OPERATING AGREEMENT FAUQUIER LANDFILL GAS, L.L.C.
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OPERATING AGREEMENT |
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This Operating Agreement (the" Agreement"), dated as of the 30th day of May 2002 by and between Pepco Energy Services, Inc. ("PES"), a Delaware corporation, and Commonwealth Green Energy, LLC ("CGE") a Virginia limited liability company (each such entity being individually' referred to a "Member" and collectively as the "Members"). WHEREAS, PES and CGE have agreed to form and operate a jointly-owned company, Fauquier Landfill Gas, LLC (the "L.L.C."), to own and operate an electric generation facility fueled by methane landfill gas collected at the Fauquier County, Virginia landfill, (the "Project"), such other similar facilitates as may hereafter be agreed upon by the parties, and to undertake and perform such other lawful acts and activities as limited liability companies may engage in pursuant to the Delaware Limited Liability Company Act (the "Act"); WHEREAS, the L.C.C. has been formed pursuant to the Act by filing on the date hereof a Certificate of Formation in the office of the Secretary of State of Delaware; WHEREAS, PES and CGE desire to establish the terms under which the L.L.C. will be owned, managed and operated; NOW, THEREFORE, in consideration of the mutual covenants herein expressed, the parties hereby agree as follows: 1. Management by Members. (a) The L.L.C. shall be managed by the Members. The Members shall have the authority to (i) exercise all the powers and privileges granted by the Act or any other law or this Agreement. together with any powers incidental thereto. so far as such powers are necessary or convenient to the conduct. promotion or attainment of the business. trade. purposes or activities of the L.L.C. and (ii) take any other action not prohibited under the Act or other applicable law. (b) All decisions of the Members respecting any matter set forth herein or otherwise affecting or arising out of the conduct of the business of the L.L.C. shall be made only by unanimous action of all of the Members evidenced by a written consent signed by each Member. (c) The Members shall form a management committee ("Management Committee") of the L.L.C. which shall operate in accordance with the applicable terms of this Agreement. The Management Committee shall consist of three representative designated by PES and one representative designated by CGE. The Management Committee initially shall consist of the following persons: X. X. Xxxxxxxx, Xxxxx Xxxxx and Xx Xxxxxxx (PES representatives) and Xxxxxxx X. Xxxxxx (CGE representative). (i) All powers of the L.L.C. shall be exercised by or under the authority of the Management Committee. Decisions of the Management Committee within its scope of authority shall be binding upon the L.L.C. and the Members. (ii) Meetings of the Management Committee shall be held at the principal place of business of the L.L.C. or at any other place that the members of the Management Committee determine. In the alternative, meetings may be held by conference telephone, provided that each member of the Management Committee can hear and speak to the others. The presence of at least one PES designated and one CGE - designated member of the Management Committee shall constitute a quorum for the transaction of business. Meetings shall be held once each month, or otherwise in accordance with a schedule established by the Management Committee. In addition, any member of the Management Committee may convene a meeting thereof upon at least two (2) business days' prior written notice to the other members. The Management Committee shall act at meetings by unanimous vote. The Management Committee also may make decisions, without holding a meeting by unanimous written consent of all of the members of the Management Committee. Minutes of each meeting and a record of each decision shall be kept by the designee of the Management Committee and shall be given to the Members promptly after the meeting or decision. (iii) Except as otherwise determined by the Members, the members of the Management Committee shall serve without compensation from the L.L.C. (iv) The Members, with or without cause, at any time and from time to time and for any reason, may remove their respective representatives on the Management Committee then acting and appoint new members of the Management Committee. (v) The Management Committee may, from time to time as it deems advisable, appoint officers of the L.L.C. (the "Officers") and assign in writing titles (including, without limitation, President, Vice President, Secretary, and Treasurer) to any such persons. Unless the Management Committee decides otherwise, if the title is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of the authorities and duties that are normally associated with that office. The Officers shall be subject to the general supervision and control of the Management Committee and shall carry out the policy decisions made by the members of the Management Committee. At each regular meeting of the Management Committee (and, when requested by any member thereof, at any special meeting of the Management Committee), the President or other appropriate Officers