EXECUTION COPY
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
of
ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC
Dated as of December 19, 2002
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TABLE OF CONTENTS
Page
ARTICLE I Definitions..........................................................1
Section 1.01. Capitalized Terms............................................1
Section 1.02. Other Definitional Provisions................................5
ARTICLE II Formation of the Limited Liability Company..........................6
Section 2.01. Formation; Filings...........................................6
Section 2.02. Name and Office..............................................7
Section 2.03. Business Purpose.............................................7
Section 2.04. Term.........................................................8
Section 2.05. Tax Treatment; No State Law Partnership......................8
Section 2.06. Authority of Member..........................................8
Section 2.07. Liability to Third Parties...................................8
Section 2.08. No Personal Liability of any Member, Special
Member, Manager, Etc.........................................8
Section 2.09. Separateness.................................................9
Section 2.10. Limited Liability and Bankruptcy Remoteness.................10
ARTICLE III Management........................................................10
Section 3.01. Management by Managers......................................10
Section 3.02. Acts by Managers............................................11
Section 3.03. Number and Qualifications...................................11
Section 3.04. Independent Managers........................................11
Section 3.05. Appointment and Vacancy.....................................12
Section 3.06. Term........................................................12
Section 3.07. Removal.....................................................12
Section 3.08. Resignation.................................................12
Section 3.09. Place of Meetings of Managers...............................12
Section 3.10. Meetings of Managers........................................12
Section 3.11. Quorum; Majority Vote.......................................13
Section 3.12. Methods of Voting; Proxies..................................13
Section 3.13. Actions Without a Meeting...................................13
Section 3.14. Telephone and Similar Meetings..............................13
Section 3.15. Compensation of Managers....................................13
Section 3.16. Managers....................................................13
ARTICLE IV Officers...........................................................14
Section 4.01. Designation; Term; Qualifications...........................14
Section 4.02. Removal and Resignation.....................................14
Section 4.03. Vacancies...................................................14
Section 4.04. Compensation................................................14
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ARTICLE V Member..............................................................14
Section 5.01. Powers......................................................14
Section 5.02. Compensation of Member......................................15
Section 5.03. Actions by the Member.......................................15
Section 5.04. Control by Member...........................................15
Section 5.05. Special Member..............................................15
ARTICLE VI Common Interest; Capital Contributions.............................16
Section 6.01. General.....................................................16
Section 6.02. Rights on Liquidation, Dissolution or Winding Up............16
Section 6.03. Redemption..................................................17
Section 6.04. Voting Rights...............................................17
Section 6.05. Capital Contributions.......................................17
ARTICLE VII Allocations; Distributions; Expenses; Taxes; Books; Records;
and Bank Accounts..........................................................17
Section 7.01. Allocations.................................................17
Section 7.02. Distributions...............................................17
Section 7.03. Limitation Upon Distributions...............................17
Section 7.04. Expenses....................................................17
Section 7.05. Tax Elections...............................................18
Section 7.06. Annual Tax Information......................................18
Section 7.07. Tax Matters Member..........................................18
Section 7.08. Maintenance of Books........................................18
Section 7.09. Reports.....................................................19
Section 7.10. Bank and Investment Accounts................................19
ARTICLE VIII Indemnification..................................................19
Section 8.01. Mandatory Indemnification of the Member, the Special
Members, and the Managers...................................19
Section 8.02. Mandatory Advancement of Expenses...........................20
Section 8.03. Indemnification of Officers, Employees and Agents...........20
Section 8.04. Nonexclusivity of Rights....................................20
Section 8.05. Contract Rights.............................................20
Section 8.06. Insurance...................................................20
Section 8.07. Savings Clause..............................................21
Section 8.08. Other Ventures..............................................21
Section 8.09. Other Arrangements Not Excluded.............................21
ARTICLE IX Miscellaneous Provisions...........................................21
Section 9.01. Offset......................................................21
Section 9.02. Notices.....................................................21
Section 9.03. Effect of Waiver or Consent.................................22
Section 9.04. Governing Law; Severability.................................22
Section 9.05. No Bankruptcy Petition; No Dissolution......................22
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Section 9.06. Amendment...................................................23
Section 9.07. Headings and Sections.......................................23
Section 9.08. Binding Agreement...........................................23
SCHEDULE A: SCHEDULE OF CAPITAL CONTRIBUTIONS OF MEMBER .....................A-1
SCHEDULE B: CERTIFICATE OF COMMON INTEREST...................................B-1
SCHEDULE C: MANAGERS.........................................................C-1
SCHEDULE D: OFFICERS.........................................................D-1
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
of
ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC,
a Delaware Limited Liability Company
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of
December 19, 2002 (as it may be further amended, supplemented or otherwise
modified and in effect from time to time, this "Agreement"), of ATLANTIC CITY
ELECTRIC TRANSITION FUNDING LLC, a Delaware limited liability company (the
"Company"), having its principal office at 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000.
WHEREAS, Atlantic City Electric Company ("ACE"), as sole Member, (i)
on March 28, 2001 caused to be filed a Certificate of Formation of the Company
with the Delaware Secretary of State and (ii) executed a Limited Liability
Company Agreement, dated as of April 11, 2001 (the "Original LLC Agreement");
and
WHEREAS, this Agreement amends and restates the Original LLC Agreement
in all respects, and from and after the date hereof constitutes the governing
instrument of the Company;
NOW THEREFORE, the Member (as defined below) hereby amends and
restates the Original LLC Agreement as follows:
ARTICLE I
Definitions
Section 1.01. Capitalized Terms. For all purposes of this Agreement,
the following terms shall have the following meanings:
"ACE" means Atlantic City Electric Company, a New Jersey corporation,
and its permitted successors and assigns.
"Act" means the Delaware Limited Liability Company Act, as amended, as
in effect on the date hereof (currently Chapter 18 of Title 6, Sections 18-101
through 18-1109 of the Delaware Code) and as it may be amended hereafter, from
time to time, and any successor law.
"Administration Agreement" means the Administration Agreement, dated
as of December 19, 2002, between the Company and PHI Service Company, as
administrator, as the same may be amended, supplemented or otherwise modified
and in effect from time to time.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For purposes of this definition, "control" when used with respect to any
specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this Amended and Restated Limited Liability Company
Agreement of the Company, as the same may be further amended, supplemented or
otherwise modified and in effect from time to time.
"Bankruptcy" means, with respect to any Person, that such Person (i)
makes an assignment for the benefit of creditors, (ii) files a voluntary
petition in bankruptcy, (iii) is adjudged bankrupt or insolvent, or has entered
against it an order for relief, in any bankruptcy or insolvency proceedings,
(iv) files a petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation or similar relief under any
statute, law or regulation, (v) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against it in
any proceeding of this nature, (vi) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the Person or of all or any
substantial part of its properties, or (vii) if 120 days after the commencement
of any proceeding against the Person seeking reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, the proceeding has not been dismissed, or if within 90 days after
the appointment without such Person's consent or acquiescence of a trustee,
receiver or liquidator of such Person or of all or any substantial part of its
properties, the appointment is not vacated or stayed, or if within 90 days after
the expiration of any such stay, the appointment is not vacated. The foregoing
definition of "Bankruptcy" is intended to replace and shall supersede and shall
be deemed to replace the definition of "Bankruptcy" set forth in Sections
18-101(1) and 18-304 of the Act.
