AMENDED AND RESTATED
OPERATING AGREEMENT
OF
ENERGY SYSTEMS INVESTORS LLC
TABLE OF CONTENTS
Page
ARTICLE I. ORGANIZATION OF THE COMPANY............................................................................2
1.01 Formation................................................................................................2
1.02 Name.....................................................................................................2
1.03 Continuation and Term....................................................................................3
1.04 Purpose..................................................................................................3
1.05 Offices..................................................................................................3
1.06 Qualification in Other Jurisdictions.....................................................................3
1.07 Fiscal Year..............................................................................................3
ARTICLE II. DEFINITIONS...........................................................................................4
ARTICLE III. MANAGEMENT OF THE COMPANY............................................................................9
3.01 The Managing Member......................................................................................9
3.02 Officers................................................................................................10
3.03 Compensation............................................................................................11
3.04 Facsimile Signatures....................................................................................12
ARTICLE IV. MEMBERSHIP INTERESTS AND CAPITAL CONTRIBUTIONS.......................................................12
4.01 Membership Interests....................................................................................12
4.02 Creation of Additional Classes or Series of Membership Interests........................................12
4.03 Initial Capital Contributions...........................................................................12
4.04 Interest on and Return of Capital Contributions.........................................................12
4.05 Additional Capital Contributions........................................................................13
4.06 Capital Accounts........................................................................................13
4.07 Advances................................................................................................13
4.08 Negative Capital Accounts. No Member shall be required to make up a negative balance in its Capital
Account.................................................................................................14
4.09 Members.................................................................................................14
ARTICLE V. ALLOCATIONS AND DISTRIBUTIONS.........................................................................14
5.01 Special Allocations.....................................................................................14
5.02 Regulatory Provisions...................................................................................15
5.03 Code Section 704(c) Allocations.........................................................................16
5.04 Other Allocation Rules..................................................................................16
5.05 Allocations for Tax Purposes............................................................................16
5.06 Distribution of Cash and Other Property.................................................................16
5.07 Limitations on Distribution.............................................................................18
5.08 Withholding Taxes.......................................................................................19
ARTICLE VI. TRANSFER OF MEMBERSHIP INTERESTS.....................................................................19
6.01 Restrictions on Transfer................................................................................19
6.02 Right of First Offer....................................................................................20
6.03 Payment and Terms.......................................................................................20
6.04 Permitted Transfers.....................................................................................21
6.05 Additional Requirements of Transfer.....................................................................21
6.06 Transferees Bound.......................................................................................22
6.07 Assignee Status.........................................................................................22
ARTICLE VII. MEMBERSHIP WITHDRAWAL; ADMISSION OF NEW MEMBERS.....................................................22
7.01 Withdrawal..............................................................................................22
7.02 Admission of New Members................................................................................22
ARTICLE VIII. VOTING, QUORUM, AND MEETINGS OF MEMBERS............................................................23
8.01 Powers of Members.......................................................................................23
8.02 Voting Rights...........................................................................................23
8.03 Voting Power............................................................................................23
8.04 Quorum..................................................................................................23
8.05 Meetings of Members.....................................................................................23
8.06 Place of Meeting........................................................................................23
8.07 Notice of Meetings......................................................................................24
8.08 Action Without a Meeting................................................................................24
8.09 Waiver of Notice........................................................................................24
ARTICLE IX. TERM AND TERMINATION.................................................................................24
9.01 Term of Agreement.......................................................................................24
9.02 Termination.............................................................................................24
9.03 Class A Redemption......................................................................................25
ARTICLE X. DISSOLUTION...........................................................................................27
10.01 Events Requiring Dissolution............................................................................27
10.02 Liquidating Distribution................................................................................27
10.03 Claims of the Members...................................................................................29
ARTICLE XI. TAX MATTERS..........................................................................................30
11.01 Preparation of Tax Returns..............................................................................30
11.02 Tax Elections...........................................................................................30
11.03 Tax Controversies.......................................................................................30
11.04 Withholding.............................................................................................30
ARTICLE XII. GENERAL PROVISIONS..................................................................................31
12.01 Addresses and Notices...................................................................................31
12.02 Titles and Captions.....................................................................................31
12.03 Pronouns and Plurals....................................................................................31
12.04 Governing Law; Successors; and Severability.............................................................31
12.05 Entire Agreement........................................................................................31
12.06 Amendment. (a) Agreement May Be Modified..............................................................32
12.07 Joinder of Future Spouses...............................................................................32
12.08 Dispute Resolution......................................................................................32
12.09 Activities..............................................................................................33
ARTICLE XIII. INDEMNIFICATION; AFFILIATE TRANSACTIONS............................................................33
13.01 Indemnification of Members, Managing Members and Officers...............................................33
13.02 Transactions with a Member, Managing Member or Officer..................................................34
ARTICLE XIV. SUBJECT TO ALL LAWS.................................................................................34
14.01 Subject to All Laws.....................................................................................34
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
ENERGY SYSTEMS INVESTORS LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "Operating
Agreement") of Energy Systems Investors LLC (the "Company") is entered into by
the Company, Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxxxxxx, Energy Systems Investors II
LLC (the "Initial Class B Members"), any additional Persons (the "Additional
Class B Members" and together with the Initial Class B Members, the "Class B
Members") who become Class B Members of the Company in accordance with the
provisions hereof, the persons set forth on schedule A-1 hereto as Class A
members of the Company (the "Initial Class A Members"), any additional Persons
set forth on schedule A as Class A Members of the Company (the "Additional
Initial Class A Members"), any additional Persons (the "Additional Class A
Members" and together with the Initial Class A Members and the Additional
Initial Class A Members, the "Class A Members") who become Class A Members of
the Company in accordance with the provisions hereof and any additional Persons
(the "Other Additional Members") who became members with Other Interests in
accordance with the provisions hereof. In consideration of the covenants,
conditions and agreements contained herein, the parties hereto hereby agree as
follows:
WHEREAS, the Company previously established an Operating
Agreement;
WHEREAS, the Company has purchased 861,110 shares of the
Series A Preferred Stock (the "USE Series A Stock") of U.S. Energy Systems, Inc.