shall be present and shall report to the Management Committee on the operations of the L.L.C. or any other matters as any member of the Management Committee may request. Any delegation of authority to the Officers may be revoked at any time by the Management Committee. An Officer may be removed at any time with or without cause by the Management Committee. (vi) At the direction of the Management Committee, the President and other appropriate Officers shall have the full power to perform any act that an "authorized person" may perform under the Act, and to execute, for and on behalf of the L.L.C., any and all documents and instruments which may be necessary to carry on the business of the L.L.C., including, without limitation, any and all deeds, contracts, leases, mortgages, deeds of trust, promissory notes, guarantees, security agreements, and financing statements pertaining to the L.L.C.'s assets or obligations. No person dealing with the President or any other Officer need inquire into the validity or propriety of any document or instrument executed in the name of the Company by the President or other Officer, or as to the authority of the President or other Officer in executing the same. (vii) The Management Committee has appointed the following persons as the initial Officers: Xxxxx Xxxxx, President; Xxxxxxx X. Xxxxxx, Vice President; Xxxx Xxxxxx, Secretary; Xxxxx XxXxxxxxx, Treasurer. (d) No Member shall be deemed to be a representative, an agent or an employee of any other Member, nor, unless otherwise expressly specified herein, shall any Member have any authority or right to assume or create any obligation of any kind or nature, express or implied, on behalf of, or in the name of any other Member, nor bind any other Member in any respect, without the prior written consent of such other Member. 2. The registered office of the L.L.C. in the State of Delaware shall be 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000, or such other office (which need not be a place of business of the L.L.C.) as the Members may designate from time to time in the manner provided by law. The registered agent of the L.L.C. in the Sate of Delaware shall be Corporation Service Company or such other persons as the Members may designate from time to time in the manner provided by law. The principal office of the L.L.C. in the United States shall be 0000 Xxxxx 00xx Xxxxxx, 00xx Xxxxx, Xxxxxxxxx, XX 00000, or such other place(s) as the Members may designate from time to time. 3. Purpose. The purposes of the L.L.C. shall be to own and operate an electric generating facility fueled by methane gas collected at the Fauquier County, Virginia landfill, such other similar facilities as may hereafter be agreed to by the Members upon the terms and conditions set forth in this Agreement, and such other lawful acts or activities as limited liability companies may engage in pursuant to the Act. The L.L.C. shall have all the powers permitted pursuant to the Act.
(a) Capital contributions may be made by any Member if agreed to by all the Members in writing and, if so made, shall be reflected on Schedule A hereto. Additional capital contributions may be made by any Member if agreed to by all the Members and shall be reflected on an amendment to Schedule A hereto. (b) Except as otherwise provided in this Section 4, no Member shall be obligated or permitted to contribute any additional capital to the L.L.C.. No interest shall accrue on any contributions to the capital of the L.L.C., and no Member shall have the right to withdraw or to be repaid any capital contributed by it or to receive any other payment in respect of its interest in the L.L.C., including, without limitation, as a result of the withdrawal or resignation of such Member from the L.L.C., except as specifically provided in this Agreement. (c) A separate capital account (a "Capital Account") shall be established for each Member, and shall be maintained in accordance with applicable regulations under the Internal Revenue Code of 1986, as amended (the "Code"). To the extent consistent with such regulations, there shall be credited to each Member's capital account the amount of any contribution of capital made by such Member to the L.L.C. plus such Member's share of the net profits of the L.L.C. (including income and gain exempt from tax), and there shall be charged against each Member's capital account the amount of all distributions to such Member plus such Member's share of the net losses of the L.L.C. (including allocations of L.L.C. expenditures described in Code Section 705(a)(2)(B)). (d) The liability of the Members for the losses, debts and obligations of the L.L.C. shall be limited to their capital contributions. No Member, in his, her or its capacity as a Member, shall have any liability to restore any negative balance in his, her, or its Capital Account. In no event shall any Member, in his, her, or its capacity as a Member, be personally liable for any liabilities or obligations of the L.L.C.. (e) All assets of the L.L.C. are property of the L.L.C. and no Member shall have severable rights or interests in such property except by agreement of all of the Members. 