by the Company to such Member
of such failure, the Company may exercise, by 15 days' prior written notice to
such Member (the "Delinquent Member"), any one or more of the following rights
or remedies:
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(a) Taking such action as the Managing Member that is not
an Affiliate of the Delinquent Member deems appropriate to obtain
payment by the Delinquent Member of that portion of its agreed
contribution that is in default, together with interest thereon at the
Interest Rate from the date that such contribution was due until the
date that such contribution is made, at the cost and expense of the
Delinquent Member; and
(b) Permitting those Members that desire to do so (the
"Non-Delinquent Members") to advance that portion of the contribution
that is in default, with the result that, at the option of the
Non-Delinquent Members:
(i) The sum thus advanced shall be determined to
be an additional Capital Contribution and the Non-Delinquent
Members shall receive additional Membership Units in
accordance with Section 4.04(c); or
(ii) The sum thus advanced shall be determined to
be a loan from the Non-Delinquent Members to the Delinquent
Member and a contribution of such sum to the Company by the
Delinquent Member pursuant to this Article IV. The loan shall
have the following terms: (A) the principal balance of such
loan and all accrued unpaid interest thereon shall be due and
payable in whole within thirty days after written demand
therefor has been given to the Delinquent Member by the
Non-Delinquent Members; (B) the loan shall bear interest at
the Interest Rate, from the date that the loan was made until
the date that such loan, together with all interest accrued
thereon, is repaid to the Non-Delinquent Members; (C) all
distributions from the Company that would otherwise be made to
the Delinquent Member are hereby assigned by the Delinquent
Member to the Non-Delinquent Members (whether before or after
dissolution of the Company) until the loan and all interest
accrued thereon have been repaid in full to the Non-Delinquent
Members (with all such payments being applied first to
interest earned and unpaid and then to principal); and (D) the
Non-Delinquent Members shall have the right, in addition to
the other rights and remedies granted to them pursuant to this
Agreement or available to them at law or in equity, to take
such action as the Non-Delinquent Members deem appropriate to
obtain payment by the Delinquent Member of the principal
balance of such loan and all accrued and unpaid interest
thereon, at the cost and expense of the Delinquent Member.
SECTION 4.06 STATUS OF CAPITAL CONTRIBUTIONS. (a) No Member
shall receive any interest, salary or drawing with respect to its Capital
Contributions or its Capital Account or for services rendered on behalf of the
Company or otherwise in its capacity as a Member, except as otherwise
specifically provided in this Agreement. Except as otherwise expressly
provided herein, no Member will be permitted to borrow, make an early
withdrawal of, or demand or receive a return of any Capital Contributions.
Under circumstances requiring a return of any Capital Contributions, except as
otherwise expressly
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provided in this Agreement, no Member will have the right to receive property
other than cash.
(b) Except as otherwise provided herein, the Members
shall be liable only to make their Capital Contributions pursuant to this
Article IV, and no Member shall be required to lend any funds to the Company
or, after a Member's Capital Contributions have been fully paid pursuant to
this Article IV, to make any additional capital contributions to the Company.
No Member shall have any personal liability for the repayment of any Capital
Contribution of any other Member or Transferee. A Member's obligation to
contribute capital to the Company is conditional (within the meaning of Section
17201(c) of the California Act), payable only to the extent, and only in such
amounts, required to be paid to the Company pursuant to this Agreement.
Notwithstanding any other provision in this Agreement, the obligations of the
Members pursuant to this Section 4.06 shall not be, and shall not be deemed to
be, a guaranty, maintenance agreement or other similar agreement, or under any
circumstances utilized to satisfy the general obligations and liabilities of
the Company.
SECTION 4.07 CAPITAL ACCOUNTS. (a) An individual Capital
Account shall be established and maintained for each Member.
(b) The Capital Account of each Member shall be
maintained in accordance with the following provisions:
(i) to each Member's Capital Account there shall be
credited such Member's Capital Contributions, such Member's
distributive share of Net Profits, any items in the nature of income
or gain that are specially allocated to such Member pursuant to
Article VII and the amount of any Company liabilities that are assumed
by such Member or that are secured by any Company assets distributed
to such Member;
(ii) to such Member's Capital Account there shall be
debited the amount of cash and the Asset Value of any Company assets
distributed to such Member pursuant to any provision of this
Agreement, such Member's distributive share of Net Losses, any items
in the nature of deductions or losses that are specially allocated to
such Member pursuant to Article VII and the amount of any liabilities
of such Member that are assumed by the Company or that are secured by
any property contributed by such Member to the Company;
(iii) in the event all or some of a Member's interest in
the Company is assigned in accordance with Article X, the assignee
shall succeed to the Capital Account of the assignor to the extent it
relates to the assigned interest; and
(iv) no Member shall be required to pay to the Company or
to any other Member or Person any deficit in such Member's capital
account upon dissolution of the Company or otherwise.
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ARTICLE V
MEMBERSHIP UNITS
SECTION 5.01 MEMBERSHIP UNITS. All Membership Units shall
have identical rights in all respects as all other Membership Units except as
otherwise specified in this Agreement. Each Member hereby agrees that its
interest in the Company and in its Membership Units shall for all purposes be
personal property.
SECTION 5.02 INITIAL MEMBERSHIP UNITS. Effective as of the
date hereof, the Pacific Enterprises Members shall have an aggregate of 50
Membership Units (the "Pacific Enterprises Initial Membership Units") and the
Enova Members shall have an aggregate of 50 Membership Units (the "Enova
Initial Membership Units"), such Membership Unites to be allocated among the
Pacific Enterprises Members and among the Enova Members prior to December 31,
1997.
SECTION 5.03 ADDITIONAL MEMBERSHIP UNITS. In the event
additional Membership Units shall be issued to an initial Member, or to any
other Person and such Person shall be admitted as a Member in accordance with
Article X, the President shall amend Schedule 2.01 accordingly. The Capital
Contribution to be made by such Person shall be in the form and amount
determined by a Majority Vote and the amount of such Capital Contribution shall
be credited to such Person's Capital Account.
ARTICLE VI
MANAGING MEMBERS; MEMBERS COMMITTEE;
OFFICERS AND EMPLOYEES
SECTION 6.01 MANAGEMENT BY THE MANAGING MEMBERS. The Company
shall be managed by the Managing Members.
SECTION 6.02 POWER OF MANAGING MEMBERS. (a) The Managing
Members, shall have the power to exercise any and all rights or powers granted
to the Members pursuant to the express terms of this Agreement. In addition to
the foregoing, the Managing Members shall have the power to exercise any and
all other rights or powers of the Company and do all lawful acts and things as
are not directed or required to be exercised or done by the Company under the
California Act or this Agreement.
(b) With respect to the internal management of the
Company, without limiting the authority of the Managing Members, in their
capacities as such, to act for and bind the Company, the Managing Members shall
act through their designees (collectively, the "Representatives") on the
Members Committee, who may be replaced at any time by the Managing Member that
appointed such Representative (with or without cause), subject to Section
6.03(a). Any vote or consent to be taken by the Managing Members shall be
taken
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with the approval of not less than a Majority Vote of the Members Committee,
except as otherwise provided in the California Act.
SECTION 6.03 MEMBERS COMMITTEE. (a) The forum for meetings
of the Managing Members shall be a members committee (the "Members Committee").
Each Managing Member shall be represented at Members Committee meetings by its
Representatives. The total number of Representatives that shall be entitled to
attend Members Committee meetings shall be six, (i) of whom three shall be
designated by the Pacific Enterprises Members (the "Pacific Enterprises
Representatives") and (ii) of whom three shall be designated by the Enova
Members (the "Enova Representatives"). The Members Committee shall select a
chairman (the "Chairman") who shall preside over meetings of the Members
Committee. The Pacific Enterprises Representatives shall be officers or
employees of the Pacific Enterprises Members or their Affiliates, and the Enova
Representatives shall be officers or employees of the Enova Members or their
Affiliates. The initial Pacific Enterprises Representatives shall be Xxxxxxx
X. Xxxxxx, Xxxxxx X. Xxxxxxxx and Xxxx Xxxxxx; the initial Enova
Representatives shall be Xxxxxxx X. Xxxx, Xxxxxx X. Xxxxxxxxx and Xxxxx X.
Xxxxxx.
(b) In addition to the Representatives, officers,
directors, employees or other representatives (including the accountants,
attorneys and/or financial advisors) of a Member and its Affiliates shall be
permitted to attend Members Committee meetings as observers.
(c) The Members Committee shall meet no less frequently
than quarterly at such place and time as shall be determined by Majority Vote.
Special meetings of the Members Committee, to be held at the offices of the
Company as above provided (or such other place as shall be agreed by Majority
Vote), shall be called at the direction of the Chairman, the President or one
or more Managing Members, and for reasonable cause shown (which is understood
to include, without limitation, any meeting called by a Managing Member to
review any determination made by the Company pursuant to this Agreement), upon
not less than three Business Days' notice given by the Chairman, the President
or the Secretary of the Company (which officers shall give such notice if
properly directed so to do as aforesaid). Emergency meetings of the Members
Committee may be held at the offices of the Company (or such other place as
shall be agreed by Majority Vote) upon not less than one Business Day's
telephone notice specifying in reasonable detail the nature of such emergency
(to be confirmed by written telecopier notice) by any Managing Member, the
Chairman, the President or the Secretary of the Company. For purposes of this
Section 6.03, the term emergency meeting shall include, but not be limited to,
any meeting called with respect to an action taken by less than the unanimous
written consent of the Members in violation of Section 6.05 of this Agreement.
(d) With respect to quarterly meetings and non-quarterly
non-emergency meetings, not later than five Business Days before each such
meeting the Chairman shall deliver to each Managing Member, together with the
notice of each such meeting, an agenda
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specifying in reasonable detail the matters to be discussed at the applicable
Members Committee meeting. Any Managing Member that wishes to have any
additional matter discussed at any such meeting, shall give to the Secretary of
the Company and each other Managing Member not later than two Business Days
prior to any such meeting, notice of each matter it so wishes to discuss.
SECTION 6.04 APPROVAL REQUIRED. The Members Committee shall
have authority with respect to all aspects of the operation of the Company.