("USE") and in connection with such purchase the Company issued to USE a
$7,741,378.90 Limited Recourse Promissory Note (the "Note"); and
WHEREAS, USE, USE Acquisition Corp and Xxxxxx Alternative
Power Corporation have entered into an Agreement and Plan of Reorganization and
Merger dated as of November 28, 2000 (as amended, the "Merger Agreement"); and
WHEREAS, it is a condition to the consummation of the merger
(the "Merger") contemplated by the Merger Agreement that the Company generally
pay the Note; and
WHEREAS, the Company and USE and certain other parties have
entered into an Amended and Restated Plan of Recapitalization (the "Plan of
Recapitalization") pursuant to which, among other things, (i) all of the holders
of shares of USE Series A Stock will exchange its shares of USE Series A Stock
for an equal number of shares of USE's Series D Preferred Stock (the "Series D
Stock", and together with the Series A Stock, the "Preferred Stock"), (ii) the
interest rate on the Note will be reduced and (iii) USE will issue its Series B
Warrants (the "Warrants") to purchase 1,500,000 shares of USE's common stock
(the "Common Stock") to various parties including the Company; and
WHEREAS, USE has agreed that to the extent that at the time
the Initial Class A Members obtain Class A Membership Interests, any Initial
Class A Member shall purchase, subject to the completion of the Plan of
Recapitalization, from USE that number of Warrants equal to 1,935 multiplied by
the number of Class A Membership Interests to which such Initial Class A Member
is subscribing, the purchase price paid by the Company shall be reduced
retroactively by one dollar for each dollar that such Initial Class A Members
pay to purchase the Warrants and the Note shall be reduced by an equal amount;
and
WHEREAS, the purchase price for the Warrants being so acquired
is $0.80 per Warrant or $1548.00 for 1,935 Warrants (the "Warrant Purchase Price
"); and
WHEREAS, each Initial Class A Member and Additional Class A
Member has made a cash capital contribution to the Company in exchange for the
number of Class A Membership Interests set forth on Schedule A, and each such
Interest shall represent an initial capital account of $10,050; and
[WHEREAS, the Plan of Recapitalization has not been completed;
and]
WHEREAS, each Initial Class A Member has delivered to USE a
Warrant Purchase Price multiplied by such number set forth on Schedule A for
such number of Warrants that is equal to 1,935 multiplied by such number, [which
(i) if the Plan of Recapitalization is completed, shall be deemed to have been
paid at the Closing to purchase the Warrants; or (ii) if the Plan of
Recapitalization is terminated, shall be deemed to be returned by USE to such
Initial Class A Member and delivered thereafter by such Initial Class Member to
the Company, and then used by the Company to reduce the principal amount of the
Note, in which case no Warrants shall be issued and the capital accounts shall
not be adjusted for the receipt of such funds]; and
WHEREAS, the Class B Members have made an aggregate cash
capital contribution to the Company of $10,050 in exchange for one Class B
Membership Interest equaling 1 Unit; and
NOW, THEREFORE,
ARTICLE I.
ORGANIZATION OF THE COMPANY
1.01 Formation.
---------
The Company is a limited liability company organized under the
provisions of the Delaware Limited Liability Company Act, as amended from time
to time (the "Act"). The Certificate of Formation (the "Certificate") was filed
on March 17, 1998 with the Secretary of State of the State of Delaware. The
Company was formed upon the issuance by Secretary of State of the State of
Delaware of the Certificate for the Company.
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1.02 Name.
-----
The name of the Company is, and the business of the Company
shall be conducted under the name of, "Energy Systems Investors LLC." The name
of the Company may be changed from time to time by amendment of the Certificate.
The Company may transact business under an assumed name by filing an assumed
name certificate in the manner prescribed by applicable law.
1.03 Term.
----
The Company shall continue in existence in perpetuity or until
the earlier termination of the Company pursuant to the provisions of this
Operating Agreement.
1.04 Purpose.
-------
The Company (i) will pay the Note and pay its operating,
organizational, private placement and other third party expenses, (ii) may hold,
manage and dispose of (A) 861,110 shares of Series A Stock, any shares of Series
D Stock for which they are exchanged (together with the shares of Series A
Stock, the "Preferred Shares") and any shares of Common Stock into which the
Preferred Shares are converted or for which they are exchanged (the "Conversion
Shares," and together with the Preferred Shares, the "Preferred Securities"),
and (B) the Warrants exercisable for that number of shares of Common Stock equal
to 1,500,000 less the product of (A) 1935 and (B) the number of Class A
Membership Interests purchased by Initial Class A Members and any shares of
Common Stock issuable upon the exercise of the Warrants (the "Exercise Shares,"
and together with the Warrants, the "Excluded Securities") (collectively the
Excluded Securities and the Preferred Securities are referred to as the
"Securities") and (iii) may engage in any other lawful business permitted under
the Act relating to the foregoing.