"Basic Documents" means this Agreement, the Certificate of Formation,
the Indenture, the Sale Agreement, any Xxxx of Sale, the Servicing Agreement,
the Administration Agreement, any Hedge Agreement and any Interest Rate Swap
Agreement, each as the same may be further amended, supplemented or otherwise
modified and in effect from time to time.
"Xxxx of Sale" means the xxxx of sale, issued by ACE to the Company as
of December 19, 2002, pursuant to the Sale Agreement, together with any other
xxxx of sale delivered in accordance therewith.
"Bondable Transition Property" means the irrevocable right of ACE to
charge, collect and receive, and be paid from collections of, the transition
bond charge in the amount necessary to provide for the full recovery of the
bondable stranded costs that have been determined to be recoverable in the BPU
Financing Orders, all rights of ACE under the BPU Financing Orders, including
without limitation all rights to obtain periodic adjustments of the transition
bond charge pursuant to the Competition Act, and all revenues, collections,
payments, money and proceeds arising under, or with respect to, all of the
foregoing.
"Bonds" has the meaning set forth in Section 2.03(a).
"BPU" means the State of New Jersey Board of Public Utilities, and any
successor.
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"BPU Financing Orders" means, collectively, the bondable stranded
costs rate order issued by the BPU in favor of ACE on September 20, 2002
pursuant to the Competition Act, any subsequent bondable stranded costs rate
orders issued by the BPU in favor of ACE pursuant to the Competition Act, and
any order supplemental to any of the foregoing.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks are authorized or required by law to be closed in New York
City, New York or, with respect to any payments on any Bonds listed on the
Luxembourg Stock Exchange, in Luxembourg.
"Certificate of Formation" means the Certificate of Formation of the
Company, which was filed in accordance with the Act with the Secretary of State
of the State of Delaware on March 28, 2001, as the same may be amended or
supplemented from time to time.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor law.
"Common Interest" means the limited liability company interest of the
Member in the Company as described in Article VI. The Company shall have one
class of Common Interest.
"Company" means Atlantic City Electric Transition Funding LLC, a
Delaware limited liability company.
"Competition Act" means the New Jersey Electric Discount and Energy
Competition Act, New Jersey Statutes Annotated, title 48, chapter 3, article 7,
as in effect from time to time.
"Fiscal Year" means, unless the Managers shall at any time determine
otherwise pursuant to the requirements of the Code, a calendar year.
"GAAP" means the generally accepted accounting principles promulgated
or adopted by the Financial Accounting Standards Board and its successors from
time to time.
"Governmental Authority" means any federal, state, local or foreign
court or governmental department, commission, board, bureau, agency, authority,
instrumentality or regulatory body.
"Hedge Agreement" means any Hedge Agreement, as defined in and
permitted by the Indenture or any Supplement.
"Indenture" means the Indenture, dated as of December 19, 2002,
between the Company and the Trustee, as the same may be amended, modified or
supplemented from time to time.
"Independent Manager" means, with respect to the Company, a Manager
who is not, and within the previous five years was not (except solely by virtue
of such Person's serving as, or being an Affiliate of any other Person serving
as, an independent director or manager, as
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applicable, of a bankruptcy-remote special purpose entity that is an Affiliate
of ACE or the Company), (i) a stockholder, member, partner, director, officer,
employee, Affiliate, customer, supplier, material creditor or independent
contractor of, or any Person that has received any benefit in any form whatever
from (other than in such Manager's capacity as a ratepayer or customer of ACE in
the ordinary course of business), or any Person that has provided any service in
any form whatsoever to, or any material creditor (or any Affiliate of any
material creditor) of, the Company, ACE, or any of their Affiliates, or (ii) any
Person owning legally or beneficially, directly or indirectly, any outstanding
shares of common stock, any limited liability company interests or any
partnership interests, as applicable, of the Company, ACE or any of their
Affiliates, or (iii) a member of the immediate family of any person described
above; provided that the indirect or beneficial ownership of stock through a
mutual fund or similar diversified investment vehicle with respect to which the
owner does not have discretion or control over the investments held by such
diversified investment vehicle shall not preclude such owner from being an
Independent Manager, or (iv) any Person who controls the Company, ACE, or their
Affiliates. For purposes of this definition, "material creditor" means a natural
person or business entity to which the Company, ACE or any of their Affiliates
has outstanding indebtedness for borrowed money or credit on open account in a
sum sufficiently large as would reasonably be expected to influence the judgment
of the proposed Independent Manager adversely to the interests of the Company
when the interests of that Person are adverse to those of the Company.
"Interest Rate Swap Agreement" means any Interest Rate Swap Agreement,
as defined in and permitted by the Indenture or any Supplement.
"Manager" means any manager of the Company, including any Independent
Manager.
"Member" means ACE, in its capacity as a member in the Company under
this Agreement, or any successor thereto as a member pursuant to Article VI;
provided, however, the term "Member" shall not include the Special Members.
"Person" means any natural person, corporation, business trust, joint
venture, association, company, partnership, limited liability company, joint
stock company, corporation, trust, unincorporated organization or Governmental
Authority.
"Proceeding" shall have the meaning set forth in Section 8.01(a).
"Rating Agency Condition" means, with respect to any action, the
notification in writing by the Trustee to each Rating Agency of such action and
the notification by each Rating Agency to the Trustee and the Issuer that such
action will not result in a reduction or withdrawal of the then current rating
by such Rating Agency of any Outstanding Series or Class of Transition Bonds;
provided that, except where such action includes the issuance of Transition
Bonds of a new Series (either as a Financing Issuance or as a Refunding
Issuance), the Rating Agency Condition shall be satisfied with respect to
Xxxxx'x by providing Xxxxx'x 10 Business Days' prior written notice of such
action.
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"Sale Agreement" means the Bondable Transition Property Sale
Agreement, dated as of December 19, 2002, between ACE, as seller, and the
Company, as the same may be amended, supplemented or otherwise modified and in
effect from time to time.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the United States Securities and Exchange Commission
promulgated thereunder, and any successor law or regulations.
"Series" means each series of Bonds issued and authenticated pursuant
to the Indenture and a related Supplement.
"Servicing Agreement" means the Bondable Transition Property Servicing
Agreement, dated as of December 19, 2002, between the Company and ACE, as
servicer, as the same may be amended, supplemented or otherwise modified and in
effect from time to time.
"Special Member" means, upon such person's admission to the Company as
a member of the Company pursuant to Section 5.05, a person acting as Independent
Manager, in such person's capacity as a member of the Company. A "Special
Member" shall have the rights and duties expressly set forth in this Agreement.
"State" means any one of the 50 states of the United States of America
or the District of Columbia.
"Supplement" means a supplement to the Indenture complying (to the
extent applicable) with the terms of Article 9 of the Indenture.
"Treasury Regulations" means regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trustee" means the party named as such in the Indenture until a
successor replaces it in accordance with the applicable provisions of the
Indenture and thereafter means the successor serving thereunder.