Without limiting the generality of the foregoing, the Company shall not take
any of the following actions except pursuant to a Majority Vote:
(a) the conduct by the Company of any business other
than, or the engagement by the Company in any transaction not
substantially related to, the Company Business;
(b) the amendment or restatement of the Articles;
(c) (i) the dissolution, liquidation or winding up of the
Company or (ii) the commencement of a voluntary proceeding seeking
reorganization or other similar relief;
(d) the adoption of any Subsequent Plan;
(e) the sending of any notice requesting Capital
Contributions to a Member pursuant to Section 4.04;
(f) other than pursuant to the types of contracts
described in clause (v) below, the incurrence, issuance, assumption,
guarantee or refinancing of any Debt if the aggregate amount of such
Debt and all other outstanding Debt of the Company exceeds $1,000,000;
(g) any expenditure by the Company for an amount that,
when taken together with all other expenditures made during the
relevant Fiscal Year, would exceed the aggregate expenditures
permitted as reflected in the applicable Approved Plan or Default
Plan;
(h) the sale, transfer, lease, sublease, license or other
disposition by the Company to a third party of any material property
or asset, real, personal or mixed (including leasehold interests and
intangible assets);
(i) the authorization, issuance, sale, acquisition,
repurchase or redemption by the Company of any Membership Units or
other equity interest (or option, warrant, conversion or similar right
with respect to any equity interest) in or of the Company, including
an initial public offering;
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(j) the declaration, making or payment of any dividend or
distribution (whether in cash, securities or other property) to the
Members or otherwise;
(k) the merger or consolidation with, or acquisition of
an interest in any Person or the acquisition of a substantial portion
of the assets or business of any Person or any division or line of
business thereof or any other acquisition of material assets;
(l) the entering into by the Company of any agreement,
arrangement or transaction with (i) any officer, affiliate or member
of the Company (or any relative, beneficiary, employee or Affiliate of
such person) or (ii) any employee of the Company that calls for
aggregate payments (other than payment of salary, bonus or
reimbursement of reasonable expenses) in excess of $100,000;
(m) except as contemplated by the then applicable
Approved Plan or Default Plan, the commitment to any capital
expenditure in excess of $100,000;
(n) other than pursuant to the types of contracts
described in clause (v) below, the entering into by the Company of any
agreement, contract or arrangement pursuant to which the Company is
obligated to pay or entitled to receive payments in excess of
$1,000,000 over the term of such contract;
(o) the appointment, or termination, of any chief
executive officer, chief financial officer, chief operating officer,
general manager, president or senior vice president, or any person who
performs similar functions, or the selection or replacement of the
independent auditors of the Company;
(p) the entering into, or amendment of, any (i) written
employment agreement or contract or employee benefit plan or employee
policy, (ii) any arrangement that would obligate the Company to pay
any employee in excess of $200,000 per year or (iii) any arrangement
that would obligate the Company to pay any employee compensation based
on the net profits, revenues or gross sales of the Company or any
other contingent basis;
(q) the commencement or settlement of any litigation for
an amount in excess of $250,000 in any such commencement or settlement
or series of related commencements or settlements;
(r) any change in the number of, or method of
designating, Representatives on the Members Committee;
(s) unless required by law or a change in GAAP, the
making of any material change in the accounting methods of the
Company;
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(t) the taking of any other action that could be
reasonably expected to have a material impact on the performance,
financial condition or prospects of the Company;
(u) the grant or revocation or powers of representation;
(v) (i) the entering into of any gas or electric purchase
or sale, risk management, swap, hedge or other derivative arrangement
or contract, or any guarantee in connection with any of the foregoing,
the purchase of any security, or the entering into of any joint
venture, partnership or similar arrangement other than in accordance
with the investment policies and guidelines adopted by the Members
Committee, or (ii) the amendment, waiver or modification of such
policies and guidelines.
SECTION 6.05 ACTION BY WRITTEN CONSENT. Any action required
or permitted to be taken by the Managing Members or the Members Committee,
either at a meeting or otherwise, may be taken without a meeting if the
Managing Members or Representatives, as the case may be, unanimously consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the Managing Members or Representatives, as the case may be.
Written notice of the action to be taken by written consent will be given by
the President or Secretary of the Company to all Managing Members at least two
Business Days prior to the effectiveness of any such action.
SECTION 6.06 TELEPHONIC MEETINGS. Representatives may
participate in a meeting of the Members Committee by means of a conference
telephone or similar communications equipment through which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.
SECTION 6.07 COMPANY MINUTES. The decisions and resolutions
of the Members and the Members Committee shall be reported in minutes, which
shall state the date, time and place of the meeting (or the date of the written
consent in lieu of meeting), the Members or Representatives, as the case may
be, present at the meeting, the resolutions put to a vote (or the subject of a
written consent) and the results of such voting (or written consent). The
minutes shall be entered in a minute book kept at the principal office of the
Company and a copy of the minutes shall be provided to each Managing Member.
SECTION 6.08 NO REIMBURSEMENTS. Except as set forth in this
Agreement or otherwise agreed upon by the Members Committee, the Company shall
not reimburse the Members for any expenses incurred by the Members on behalf of
the Company.
SECTION 6.09 PARTITION. Each Member waives, until
termination of the Company, any and all rights that it may have to maintain an
action for partition of the Company's property.
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SECTION 6.10 OFFICERS (a) The Company shall have employees
or agents who are denominated as officers (including, but not limited to a
President, one or more Vice-presidents, a Chief Financial Officer or a
Treasurer, one or more Assistant Treasurers, a Secretary, and one or more
Assistant Secretaries), as the Members Committee may designate from time to
time (the "Officers").
(b) The Officers shall be responsible for implementing
the decisions of the Members Committee and for conducting the ordinary and
usual business and affairs of the Company, including, subject to the policies
and limitations established by, and the supervision of, the Members Committee
and subject to the terms of this Agreement, including, without limitation,
Section 6.04:
(i) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the
Company;
(ii) the acquisition or disposition of assets of the
Company in the ordinary course of its business;
(iii) the use of the assets of the Company (including,
without limitation, the financing of the conduct of the operations of
the Company, the lending of funds to other Persons and the repayment
of obligations of the Company);
(iv) the negotiation, execution and performance of any
contracts, guarantees, credit arrangements, risk management, swap,
hedge or other derivative contracts, conveyances or other instruments
in the ordinary course of the Company's business;
(v) the maintenance of insurance for the benefit of the
Members and the Company; and
(vi) the control of any matters affecting the rights and
obligations of the Company, including, without limitation, the
bringing and defending of actions at law or in equity and otherwise
engaging in the conduct of litigation and the incurring of legal
expense and settlement of claims and litigation up to $250,000 in
amount.
(c) The Officers shall be entitled to receive for their
services to the Company such compensation as may be determined by the Members
Committee from time to time, such compensation to be paid by the Company. The
Officers shall at all times be subject to the supervision and control of the
Members Committee and shall conform to policies and programs established by the
Members Committee, and the scope of the Officers' authority shall be limited to
such policies and programs. The acts of the Officers shall bind the Company
when within the scope of the authority of such Officers. Except as otherwise
authorized by the Members Committee or the President, no other Person shall
have authority
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to bind or act for, or assume any obligations or responsibilities on behalf of,
the Company. The Officers shall keep the Members Committee informed as to all
matters of concern to the Company.
(d) Nothing in this Section 6.10 shall be construed so as
to limit the authority of the Managing Members, in their capacities as such, to
act for and bind the Company.
ARTICLE VII
ALLOCATIONS; TAX MATTERS
SECTION 7.01 ALLOCATIONS. (a) The Company's Net Profits and
Net Losses, subject to the special allocations pursuant to Sections 7.02 and
7.03, shall be allocated for each fiscal year to the Members as follows:
(i) the Company's Net Profits shall be allocated to the
Members, pro rata in accordance with the number of Membership Units
owned by each Member; and
(ii) the Company's Net Loss shall be allocated to the
Members, pro rata in accordance with the number of Membership Units
owned by each Member.
(b) Notwithstanding anything to the contrary in Section
7.01(a), in the event of the winding up and termination of the Company pursuant
to Section 11.04 hereof, Net Profit and Net Loss (and items of gross income,
loss or deduction, if necessary), including gain or loss realized by the
Company upon the sale (or deemed sale) of its property or assets, shall be
allocated to the extent possible, subject to the special allocations of
Sections 7.02 and 7.03, in a manner so as to cause the Capital Accounts of the
Members to equal the amounts due the respective Members in accordance with the
provisions of Section 11.04.
SECTION 7.02 SPECIAL ALLOCATIONS. (a) Minimum Gain
Chargeback. Except as otherwise provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this Article VII, if there
is a net decrease in membership minimum gain during any fiscal year, each
Member shall be specially allocated items of Company income and gain for the
fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to
such Member's share of the net decrease in membership minimum gain, determined
in accordance with Regulations Section l.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(f)(6) and
1.704-2(j)(2) of the Regulations. This Section 7.02(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
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(b) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described
in Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
l.704-l(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible,
provided that an allocation pursuant to this Section 6.02(b) shall be made only
if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article VII have been
tentatively made as if this Section 7.02(b) were not in the Agreement.
(c) Gross Income Allocation. In the event any Member has
a deficit Capital Account at the end of any fiscal year which is in excess of
the sum of (i) the amount such Member is obligated to restore pursuant to any
provision of this Agreement, and (ii) the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially
allocated items of Company income and gain in the amount of such excess as
quickly as possible; provided that an allocation pursuant to this Section
7.02(c) shall be made only if and to the extent that such Member would have a
Adjusted Capital Account Deficit in excess of such sum after all other
allocations provided for in this Article VII have been made as if Section
7.02(b) and this Section 7.02(c) were not in the Agreement.
(d) Nonrecourse Deductions. Nonrecourse deductions for
any fiscal year shall be allocated to the Members pro rata in accordance with
the number of Membership Units owned by such Member.
(e) Net Loss Limitation. The Net Losses and items of
deduction or loss allocated pursuant to Sections 7.01 and 7.02 shall not exceed
the maximum amount of Losses and items of deduction and loss that can be so
allocated without causing any Member to have an Adjusted Capital Account
Deficit at the end of any Fiscal Year. All Net Losses and items of deduction
or loss in excess of the limitations set forth in this Section 7.02 shall be
allocated to the Members who do not have Adjusted Capital Account Deficits in
proportion to their Adjusted Capital Accounts.
SECTION 7.03 CURATIVE ALLOCATIONS. The allocations set forth
in Section 7.02 hereof (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 7.03.
Therefore, notwithstanding any other provision of this Article VII (other than
the Regulatory Allocations), the Members shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the
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Regulatory Allocations were not part of the Agreement and all Company items
were allocated pursuant to this Article VII without regard to the Regulatory
Allocations. In exercising their discretion under this Section 7.03, the
Members shall take into account future Regulatory Allocations under Section
7.02 that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Section 7.02.