1.05 Offices.
-------
The principal office of the Company shall be determined from
time to time by the Managing Member. The registered office of the Company
required by the Act to be maintained in the State of Delaware shall be at 0 Xxxx
Xxxxxxxxxx Xxxxxx, Xxxxx, Xxxxxxxx 00000. The registered agent for service of
process at such address shall be as determined by the Managing Member. The
Company's registered office, registered agent and the addresses thereof may be
changed from time to time by the Managing Member in accordance with the Act. The
Company may also have offices at such other places, both within and without the
State of Delaware, as the Managing Member may from time to time determine or the
business of the Company may require.
1.06 Qualification in Other Jurisdictions.
------------------------------------
The Company shall be qualified or registered to do business in
any jurisdiction in which the Company transacts business and in which such
qualification or registration is required by law or deemed advisable by the
Company. The Secretary of the Company, as an authorized person within the
meaning of the Act, shall execute, deliver and file any certificates (and any
amendments and/or restatements thereof) necessary for the Company to qualify to
do business in any such jurisdiction.
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1.07 Fiscal Year.
-----------
The fiscal year of the Company (the "Fiscal Year") shall end
on the 31st day of December in each year. The Company shall have the same fiscal
year for income tax and for financial and accounting purposes.
ARTICLE II.
DEFINITIONS
When used in this Operating Agreement, the following terms
shall have the respective meanings assigned to them in this Article II or in the
Sections referenced below.
"Accounting Period" The initial "Accounting Period" shall be
deemed to have commenced as of the date hereof. Each subsequent "Accounting
Period" shall commence immediately after the close of the next preceding
"Accounting Period". Each "Accounting Period" shall close at the close of
business on the first to occur of (i) the last day of a fiscal year of the
Company, (ii) the date of the Company's liquidation provided that an Accounting
Period may be subject to earlier termination by virtue of changes in the Members
or their Capital Contribution as determined by the Managing Member with
consultation with the Company's accountant.
"Act" means the Delaware Limited Liability Company Act, as
amended from time to time.
"Adjusted Capital Account" means, with respect to any Member,
such Member's Capital Account, increased for the amount such Member is deemed
obligated to restore pursuant to (A) the penultimate sentences of Treasury
Regulations Section 1.704-2(g)(l) and 1.704-2(i)(5) and (B) Treasury Regulations
Sections 1.704-1(b)(2)(ii)(c), as of the end of the Company's Fiscal Year or
other applicable period, and reduced for the items described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Affiliate" shall mean, with respect to any specified Person,
a Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Assignee" shall mean a person to whom an Interest has been
transferred in a manner permitted under this Operating Agreement, and who
thereby has an interest in the Company equivalent to that of a Member but (i)
limited to the rights and obligations appurtenant to an Interest to share in the
allocations and distributions, including liquidating distributions, of the
Company, and (ii) otherwise subject to the limitations under the Act on the
rights of an assignee.
"Available Cash" shall mean the cash of the Company available
for distribution from any source to the extent not reasonably required for
current or anticipated future expenses, obligations or reserves or the funding
of any anticipated investments by the Company.
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"Capital Account" means the account established and maintained
for each Member in the manner described in Section 4.06.
"Capital Contribution" means the amount of cash or other
consideration contributed to the Company by each Member in exchange for its
Interest.
"Class A Redemption" means the redemption, pursuant to
Section 9.03 hereof, of the Class A Membership Interests.
"Class Interest Percentage" shall mean as to a Member, the
percentage arrived at by dividing the number of Units issued to such Member as
of the date such Class Interest Percentage is measured by the total number of
Units issued to all Members in the Class to which such Member belongs as of such
date.
"Code" means the Internal Revenue Code of 1986, as amended and
in effect from time to time.
"Company" means Energy Systems Investors LLC, a limited
liability company organized under the laws of the State of Delaware.
"Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowed or allowable for federal income tax purposes with respect to an asset
for such Fiscal Year or other period; provided, however that, except as
otherwise provided in Treasury Regulations Section 1.704-2, if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such Fiscal Year or other period bears to such beginning
adjusted tax basis; provided, further, that if the adjusted basis for federal
income tax purposes of an asset at the beginning of such Fiscal Year or other
period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing
Member.
"Early Termination Trigger Date" means the date which is the
20th consecutive trading day for which a share of Common Stock had a Fair Market
Value greater than $20.00.
"Fair Market Value" means (1) with respect to a share of
Common Stock on a specified date: (i) the final reported sales price on the date
in question (or if there is no reported sale on such date, on the last preceding
date on which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or admitted to
trading on the principal United States securities exchange (including but not
limited to the Nasdaq Stock Market) on which such Common Stock is listed or
admitted to trading; or (ii) if such Common Stock is not listed or admitted to
trading on any such exchange, the closing bid quotation with respect to a share
of such Common Stock on such date on the National Association of Securities
Dealers Automated Quotations System, or, if no such quotation is provided, on
another similar system, then in use, selected by the Managing Member; and (2)
with respect to any other asset, the value of an asset in question, as
determined by the Managing Member.
5
"Funding Date" means the date on which the Company shall have
obtained $7,750,000 in gross proceeds from the sale of Interests.