"Underwriting Agreement" means the Underwriting Agreement dated as of
December 11, 2002, among the Seller, the Issuer and Xxxxxx Xxxxxxx & Co.
Incorporated, on behalf of itself and as the representative of the several
underwriters named therein.
Section 1.02. Other Definitional Provisions.
(a) Unless otherwise defined herein, all capitalized terms herein
shall have the meanings ascribed thereto in the Indenture.
(b) All terms defined in this Agreement shall have the meanings herein
assigned to them when used in any certificate or other document made or
delivered pursuant hereto except where otherwise expressly provided therein.
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(c) As used in this Agreement and in any certificate or other
documents made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under GAAP. To the extent that the definitions of accounting terms
in this Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under GAAP, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder", and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.
(e) References in this Agreement to articles, sections and schedules
are to the articles, sections and schedules of or to this Agreement unless
otherwise specified.
(f) The term "including" means "including without limitation" and "or"
is used in the inclusive sense.
(g) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of the defined terms, and personal pronouns
refer to all persons regardless of gender.
(h) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein.
ARTICLE II
Formation of the Limited Liability Company
Section 2.01. Formation; Filings. Pursuant to the Act and in
accordance with the further terms and provisions hereof, the Member and, when
signed by the Special Members, the Special Members, hereby continue the Company
as a limited liability company. The Certificate of Formation of the Company has
been executed and filed with the Secretary of State of the State of Delaware by
Xxxxx X. XxXxxxxxx, as an "authorized person" within the meaning of the Act. The
Member shall execute or cause to be executed from time to time all other
instruments, certificates, notices and documents, and shall do or cause to be
done all such filing, recording, publishing and other acts, in each case, as may
be necessary or appropriate from time to time to comply with all applicable
requirements for the formation and/or operation and, when appropriate,
termination of a limited liability company in the State of Delaware and all
other jurisdictions where the Company shall desire to conduct its business.
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Section 2.02. Name and Office.
(a) The name of the Company shall be "Atlantic City Electric
Transition Funding LLC." All business of the Company shall be conducted in such
name and all contracts, property and other assets of the Company shall be held
in that name and the Member shall not have any ownership interests in such
contracts, property or other assets in its individual name.
(b) The address of the registered office of the Company in the State
of Delaware is 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
(c) The Company may also have offices at such other places both within
and without the State of Delaware as the Member may from time to time determine.
Section 2.03. Business Purpose. The nature of the business or purpose
to be conducted or promoted by the Company is to engage exclusively in the
following business and financial activities:
(a) to authorize, issue, sell and deliver one or more Series or
classes of transition bonds pursuant to the Competition Act ("Bonds") under the
Indenture and, in connection therewith, to execute and deliver Supplements,
including Supplements providing for the issuance of additional Series of Bonds,
each as permitted by and in accordance with the terms of the Indenture;
(b) to purchase and own Bondable Transition Property and pledge the
same and other collateral to the Trustee pursuant to the terms and conditions of
the Basic Documents;
(c) to negotiate, authorize, execute, deliver, assume the obligations
under, and perform, the Basic Documents and any other agreement or instrument or
document relating to the activities set forth in clauses (a) and (b) above,
including but not limited to agreements with third-party credit enhancers and
Hedge Agreement and Interest Rate Swap Agreement counterparties relating to any
Series or Class of Bonds; provided that each party to any agreement with the
Company shall covenant that such party shall not, prior to the date that is one
year and one day after the termination of the Indenture and the payment in full
of any Series of the Bonds and any other amounts owed under the Indenture,
including without limitation any amounts owed to third-party credit enhancers,
and any amounts owed under any Hedge Agreement or Interest Rate Swap Agreement,
acquiesce, petition or otherwise invoke or cause the Company to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Company under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Company or any
substantial part of the property of the Company; or ordering the winding up or
liquidation of the affairs of the Company; and provided, further, that the
Company shall be permitted to incur additional indebtedness or other liabilities
to service providers and trade creditors in the ordinary course of business in
connection with the foregoing activities, payable as Operating Expenses pursuant
to the Indenture, in an aggregate amount not to exceed in any calendar year
$10,000 unless the Rating Agency Condition shall have been satisfied with
respect to such excess; and
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(d) to engage in any activity and to exercise any powers permitted to
limited liability companies under the laws of the State of Delaware that are
related or incidental to the foregoing and necessary, convenient or advisable to
accomplish the foregoing.
Section 2.04. Term. The term of the Company shall continue until the
Company is dissolved and liquidated in accordance with the Act, subject to
Sections 6.03 and 9.05. The existence of the Company as a separate legal entity
shall continue until the cancellation of the Certificate of Formation in
accordance with the Act.
Section 2.05. Tax Treatment; No State Law Partnership.
(a) The Member, the Special Members and the Managers intend that the
Company be disregarded as an entity separate from its sole Member under Treasury
Regulations Section 301.7701-3(b)(1) for federal, state and local income tax
purposes. All provisions of this Agreement shall be interpreted and construed so
as to effectuate such treatment. Neither the Member, any Special Member or any
Manager shall make an election for the Company to be treated as an association
taxable as a corporation under Treasury Regulations Section 301.7701-3(a).
(b) The Member, the Special Members and the Managers intend that the
Company shall not be a partnership (including without limitation a general
partnership or a limited partnership) or joint venture, and no partnership or
joint venture shall exist among the Member, any Special Member and any Managers
or any subgroup thereof with respect to the business of the Company for any
purposes. No provisions of this Agreement shall be construed to suggest
otherwise.
Section 2.06. Authority of Member. Subject to Section 3.04, the
Member, acting in such capacity, shall have the authority or power to act for or
on behalf of the Company, to do any act that would be binding on the Company, or
to incur any expenditures, debts, liabilities or obligations on behalf of the
Company.
Section 2.07. Liability to Third Parties. Except as otherwise
expressly provided by the Act, neither the Member, any Special Member nor any
Manager shall be liable for the debts, obligations or liabilities of the Company
(whether arising in contract, tort or otherwise), including without limitation
under a judgment, decree or order of a court, by reason of being the Member or
acting as a Special Member or Manager of the Company.
Section 2.08. No Personal Liability of any Member, Special Member,
Manager, Etc. (a) Neither the Member nor any Special Member shall be subject in
such capacity to any personal liability whatsoever to any Person in connection
with the assets or the acts, obligations or affairs of the Company, (b) the
Member and each Special Member shall have the same limitation of personal
liability as is extended to stockholders of a private corporation for profit
incorporated under the General Corporation Law of the State of Delaware, and (c)
no Manager or officer of the Company shall be subject in such capacity to any
personal liability whatsoever to any Person, other than the Company or its
Member, in connection with the assets or the affairs of the Company; and,
subject to the provisions of Article VIII, all such Persons shall look solely to
the assets of the Company for satisfaction of claims of any nature arising in
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connection with the affairs of the Company; provided that such protection from
personal liability shall apply to the fullest extent permitted by applicable
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Company to
provide greater or broader indemnification rights than such law permitted the
Company to provide prior to such amendment).
Section 2.09. Separateness.
(a) Except as provided in the Basic Documents, the funds and other
assets of the Company shall not be commingled with those of any other entity and
the Company shall maintain with commercial banking institutions its own bank
accounts separate from those of the Member and any other Person.