SECTION 7.04 OTHER ALLOCATION RULES. (a) Solely for
purposes of determining the Members' proportionate share of the "excess
nonrecourse liabilities" of the Company within the meaning of Regulations
Section 1.752-3(a)(3), the Members' interests in Company profits are in
proportion to their ownership of Membership Units.
(b) To the extent permitted by Section 1.704-2(h)(3) of
the Regulations, the Members shall endeavor to treat distributions of cash as
having been made from the proceeds of a nonrecourse liability only to the
extent that such distributions would cause or increase an Adjusted Capital
Account Deficit for any Member.
(c) If the number of Membership Units owned by any Member
changes during the fiscal year, the Company's Net Profits and Net Losses for
that fiscal year shall be allocated evenly among each day of the fiscal year,
and each Members' share of Net Profits and Net Losses for such fiscal year
shall be the sum of its shares of the Net Profits and Net Losses for each day
during the fiscal year.
SECTION 7.05 TAX ALLOCATIONS. (a) In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted basis of such property to
the Company for Federal income tax purposes and its initial Asset Value
(computed in accordance with the definition of Asset Value in Section 1.01).
(b) In the event the Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii) of the definition of Asset Value in
Section 1.01, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for Federal income tax purposes and its Asset Value in the
same manner as under Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to such
allocations shall be made by the tax matters Member in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 7.05 are solely for purposes of Federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Net Profit, Net Loss, other
items, or distributions pursuant to any provision of this Agreement.
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(d) Except as otherwise provided in this Agreement, all
items of Company gain, loss, deduction, and any other allocations not otherwise
provided for shall be divided among the Members in the same proportions as they
share Net Profit or Net Loss, or amounts specially allocated pursuant to
Section 7.02 or 7.03 hereof, as the case may be, for the fiscal year.
SECTION 7.06 TAX DECISIONS. (a) The Company shall file as a
partnership for Federal and state income tax purposes. All elections required
or permitted to be made by the Company, and all other tax decisions and
determinations relating to Federal, state or local tax matters shall be made by
the tax matters Member, in consultation with the Managing Members and the
Company's attorneys and/or accountants. Tax audits, controversies and
litigations shall be conducted under the direction of the tax matters Member.
The tax matters Member shall submit to the Members, for their review and
comment, any settlement or compromise offer with respect to any disputed item
of income, gain, loss, deduction or credit of the Company. Pacific Enterprises
Energy Management Services shall be the initial tax matters Member within the
meaning of Section 6231(a)(7) of the Code. The tax matters Member shall
furnish to the Members a copy of all notices or other written communications
received by the tax matters Member from the Internal Revenue Service or any
state of local taxing authority. The tax matters Member shall cause all tax
returns of the Company to be timely filed. Copies of such returns shall be
kept at the Company's principal place of business or at such other place as the
tax matters Member shall determine and shall be available for inspection by the
Members or their duly authorized representatives during regular business hours.
The tax matters Member shall distribute to each of the Members, as soon a
practicable after the end of the fiscal year of the Company, information with
respect to the Company necessary for each Member to prepare its Federal, state
and local tax returns.
(b) Upon a change in U.S. tax law, including a change
pursuant to the promulgation of Regulations, that permits entities such as the
Company to affirmatively elect classification as a partnership for Federal
income tax purposes, the tax matters Member shall take such steps as may be
reasonably required to make such election for or on behalf of the Company, and
the other Members shall cooperate in the making of such election (including by
providing consents and other authorizations that may be required).
ARTICLE VIII
DISTRIBUTION
SECTION 8.01 DISTRIBUTION. (a) The Members Committee, as
determined in accordance with Article VI, may make distributions to the
Members, pro rata in accordance with their respective Membership Units.
SECTION 8.02 LIQUIDATION DISTRIBUTION. Distributions made
upon liquidation of the Company shall be made as provided in Section 11.04.
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SECTION 8.03 DISTRIBUTION RULES. (a) All amounts withheld
pursuant to the Code or any provision of any state or local tax law with
respect to any payment, distribution or allocation by the Company to the
Members shall be treated as amounts distributed to the Members pursuant to this
Article VIII for all purposes of this Agreement. The President is authorized
and directed to withhold from distribution, or with respect to allocations, to
the Members and to pay over to any Federal, state or local government any
amounts required to be so withheld pursuant to the Code or any provision of any
other Federal, state or local law and shall allocate such amounts to those
Members with respect to which such amounts were withheld. Promptly upon
learning of any requirement under any provision of the Code or any other
applicable law requiring the Company to withhold any sum from a distribution to
a Member or to make any payment to any taxing authority in respect of such
Member, the Company shall give written notice to such Member of such
requirement and, if practicable and if requested by such Member, shall
cooperate with such Member in all lawful respects to minimize or to eliminate
any such withholding or payment.
(b) A Member shall not have the status of, and is not
entitled to the remedies available to, a creditor of the Company with regard to
distributions that such Member becomes entitled to receive pursuant to this
Agreement and the California Act.
SECTION 8.04 LIMITATIONS ON DISTRIBUTION. Notwithstanding
any provision to the contrary contained in this Agreement, the Company shall
not make a distribution to any Member on account of its Membership Interest if
such distribution would violate Section 17254 of the California Act or other
applicable law.
ARTICLE IX
BOOKS AND RECORDS; FINANCIAL STATEMENTS
SECTION 9.01 BOOKS AND RECORDS; FINANCIAL STATEMENTS. (a)
At all times during the continuance of the Company, the Company shall maintain
separate books of account for the Company that shall show a true and accurate
record of all costs and expenses incurred, all charges made, all credits made
and received and all income derived in connection with the operation of the
Company Business in accordance with GAAP consistently applied, and, to the
extent inconsistent therewith, in accordance with this Agreement. Such books
of account, together with a certified copy of this Agreement and of the
Articles, shall at all times be maintained at the principal place of business
of the Company and shall be open to inspection and examination at reasonable
times by each Member and its duly authorized representatives for any purpose
reasonably related to such Member's interest in the Company. The books of
account and the records of the Company shall be examined by and reported upon
as of the end of each Fiscal Year by a firm of independent certified public
accountants that shall be selected by the Members Committee (the "Auditors").
Any Member shall have the right to have a private audit of the Company books
and records conducted at reasonable times and after reasonable advance notice
to the Company for any purpose reasonably related to such Member's interest in
the Company, but
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any such private audit shall be at the expense of the Member desiring it, and
it shall not be paid for out of Company funds. Such private right to audit the
books and records of the Company shall also include the right to audit and make
recommendations regarding the internal control systems, policies and procedures
and compliance therewith of the Company.
(b) The Chief Financial Officer or Treasurer shall
prepare and maintain, or cause to be prepared and maintained, the books of
account of the Company and the following financial information, prepared, in
the case of (i)(A) and (i)(C), in accordance with GAAP, and in the case of (i)
A, on an accrual basis, together with an operating report in a form to be
determined by the Members Committee analyzing such information, shall be
transmitted by the Chief Financial Officer or Treasurer to each Managing Member
at the times hereinafter set forth:
(i) Within 60 days after the close of each Fiscal Year,
the following financial statements, examined by and certified to by
the Auditors:
(A) the balance sheet of the Company as of the
close of such Fiscal Year;
(B) a statement of Company Net Profits and Net
Losses for such Fiscal Year;
(C) a statement of the Company's cash flows for
such Fiscal Year; and
(D) a statement of such Member's Capital Account
as of the close of such Fiscal Year, and changes therein
during such Fiscal Year.
(ii) Within 60 days after the close of each Fiscal Year, a
statement indicating such Member's share of each item of Company
income, gain, loss, deduction or credit for such Fiscal Year for
income tax purposes.
(iii) As soon as available and in any event within 30 days
after the end of each three-month period, balance sheets of the
Company as of the end of such three-month period and statements of
income and Company Net Profits and Net Losses for the period
commencing at the end of the previous fiscal year and ending with the
end of such three-month period, certified by the Chief Financial
Officer or Treasurer of the Company.
(iv) As soon as practicable and in any event within 20
days following the end of each calendar month, a monthly operating
summary of the Company's activities in a form to be established by the
Members' Committee.
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(c) Each Member shall provide to the Chief Financial
Officer or Treasurer upon request tax basis information about contributed
assets and other tax information reasonably requested by the Chief Financial
Officer or Treasurer.
SECTION 9.02 REPORTING REQUIREMENTS. The President shall
furnish or cause to be furnished to each Member:
(a) as soon as possible and in any event within ten days
after the Company has received notice of the occurrence of any default
or event of default continuing on the date of such statement under any
agreement relating to any material obligation of the Company, a
statement of the President setting forth details of such default or
event of default and the action which the President has taken and
proposes to take with respect thereto;
(b) promptly after the sending or filing thereof, copies
of all reports that the Company sends to any of its creditors, and
copies of all tax returns that the Company files with any federal or
state taxing authority;
(c) within 15 days of the filing by the tax matters
Member of the Company's federal tax return (Federal Form 1065), a copy
of Schedule K-1 of Federal Form 1065 reporting the Member's allocable
share of Net Profits, Net Losses and other items of income, gain,
deductions or loss for such Fiscal Year, and, from time to time, such
additional information as the Member may reasonably require for tax
purposes;
(d) on each Business Day, to each Member's representative
on the Members Committee, a report on the Company's derivative
securities position as of the close of the such Business Day,
summarizing the changes occurring during the course of such Business
Day; and
(e) such other information regarding the condition or
operations, financial or otherwise, of the Company as any Member may
from time to time reasonably request.
ARTICLE X
TRANSFERABILITY AND ADDITIONAL MEMBERS
SECTION 10.01 GENERAL RESTRICTIONS ON TRANSFER. (a) No
Transfer may be made by any Member of all or any part of its Membership
Interest in the Company without the written consent of all Managing Members.
No Managing Member, without the prior written consent of each other Managing
Member, shall permit to be made by any Affiliate of a Member a Transfer of all
or any part of such Affiliate's direct or indirect ownership interest in such
Member.
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(b) In the case of permitted Transferees, any Transferee
of a Membership Interest (including an Affiliate of the transferor) shall be
admitted as a Member only after such Transferee agrees to assume all
obligations of the transferor hereunder and otherwise be bound by the
provisions of this Agreement.
(c) Any Person that becomes a Member after the date
hereof, by becoming a Member, accepts, ratifies and agrees to be bound by all
actions duly taken pursuant to the terms and provisions of this Agreement by
the Company prior to the date such Person became a Member and, without limiting
the generality of the foregoing, specifically ratifies and approves all
agreements and other instruments as may have been executed and delivered on
behalf of the Company prior to such date and which are in force and effect on
such date.