"Gross Asset Value" means, with respect to any asset of the
Company, such asset's adjusted basis for federal income tax purposes, except as
follows:
(a) the initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset (computed
without taking Section 7701(g) of the Code into account) without reduction
for liabilities, as determined by the contributing Member and the Company;
(b) if the Managing Member reasonably determine that an adjustment is
necessary or appropriate to reflect the relative economic interests of the
Members, the Gross Asset Values of all Company assets shall be adjusted in
accordance with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f) and (g)
to equal their respective gross fair market values, without reduction for
liabilities, as reasonably determined by the Managing Member, as of the
following times:
(i) a Capital Contribution (other than a de minimis Capital
Contribution) to the Company by a new or existing Member as
consideration for an Interest in the Company; or
(ii) the distribution by the Company to a Member of more than a
de minimis amount of Company assets as consideration for the redemption
of an Interest in the Company; or
(iii) the liquidation of the Company within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g);
(c) the Gross Asset Value of any asset distributed to any Member shall
be the gross fair market value of such asset (computed without taking
Section 7701(g) of the Code into account) without reduction for liabilities
, as reasonably determined by the Managing Member as of the date of
distribution; and
(d) the Gross Asset Values of the Company's assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant
to this paragraph (d) to the extent that the Managing Member reasonably
determine that an adjustment pursuant to paragraph (b) above is necessary
or appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Company's assets for purposes of computing net
profits and net losses.
6
"Indebtedness" (i) all indebtedness, whether or not
represented by bonds, debentures, notes or other securities, for the repayment
of money borrowed, (ii) all guaranties, endorsements (other than endorsements in
the ordinary course of business), and assumptions, in respect of, or to purchase
or to otherwise acquire, indebtedness of others relating to the repayment of
money borrowed, and (iii) all capitalized lease obligations (excluding
obligations under operating lease).
"Interest" means the entire limited liability company interest
of a Member in the Company at any particular time, including the right of such
Member to any and all benefits to which such Member may be entitled as provided
in this Operating Agreement, together with the obligations of such Member to
comply with all terms and provisions of this Operating Agreement.
"Interest Percentage" shall mean as to a Member the percentage
arrived at by dividing the number of Units issued to such Member as of the date
such Interest Percentage is measured by the total number of Units issued to all
Members as of the date such Interest Percentage is measured.
"Involuntary Withdrawal" means, with respect to any Member,
the occurrence of any of the following events:
(i) the Member makes an assignment for the benefit of
creditors;
(ii) the Member files a voluntary petition in bankruptcy;
(iii) the Member is adjudged bankrupt or insolvent or there is
entered against the Member an order for relief in any bankruptcy or
insolvency proceeding;
(iv) the Member files a petition or answer seeking for the
Member any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any statute,
law, or regulation;
(v) the Member seeks, consents to, or acquiesces in the
appointment of a trustee, receiver, or liquidator of the Member or
of all or any substantial part of the Member's properties;
(vi) the Member files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed
against the Member in any proceeding described in Subsections (i)
through (v);
(vii) if, within one hundred twenty (120) days of the filing
of any proceeding against the Member seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution,
or similar relief under any statute, law, or regulation the
proceeding has not been dismissed, or within ninety (90) days after
the appointment of a trustee, receiver, or liquidator for the
Member or all or any substantial part of the Member's properties
without the Member's agreement or acquiescence, which appointment
7
is not vacated or stayed, or if the appointment is stayed, for
ninety (90) days after the expiration of the stay, unless during
such period the appointment is vacated;
(viii) if the Member is an individual, the Member's death or
adjudication by a court of competent jurisdiction as incompetent to
manage the Member's person or property;
(ix) if the Member is acting as a Member by virtue of being a
trustee of a trust, the termination of the trust;
(x) if the Member is a partnership or another limited
liability company, the dissolution and commencement of winding up
of the partnership or limited liability company;
(xi) if the Member is a corporation, the dissolution of the
corporation or the revocation of its charter; or
(xii) if the Member is an estate, the distribution by the
fiduciary of the estate's entire interest in the Company.
"Managing Member" shall mean Energy Systems Investors II LLC
and any replacement appointed in accordance with this Operating Agreement.
"Member" means a person who holds an Interest and has become a
member of the Company in accordance with this Operating Agreement.
"Other Interests" mean Interests other than Class A
Membership Interests and Class B Membership Interests.
"Person" means any individual, firm, corporation, trust,
association, company, limited liability company, joint stock company,
partnership, joint venture or other entity or enterprise.
"Premium Trading Period' means any period of 20 consecutive
trading days during which the trading price of a share of Common Stock has not
had a Fair Market Value less than $6.00.
"Rate of Return" means a cumulative annual return equal to the
annual dividend rate on the Preferred Stock less 50 basis points (which basis
points shall accrue without interest until the Company is liquidated).
"Unit" shall mean a denomination of Interest in the Company
equal to the capital contribution made to the Company by the Unit holder divided
by $10,050.
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ARTICLE III.
MANAGEMENT OF THE COMPANY
-------------------------
3.01 The Managing Member.
-------------------
(a) General. Except as otherwise provided by the Act or in this
Agreement, the business and affairs of the Company shall be managed by or under
the direction of the Managing Member. Other than with respect to rights and
powers expressly reserved to Members under Sections 8.01 and 8.02 of this
Agreement or Act and subject to Section 3.02 hereof, the Managing Member shall
have full, exclusive and complete discretion to manage and control the business
and affairs of the Company, to make all decisions affecting the business and
affairs of the Company, including voting the Securities, making determinations
regarding the conversion, exchange, sale and distribution of Securities, and to
take all such actions as it deems necessary or appropriate to accomplish the
purposes of the Company as set forth herein. The Managing Member is hereby
designated as an "authorized person", within the meaning of the Act, to execute,
deliver and file any amendments and/or restatements of the Certificate and any
other certificates (and any amendments and/or restatements thereof) necessary
for the Company to qualify to do business in a jurisdiction in which the Company
may wish to conduct business. The Managing Member shall have the power and
authority to bind the Company. Any action taken by the Managing Member, or any
duly appointed and acting Officer, in accordance with this Agreement shall
constitute the act of, and shall serve to bind, the Company.