(b) The Company shall act solely through its duly authorized Member,
Special Members, Managers, officers and agents in the conduct of its business,
shall take all reasonable steps to continue its identity as a separate legal
entity, shall conduct its business in its own name and so as not to mislead
others as to the identity of the entity or assets with which they are concerned,
and shall correct any known misunderstanding regarding its separate identity.
Neither the Member nor any of its Affiliates shall be appointed to act as agent
of the Company except as contemplated by the Basic Documents, in which case the
capacity of such agent shall be clearly identified.
(c) The Company shall maintain separate records, books of account and
financial statements, and shall not commingle its records and books of account
with the records and books of account of the Member or any other entity.
(d) The Managers shall hold appropriate meetings to authorize all of
its limited liability company actions (which meetings may be held by telephone
conference call), and shall observe all other formalities required by the Basic
Documents and applicable law with respect to action taken on behalf of the
Company. Without limiting the foregoing, the Company shall observe all of the
formalities required by this Agreement.
(e) The Company shall at all times ensure that its capitalization is
adequate in light of its business and purpose and shall make it apparent to
third parties that it is an entity with assets and liabilities distinct from
those of the Member and its Affiliates, any Special Member, any Manager or any
other Person.
(f) Neither the Member, any Special Member or any Manager shall
guarantee, become liable on, or hold itself out as being liable for the debts of
the Company or make loans or advances to the Company, except in each case as
contemplated by the Basic Documents, it being understood that in any event the
Member may lend or provide funds to the Company in connection with the
organization of the Company and may elect to make capital contributions to the
Company in connection with issuances of Bonds.
(g) The Company shall not guarantee, become liable on, or hold itself
out as being liable for the debts of any other Person, shall not pledge its
assets for the benefit of any entity, and shall not make loans or advances to,
or acquire obligations or securities of, the Member, any Special Member or any
Manager, except as contemplated by the Basic Documents.
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(h) The Company shall pay its operating expenses and liabilities out
of its own funds as provided in the Indenture, including fees and expenses of
the Administrator pursuant to the Administration Agreement and the Servicer
pursuant to the Servicing Agreement.
(i) The Company shall ensure that, to the extent that it jointly
contracts with the Member or any Affiliate thereof to do business with vendors
or service providers or shares employees or office space or other overhead items
with any such Persons, the costs so incurred shall be allocated fairly among
such Persons, and each such Person shall bear its fair share of such costs.
(j) The Company shall not form, acquire or hold any subsidiaries.
(k) The Company shall maintain an arm's length relationship with its
Affiliates.
(l) The Company shall use its own separate stationery, invoices and
other business forms.
(m) The Company shall pay the salaries of its own employees, if any,
except as otherwise provided in the Basic Documents, and shall file its own tax
and information returns if and to the extent it is required to do so under
applicable federal, state or local tax laws.
(n) The Company shall comply with all restrictions on its business and
operations as set forth in Sections 2.03 and 3.04.
Failure of the Company, the Member, any Special Member or any Manager
on behalf of the Company to comply with any of the foregoing covenants or any of
the covenants contained in this Agreement shall not affect the status of the
Company as a separate legal entity or the limited liability of the Member, any
Special Member or any Manager. Section 2.10. Limited Liability and Bankruptcy
Remoteness. Without limiting the generality of Section 2.09, the Company shall
be operated in such a manner as the Managers deem reasonable and necessary or
appropriate to preserve (a) the limited liability of ACE (or its successor) as
the Member in the Company and the limited liability of the Special Members, (b)
the separateness of the Company from the business of ACE (or its successor), as
the Member of the Company, or any other Affiliate thereof and (c) until the
expiration of the period of one year and one day specified in Section 9.05, the
bankruptcy-remote status of the Company.
ARTICLE III
Management
Section 3.01. Management by Managers. The powers of the Company shall
be exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, the Managers.
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Section 3.02. Acts by Managers.
(a) The Managers shall be obliged to devote only as much of their time
to the Company's business as shall be reasonably required in light of the
Company's business and objectives. A Manager shall perform his or her duties as
a Manager in good faith, in a manner he or she reasonably believes to be in the
best interests of the Company, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances.
(b) Every Manager is an agent of the Company for the purpose of its
business, and the act of every Manager, including the execution in the name of
the Company of any instrument for carrying on the business of the Company, binds
the Company, unless such act is in contravention of this Agreement or unless the
Manager so acting otherwise lacks the authority to act for the Company and the
person with whom he or she is dealing has knowledge of the fact that he or she
has no such authority.
(c) The Managers shall have the right and authority to take all
actions that the Managers deem necessary, useful or appropriate for the
day-to-day management and conduct of the Company's business.
(d) The Managers may exercise all powers of the Company and do all
such lawful acts and things as are not by the Act, other applicable law or this
Agreement directed or required to be exercised or done by the Member. All
instruments, contracts, agreements and documents providing for the acquisition
or disposition of property of the Company shall be valid and binding on the
Company if executed by one or more of the Managers. All instruments, contracts,
agreements and documents of whatsoever type executed on behalf of the Company
shall be executed in the name of the Company by one or more Managers.
Section 3.03. Number and Qualifications. The number of Managers of the
Company shall not be less than three nor more than five, as may be determined by
the Member from time to time, but no decrease in the number of Managers shall
have the effect of shortening the term of any incumbent Manager.
Section 3.04. Independent Managers.
(a) The Company shall have at all times at least two individuals who
are each Independent Managers. The Independent Managers may not delegate their
duties, authorities or responsibilities hereunder. If any Independent Manager
resigns, dies or becomes incapacitated, or such position is otherwise vacant, no
action requiring the unanimous affirmative vote of the Managers shall be taken
until a successor Independent Manager is appointed by the Member and qualifies
and approves such action.
(b) Notwithstanding any other provision of this Agreement and any
provision of law that otherwise so empowers the Company, the Member, any Special
Member, any Manager or any other Person, the Company shall not, and neither the
Member nor any Special Member, Manager nor any other Person on behalf of the
Company shall, without the prior unanimous consent of the Managers, including
each of the Independent Managers, do any of the following: (i) engage in any
business or activity other than those set forth in Article II; (ii) except as
provided in the Basic Documents, incur any indebtedness, other than the Bonds,
obligations
11
under agreements with third party credit enhancers and swap or hedge agreement
counterparties relating to any Series of Bonds and ordinary course expenses as
set forth in Article II, or assume or guarantee any indebtedness of any other
entity; (iii) make a general assignment for the benefit of creditors; (iv) file
a petition commencing a voluntary bankruptcy case; (v) file a petition or answer
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation; (vi) file an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, or the entry of any
order appointing a trustee, liquidator or receiver of it or of its assets or any
substantial portion thereof; (vii) seek, consent to or acquiesce in the
appointment of a trustee, receiver or liquidator of it or of all or any
substantial part of its assets; (viii) consolidate or merge with or into any
other entity or convey or transfer substantially all of its properties and
assets substantially as an entirety to any entity; or (ix) amend this Agreement
or take action in furtherance of any such action. With regard to any action
contemplated by the preceding sentence, or with regard to any action taken or
determination made at any time when the Company is insolvent, each Manager
shall, to the fullest extent permitted by law, owe its primary fiduciary duty to
the Company (including the creditors of the Company).