(d) Each Transfer of all or a part of a Membership
Interest (other than any Transfer of all or part of a Membership Interest or
any interest therein upon foreclosure of a security interest created in such
Membership Interest) to a permitted Transferee shall entitle such Transferee to
share in such Net Profits and Net Losses, to receive such distributions, and to
receive such allocations of income, gain, loss, deduction or credit or similar
item to which the transferor was entitled, but only to the extent of the
transferred Membership Interest. Such Transfer shall also give a permitted
Transferee the right to participate in the management of the Company through
voting or otherwise and any other rights exercisable by a Member or, in the
case of a Transfer by a Managing Member, such Managing Member, subject to the
compliance of such Transferee with the provisions of paragraph (b) above and
the admission of such Transferee as a Member.
SECTION 10.02 RECOGNITION OF TRANSFER BY COMPANY. No
Transfer of a Membership Interest, or any part thereof, that is in violation of
this Article X shall be valid or effective, and neither the Company nor the
Members shall recognize the same for the purpose of making distributions
pursuant to Section 8.01 hereof with respect to such Membership Interest or
part thereof. Neither the Company nor the non-transferring Members shall incur
any liability as a result of refusing to make any such distributions to the
Transferee of any such invalid Transfer.
SECTION 10.03 INDEMNIFICATION. In the case of a Transfer or
attempted Transfer of an interest in the Company contrary to the provisions of
Section 10.01 hereof, the parties engaging or attempting to engage in such
Transfer shall indemnify and hold harmless the Company and each of the other
Members from all costs, liabilities or damages that any of such indemnified
Persons may incur (including, without limitation, incremental tax liability and
lawyers' fees and expenses) as a result of such Transfer or attempted Transfer
and efforts to enforce terms of this Agreement and the indemnity granted
hereby.
SECTION 10.04 EFFECTIVE DATE OF TRANSFER. Any valid Transfer
of a Membership Interest in the Company, or part thereof, shall be effective as
of the close of business on the last day of the calendar month in which such
Transfer occurs. The Company shall, from the effective date of such Transfer,
thereafter pay all further distributions on
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account of the Membership Interest (or part thereof) so transferred, to the
Transferee of such interest, or part thereof. As between any Member and its
Transferee, Net Profits and Net Losses for the Fiscal Year of the Company in
which such Transfer occurs shall be apportioned for federal income tax purposes
in accordance with any convention permitted under Section 706(d) of the Code
and selected by the transferring Member and its Transferee (subject to the
objection of and restriction by the Members Committee acting by Majority Vote).
SECTION 10.05 ADDITIONAL TRANSFER PROVISIONS. In the case of
any Transfer under this Article X:
(a) Subject to this Section 10.05, upon the Transfer of
the entire Membership Interest of a Member, such Member shall have no
further obligations pursuant to this Agreement, except that (i) the
obligations of such Member pursuant to Section 14.01 shall survive
indefinitely, and (ii) the obligations of such Member pursuant to
Section 15.02 shall survive for a period of 24 months after the
effective date of such Transfer. The contractual rights and
obligations of such Member to the Company (other than pursuant to this
Agreement) shall remain unaffected unless otherwise provided in
paragraph (b) below.
(b) Upon the Transfer of a Members' Membership Interest,
the following specific provisions shall apply (which provisions
illustrate and clarify the provisions of paragraph (a) above):
(i) such Member shall no longer have any
obligation to make Capital Contributions, pursuant to Section
4.01 or 4.04, but any assets or cash contributed to the
Company prior to the date of such Transfer shall remain
property of the Company;
(ii) such Member shall have no obligation to
continue to make assets, facilities or services available to
the Company in accordance with Section 4.02, but such Member
shall be entitled to compensation for assets, facilities or
services used by the Company prior to the date of such
Transfer;
(iii) the License Agreement between such Member and
the Company shall remain in effect in accordance with its
terms;
(iv) the Management Services Agreement between
such Member and the Company shall be terminated in accordance
with such Management Service Agreement;
(v) such Member shall have no further obligation
to make certain Persons available to perform services in
accordance with Section 12.01(a) but
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shall be entitled to compensation for services provided prior
to the date of such Transfer;
(vi) Persons who become employees of the Company
in accordance with Section 12.01(b) shall remain employees of
the Company; and
(vii) such Member shall be entitled to receive a
copy of all customer information of the Company as of the date
of such Transfer, but shall have no rights in respect of
customer information developed subsequent to such date.
(c) The Transferee or Transferees, as the case may be,
shall be required to pay any and all filing and recording fees, fees
of counsel and accountants and other costs and expenses reasonably
incurred by the Company as a result of such Transfer.
(d) No such Transfer of a Membership Interest shall be
made except upon terms which would not, in the opinion of counsel to
the Company, result in a violation of the Securities Act of 1933, as
amended, or any "Blue Sky" laws or other securities laws of any state
of the United States applicable to the Company or the Membership
Interest to be transferred.
(e) Notwithstanding any other provision of this Article
X, no Transfer of a Membership Interest will occur (a) unless and
until any and all necessary regulatory approvals and third-party
approvals have been obtained, including, without limitation,
expiration of any applicable waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
(b) if such transfer would (x) cause the Company to lose its
regulatory authority to sell power at market based rates, or (y) cause
the Company to become subject to any statute, rule, regulation, order
or injunction that would impose material limitations or restrictions
on the ability of the Company to conduct the Company Business.
SECTION 10.06 WITHDRAWAL. No Member may withdraw from the
Company or resign as a Member except as a result of a Transfer made in
accordance with this Article X or upon dissolution in accordance with Article
XI. If any of the Members withdraws from the Company or resigns as a Member in
breach of this provision, such withdrawal or resignation shall be of no force
or effect.
SECTION 10.07 FURTHER ASSURANCES. The Members shall
cooperate and use all reasonable efforts to take all actions necessary to
complete a Transfer in accordance with this Article X, including the making of
filings, and provision of information, necessary to comply with Sections
10.05(e).
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ARTICLE XI
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 11.01 NO DISSOLUTION. The Company shall not be
dissolved by the admission of additional Members in accordance with the terms
of this Agreement.
SECTION 11.02 EVENTS CAUSING DISSOLUTION. The Company shall
be dissolved and its affairs shall be wound up upon the occurrence of any of
the following events:
(a) the expiration of the term of the Company as provided
in Section 2.03;
(b) the unanimous vote of the Members Committee to
dissolve, wind up and liquidate the Company;
(c) the sale of all or substantially all the assets of
the Company;
(d) the death, insanity, permanent incapacity,
Bankruptcy, insolvency, retirement, expulsion from the Company of a
Managing Member, unless within ninety days after the occurrence of
such an event, Members holding a majority of the remaining Membership
Units and more than 50% of the remaining aggregate Capital Account
balances (computed on a fair market value basis as of the date of the
dissolution event) agree in writing to continue the business of the
Company and to the appointment, if necessary or desired, effective as
of the date of such event, of one or more additional Members;
(e) the entry of a decree of judicial dissolution under
Section 17351 of the California Act; or
(f) at the option of either Managing Member, upon the
delivery of written notice to the Company, upon the termination of the
Merger Agreement in accordance with its terms; provided, however, that
the parties intend to discuss other alternatives to dissolving the
Company, including the possible purchase by one Managing Member of the
other Managing Member's Member Group's Membership Interest prior to
delivering such notice.
If the Company is continued pursuant to clause (d) above after the death,
insanity, permanent incapacity, Bankruptcy, insolvency, retirement or expulsion
of a Managing Member (the "Former Member"), the other Managing Members shall
have the right to purchase the Membership Interest of such dead, insane,
permanently incapacitated, bankrupt, insolvent, retired or expelled Member at
the Fair Market Value of such Membership Interest in accordance with the
procedures set forth below. The "Fair Market Value" of the Company shall be
determined by a nationally recognized investment banking firm selected by the
other Managing Members from a list of three such firms provided by a
representative of the
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Former Member (the "Appraiser") and the fees and expenses of such Appraiser
will be borne by the Company. The Appraiser's determination of the Fair Market
Value shall be considered in the context of a hypothetical purchase of the
Company negotiated between a willing buyer and a willing seller, neither of
whom is under compulsion to act, without any control premium or any discount
for a minority interest, transfer restrictions, illegality or other similar
factors. The Appraiser shall also assume that the Company will continue to
have obligations to third parties but that the proceeds of the sale shall be
used to make payments representing a return of Capital Contributions (including
any interest thereon). In evaluating the Company, the Appraiser shall give due
consideration to the prospects and potential of the Company. Within 30 days of
the date of selection, the Appraiser will determine the Fair Market Value and
allocate such value between the Membership Interests of the Former Member and
the other Members and within 30 days of the delivery of such determination and
allocation by the Appraiser, the other Managing Members shall notify the
representative of the Former Member whether such other Managing Members will
exercise their right to acquire the Membership Interest of the Former Member.
Any acquisition pursuant to this Section 11.02 shall be completed within 60
days of the date of the selection of the Appraiser.
SECTION 11.03 NOTICE OF DISSOLUTION. Upon the dissolution of
the Company, the Person or Persons approved by the Members holding a majority
of the remaining Membership Units to carry out the winding up of the Company
(the "Liquidating Trustee") shall promptly notify the Members of such
dissolution, except that in the case of a dissolution pursuant to Section
11.02(d) the Liquidating Trustee shall be the Managing Member (or Members) that
is not bankrupt, insolvent, disabled, dead, insane or terminated.
SECTION 11.04 LIQUIDATION. (a) Upon dissolution of the
Company, the Liquidating Trustee shall immediately commence to wind up the
Company's affairs; provided, however, that a reasonable time shall be allowed
for the orderly liquidation of the assets of the Company and the satisfaction
of liabilities to creditors so as to enable the Members to minimize the normal
losses attendant upon a liquidation. The Members shall continue to share Net
Profits and Net Losses during liquidation in the same proportions, as specified
in Article VII hereof, as before liquidation. Each Member shall be furnished
with a statement audited by the Auditors that shall set forth the assets and
liabilities of the Company as of the date of dissolution. Each Member (and its
Affiliates) shall pay to the Company all amounts then owing by it (and them) to
the Company. The proceeds of liquidation shall be distributed, as realized, in
the following order and priority:
(i) to creditors of the Company (including holders of
Membership Units that are creditors to the extent otherwise permitted
by law), in satisfaction of the liabilities of the Company (whether by
payment or the making of reasonable provision for payment thereof),
other than liabilities for distributions to holders of Membership
Units; and
(ii) to the Members in the following order and priority:
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(A) to the Members, pro rata in accordance with
their positive Capital Account balances (such Capital Account
balances to be revalued in accordance with the procedures set
forth in Section 11.02 at the time of the distribution), to
the extent thereof, after giving effect to all contributions,
distributions and allocations for all periods;
(B) to the Members, pro rata in accordance with
the number of Membership Units owned by each such Member.