5. Return of Contributions. The contribution of each Member is to be returned to such Member only upon the termination and liquidation of the L.L.C., but contributions may be returned prior to such time if agreed upon by all Members. 6. Share of Profits and Other Items. (a) The net profits, net losses, net cash flow and net proceeds of any sales or refinancing of any property of the L.L.C. or upon liquidation of the L.L.C. shall be allocated among the Members according to the percentage interests of each Member as set forth on Schedule A unless specifically modified therein. Subject to the foregoing, distributions to the Members shall be made at such times and in such amounts as the Members unanimously shall agree. (b) For tax purposes, all items of depreciation, gain, loss, deduction or credit shall be determined in accordance with the Code, and except to the extent otherwise required by the Code, allocated to and among the Members the same percentages in which the Members share in net profits and net losses unless specifically modified in Schedule A. 7. Transfers of a Member's Interest. No Member may sell, assign, give, pledge, hypothecate, encumber or otherwise transfer, including, without limitation, any assignment or transfer by operation of law or by order of court, such Member's interest in the L.L.C. or any part thereof, without the unanimous written consent of all of the Members (excluding the Member transferring its interest), which consent shall be within each Member's sole discretion, and any purported assignment without such consent shall be null and void and of no effect whatsoever. 8. Admission of Additional Members. No person or entity, including any transferee or holder by operation of law or the interest of a Member, may be admitted to the L.L.C. as a Member, except with the consent of all the Members in their sole discretion. 9. Priorities. No Member shall have any rights or priority over any other Members as to contributions or as to distributions or compensation by way of income. 10. Dissolution of L.L.C. The L.L.C. shall terminate upon the first to occur of the events described in Section 18-801 of the Act. The Members may continue the business of the L.L.C. upon the occurrence of any event which constitutes an event of dissolution of the L.L.C. under the Act by electing to do so within 90 days after the occurrence of any such event. Any such election shall be made by the Members (excluding the Member that caused the event of dissolution) in accordance with Section I (b) of this Agreement. In the event of such termination. the L.L.C. shall be dissolved and wound-up and its assets shall be liquidated and distributed in the following order of priority: (i) to pay or make provision for the payment of liabilities owed to creditors and (ii) distributed to the Members in proportion to their positive Capital Account balances. 11. Termination of Membership: Return of Capital. No Member may terminate his, her or its membership in the L.L.C. or have any right to distributions respecting his, her or its membership interest (upon withdrawal or resignation of the L.L.C. or otherwise) except as expressly set forth 12. Books and Records: Bank Accounts. (a) The Members shall cause the L.L.C. to keep just and true books of account with respect to the operations of the L.L.C. Such books shall be maintained at the principal place of business of the L.L.C., or at such other place as the Members shall determine, and all Members and their duly authorized representatives shall at all reasonable times have access to such books. (b) Such books shall be kept in accordance with generally accepted accounting principles and shall have a December 31 fiscal year end. An income statement and balance sheet shall be prepared monthly and provided to Members no later than 20 days from the end of the prior month. Audited financial statements including footnotes shall be provided to the Members within 60 days of the fiscal year end. The audit shall be performed by a nationally recognized firm agreed upon by the Members at the expense of the L.L.C. (c) Bank Accounts. The L.L.C. shall maintain appropriate accounts at one or more financial institutions approved by the Members Committee for all funds of the L.L.C. Such accounts shall be used solely on the business of the L.L.C. Withdrawals or transfers from such accounts shall be made only upon the approval of those persons authorized in writing by the Members. (d) PES shall be the "tax matters partner" of the L.L.C. for purposes of the Code. Unless otherwise required by the Code, or Treasury Regulations, the "tax matters partner" of the L.L.C. shall act (or refrain from acting) on behalf of the L.L.C. in accordance with the directions of the Members, and shall make no election, declaration or statement, settle or compromise any audit matter or dispute, or execute or file any tax return, tax filing or other document on behalf of tl1e L.L.C. without the prior approval of the Members. (e) The parties agree that the L.L.C. shall pay to PES the sum of $1,200.00 on the last business day of each year beginning in the year 2002 (or such other amounts as hereafter may be agreed upon by the Members) as fair and reasonable compensation for acting as the "tax matters partners" and assisting the L.L.C. in preparing and maintaining its books of account and its monthly and annual financial statements. 