Section 3.05. Appointment and Vacancy. The Member shall appoint each
manager, including any Manager to be appointed by reason of an increase in the
number of Managers.
Section 3.06. Term. Each Manager shall hold office until his or her
successor shall be selected by the Member and qualified, or until his or her
earlier death, resignation or removal as provided in this Agreement.
Section 3.07. Removal. Subject to Section 3.04 (a) and Section 3.15 of
this Agreement, the Member may remove, with or without cause, any Manager.
Section 3.08. Resignation. Any Manager may resign at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein or, if no time is specified therein, at the time of its receipt by the
remaining Managers; provided that the resignation of an Independent Manager
shall not be effective until a replacement Independent Manager has been
appointed. The acceptance of a resignation shall not be necessary to make it
effective, unless so expressly provided in the resignation.
Section 3.09. Place of Meetings of Managers. Any meetings of the
Managers may be held either within or without the State of Delaware at such
place or places as shall be determined from time to time by resolution of the
Managers.
Section 3.10. Meetings of Managers. Meetings of the Managers may be
held when called by any Managers or Manager. The Manager or Managers calling any
meeting shall cause notice to be given of such meeting, including therein the
time, date and place of such meeting, to each Manager at least two Business Days
before such meeting. The business to be transacted at, or the purpose of, any
meeting of the Managers shall be specified in the notice or waiver of notice of
any such meeting. If fewer than all of the Managers are present in person, by
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telephone or by proxy, business transacted at any such meeting shall be confined
to the business or purposes specifically stated in the notice or waiver of
notice of such meeting.
Section 3.11. Quorum; Majority Vote. At all meetings of the Managers,
the presence in person, by telephone or by proxy of a majority of the Managers
shall be necessary and sufficient to constitute a quorum for the transaction of
business unless a greater number is required by this Agreement or by law. The
act of a majority of the Managers present in person, by telephone or by proxy at
a meeting at which a quorum is present in person, by telephone or by proxy shall
be the act of the Managers, except as otherwise provided by law or this
Agreement. If a quorum shall not be present in person, by telephone or by proxy
at any meeting of the Managers, the Managers present in person, by telephone or
by proxy at the meeting may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
in person, by telephone or by proxy.
Section 3.12. Methods of Voting; Proxies. A Manager may vote either in
person, by telephone or by proxy executed in writing by the Manager; provided
that the Person designated to act as proxy for an Independent Manager must be an
Independent Manager.
Section 3.13. Actions Without a Meeting. Any action required or
permitted to be taken at a meeting of the managers may be taken without a
meeting, without prior notice, and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the Managers having not fewer
than the minimum number of votes that would be necessary to take the action at a
meeting at which all Managers entitled to vote on the action were present and
voted. Copies of any such consents shall be filed with the minutes and permanent
records of the Company.
Section 3.14. Telephone and Similar Meetings. The Managers, or members
of any committee thereof, may participate in and hold meetings by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Such participation in
any such meeting shall constitute presence in person at such meeting, except
where a Person participates in such meeting for the express purpose of objecting
to the transaction of any business on the ground that such meeting is not
lawfully called or convened.
Section 3.15. Compensation of Managers. The Managers other than the
Independent Managers shall not be compensated by the Company for their services
on behalf of the Company. The Independent Managers shall be paid monthly fees
from the revenues of the Company and shall be reimbursed for their reasonable
expenses. These expenses include without limitation the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Independent Managers may employ in the exercise and performance of their
rights and duties under this Agreement and the Other Basic Documents.
Section 3.16. Managers. The Member and each Manager shall take all
actions necessary from time to time to ensure that at all times the number of
Managers shall be not less than three nor more than five; provided, however,
that pursuant to Section 3.04, the Company shall at all times have at least two
Independent Managers. The Managers upon the execution of this Agreement shall be
Xxxxxx X. Xxxx, Xxxxx X. Xxxxx, Xxxxxxx X. Xxxxxx,
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Xxxx X. Xxxxxxxxxxxx (who shall serve as an Independent Manager) and Xxxxxxx
Xxxxxxxx (who shall serve as an Independent Manager).
ARTICLE IV
Officers
Section 4.01. Designation; Term; Qualifications. The Managers may,
from time to time, designate one or more Persons to be officers of the Company.
Any officer so designated shall have such title and authority and perform such
duties as the Managers may, from time to time, delegate to them. Each officer
shall hold office for the term for which such officer is designated and until
his or her successor shall be duly designated and shall qualify or until his or
her death, resignation or removal as provided in this Agreement. Any Person may
hold any number of offices. No officer need be a Manager, the Member, a Delaware
resident, or a United States citizen. The persons identified on Schedule D are
hereby designated the initial officers of the Company.
Section 4.02. Removal and Resignation. Any officer of the Company may
be removed as such, with or without cause, by the Managers at any time. Any
officer of the Company may resign as such at any time upon written notice to the
Company. Such resignation shall be made in writing and shall take effect at the
time specified therein or, if no time is specified therein, at the time of its
receipt by the Managers.
Section 4.03. Vacancies. Any vacancy occurring in any office of the
Company may be filled by the Managers.
Section 4.04. Compensation. The compensation, if any, of the officers
of the Company shall be fixed from time to time by the Managers.
ARTICLE V
Member
Section 5.01. Powers. Subject to the provisions of this Agreement and
the Act, all powers shall be exercised by or under the authority of, and the
business and affairs of the Company shall be controlled by, the Member pursuant
to Section 5.03. Pursuant to Section 3.01, the Member has delegated such powers
to the Managers. Without prejudice to such general powers, but subject to the
same limitations, it is hereby expressly declared that the Member shall have the
following powers, subject to Section 3.04 in all cases:
First: To select and remove the Managers and prescribe such powers and
duties for them as may be consistent with the Act and other applicable law and
this Agreement.
Second: To conduct, manage and control the affairs and business of the
Company, and to make such rules and regulations therefor consistent with the Act
and other applicable law and this Agreement.
14
Third: To change the registered office of the Company in Delaware from
one location to another; to fix and locate from time to time one or more other
offices of the Company; and to designate any place within or without the State
of Delaware for the conduct of the business of the Company.
Section 5.02. Compensation of Member. The Company shall have authority
to pay to the Member reasonable compensation for the Member's services to the
Company. It is understood that the compensation paid to the Member under the
provisions of this Section shall be determined without regard to the income of
the Company, shall not be deemed to constitute distributions to the recipient of
any profit, loss or capital of the Company and shall be considered as an
operating expense of the Company.
Section 5.03. Actions by the Member. All actions of the Member may be
taken by written resolution of the Member signed on behalf of the Member by an
authorized officer of the Member and filed with the minutes and permanent
records of the Company.
Section 5.04. Control by Member. To the extent the Member takes any
action with respect to the Company (including by means of its appointment of any
individual Manager or its control or employment of any individual Manager in any
other capacity), the Member, or any such Manager, as applicable, shall act in
good faith in accordance with the terms of this Agreement, and make decisions
with respect to the business and daily operations of the Company independent of,
and not dictated by, in the case of any such Manager, the Member, or in either
case any Affiliate of the foregoing, and, to the fullest extent permitted by
law, any such Manager shall bear a fiduciary duty to the Company (including its
creditors) under the circumstances set forth in Section 3.04.