To the extent that the Members determine that any or all of the assets of the
Company shall be sold, such assets shall be sold as promptly as practicable, in
a commercially reasonable manner. For purposes of making the liquidating
distributions required by this Section 11.04(a), the Liquidating Trustee may
determine, at the direction of the Members holding a majority of the Membership
Units, whether to distribute all or any portion of the assets of the Company in
kind or to sell all or any portion of the assets of the Company and distribute
the proceeds therefrom; provided, however, that all Joint Work Product (as such
term is defined in the License Agreement) except all Company Marks and Hybrid
Marks (as those terms are defined in the License Agreement) shall be
distributed to the Members and such Joint Work Product shall thereafter be
jointly owned by the Members and each Member shall have the unrestricted right
to use, license, distribute, sell or otherwise fully exploit such rights
without accounting to the other Members, subject to any rights of third parties
with regard to such Joint Work Product. In the event that any Joint Work
Product is embodied in or is used in connection with a Member's Separate Work
Product (as such term is defined in the License Agreement), such Member shall
grant to each other Member a limited non-exclusive, royalty-bearing license, on
commercially reasonable terms, to use the Separate Work Product solely in
connection with obligations and services being provided pursuant to contracts
and agreements in effect on the date liquidation of the Company begins, and not
for general use of the Joint Work Product in the Member's business. The
Liquidating Trustee shall promptly cause copies of any physical embodiments of
all Joint Work Product (including source code) other than Company Marks and
Hybrid Marks to be delivered to each Member. All Company Marks and all Hybrid
Marks shall be deemed to be abandoned. The Members shall have no rights in the
Company Marks, Hybrid Marks or any component parts of any Hybrid Marks, or any
goodwill associated with any of the foregoing except that (i) the Members shall
be permitted to use such Company Marks and Hybrid Marks solely in connection
with obligations and services being provided pursuant to contracts and
agreements in effect on the date of liquidation of the Company begins, and not
for general use in the Member's business and (ii) the name under which the
Company is conducting business and the goodwill associated therewith shall, at
the election of the Pacific Enterprises Members, revert to the Pacific
Enterprises Members, in which case the Pacific Enterprises Members shall be
credited the fair market value of such name and goodwill as of the date of
liquidation as determined by the Liquidating Trustee. All rights in said
component parts, and the goodwill associated therewith, shall revert to the
Member owning such component parts. Each Member Group shall receive copies of
all customer information relating to customers of the Company. Subject to
paragraph (c) below, customer contracts will be divided among the
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Members such that each Member Group receives customer contracts with
approximately equal aggregate value. The Capital Account of each Member shall
be adjusted to take into account the Net Profit and Net Losses resulting from
the sale of the Company's assets and all other transactions in connection with
the winding up of the Company.
(b) Notwithstanding any provision to the contrary in this
Section 11.04, upon dissolution of the Company as a result of Section 11.02(a),
(b) or (f), the Liquidating Trustee shall, to the extent practicable and
consistent with Sections 11.04(a)(i) and 11.04(a)(ii), distribute in kind to
each Member the respective assets contributed or transferred by such Member to
the Company. Unless otherwise specifically provided on Schedule 4.01, the
value of each such asset at dissolution shall be determined using the same
methodology that was used to determine the value of the assets to be
contributed to the Company as set forth herein on Schedule 4.01.
(c) To the extent that, pursuant to the provisions of
paragraphs (a) and (b) above, a Member Group does not, as provided in Section
11.04(a)(ii), receive property or assets equal to the value of such Member
Group's Capital Account plus a proportionate share of the remainder of property
and assets available for distribution after all Members' Capital Accounts have
been eliminated pursuant to the liquidation, an attempt will be made to
re-allocate the customer contracts such that each Member Group receives
property and assets equal to the value of such Member Group's aggregate Capital
Account plus a proportionate share of the remainder of property and assets
available for distribution after all Members' Capital Accounts have been
eliminated pursuant to the liquidation. In the event that the re-allocation of
the customer contracts fails to provide each Member Group with the full value
of such Member Group's Capital Account plus a proportionate share of the
remainder of property and assets available for distribution after all Members'
Capital Accounts have been eliminated pursuant to the liquidation, the Member
Group which has received more than the full value of its Capital Accounts plus
a proportionate share of the remainder of property and assets available for
distribution after all Members' Capital Accounts have been eliminated pursuant
to the liquidation, shall pay to the Managing Member of the other Member Group,
within 5 Business Days of the delivery of the notice described in paragraph (d)
below by the Liquidating Trustee becomes final, a cash amount in immediately
available funds, equal to the difference in the amount such Member Group was
entitled to receive pursuant to Section 11.04(a)(ii) and the amount such Member
actually received. Notwithstanding any other provisions of this paragraph, in
the event that should there be an insufficient amount of assets to return to
each Member Group the full value of its aggregate Capital Accounts, the
Liquidating Trustee will, in its discretion, divide the assets such that each
Member Group receives as near as possible the proportionate amount it was
entitled to receive pursuant to Section 11.04(a)(ii).
(d) As soon as practicable, the Liquidating Trustee shall
deliver a notice to each Member setting forth the value assigned to each asset
and the Member to which such asset will be distributed, in connection with the
provisions of paragraphs (a), (b) and (c) above. Each Member Group shall have
15 days to dispute such valuation and if no notice of
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dispute is delivered to the Liquidating Trustee and the other Members, the
notice of valuation shall become final. If such notice of dispute is
delivered, the matter shall be submitted to a nationally recognized investment
banking firm, accounting firm or valuation firm selected by the Liquidating
Trustee from a list of three such firms provided by the disputing Member Group.
The banking, accounting or valuation firm shall make a decision within 60 days
of referral, which decision shall be final and binding, and the fees and
expenses of such firm shall be borne by the Company.
SECTION 11.05 TERMINATION. The Company shall terminate when
all of the assets of the Company, after payment of or due provision for all
debts, liabilities and obligations of the Company, shall have been distributed
to the holders of Membership Units in the manner provided for in this Article
XI, and the Certificate shall have been cancelled in the manner required by the
California Act.
SECTION 11.06 CLAIMS OF THE MEMBERS. The Members shall look
solely to the Company's assets for the return of their Capital Contributions,
and if the assets of the Company remaining after payment of or due provision
for all debts, liabilities and obligations of the Company are insufficient to
return such Capital Contributions, the Members shall have no recourse against
the Company or any other Member or any other Person. No Member with a negative
balance in such Member's Capital Account shall have any obligation to the
Company or to the other Members or to any creditor or other Person to restore
such negative balance upon dissolution or termination of the Company or
otherwise.
ARTICLE XII
EMPLOYEES
SECTION 12.01 EMPLOYEES. (a) Commencing on the date hereof,
the Enova Members and the Pacific Enterprises Members shall make certain
Persons available to perform services and work for the Company as and when
requested by the Members Committee. The relevant Enova Member or Pacific
Enterprises Member shall xxxx the Company on a "straight-time" basis by
allocating that portion of the employee's salary to the Company that is
represented by the portion of the employee's working time that is spent
performing services for the Company. A portion of the cost of maintaining
employee welfare and benefit plans and payroll services shall be allocated to
the Company on the basis of the actual cost to the relevant Member of providing
a proportionate amount of such benefits or, if applicable, by Enova in
accordance with its affiliate transfer pricing policies or by Pacific
Enterprises in accordance with its affiliate transfer pricing policies, as the
case may be. Within five Business Days of the last day of each month, each of
Enova and Pacific Enterprises shall notify the Company in writing of the
compensation due for the services provided and costs allocated to the Persons
referred to above during the preceding month. Should the Company not pay said
sum, or any part thereof, within 30 calendar days from the date of the monthly
invoice (i) interest at the Interest Rate shall be additionally due and owing
on the unpaid balance, from the date past due and (ii) the Member Group to
which
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such sum is owed shall, effective 30 days following the delivery of written
notice, have no further obligation pursuant to this Section 12.01 to make
available to the Company any Persons until such unpaid balance plus all accrued
interest shall have been paid; provided, however, that no Member shall be
relieved of any of its obligations pursuant to this Section 12.01 if, following
the delivery of written notice pursuant to this clause (ii) but prior to 30
days following such delivery, the Company shall deliver to the relevant Member
written notice setting forth in reasonable detail why the Company in good faith
believes no unpaid amount is owed pursuant to this Section 12.01. The Company
shall notify Pacific Enterprises or Enova, as the case may be, of any billing
items in question. The Enova or Pacific Enterprises authorized representative
will research the items in question and resolve any differences with each Enova
Member and Pacific Enterprises Member. In the event any amount that was paid
by the Company was not properly owed, then within 30 days after the delivery of
such notice, the Company shall be reimbursed that amount with interest at the
Interest Rate from the date the original payment was received until the
adjustment was refunded. Upon the termination of this Agreement, Enova and
Pacific Enterprises will xxxx the Company for the actual costs incurred since
the last billing under the normal terms and conditions mentioned above. Enova
and Pacific Enterprises shall have the same audit rights in respect of
compensation due pursuant to this Section 12.01 as they have pursuant to
Section 4.02(d).
(b) In the event the Members Committee hires employees to
work directly for the Company, or determines to have certain employees of the
Enova Member Group or the Pacific Enterprises Member Group become employees of
the Company rather than provide services on a dedicated basis, it shall
determine whether to establish welfare and benefit plans for the Company and
provide payroll services directly or contract with Enova or Pacific Enterprises
to provide such benefits and services. In the event the Members Committee
elects to contract with Enova or Pacific Enterprises for such benefits and
services, such contract shall be on the terms set forth in paragraph (a) above.
ARTICLE XIII
MARKETING PRODUCTS;
ENERGY MANAGEMENT PRODUCTS
SECTION 13.01 ENERGY COMMODITY PRODUCTS. The Officers shall,
in consultation with the Members Committee, (a) develop methods of marketing on
an unregulated basis, as determined by the Members Committee, for gas,
electricity and other energy and related services and methods of providing such
commodities and services, as set forth on Schedule 13.01 ("Energy Commodity
Products") in the Marketing Region to (i) large industrial customers (greater
than 250,000 therm gas usage annually or BTU equivalent in electricity
consumption), (ii) large and medium commercial customers (greater than 50,000
therm gas usage annually or a BTU equivalent in electricity consumption),
including schools, hospitals, colleges, federal or state facilities and
national chain accounts, (iii) municipalities and (iv) residential and small
commercial customers; (b) conduct feasibility studies in
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connection with such Energy Commodity Products; (c) determine the most
effective structure for delivering such Energy Commodity Products to potential
customers; and (d) if feasible, proceed with the sale of the Energy Commodity
Products.