(b) Duties. The Managing Member and the Officers shall be obligated 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. The
Managing Member and each Officer shall perform his or her duties 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.
(c) Termination for Cause. The Company may remove the Managing Member
for (i) willful material breach (after the notice to cure and a lapse of a
thirty day period commencing upon the Managing Member's receipt of such notice
without the cure of such breach during such thirty day period) of the provisions
in this Operating Agreement respecting the purposes of the Company,
distributions by the Company, redemptions by the Company and reinvestments by
the Company and (ii) being convicted of a felony committed by the Managing
Member or any person who controls the Managing Member.
(d) Replacement and Vacancy. If there is no Managing Member by reason of
the death, disability, termination for cause in accordance with Section 3.01(c)
or resignation of the Managing Member, the holders of the Class B Membership
Units are entitled to select, by a vote as a class with one vote per Unit, a
replacement to serve as the Managing Member. The Members shall take any action
necessary to cause the replacement Managing Member selected by the Class B
Members to be appointed as Managing Member.
(e) Restrictions on the Managing Member. The Managing Member shall not
(i) do
9
any act in contravention of any applicable law or regulation, or provision of
this Agreement; or (ii) have any interest in any property of the Company or
possess Company property for other than a Company purpose.
(f) Approval of Budget. The Managing Member shall have the sole
authority to approve (i) the annual operating budget which shall project the
operating revenues and operating expenses for the Company for the coming
calendar year but which shall exclude revenues and expenses relating to capital
matters for the Company (the "Annual Operating Budget") and (ii) the annual
capital budget which shall project capital expenditures and any proceeds from
capital transactions for each coming year (the "Annual Capital Budget"). The
President shall submit a proposed Annual Operating Budget and the Annual Capital
Budget to the Managing Member for each coming year at least 30 days prior to the
commencement of such year. In the event the Managing Member does not approve an
Annual Operating Budget and the Annual Capital Budget for the coming year then
the Company shall operate pursuant to the Annual Operating Budget and the Annual
Capital Budget then in effect except that at the President's discretion all
items of operating revenue and expense may be increased up to 5%. No line item
deviation in excess of 15% from an approved Annual Operating Budget or the
Annual Capital Budget will be effective unless approved by the Managing Member.
3.02 Officers.
--------
(a) Generally. The Managing Member shall have sole authority to appoint
and discharge agents of the Company, who are referred to herein as "Officers" of
the Company. The original slate of Officers is set forth herein at Section 3.02
(d) - (g), and shall be deemed to have been appointed by the Managing Member in
accordance with the procedure set forth at Section 3.02(c) below. Unless
provided otherwise by resolution of the Managing Member, the Officers shall have
the titles, power, authority and duties described below in this Section 3.02.
(b) Titles and Number. The Officers of the Company shall be the
President, any and all Vice Presidents (including, without limitation, Executive
Vice Presidents, Senior Vice Presidents and Assistant Vice Presidents), the
Secretary, the Controller, the Treasurer and any and all Assistant Secretaries,
Assistant Controllers and Assistant Treasurers. There shall be appointed from
time to time, in accordance with Section 3.02(c) below, such Vice Presidents
(including, without limitation, Executive Vice Presidents, Senior Vice
Presidents and Assistant Vice Presidents), Secretaries, Assistant Secretaries,
Controllers, Assistant Controllers, Treasurers and Assistant Treasurers as the
Managing Member may desire. Any person may hold two or more offices.
(c) Appointment and Term of Office. The Officers shall be appointed by
the Managing Member at such time and for such term as the Managing Member shall
determine. Any Officer may be removed, with or without cause, only by the
Managing Member. Vacancies in any office may be filled only by the Managing
Member.
(d) President. Subject to the limitations imposed by this Operating
Agreement, any employment agreement, any employee plan or any determination of
the Managing Member, the President, subject to the direction of the Managing
Member, shall be
10
the chief executive officer of the Company and, as such, shall be responsible
for the management and direction of the day-to-day business and affairs of the
Company, its other Officers, employees and agents, shall supervise generally the
affairs of the Company and shall have full authority to execute all documents
and take all actions that the Company may legally take. The President shall
exercise such other powers and perform such other duties as may be assigned to
him by this Operating Agreement or the Managing Member, including any duties and
powers stated in any employment agreement approved by the Managing Member. The
Company's initial President shall be Xxxxxxxx Xxxxxxxxx.
(e) Vice Presidents. In the absence of the President, each Vice
President appointed by the Managing Member shall have all of the powers and
duties conferred upon the President, including the same power as the President
to execute documents on behalf of the Company. Each such Vice President shall
perform such other duties and may exercise such other Powers as may from time to
time be assigned by this Operating Agreement, the Managing Member, or the
President. The Company's initial Vice President shall be Xxxxx Xxxxxxxxx.