Section 5.05. Special Member. Upon the occurrence of any event that
causes the Member to cease to be a member of the Company, each person acting as
an Independent Manager pursuant to Section 3.04 shall, without any action of any
Person and simultaneously with the Member ceasing to be a member of the Company,
automatically be admitted to the Company as a special member (a "Special
Member") and shall continue the Company without dissolution. No Special Member
may resign from the Company or transfer its rights as Special Member unless (a)
a successor Special Member has been admitted to the Company as Special Member by
executing a counterpart to this Agreement, and (b) such successor has also
accepted its appointment as Independent Manager, provided, however, the Special
Members shall automatically cease to be members of the Company upon the
admission to the Company of a substitute Member. Each Special Member shall be a
member of the Company that has no interest in the profits, losses and capital of
the Company and has no right to receive any distributions of Company assets.
Pursuant to Section 18-301 of the Act, a Special Member shall not be required to
make any capital contributions to the Company and shall not receive a limited
liability company interest in the Company. A Special Member, in its capacity as
Special Member, may not bind the Company. Except as required by any mandatory
provision of the Act, each Special Member, in its capacity as Special Member,
shall have no right to vote on, approve or otherwise consent to any action by,
or matter relating to, the Company, including without limitation the merger,
consolidation or conversion of the Company. In order to implement the admission
to the Company of each Special Member pursuant to this Section 5.05, each person
acting as an Independent Manager pursuant to Section 3.04 shall execute a
15
counterpart to this Agreement. Prior to its admission to the Company as Special
Member, each person acting as an Independent Manager pursuant to Section 3.04
shall not be a member of the Company.
ARTICLE VI
Common Interest; Capital Contributions
Section 6.01. General. The Common Interest constitutes personal
property and shall be freely transferable and assignable in whole but not in
part upon registration of such transfer and assignment on the books of the
Company in accordance with the procedures established for such purpose by the
Managers of the Company. Upon registration of the transfer and assignment of the
Common Interest on the books of the Company, the transferee/assignee shall be
and become the sole Member of the Company and shall have the rights and powers,
and be subject to the restrictions and liabilities, of the Member under this
Agreement and the Act, and the transferor/assignor shall cease to be the Member,
each as of the date of such registration. Notwithstanding the foregoing, the
Common Interest may not be transferred unless the Rating Agency Condition shall
have been satisfied with respect to such transfer. The Common Interest of the
Member in the Company shall be evidenced by a certificate in the form set forth
in Schedule B.
Section 6.02. Rights on Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
Company, the Member shall be entitled to all remaining assets of the Company
available for distribution to the Member after payment of all liabilities, debts
and obligations of the Company to creditors, as set forth in Section 18-804 of
the Act.
(b) Neither the sale of all or substantially all of the property or
business of the Company, nor the merger or consolidation of the Company into or
with another Company or other entity, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purpose of this
Section 6.03.
(c) The commencement of a bankruptcy, insolvency, receivership or
other similar proceeding by or against the Company, any Special Member or the
Member shall not result in the dissolution of the Company or in the cessation of
the interest of the Member in the Company. The withdrawal or resignation of the
Member or any Special Member or the dissolution of the Member or any Special
Member shall not, by itself, constitute a dissolution of the Company.
(d) Subject to Section 5.05, upon the occurrence of any event that
causes the last remaining member of the Company to cease to be a member of the
Company, to the fullest extent permitted by law, the personal representative of
such member is hereby authorized to, and shall, within ninety (90) days after
the occurrence of the event that terminated the continued membership of such
member in the Company, agree in writing (i) to continue the Company and (ii) to
the admission of the personal representative or its nominee or designee, as the
case may be, as a substitute member of the Company, effective as of the
occurrence of the event that
16
terminated the continued membership of the last remaining member of the Company
in the Company.
(e) Notwithstanding any other provision of this Agreement, the
bankruptcy of the Member or any Special Member shall not cause the Member or
Special Member, respectively, to cease to be a member of the Company and upon
the occurrence of such an event, the business of the Company shall continue
without dissolution.
Section 6.03. Redemption. The Common Interest shall not be redeemable.
Section 6.04. Voting Rights. The Member shall have the sole right to
vote on all matters as to which members of a limited liability company shall be
entitled to vote pursuant to the Act and other applicable law.
Section 6.05. Capital Contributions. The Member may make capital
contributions in cash in such amounts as the Member may agree to from time to
time. To the extent that the Member makes an additional capital contribution to
the Company, the Member shall revise Schedule A to reflect the amount
contributed by the Member. The Member shall not be required to make any
additional capital contributions to the Company.
ARTICLE VII
Allocations; Distributions; Expenses;
Taxes; Books; Records; and Bank Accounts
Section 7.01. Allocations. All items of income, gain, loss, deduction,
and credit of the Company for each Fiscal Year shall be allocated to the Member.
Any credit available for federal income tax purposes shall be allocated to the
Member in the same manner.
Section 7.02. Distributions. The Member shall be entitled to receive,
out of the assets of the Company legally available therefor, when, as and if
declared by the Managers, distributions payable in cash in such amounts, if any,
as the Managers shall declare.
Section 7.03. Limitation Upon Distributions. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
required to make a distribution to the Member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or any Basic Document.
Section 7.04. Expenses. Except as otherwise provided in this
Agreement, and subject to the provisions of the Basic Documents, the Company
shall be responsible for all expenses and the allocation thereof including
without limitation:
(a) all expenses incurred by the Member or its Affiliates in
organizing the Company;
(b) all expenses related to the payment of the principal of and
interest on the Bonds issued by the Company;
17
(c) all expenses related to the business of the Company and all
routine administrative expenses of the Company, including any amounts payable
under the Administration Agreement and the Servicing Agreement, the maintenance
of books and records of the Company, and the preparation and dispatch to the
Member of financial reports, tax returns and notices required pursuant to this
Agreement;
(d) all expenses incurred in connection with any litigation or
arbitration involving the Company (including the cost of any investigation and
preparation) and the amount of any judgment or settlement paid in connection
therewith;
(e) all expenses for indemnity or contribution payable by the Company
to any person;
(f) all expenses incurred in connection with the collection of amounts
due to the Company from any person;
(g) all expenses incurred in connection with the preparation of
amendments to this Agreement;
(h) all expenses incurred in connection with the liquidation,
dissolution and winding up of the Company; and
(i) all expenses otherwise allocated in good faith to the Company by
the Managers.
Section 7.05. Tax Elections. The Managers shall make the following
elections on behalf of the Company:
(a) To elect the calendar year as the Company's Fiscal Year;
(b) To elect the accrual method of accounting;
(c) To elect to treat all organization and start-up costs of the
Company as deferred expenses amortizable over sixty (60) months under Section
195 of the Code; and
(d) To elect with respect to such other federal, state and local tax
matters as the Managers shall agree upon from time to time.