SECTION 13.02 ENERGY MANAGEMENT PRODUCTS. The Officers
shall, in consultation with the Members Committee, (a) develop methods of
providing on an unregulated basis, as determined by the Members Committee,
advising and consulting services related to the use of energy as set forth on
Schedule 13.02 ("Energy Management Products") in the Marketing Region to (i)
residential consumers, (ii) the business to business marketplace (including
large industrial and commercial customers, commercial buildings, hospitals,
hotels, retail chain stores, restaurants chains and grocery store chains),
(iii) the wholesale marketplace (including municipal utilities, local
distribution companies and electric co-ops), and (iv) federal and state
government facilities, colleges, universities and schools, (b) conduct
feasibility studies in connection with such Energy Management Products, (c)
determine the most effective structure for delivering such Energy Management
Products to potential customers and (d) if feasible, proceed with the sale of
the Energy Management Products.
ARTICLE XIV
CERTAIN AGREEMENTS
SECTION 14.01 SCOPE OF BUSINESS (a) The Members expect that
the Products and most new products and services being developed by Pacific
Enterprises, Enova and their respective subsidiaries will be marketed by the
Company and that, other than as set forth on Schedule 14.01, all new products
and services of Enova and Pacific Enterprises that are to be marketed on an
unregulated basis will be offered through the Company. The Members Committee
shall determine what products or services shall be offered through the Company
or one or more of its subsidiaries. Any Member may deliver written notice to
the Company requesting whether a product or service not then offered by the
Company will be offered by the Company and the Company shall have 30 days to
respond to such Member. In the event that within such 30-day time period the
Members Committee is unable to determine that such product or service will be
offered by the Company then the Enova Members and the Pacific Enterprises
Members hereby agree that such product or service shall not be deemed to
constitute a "Product" and may be offered in the Marketing Region by the Enova
Members, the Pacific Enterprises Members or any of their respective Affiliates.
The Members agree that the Agreement will not prevent any Member from (A)
marketing the Products outside of the Marketing Region, (B) marketing within
the Marketing Region any products or services that do not constitute Products
or (C) marketing the Products within the Marketing Region after the date on
which such Member and its Affiliates have transferred their entire Membership
Interest and ceased to be Members of the Company. The Members agree that they
will not, and they will use their respective best efforts to cause their
respective Affiliates not to, enter into any other new agreement to provide any
of the Products that are the subject of the Agreement with any other party, or
invest, hold any
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equity or financial interest in, or participate in the management of any Person
that provides such Products or otherwise competes with the Company Business in
the Marketing Region and, except as provided below, any existing activities
conducted by them shall be, and the Members will use all good faith reasonable
efforts to cause their respective Affiliates' existing activities to be,
integrated into the Company on mutually agreeable terms. The Members agree
that they will cease participation in, and use their best efforts to cause the
cessation of the provision of the Products in the Marketing Region of, any of
their respective Affiliates' existing ongoing businesses activities (as opposed
to sole purpose project activities) for which the integration into the Company
cannot be mutually agreed upon. It is recognized that the Managing Members
currently have marketing efforts with respect to potential customer contracts,
customer contracts and facilities constituting Products which may not be
contributed initially, or, in some cases, ever, to the Company (the
"Non-Contributed Products"). The Members agree that the restrictions of this
paragraph will not apply to Non-Contributed Products until such time as any
such products are contributed to the Company.
(b) Except as provided in paragraph (a) above, no
Affiliate of a Member shall have any obligation to refrain from (i) engaging in
the same or similar activities or lines of business as the Company or
developing or marketing any products or services that compete, directly or
indirectly, with those of the Company or (ii) investing or owning any interest
publicly or privately in, or developing a business relationship with, any
Person engaged in the same or similar activities or lines of business as, or
otherwise in competition with, the Company; and neither the Company nor any
Member (or Affiliate of such Member) shall have any right by virtue of this
Agreement in or to, or to be offered any opportunity to participate or invest
in, any venture engaged or to be engaged in by any other Member (or Affiliate
of such Member) or any right by virtue of this Agreement in or to any income or
profits derived therefrom.
SECTION 14.02 COMPLIANCE WITH U.S. FOREIGN CORRUPT PRACTICES
ACT. (a) Each Member shall take all appropriate action to cause the Company
to adopt such internal policies as are necessary to assure that the business of
the Company and the conduct of its officers, employees and agents are
consistent with the following operating principles: No money or other thing of
value shall be offered, promised or given directly or indirectly to:
(i) any governmental official,
(ii) any political party or official thereof,
(iii) any candidate for political office, or
(iv) any other person,
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while knowing or having reason to know that all or a portion of such money or
thing of value will be offered, promised or given, directly or indirectly, to
any of those listed in items (i) through (iv) above for the purpose of
influencing any action, omission or decision by the recipient in order to
either obtain or retain business for the Company or to direct business to
another.
(b) Upon receiving information which provides reasonable
certainty that any such payment has been made, or action has been taken, each
Member shall:
(i) advise all other Members of the occurrence; and
(ii) take all actions reasonably necessary to mitigate,
correct and report such occurrence, under law or otherwise (such steps
may include termination or severance of the individual(s) involved).
All Members acknowledge they have a good working knowledge of
the requirements of the Foreign Corrupt Practices Act. The Members also agree
to adhere to the foregoing operating principle with respect to their own
actions on behalf or in the name of the Company.
SECTION 14.03 REGULATORY APPROVALS. Each Member shall
cooperate and use its best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
filings and other documents, and to use all commercially reasonable efforts to
obtain all necessary permits, consents, approvals and authorizations of all
governmental or regulatory authorities necessary or advisable to (i) consummate
the transactions contemplated by this Agreement and (ii) allow the Company to
engage in the Company Business. Enova shall have the right to review and
approve in advance all characterizations of the information relating to Enova,
on the one hand, and Pacific Enterprises shall have the right to review and
approve in advance all characterizations of the information relating to Pacific
Enterprises, on the other hand, in either case, which appear in any filing made
in connection with the transactions contemplated by this Agreement. Enova and
Pacific Enterprises agree that they will consult with each other with respect
to the obtaining of all such necessary permits, consents, approvals and
authorizations of governmental and regulatory authorities. Pacific Enterprises
and Enova shall jointly assist the Company in its efforts to obtain necessary
approvals from any governmental or regulatory authority.
SECTION 14.04 CONFIDENTIALITY. Each Member and each of its
Affiliates shall keep confidential and not reveal, and shall cause its
Affiliates/Subsidiaries and the officers, directors, employees, agents and
representatives of it and such entities, to keep confidential and not to
reveal, to any other Person (other than on a "need to know" basis, to the
Company or its officers and employees, to any Affiliate or any officer,
director, employee, agent or representative of such Member or its Affiliates
(each of whom shall be subject to confidentiality obligations), or to any other
Member or such Member's Affiliates),
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any documents and other information concerning, relating to or in connection
with the Company or another Member or the business of the Company or such other
Member, that come to the knowledge of such Member or its Affiliates or their
respective representatives or agents by reason of the relationship of such
Member or Affiliate with the Company or such other Member, except for such
information that (a) is generally available to the public (other than as a
result of a disclosure by such Member or its Affiliates) or (b) is available to
such Person on a non- confidential basis from a source that is not prohibited
from disclosing such Information to such Person ("Information"). In the event
that any Member or any such agent, representative, Affiliate, employee, officer
or director becomes legally compelled to disclose any such Information, such
party shall provide the Managing Members with prompt written notice of such
requirement so that such Managing Members or the Company may seek a protective
order or other remedy or waive compliance with this Section 14.04; provided,
however, that in the event that such protective order or other remedy is not
obtained, or the Managing Members waive compliance with this Section 14.04, the
disclosing party shall furnish only that portion of such Information with is
legally required to be provided and shall exercise all reasonable efforts to
obtain assurances that confidential treatment will be accorded such
information. The Members further agree not to use any Information for any
purpose other than in connection with activities of the Company and shall cause
each of their respective employees who have access to Information to sign
confidentiality agreements.
SECTION 14.05 TEAM SOFTWARE SUBLICENSE. As promptly as
practicable following the entering into by the relevant Enova Member of a
license for TEAM Software from Energy Auditing Agency Limited, the Company and
such Enova Member shall in good faith negotiate and enter into a sublicense (as
set forth on Schedule 4.01(b)(ii)(2)) of such software on terms reasonably
satisfactory to the Company. Such sublicense shall be on terms substantially
similar to the terms of the license held by the relevant Enova Member and shall
(i) entitle the Company to use all of the software the relevant Enova Member is
entitled to use pursuant to its license and (ii) provide that the Company shall
pay any royalties owed pursuant to the license of the relevant Enova Member
resulting from the use by the Company of such software. In the event the
Company and the relevant Enova Member desire that any modification, improvement
or development of such software be contributed to the Company, the value of
such modification, improvement or development shall be determined at such time.
ARTICLE XV
LIABILITY AND INDEMNIFICATION
SECTION 15.01 LIABILITY. (a) Except as otherwise provided
by the California Act or this Agreement, the debts, obligations and liabilities
of the Company, whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and
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liabilities of the Company, and no Covered Person shall be obligated personally
for any such debt, obligation or liability of the Company solely by reason of
being a Covered Person.
(b) Except as otherwise expressly required by law, a
Member, in its capacity as such, shall have no liability in respect of any
distributions wrongfully distributed to it unless such Member had actual
knowledge at the time of the distribution of facts indicating the impropriety
of the distribution and if immediately after giving effect to such distribution
all liabilities of the Company (other than liabilities to Members or assignees
on account of their Membership Interest and liabilities as to which recourse is
limited to specific property of the Company) exceed the fair market value of
the Company's assets; provided, however, that a Member shall have no liability
under this Section 15.01 in respect of any distribution on or after the fourth
anniversary of the distribution unless an action to recover such distribution
from such Member is commenced prior to such fourth anniversary and an
adjudication of liability against such Member is made in such action.
SECTION 15.02 INDEMNIFICATION. (a) To the fullest extent
permitted by applicable law, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of authority conferred on such
Covered Person by this Agreement, except that no Covered Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Covered Person by reason of gross negligence, bad faith or willful
misconduct with respect to such acts or omissions; provided, however, that any
indemnity under this Section 15.02 shall be provided out of and to the extent
of Company assets only, and no other Covered Person shall have any personal
liability on account thereof.