(f) Secretary and Assistant Secretaries. The Secretary shall record or
cause to be recorded in books provided for that purpose the minutes of the
meetings or actions of the Managing Member and Members, shall see that all
notices are duly given in accordance with the provisions of this Operating
Agreement and as required by law, shall be custodian of all records (other than
financial), shall see that the books, reports, statements, certificates and all
other documents and records required by law are properly kept and filed, and, in
general, shall perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned to him by this Operating
Agreement, the Managing Member, or the President. The Assistant Secretaries
shall exercise the powers of the Secretary during that Officer's absence or
inability or refusal to act. The Company's initial Secretary shall be Xxxxx
Xxxxxxxxx.
(g) Controller, Assistant Controller, Treasurer and Assistant
Treasurers. The Controller (or if there is no Controller, the Treasurer) shall
keep or cause to be kept the books of account of the Company and shall render
statements of the financial affairs of the Company in such form and as often as
required by this Operating Agreement, the Managing Member or the President. The
Controller (or if there is no Controller, the Treasurer), subject to the order
of the Managing Member, shall have the custody of all funds and securities of
the Company. The Controller (or if there is no Controller, the Treasurer) shall
perform all other duties commonly incident to his office and shall perform other
duties and have such other powers as this Operating Agreement, the Managing
Member, or the President shall designate from time to time. The Company's
initial Controller shall be Xxxxx Xxxxxxxxx.
(h) Powers of Attorney. The Company may xxxxx xxxxxx of attorney or
other authority as appropriate to establish and evidence the authority of the
Officers and other Persons.
(i) Delegation of Authority. Unless otherwise provided by resolution of
the Managing Member no Officer shall have the power or authority to delegate to
any Person such Officer's rights and powers as an Officer to manage the business
and affairs of the Company.
3.03 Compensation.
------------
The Officers and the Managing Member shall receive no compensation
for their services; provided, however, the Officers and the Managing Member
11
shall be entitled to be reimbursed for out-of-pocket costs and expenses incurred
in the course of their service hereunder.
3.04 Facsimile Signatures.
--------------------
In addition to the provisions for the use of facsimile
signatures elsewhere specifically authorized in this Operating Agreement,
facsimile signatures of any Officer of the Company may be used whenever and as
authorized by the Managing Member.
ARTICLE IV.
MEMBERSHIP INTERESTS
AND CAPITAL CONTRIBUTIONS
4.01 Membership Interests.
--------------------
(a) Classes. The Interests of the Company shall be divided into
classes, which initially shall be referred to herein as Class A Interests and
the Class B Interests. The Class A Interests and the Class B Interests shall be
issued in Unit increments. The Company is hereby authorized to issue 100 Units
of Class B Interests (the, "Class B Units"), and 775 Units of Class A Interests
(the "Class A Units") and the units of other classes or series of Interests
created pursuant to Section 4.02 below (the "Units").
(b) Voting. The Voting Rights of Members are set forth in
Articles III and VIII hereof.
(c) Exclusion of Other Rights. Except as may otherwise be
required by law, the Units shall not have any preferences or relative,
participating, optional, or special rights, other than those specifically set
forth herein (as such may be amended from time to time) and in accordance with
Section 4.02 below.
4.02 Creation of Additional Classes or Series of Membership Interests.
----------------------------------------------------------------
Subject to obtaining any consent expressly required under this
Operating Agreement, the Managing Member shall be authorized to create one or
more classes or series of Interests with such designations, preferences and
relative, participating, optional or other special rights, powers or duties as
shall be fixed by the Managing Member in the exercise of its sole discretion and
reflected in a written action or actions approved by the Managing Member (each a
"Series Designation"). The creation of any new series or class of interests
shall be deemed an amendment, modification or restatement of this Agreement.
4.03 Initial Capital Contributions.
-----------------------------
Each Member shall make his initial Capital Contribution and
shall receive in return the appropriate number and class of Units.
4.04 Interest on and Return of Capital Contributions.
-----------------------------------------------
12
Except as specifically provided in Section 4.07 of this
Operating Agreement, no Member shall be entitled to interest on any Capital
Contribution or Member Loan or on such Member's Capital Account balance and no
Member shall have the right to withdraw or to demand the return of all or any
part of his Capital Contribution.
4.05 Additional Capital Contributions.
No Member shall be required to make any additional Capital
Contribution to the Company.
4.06 Capital Accounts.
(a) The Company shall maintain for each Member a separate
Capital Account in accordance with the provisions of Article V hereof. Such
Capital Account shall be increased by (a) (i) the cash or fair market value of
any property contributed to the Company by the Member (net of any liabilities
secured by the property that the Company is considered to assume or take subject
to under Section 752 of the Code) and (ii) all items of Company income and gain
(as computed in accordance with the Allocation Regulations) allocated to such
Member pursuant to Article V hereof; and decreased by (b)(i) the cash or fair
market value of any property (net of any liabilities secured by the property
that the Member is considered to assume or take subject to under Section 752 of
the Code) distributed to the Member, (ii) allocations to the Member of
expenditures of the Company described in Section 705(a)(2)(B) of the Code, and
(iii) all items of Company loss and deductions (as computed in accordance with
the Allocation Regulations) allocated to such Member pursuant to Section Article
V hereof.