Section 7.06. Annual Tax Information. The Managers shall cause the
Company to deliver to the Member all information necessary for the preparation
of the Member's federal or state income tax return.
Section 7.07. Tax Matters Member. The Member shall communicate and
negotiate with the Internal Revenue Service on any tax matter on behalf of the
Member and the Company.
Section 7.08. Maintenance of Books. The Company shall keep books and
records of accounts in accordance with GAAP and shall keep minutes of the
proceedings of
18
the Member, the Managers and each committee of the Managers. The Fiscal Year
shall be the accounting year of the Company.
Section 7.09. Reports. Within sixty (60) days following the end of
each Fiscal Year during the term of the Company, the Managers shall cause to be
furnished to the Member a balance sheet, an income statement and a statement of
changes in Member's capital account for, or as of the end of, that Fiscal Year.
Such financial statements shall be prepared in accordance with the accounting
method selected by the Managers consistently applied (except as therein noted),
and shall be accompanied by an audit report from a nationally recognized
accounting firm. The Managers also may cause to be prepared or delivered such
other reports as they may deem appropriate. The Company shall bear the costs of
all such financial statements and reports.
Section 7.10. Bank and Investment Accounts. The Managers shall
establish and maintain one or more separate bank and investment accounts and
arrangements for Company funds in the Company name with such financial
institutions and firms as the Managers determine.
ARTICLE VIII
Indemnification
Section 8.01. Mandatory Indemnification of the Member, the Special
Members, and the Managers. Any Person who was or is a party or is threatened to
be made a party to, or is involved in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative (hereafter a "Proceeding"), or any appeal in such a Proceeding
or any inquiry or investigation that could lead to such a Proceeding, by reason
of the fact that such Person is or was the Member, a Special Member or a
Manager, or by reason of the fact that the Member, such Special Member or such
Manager is or was serving at the request of the Company as a member, director,
manager, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, limited
liability company, partnership, joint venture, trust, sole proprietorship,
employee benefit plan or other enterprise, shall be indemnified by the Company
to the fullest extent permitted by applicable law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide greater or broader
indemnification rights than such law permitted the Company to provide prior to
such amendment) against judgments, penalties (including without limitation
excise and similar taxes and punitive damages), fines, settlements and
reasonable expenses (including without limitation attorneys' fees) actually
incurred by such Person in connection with such Proceeding. It is expressly
acknowledged that the indemnification provided in this Article VIII could
involve indemnification for negligence or under theories of strict liability
subject to the exclusions set forth in Section 8.09(a). Notwithstanding anything
herein to the contrary, for so long as any Bonds are outstanding, no payment
from funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under this Article VIII shall be payable except out
of funds available for payment of Company expenses as provided in the Indenture.
19
Section 8.02. Mandatory Advancement of Expenses. Expenses incurred by
a Person of the type entitled to be indemnified under Section 8.01 in defending
any Proceeding shall be paid or reimbursed by the Company in advance of the
final disposition of the Proceeding, without any determination as to such
Person's ultimate entitlement to indemnification under Section 8.01, upon
receipt of a written affirmation by such Person of such Person's good faith
belief that such Person has met the standard of conduct necessary for
indemnification under applicable law and a written undertaking by or on behalf
of such Person to repay all amounts so advanced if it shall ultimately be
determined that such Person is not entitled to be indemnified by the Company as
authorized in Section 8.01 or otherwise. The written undertaking shall be an
unlimited general obligation of the Person but need not be secured and shall be
accepted without reference to financial ability to make repayment.
Section 8.03. Indemnification of Officers, Employees and Agents. The
Company shall indemnify and pay and advance expenses to an officer, employee or
agent of the Company to the same extent and subject to the same conditions under
which it may indemnify and pay and advance expenses to the Member, any Special
Member or any Manager under this Article VIII; and the Company shall indemnify
and pay and advance expenses to any Person who is or was an officer, employee or
agent of the Company and who is or was serving at the request of the Company as
a member, manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company, partnership, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise against any
liability asserted against such Person and incurred by such Person in such a
capacity or arising out of such Person's status as such to the same extent and
subject to the same conditions that the Company may indemnify and pay and
advance expenses to the Member, any Special Member or any Manager under this
Article VIII.
Section 8.04. Nonexclusivity of Rights. The indemnification and
advancement and payment of expenses provided by this Article VIII (a) shall not
be deemed exclusive of any other rights to which the Member, a Special Member, a
Manager or other Person seeking indemnification may be entitled under any
statute, agreement, decision of the Member or disinterested Managers, or
otherwise both as to action in such Person's official capacity and as to action
in another capacity while holding such office, (b) shall continue as to any
Person who has ceased to serve in the capacity that initially entitled such
Person to indemnity and advancement and payment of expenses, and (c) shall inure
to the benefit of the heirs, executors, administrators, successors and assigns
of the Member, such Special Member, such Manager or such other Person.
Section 8.05. Contract Rights. The rights granted pursuant to this
Article VIII shall be deemed to be contract rights, and no amendment,
modification or repeal of this Article VIII shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal.
Section 8.06. Insurance. The Company may purchase and maintain
insurance or other arrangement or both, at its expense, on behalf of itself or
any Person who is or was serving as the Member, a Special Member or a Manager,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a member, manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
20
foreign or domestic limited liability company, partnership, corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan or
other enterprise, against any liability, expense or loss, whether or not the
Company would have the power to indemnify such Person against such liability
under the provisions of this Article VIII.
Section 8.07. Savings Clause. If this Article VIII or any portion of
this Agreement shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify and hold harmless
the Member, each Special Member, each Manager or any other Person indemnified
pursuant to this Article VIII as to costs, charges and expenses (including
without limitation attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to the fullest extent permitted by
any applicable portion of this Article VIII that shall not have been invalidated
and to the fullest extent permitted by applicable law.
Section 8.08. Other Ventures. It is expressly agreed that the Member,
any Special Member, any Manager and any Affiliates, officers, directors,
managers, stockholders, partners or employees of the Member, any Special Member
or any Manager, may engage in other business ventures of every nature and
description, whether or not in competition with the Company, independently or
with others, and the Company shall not have any rights in and to any independent
venture or activity or the income or profits derived therefrom.
Section 8.09. Other Arrangements Not Excluded. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to this
Article VIII:
(a) Does not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled under any agreement,
decision of the Member or otherwise, for either an action of the Member, any
Special Member or any Manager, officer, employee or agent in the official
capacity of such Person or an action in another capacity while holding such
position, except that indemnification, unless ordered by a court, may not be
made to or on behalf of the Member, any Special Member or any Manager if a final
adjudication established that its acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action; and
(b) Continues for a person who has ceased to be the Member, a Special
Member or a Manager, officer, employee or agent and inures to the benefit of the
successors, heirs, executors and administrators of such a person.
ARTICLE IX
Miscellaneous Provisions
Section 9.01. Offset. Whenever the Company is to pay any sum to the
Member, any amounts the Member owes the Company may be deducted from such sum
before payment.