(b) (i) In the event that any claim, demand, action,
suit or proceeding shall be instituted or asserted or any loss, damage or claim
shall arise in respect of which indemnity may be sought by a Covered Person
pursuant to Section 15.02(a), such Covered Person shall promptly notify the
Company thereof in writing. Failure to provide notice shall not affect the
Company's obligations hereunder except to the extent the Company is actually
and materially prejudiced thereby.
(ii) The Company shall have the right, exercisable subject
to the approval of the disinterested Members, to participate in and control the
defense of any such claim, demand, action, suit or proceeding and, in
connection therewith, to retain counsel reasonably satisfactory to each Covered
Person, at the Company's expense, to represent each Covered Person and any
others the Company may designate in such claim, demand, action, suit or
proceeding. The Company shall keep the Covered Person advised of the status of
such claim, demand, action, suit or proceeding and the defense thereof and
shall consider in good faith recommendations made by the Covered Person with
respect thereto.
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(iii) In any such claim, demand, action, suit or
proceeding, any Covered Person shall have the right to retain its own counsel
at its own expense; provided, however, that the fees and expenses of such
Covered Person's counsel shall be at the expense of the Company if (A) each
other Member and such Covered Person shall have mutually agreed to the
retention of such counsel, (B) the Company shall have failed, within a
reasonable time after having been notified of the existence of an indemnified
claim, to assume the defense of such indemnified claim or (C) the named parties
to any such claim, demand, action, suit or proceeding (including any impleaded
parties) include both the Company and such Covered Person and representation of
both parties by the same counsel would be inappropriate in the judgment of the
Covered Person (as evidenced by an opinion of counsel) due to actual or
potential differing interests between them and the Company shall have failed,
within a reasonable time after having been notified of the Covered Person's
objection under this Section 15.02(b)(iii)(C) to such joint representation, to
retain counsel for such Covered Person reasonably satisfactory to such Covered
Person. It is understood that the Company shall not, in respect of the legal
expenses of any Covered Person, in connection with any claim, demand, action,
suit or proceeding or related claims, demands, actions, suits or proceedings in
the same jurisdiction, be liable for the fees and expense of more than one
separate firm (in addition to any local counsel) for all such Covered Persons
and that all such fees and expenses shall be reimbursed as they are incurred;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of a
Covered Person (as evidenced by an opinion of counsel) for the same counsel to
represent such Covered Person and any other Covered Person, then such Covered
Person shall be entitled to retain its own counsel, in each jurisdiction for
which the Covered Person reasonably determines counsel is required, at the
expense of the Company.
(iv) The Company shall not be liable for any settlement of
any claim, demand, action, suit or proceeding effected without its written
consent (which consent shall not be unreasonably withheld or delayed), but if
settled with such consent or if there be a final judgment for the plaintiff,
the Company agrees to indemnify each Covered Person, to the extent provided in
Section 15.02(a), from and against all losses, damages or claims by reason of
such settlement or judgment. The Company shall not effect any settlement of
any pending or threatened claim, demand, action, suit or proceeding in respect
of which any Covered Person is seeking indemnification hereunder without the
prior written consent of each such Covered Person (which consent shall not be
unreasonably withheld or delayed by any such Covered Person), unless such
settlement includes an unconditional release of each such Covered Person from
all liability and claims that are the subject matter of such claim, demand,
action, suit or proceeding.
(v) As necessary or useful to the defending party in
effecting the foregoing procedures, the parties shall cooperate in the
execution and delivery of agreements, instruments and other documents and in
the provision of access to witnesses, documents and property (including access
to perform interviews, physical investigations or other activities).
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SECTION 15.03 EXPENSES. To the fullest extent permitted by
applicable law, expenses (including legal fees) actually and reasonably
incurred by a Covered Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Company prior to the
final disposition of such claim, demand, action, suit or proceeding upon
receipt by the Company of an undertaking by or on behalf of the Covered Person
to repay such amount if it shall be determined that the Covered Person is not
entitled to be indemnified therefor as authorized in Section 15.02 hereof.
ARTICLE XVI
MISCELLANEOUS
SECTION 16.01 NOTICES. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly given upon receipt) by delivery in
person, by telecopier or by registered or certified mail (postage prepaid,
return receipt requested), as follows:
(i) if given to the Company, in care of the Secretary at
the Company's mailing address set forth in Section 2.04 or such other
address as the Company may hereafter designate in writing; or
(ii) if given to any Member at the address set forth
opposite its name on Schedule 2.01 attached hereto, or at such other
address as such Member may hereafter designate by written notice to
the Company.
SECTION 16.02 PUBLIC ANNOUNCEMENTS. The Members (and their
Affiliates) agree to consult with each other before issuing any press release
or making any public statement with respect to this Agreement and will not
issue any such press release or make any such public statement prior to such
consultation, and, except as may be required by applicable law, will not issue
any such press release or make any such public statement without the prior
consent of the other party.
SECTION 16.03 CUMULATIVE REMEDIES. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or
remedy by any party shall not preclude or waive its right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
SECTION 16.04 BINDING EFFECT. This Agreement shall be
binding upon and inure to the benefit of all of the parties and, to the extent
permitted by this Agreement, their successors, executors, administrators,
heirs, legal representatives and assigns.
SECTION 16.05 INTERPRETATION. Throughout this Agreement,
nouns, pronouns and verbs shall be construed as masculine, feminine, neuter,
singular or plural,
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44
whichever shall be applicable. Unless otherwise specified, all references
herein to "Articles", "Sections" and paragraphs shall refer to corresponding
provisions of this Agreement.
SECTION 16.06 SEVERABILITY. If any term or other provision
of this Agreement is held to be invalid, illegal or incapable of being enforced
by any rule of law, or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions is not affected in any
manner materially adverse to any party. Upon a determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
SECTION 16.07 COUNTERPARTS. This Agreement may be executed
and delivered (including by facsimile transmission) in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed and delivered shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 16.08 INTEGRATION. This Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
SECTION 16.09 GOVERNING LAW; SUBMISSION TO JURISDICTION. (a)
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of California.
(b) Any claim, action, suit or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall
be brought as provided in the California Act or in a court of competent
jurisdiction sitting in Orange County, California and each of the parties
hereto hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom in any such claim, action, suit or
proceeding) and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any such
claim, action, suit or proceeding in any such court or that any such claim,
action, suit or proceeding which is brought in any such court has been brought
in an inconvenient forum. Subject to applicable law, process in any such
claim, action, suit or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing and subject to applicable law, each party agrees that
service of process on such party as provided in 16.01 shall be deemed effective
service of process on such party. Nothing herein shall affect the right of any
party to serve legal process in any other manner permitted by law or at equity.
WITH RESPECT
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TO ANY SUCH CLAIM, ACTION, SUIT OR PROCEEDING IN ANY SUCH COURT, EACH OF THE
PARTIES IRREVOCABLY WAIVES AND RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY
JURY, AND AGREES THAT IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING.
(c) The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties hereto shall be entitled
to specific performance of the terms hereof, in addition to any other remedy at
law or in equity.
SECTION 16.10 EXPENSES. Each of the Members will bear its
own costs and expenses, including brokers' or finders' fees, if any, incurred
in connection with the preparation and execution of this Agreement.
SECTION 16.11 FURTHER ASSURANCES. The Members will execute
and deliver such further instruments and do such further acts and things as may
be required to carry out the intent and purpose of this Agreement.
SECTION 16.12 AMENDMENTS AND WAIVERS; ASSIGNMENT. (a) Any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
all parties hereto, or in the case of a waiver, by the party or parties against
whom the waiver is to be effective; provided, however, that Schedule 2.01 to
this Agreement shall be deemed amended from time to time to reflect the
admission of a new Member, the withdrawal or resignation of a Member and the
adjustment of the Membership Units resulting from any sale, Transfer or other
disposition of a Membership Unit, in each case that is made in accordance with
the provisions thereof.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder (other than a failure or delay beyond a
period of time specified herein) shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(c) Except as provided in Article X hereof, this
Agreement shall not be assigned by the Members and no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations.
SECTION 16.13 NO THIRD PARTY BENEFICIARIES. No person or
entity other than a party hereto shall have any rights or remedies under this
Agreement. Without limiting the foregoing, any obligation of the Pacific
Enterprises Members and the Enova Members to make Capital Contributions to the
Company under this Agreement is an agreement only
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between the Managing Members and no other person or entity, including the
Company, shall have any rights to enforce such obligations.
SECTION 16.14 HEADINGS. The headings and subheadings in this
Agreement are included for convenience and identification only and are in no
way intended to describe, interpret, define or limit the scope, extent or
intent of this Agreement or any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have entered into this
Operating Agreement or have caused this Agreement to be duly executed by their
respective authorized officers, in each case as of the date first above stated.
PACIFIC ENTERPRISES ENERGY SERVICES
By: /s/ XXXX X. XXXXXX
--------------------------------
Name: Xxxx X. Xxxxxx
Title: President
ENSOURCE
By: /s/ XXXX X. XXXXXX
--------------------------------
Name: Xxxx X. Xxxxxx
Title: President
PACIFIC ENTERPRISES LNG COMPANY
By: /s/ XXXX X. XXXXXX
--------------------------------
Name: Xxxx X. Xxxxxx
Title: President
ENERGY ALLIANCE I
By: /s/ XXXX X. XXXXXX
--------------------------------
Name: Xxxx X. Xxxxxx
Title: President
PACIFIC ENERGY LEASING COMPANY
By: /s/ XXXX X. XXXXXX
--------------------------------
Name: Xxxx X. Xxxxxx
Title: President
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PACIFIC ENTERPRISES ENERGY MANAGEMENT
SERVICES
By: /s/ XXXX X. XXXXXX
------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
ENOVA ENERGY, INC.
By: /s/ XXXXX X. XXXXXX
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Operating Officer
ENOVA TECHNOLOGIES
By: /s/ XXXXX X. XXXXXX
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Operating Officer
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SCHEDULE 1.01
CERTAIN DEFINITIONS
"Adjusted Capital Account" means, with respect to each Member,
the balance in such Member's Capital Account as of the end of the relevant
Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of each of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
"Adjusted Capital Account Deficit" means, with respect to each
Member, the deficit balance, if any, in such Member's Adjusted Capital Account
as of the end of the relevant Fiscal Year.