13. Indemnity; Other Business. (a) Subject to paragraph (c) below, the L.L.C. shall indemnify, defend and hold harmless any natural person, corporation, limited liability company, general partnership, limited liability partnership, venture, trust, business trust, estate or other entity (a "Person") who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or on behalf of a Member), by reason of the fact that he is or was a member, manager, employee or officer of the L.L.C., or is or was an officer of the L.L.C. serving at the request of the L.L.C. as a manger, director, officer, employee or agent of another entity against expenses (including reasonable attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the L.L.C., and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the L.L.C., and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) Subject to paragraph (c) below, the L.L.C. shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action. suit or proceeding by or on behalf of a Member to procure a judgment in its favor by reason of the fact that he is or was a member. manager. employee or officer of the L.L.C.. or is or was an officer of the L.L.C. serving at the request of the L.L.C. as a manager. director, officer, employee or agent of another entity against expenses (including reasonable attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the L.L.C.; except that no indemnification shall be made in respect of any claim, issue or matter as to which such Person shall have been adjudged to be liable unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjunction of liability but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. (c) Any indemnification under this Section 13 (unless ordered by a court) shall be made by the L.L.C. only as authorized in the specific case upon a determination that indemnification of the member, manager, employee or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) or (b) above. Such determination shall be made (i) by a majority vote of the disinterested Members on the Members' Committee, or (ii) if the Members' Committee so directs, by independent legal counsel in a written opinion. Notwithstanding the foregoing, to the extent, however, that a representative or officer of the L.L.C. has been successful on the merits or otherwise in defense of any action, suit or processing described above, or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including reasonable attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. (d) For purposes of any determination under this Section 13, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the L.L.C., or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the L:L.C. or another enterprise, or on information supplied to him by the officers of the L.L.C. or another enterprise or on information or records given or reports made to the L.L.C. or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the L.L.C. or another enterprise. The term "another enterprise" as used in this paragraph (d) shall mean any entity which such person is or was serving at the request of the L.L.C. (e) Notwithstanding the foregoing, any member, manager, employee or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under paragraphs (a) and (b) above by reason of the fact that he has met the applicable standard of conduct. If successful, in whole or in part, the representative or officer seeking indemnification shall also be entitled to be paid the expenses of prosecuting such application. (f) Expenses incurred by a member, manager, employee or officer in defending or investigating a threatened or pending actiont suit, or proceeding shall be paid by the L.L.C. in advance of the final disposition thereof upon receipt of an undertaking to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the L.L.C. as authorized in this Section 13. (g) The indemnification and advancement of expenses in this Section 13 shall not be deemed exclusive of any other rights which may apply, it being the policy of the L.L.C. that indemnification of the persons specified in the paragraphs (a) and (b) above shall be made to the fullest extent permitted by law. The provisions of this Section 13 shall not preclude the indemnification of any person who is not specified herein but whom the L.L.C. has the power or obligation to indemnify under the Act, or otherwise. (h) The L.L.C. may purchase and maintain insurance on behalf of the persons specified in paragraph (a) above against any liability asserted against them and incurred by them in any such capacity. or arising out of their status as such, whether or not the L.L.C. would have the power or the obligation to indemnify them under this Section 13. (i) The indemnification and advancement of expenses provided by this Section 13 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a member, manager, employee or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. (j) Except for proceedings to enforce rights to indemnification (which shall be governed by paragraph (e) above), the L.L.C. shall not be obligated to indemnify any representative or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by all the Members. 