Section 9.02. Notices. Except as expressly set forth to the contrary
in this Agreement, all notices, requests, or consents provided for or permitted
to be given under this Agreement shall be in writing and shall be given either
by depositing such writing in the United
21
States mail, addressed to the recipient, postage paid, and registered or
certified with return receipt requested or by delivering such writing to the
recipient in person, by reputable overnight courier, or by facsimile
transmission; and a notice, request or consent given under this Agreement shall
be effective on receipt by the Person to whom sent. All notices, requests, and
consents to be sent to the Member shall be sent to or made to 000 Xxxx Xxxxxx,
X.X. Xxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, Attention: General Counsel or such
other address as the Member may specify by notice to the Company and the
Managers. Any notice, request, or consent to the Company or the Managers must be
given to the Managers at the following address: 000 Xxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, Attention: Managers. Whenever any notice is required to be given
by law or this Agreement, a written waiver thereof, signed by the Person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
Section 9.03. Effect of Waiver or Consent. A waiver or consent,
express or implied, to or of any breach or default by any Person in the
performance by such Person of its obligations with respect to the Company shall
not be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of such Person
with respect to the Company.
Section 9.04. Governing Law; Severability. THIS AGREEMENT SHALL BE
GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE, EXCLUDING ANY CONFLICT OF LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE
GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER
JURISDICTION. In the event of a direct conflict between the provisions of this
Agreement and any mandatory provision of the Act, then the applicable provision
of the Act shall control. If any provision of this Agreement or the application
thereof to any Person or circumstance is held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of that provision to
other Persons or circumstances shall not be affected thereby and such provision
shall be enforced to the fullest extent permitted by law.
Section 9.05. No Bankruptcy Petition; No Dissolution. (a) The
Member, each Special Member and each Manager hereby covenants and agrees (or
shall be deemed to have hereby covenanted and agreed) that such Member, Special
Member or Manager shall not, prior to the date that is one year and one day
after the termination of the Indenture and the payment in full of all of the
outstanding Bonds, all other amounts owed under the Indenture (including without
limitation all amounts owed to third-party credit enhancers) and all amounts
owed by the Company under all Hedge Agreements and Interest Rate Swap
Agreements, acquiesce, petition or otherwise invoke or cause the Company to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Company under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of the property of the Company, or ordering the
winding up or liquidation of the affairs of the Company; provided, however, that
nothing in this Section 9.05 shall constitute a waiver of any right to
indemnification, reimbursement or other payment from the Company pursuant to
this Agreement.
22
(b) To the fullest extent permitted by law, the Member, each Special
Member and each Manager hereby covenants and agrees (or shall be deemed to have
hereby covenanted and agreed) that, until the termination of the Indenture and
the payment in full of all Series of the Bonds, any other amounts owed under the
Indenture, including without limitation, any amounts owed to third-party credit
enhancers, and any amounts owed under any Hedge Agreement or Interest Rate Swap
Agreement, the Member, such Special Member and such Manager shall not consent
to, or make application for, or institute or maintain any action for, the
dissolution of the Company under Section 18-801 or 18-802 of the Act or
otherwise.
(c) In the event that the Member, any Special Member or any Manager
takes action in violation of this Section 9.05, the Company shall file an answer
with the court or otherwise properly contest the taking of such action and raise
the defense that the Member, the Special Member or the Manager, as the case may
be, has agreed in writing not to take such action and should be estopped and
precluded therefrom and such other defenses, if any, as its counsel advises that
it may assert.
(d) The provisions of this Section 9.05 shall survive the termination
of this Agreement and the resignation, withdrawal or removal of the Member, any
Special Member or any Manager. Nothing herein contained shall preclude
participation by the Member, any Special Member or a Manager in assertion or
defense of its claims in any such proceeding involving the Company.
Section 9.06. Amendment. This Agreement may not be amended, except in
writing by the member and the Company, upon prior approval of the Trustee and
with prior notice to the Rating Agencies (as defined in the Indenture).
Section 9.07. Headings and Sections. The headings in this Agreement
are inserted for convenience 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.
Section 9.08. Binding Agreement. Notwithstanding any other provision
of this Agreement, the Member agrees that this Agreement constitutes a legal,
valid and binding agreement of the Member, and is enforceable against the Member
by the Independent Managers, in accordance with its terms. In addition, the
Independent Managers shall be intended beneficiaries of this Agreement.
IN WITNESS WHEREOF, this Agreement is hereby executed by the
undersigned as of December 19, 2002.
MEMBER:
ATLANTIC CITY ELECTRIC COMPANY
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
23
COMPANY:
ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Manager
24
Agreed and Consented to by the Special Members
and Independent Managers:
/s/ Xxxx X. Xxxxxxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxx
25
SCHEDULE A
SCHEDULE OF CAPITAL CONTRIBUTIONS OF MEMBER
COMMON INTEREST
Capital Common Interest Capital
Member's Name Contribution Percentage Account
------------------------------ ------------ ---------------- ------------
Atlantic City Electric Company $2,200,000 100% $2,200,000
A-1
SCHEDULE B
CERTIFICATE OF COMMON INTEREST
of
ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC
A Limited Liability Company
Organized under the Laws of the State of Delaware
This Certificate is issued and shall be held subject to the provisions
of (i) the Certificate of Formation of ATLANTIC CITY ELECTRIC TRANSITION FUNDING
LLC, a limited liability company organized under the laws of the State of
Delaware (the "Company"), filed on March 28, 2001 with the Secretary of State of
the State of Delaware, as amended or supplemented from time to time and (ii) the
Limited Liability Company Agreement dated as of April 11, 2001 of the Company,
as amended and restated on December 19, 2002, as amended or supplemented from
time to time.
This Certificate of Common Interest certifies that Atlantic City
Electric Company is the registered holder of the entire Common Interest of the
Company, which Common Interest shall be transferable only on the books of the
Company by the holder hereof in person or by a duly authorized attorney upon
surrender of this Certificate with a proper endorsement.
IN WITNESS WHEREOF, this Company has caused this Certificate to be
signed by one of its duly authorized Managers this ____ day of _______, ____.
------------------------------------
Title: Manager
B-1
ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC
For Value Received the undersigned hereby sells, assigns and transfers
unto _____________________________________________________________ the entire
Common Interest of the Company represented by the within Certificate and does
hereby irrevocably constitute and appoint
___________________________________________________________ Attorney, to
transfer said Common Interest on the books of the Company with full power of
substitution in the premises.
Dated: ________________
____________________________________
B-2
SCHEDULE C
MANAGERS
Names
1. Xxxxxx X. Xxxx
2. Xxxxx X. Xxxxx
3. Xxxxxxx X. Xxxxxx
4. Xxxx X. Xxxxxxxxxxxx (Independent Manager)
5. Xxxxxxx Xxxxxxxx (Independent Manager)
C-1
SCHEDULE D
OFFICERS
Names Office
Xxxxxx X. Xxxx Chairman
Xxxxxx X. Xxxxx President & COO
Xxxxxxx X. Xxxxx Vice President
Xxxxx X. Xxxxx CFO
Xxxx X. Xxxx General Counsel
Xxxxx X. Xxxxxx Treasurer
Xxxxxxx X. Xxxxxx Assistant Treasurer
Xxxxx Xxxxxxx Xxxxxx Secretary
Xxxxx X. XxXxxxxxx Assistant Secretary
Xxxx X. Xxxxxxxx Assistant Secretary
D-1