(b) Any Capital Contributions or distributions made in a form
other than cash shall be valued at the Fair Market Value of such property as of
the date of such Capital Contribution or distribution as determined in good
faith by the Managing Member; provided however, that shares of Common Stock will
be valued on the basis of the average Fair Market Value of the Common Stock for
the five consecutive trading days ending as of the first trading day prior to
the date of such Contribution or distribution and each Preferred Share will be
valued on the basis of the number of the shares of Common Stock into which it
could be converted if it were converted 6 trading days prior to the date of such
Contribution or distribution and such shares of Common Stock were valued on the
basis of the average Fair Market Value of the Common Stock for the five
consecutive trading days ending as of the first trading day prior to the date of
such Contribution or distribution.
4.07 Advances. Any Member in its reasonable discretion upon reasonable
advance notice to the other Members in writing and only to the extent necessary
in order for the Company to meet short-term working capital requirements, may
advance funds to the Company in excess of its Capital Contributions. The amount
of such advance shall neither increase such Member's Capital Account nor entitle
it to any increase in its share of the distributions of the Company. The amount
of any such advance shall be a debt obligation of the Company to such Member and
shall be repaid to it by the Company at a reasonable interest rate to be agreed
upon by such Member and the Company not to exceed the then prevailing market
rate for
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similar loans as soon as practicable. Any such advance shall be payable and
collectible only out of Company assets, and no Member shall be personally
obligated to repay any part thereof. No Person who makes any loan to the Company
shall have or acquire, as a result of making such loan, any direct or indirect
interest in the profits, capital, membership interests or property of the
Company, other than as a creditor. The loans and advances referred to in this
paragraph shall be referred to as "Member Loans."
4.08 Negative Capital Accounts. No Member shall be required to make
up a negative balance in its Capital Account.
4.09 Members.
-------
(a) Member Interests as Personal Property. Each Member hereby agrees
that its Units shall for all purposes be personal property. A Member has no
interest in any property of the Company.
(b) Partition. Each Member waives any and all rights that it may
have to maintain an action for partition of the property of the Company.
(c) Liability of Members. Except as otherwise provided by the Act,
(i) the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company and (ii) no Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member of the Company.
ARTICLE V.
ALLOCATIONS AND DISTRIBUTIONS
5.01 Special Allocations.
Notwithstanding anything in this Agreement to the contrary:
(a) All nonrecourse deductions (as defined in Treasury Regulations
Section 1.704-2(b)(1)) shall be charged to the Capital Accounts of the Members
in proportion to their Interest Percentages.
(b) No Member shall be allocated any item of loss or deduction to the
extent said allocation will cause or increase any deficit in said Member's
Adjusted Capital Account. If any Member with a deficit in its Adjusted Capital
Account unexpectedly receives any adjustment, allocation or distribution
described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
then Company items of income and gain shall be specifically allocated to such
Member in an amount and manner sufficient to eliminate the deficit in said
Member's Adjusted Capital Account created by such adjustment, allocation or
distribution as quickly as possible. The Members intend that the provisions set
forth in this clause will constitute a "Qualified Income Offset" as described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
14
(c) The following provisions shall be applicable beginning in the first
taxable year in which the Company has "nonrecourse deductions" as defined in
Treasury Regulations Section 1.704-2(b)(1):
(i) For purposes of this Section 5.01(c) "Minimum Gain" means
the total gain which the Company would realize if it sold, in a taxable
disposition, each of its assets that were subject to nonrecourse liabilities in
full satisfaction of the liabilities. In computing such gain, only the portion
of the assets' tax bases allocated to nonrecourse liabilities of the Company
shall be taken into account.
(ii) If in any Fiscal Year of the Company there is a net
decrease in Minimum Gain, then each Member with a share of Minimum Gain
(as determined in accordance with Treasury Regulations Section 1.704-2(g)(1)) as
of the beginning of such year shall be allocated items of income and gain for
such year (and, if necessary, for succeeding years), equal to that Member's
share of the net decrease in Minimum Gain (determined in accordance with
Treasury Regulations Section 1.704-2(g)(2)). In allocating the income and gain
pursuant to the previous sentence, gains recognized from the disposition of
Company assets subject to nonrecourse liabilities of the Company shall be
allocated first to the extent of the decrease in Minimum Gain attributable to
the disposition of said asset. Thereafter, any income and gain to be allocated
shall consist of a pro rata amount of other Company income and gain for that
year. The Members intend that this clause (ii) will constitute a "Minimum Gain
Chargeback" as set forth in Treasury Regulations Section 1.704-2(f).
(iii) If any Member bears the "economic risk of loss" (within
the meaning of Treasury Regulations Section 1.752-2) with respect to any
nonrecourse loan of the Company, then (A) the losses, deductions or Section
705(a)(2)(B) expenditures that are attributable to such nonrecourse loan for any
fiscal year or other period shall be allocated to the Members who bear the
burden of such economic risk of loss in accordance with Treasury Regulations
Section 1.704-2(i), and (B) if in any taxable year there is a net decrease in
Partner Nonrecourse Debt Minimum Gain (as determined in accordance with Treasury
Regulations Section 1.704-2(i)(4)) attributable to such nonrecourse loan, each
Member with a share of Partner Nonrecourse Debt Minimum Gain (as defined in
Treasury Regulations Section 1.704-2(i)(2)) attributable to such nonrecourse
loan (as determined in accordance with Treasury Regulations Section 1.
704-2(i)(5)) as of the beginning of the year shall be allocated items of income
and gain for the year (and, if necessary, for succeeding years), equal to that
Member's share of the net decrease in the Partner Nonrecourse Debt Minimum Gain
(as determined in accordance with Treasury Regulations Section 1.704-2(i)(4)).