"Affiliate" means, with respect to a specified Person, any
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the specified
Person including, without limitation, any partnership or joint venture in which
the specified Person (either alone or together with any other subsidiary) has,
directly or indirectly, an interest of 5% or more. As used in this definition,
the term "control" means the possession, directly or indirectly, or as trustee
or executor, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise.
"Agreement" means this Operating Agreement of Mineral JV, LLC,
as amended, modified, supplemented or restated from time to time.
"Articles" means the Articles of Organization and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the office of the Secretary of State of the State of California pursuant to the
California Act.
"Asset Value" means, with respect to any asset or liability,
such asset's or liability's adjusted basis for federal income tax purposes,
except as follows:
(i) the initial Asset Value of any asset (other than
money) contributed by, or liability assumed from, a Member to the
Company shall be the value of such asset or liability, (A) as set
forth on Schedule 4.01 or determined in accordance with the
methodology set forth on Schedule 4.01, or (B) if such asset or
liability is not listed on Schedule 4.01, as provided in Section
4.01(e) or Section 4.04(c); and
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(ii)
(ii) the Asset Value of all assets and liabilities of the
Company shall be adjusted to equal their respective gross fair market
values, as determined by the Members Committee, immediately prior to
the liquidation of the Company within the meaning of Regulation
Section 1.704-1(b)(2)(ii)(g).
If the Asset Value of an asset or liability has been determined or adjusted
pursuant to paragraph (i) or paragraph (ii) above, such Asset Value shall
thereafter be reduced by the Depreciation taken into account with respect to
such asset for purposes of computing Net Profits and Net Losses.
"Bankruptcy" of a Member shall be deemed to occur for purposes
of this Agreement if:
(i) an involuntary petition under any bankruptcy or
insolvency law or under the reorganization provisions of any such law
is filed with respect to such Member or a receiver of or for the
property of such Member is appointed without acquiescence of such
Member, which petition or appointment remains undischarged or unstayed
for an aggregate period of ninety (90) days (whether or not
consecutive); or
(ii) a voluntary petition under any bankruptcy or
insolvency law or under the reorganization provisions of any such law
is filed by such Member, a voluntary assignment of such Member's
property for the benefit of creditors is made, or a receiver of or for
the property of such Member is appointed by, or acquiesced in, by such
Member.
"Business Day" means any day, except a Saturday, Sunday or
other day on which commercial banking institutions in San Diego or Los Angeles
are authorized or directed by law or executive order to close.
"California Act" means the Xxxxxxx-Xxxxxx Limited Liability
Company Act, California Corporations Code Section Section 17000, et seq., as
amended from time to time, except that it shall not include any provision
thereof adopted after the date hereof that would only be applicable to the
Company absent a provision in this Agreement to the contrary unless such
provision is approved by the Members Committee.
"Capital Account" means, with respect to any Member, the
account maintained for such Member in accordance with the provisions of Section
4.07.
"Capital Contribution" means, with respect to any Member, the
aggregate amount of money contributed to the Company and the initial Asset
Value of any property (other than money) contributed to the Company pursuant to
Article IV with respect to the Membership Units held by such Member. In the
case of a Member that acquires an interest in the Company by virtue of an
assignment or transfer in accordance with the terms of this
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(iii)
Agreement, "Capital Contribution" means the Capital Contribution of such
Member's predecessor to the extent relating to the acquired interest.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any corresponding federal tax statute enacted after the
date of this Agreement. The reference to a specific section (Section ) of the
Code refers not only to such specific section but also to any corresponding
provision of any federal tax statute enacted after the date of this Agreement,
as such specific section or corresponding provision is in effect on the date of
application of the provisions of this Agreement containing such reference.
"Company Business" means any activity, business, project or
undertaking related to the joint provision of Energy Commodity Products and
Energy Management Services in the Marketing Region as contemplated in Article
XIII in which the Members Committee by Majority Vote determines the Company
should be engaged.
"Covered Person" means a Member, any Affiliate of a Member,
any officers, directors, Representatives, shareholders, employees or partners
or members of a Member, or its respective Affiliates or any officers of the
Company.
"CPUC" means the California Public Utilities Commission, or
any successor agency thereto.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments, (c)
all obligations of such Person as lessee under leases that have been or should
be, in accordance with GAAP, recorded as capital leases, (d) all obligations,
contingent or otherwise, of such Person in respect of acceptances, letters of
credit or similar extensions of credit, (e) all Debt of others referred to in
clauses (a) through (d) above or clause (f) below guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such Debt
or to advance or supply funds for the payment or purchase of such Debt, (ii) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such Debt or to assure the holder of such Debt against loss, (iii) to supply
funds to or in any other manner invest in the debtor (including any agreement
to pay for property or services irrespective of whether such property is
received or such services are rendered) or (iv) otherwise to assure a creditor
against loss, and (f) all Debt referred to in clauses (a) through (e) above
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Debt. Notwithstanding the foregoing, Capital Contributions made pursuant to
Article IV shall not be considered Debt of any Person.
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(iv)
"Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
Fiscal Year or other period; provided, however, that if the Asset Value of an
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such Fiscal Year or other period, Depreciation shall be an amount
that bears the same ratio to such beginning Asset Value as the federal income
tax depreciation, amortization or other cost recovery deduction with respect to
such asset for such Fiscal Year or other period bears to such beginning
adjusted tax basis; and provided further that, if the federal income tax
depreciation, amortization or other cost recovery deduction for such Fiscal
Year or other period is zero, Depreciation shall be determined with reference
to such beginning Asset Value using any reasonable method selected by the
Members.
"Fiscal Year" means (i) the period commencing upon the
formation of the Company and ending on December 31, 1997, (ii) any subsequent
twelve month period commencing on January 1 and ending on December 31, or (iii)
any portion of the period described in clause (ii) of this sentence for which
the Company is required to allocate Net Profits, Net Losses and other items of
Company income, gain, loss or deduction pursuant to Article VII hereof.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Interest Rate" means the London Interbank Offered Rate
(LIBOR) plus 1%.
"Liens" means any liens, claims, encumbrances, security
interests, equities, charges and options of any nature whatsoever.
"Majority Vote" means, with respect to any matter to be voted
on, the written approval of, or the affirmative vote by, a majority of the six
Representatives of the Managing Members serving on the Members Committee.
"Managing Members" means Pacific Enterprises Energy Management
Services and Enova Energy or any successors or assigns thereof.
"Marketable Securities" means shares of common stock that are
listed and traded on a national exchange or the Nasdaq National Market.
"Marketing Region" means the United States, Canada and Mexico.
"Member" means any Person named as a member of the Company on
Schedule 2.01 hereto and any Person admitted as an additional Member pursuant
to the provisions of this Agreement, in each case, in such Person's capacity as
a member of the Company.
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(v)
"Member Group" shall mean collectively the Pacific Enterprises
Members or collectively the Enova Members, as the case may be.
"Membership Interest" means, a Member's entire equity interest
in the Company, including the Membership Units owned by such Member and any
right of such Member to the return of Capital Contributions and any interest
thereon.
"Membership Unit" means a limited liability company interest
in the Company (not including any right to the return of Capital Contributions
and any interest thereon) representing such fractional part of the interest of
all unit holders pursuant to this Agreement as is equal to the quotient of one
divided by the total number of Membership Units.
"Net Asset Value" means, with respect to any Member, the
excess, if any, of (a) the aggregate Asset Value of all such Members Assets set
forth on Schedule 4.01 determined in accordance with Section 4.01(e) over (b)
the aggregate value of all the liabilities of such Member as set forth on
Schedule 4.01.
"Net Profits" and "Net Losses" mean, for each Fiscal Year, an
amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Section 703(a) of the Code (but including in
taxable income or loss, for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Section 703(a)(1) of
the Code), with the following adjustments:
(i) any income of the Company exempt from federal income
tax and not otherwise taken into account in computing Net Profits or
Net Losses pursuant to this definition shall be added to such taxable
income or loss;
(ii) any expenditures of the Company described in Section
705(a)(2)(B) of the Code (or treated as expenditures described in
Section 705(a)(2)(B) of the Code pursuant to Regulation Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this definition shall
be subtracted from such taxable income or loss;
(iii) in the event the Asset Value of any asset of the
Company is adjusted in accordance with paragraph (ii) or paragraph
(iii) of the definition of "Asset Value" above, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Profits or Net
Losses;
(iv) gain or loss resulting from any disposition of any
asset of the Company with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by reference to the
Asset Value of the asset disposed of, notwithstanding that the
adjusted tax basis of such asset differs from its Asset Value;
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(vi)
(v) in lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such Fiscal Year or other period, computed in accordance with the
definition of "Depreciation" above; and
(vi) any items which are specially allocated pursuant to
Sections 7.02 and 7.03 shall not be taken into account in computing
Net Profits or Net Losses.
The amounts of the items of Company income, gain, loss or deduction available
to be specially allocated pursuant to Sections 7.02 and 7.03 shall be
determined by applying rules analogous to those set forth in subparagraphs (i)
through (v) above.
"Person" means any individual, corporation, partnership,
limited partnership, limited liability company, joint venture, trust,
unincorporated or governmental organization or any agency or political
subdivision thereof.
"Products" means Energy Commodity Products and Energy
Management Products.
"Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Subsidiary" or "Subsidiaries" of any Person means any
corporation, partnership, limited liability company, joint venture or other
legal entity of which such person (either alone or through or together with any
other subsidiary), owns, directly or indirectly, more than 50% of the stock or
other equity interests, the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity.
"Transfer" means the voluntary or involuntary sale,
assignment, transfer, pledge, hypothecation or other disposition or conveyance
of legal or beneficial interest, directly or indirectly, whether in one
transaction or in a series of related transactions.
"Transferee" means any Person that is a transferee of a
Member's interest in the Company, or part thereof.
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SCHEDULE 2.01
MEMBERS, CAPITAL CONTRIBUTIONS, ADDRESSES
AND NUMBER OF MEMBERSHIP UNITS
Number of
Cash Capital Membership
Member Name and Address Contributions Units
----------------------- ------------- ---------------
ENOVA MEMBERS 50.0
Enova Energy, Inc. $5,000,000
000 Xxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
Enova Technologies
000 Xxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
PACIFIC ENTERPRISES MEMBERS 50.0
Pacific Enterprises Energy Services $5,000,000
000 Xxxx 0xx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Ensource
000 Xxxx 0xx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Pacific Enterprises LNG Company
000 Xxxx 0xx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Energy Alliance I
000 Xxxx 0xx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Pacific Energy Leasing Company
000 Xxxx 0xx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Pacific Enterprises Energy Management Services
000 Xxxx 0xx xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