14. Developer Cash Advance and Fee. (a) The parties agree that the L.L.C. shall pay to CGE an advance against future earnings of the Project of $40,000 (the "Advance") and an additional cash fee of $60,000 as full and complete compensation to CGE for work in developing the Project. (the "Fee") The advance shall be repaid and retired at an amount not to exceed $8,000 per year until such time as the Advance is fully repaid and retired. The parties agree that this Advance shall be repaid and retired if at all, from CGE's share of the earnings of the LLC and is not a debt, warrant, or any other sort of financial instrument that would suggest a financial obligation by CGE to either PES, the L.L.C., or to any other person. The parties agree that any distribution that CGE may receive pursuant to this Agreement shall be reduced by an amount not to exceed $8,000 per year until such time as the Advance is fully repaid and retired. (b) The Advance and the Fee shall be paid only in accordance with the following schedule: |
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Upon signing of contract with Fauquier County |
$40,000 Advance and $30,000 Fee |
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Upon commencement of construction |
$20,000 Fee |
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Upon substantial completion of construction |
$ 5.000 Fee |
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Upon completion of construction/project start-up |
$ 5.000 Fee |
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15. Design. Construction. Operation and Maintenance Fees. (a) The parties agree that PES may, if it elects to do so, perfoml any or all design, construction, operations and maintenance work associated with the Project and such other similar facilities as may hereafter be agreed upon (the "Work"). (b) The parties agree that the Work associated with the Project shall be charged monthly be PES to the L.L.C. at PES' actual out-of-pocket costs (including reasonable contingency and overhead) plus 10% profit. 16. Miscellaneous. (a) Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of all the Members. (b) All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not. This Agreement and the rights and obligations of the parties hereto may not be assigned by any of the parties hereto without the prior written consent of the oilier parties. (c) This Agreement may be executed simultaneously in counterparts, anyone of which need not contain the signatures of more than one party. but all such counterparts taken together will constitute one and the same Agreement. (d) The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (e) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of law principles. (f) All notices, requests or other communications hereunder shall be deemed duly delivered, given or made to or upon any party hereto if in writing and delivered by hand against receipt, or by certified or registered mail, postage prepaid, return receipt requested, or to a courier who guarantees next business day delivery or sent by facsimile (with confirmation), to any such party at its address set forth below or to such other addresses as such party may at any time, or from time to time, direct by notice given accordance with this Paragraph 14(f). |
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(i) |
If to PES: |
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(ii) |
If to CGE: |
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The date of delivery of any such notice, request or other communication shall be the earlier of (i) the dates of actual receipt or (ii) three business days after such notice, request or other communication is sent if sent by certified or registered mail with return receipt requested (ill) if sent by courier who guarantees next business day delivery the business day next following the day such notice, request, or other communication is actually delivered to courier or (iv) the day of confirmation of receipt if by facsimile. (g) This Agreement has been negotiated and prepared by each of PES and CGE, and if any provision of this Agreement requires judicial interpretation, the court interpreting or construing the provision shall not apply the rule of construction that a document is to be construed more strictly against the party who prepared the documents. IN WITNESS WHEREOF, each of the undersigned has executed this Agreement as of the date first set forth above. |
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PEPCO ENERGY SERVICES, INC.
By: /s/ Xxxxx Xxxxx Name: Xxxxx Xxxxx Title: President - Performance Management Group
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COMMONWEALTH GREEN ENERGY, LLC
By: /s/ Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxx, III Title: President |
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SCHEDULE A |
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NAMES AND ADDRESSES |
CUMULATIVE |
PERCENTAGE OF |
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PES Landfill Gas Corporation |
$ 1,630,959 |
75% |
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Commonwealth Green Energy, LLC |
$ 543,653 |
25% |
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Section 29/45 Tax Credits Emission Credits |
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