5.02 Regulatory Provisions. The provisions of Section 5.01
(collectively, the "Regulatory Provisions") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Members that,
to the extent possible, all allocations pursuant to the Regulatory Provisions
shall be offset either with other allocations pursuant to the Regulatory
Provisions or, if necessary, with curative allocations of other items of income,
gain, loss or deduction pursuant to this Section 5.02. Therefore,
notwithstanding any other provision of this Agreement, other than the Regulatory
Provisions, allocations pursuant to the Regulatory Provisions shall be taken
into account in allocating other items of income, gain, expense or loss among
the Members so that, to the extent possible, the net amount of such allocations
of other items and the allocations pursuant to the Regulatory Provisions to each
member are equal to
15
the net amount that would have been allocated to such Member if the Regulatory
Provisions were not part of this Agreement. In applying this Section 5.02, there
shall be taken into account (a) future allocations under Section 5.01(c)(ii)
that, although not yet made, are likely to offset other allocations previously
made under Section 5.01(a), and (b) future allocations under Section
5.01(c)(iii)(B) that, although not yet made, are likely to offset other
allocations previously made under Section 5.01(c)(iii)(a).
5.03 Code Section 704(c) Allocations.
-------------------------------
Notwithstanding any other provision in this Article V, in
accordance with Code Section 704(c) and the Treasury Regulations promulgated
thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its Gross Asset Value on the date of contribution.
If, under Treasury Regulations Section 1.704-1(b)(2)(iv)(f),
Company property that has been revalued is properly reflected in the Capital
Accounts and on the books of the Company at a Gross Asset Value that differs
from the adjusted tax basis of such property, then depreciation, depletion,
amortization and gain or loss with respect to such property shall be shared
among the Members in a manner that takes account of the variation between the
adjusted tax basis of such property and its Gross Asset Value in the same manner
as variations between the adjusted tax basis and Gross Asset Value of property
contributed to the Company are taken into account (as provided in the preceding
paragraph) in determining the Members' shares of tax items under Section 704(c)
of the Code.
5.04 Other Allocation Rules. Upon any change in the relative interests
of the Members in the Company, whether by reason of the admission or withdrawal
of a Member, the transfer by any Member of all or any part of its interest, or
otherwise, the Members' shares of all Company items shall be determined by
reference to any method acceptable under the Regulations under Section 706 of
the Code, as determined by the Managing Member.
5.05 Allocations for Tax Purposes.
----------------------------
For federal income tax purposes, except as otherwise provided
in the Code or Treasury Regulations, each item of income, gain, of the Company
shall be allocated among the Members on a basis consistent with Interest
Percentages and with distributions to Members pursuant to Section 5.06 of this
Agreement. Losses and deductions shall be allocated among Members based on
Interest Percentages.
5.06 Distribution of Cash and Other Property.
(a) Other than in respect of the winding up of the Company,
distributions of cash or property of the Company shall be made at such time and
in such amounts as determined by the Managing Member.
16
(b) Subject to applicable law, the Managing Member shall cause
the Company to distribute Available Cash attributable to dividends on the
Preferred Securities to the Members within thirty days after the Company's
receipt of the applicable dividend on Preferred Securities, in the following
manner:
(i) first, to the repayment of any Member Loans
plus accrued interest;
(ii) second, on a pari passu basis to the Class A
Members until there shall have been distributed to the Class A Members a
cumulative aggregate amount under this Section 5.06 equal to the product of (A)
the Rate of Return and (B) the number of years during the period commencing on
the Effective Date and ending on the date of such distribution and (C) the
initial Capital Contribution made by such Members; provided, however, that the
Managing Member may amend this clause 5.06 (b)(ii) prior to the Funding Date so
long as such amendment will not cause the holder of one Class A Unit to not be
entitled on a pari passu basis to at least 1/775th of all distributions
hereunder and will not reduce the aggregate amount to be distributed hereunder
with respect to one Class A Unit; and
(iii) third, on a pari passu basis to the Members (other
than the Class A Members).
(c) Subject to applicable law, the Managing Member shall cause the
Company to distribute Available Cash attributable to dividends on the Excluded
Securities to the Class B Members, at such times and in such amounts as shall be
determined in the sole discretion of the Managing Member, on a pari passu basis
to such Members.
(d) Subject to applicable law, the Managing Member shall cause the
Company to distribute Preferred Securities and Available Cash attributable
to the proceeds from the sale of Preferred Securities to the Members, at such
times and in such amounts as shall be determined in the sole discretion of the
Managing Member, in the following manner:
(i) first, to the repayment of any Member Loans plus
accrued interest;
(ii) second, on a pari passu basis, to the Class A Members an
amount equal to (1) the product of (A) the Rate of Return and (B) the number of
years during the period commencing on the Effective Date and ending on the date
of such distribution and (C) the Initial Capital Contribution made by such
Members less (2) distributions with respect to such previously made pursuant to
Section 5.06(b)(ii);
(iii) third, after the foregoing distributions have been made,
on a pari passu basis, to the Class A Members an amount equal to the product of
(A) 50 basis points and (B) the number of years during the period commencing on
the Effective Date and ending on the date of such distribution and (C) the
Initial Capital Contribution made by such Members;
(iv) fourth, after the foregoing distributions have been made,
the remaining assets shall be distributed to the Class A Members on a pari passu
basis based on their Class Interest Percentage until their Capital Accounts are
reduced to zero; and
17
(v) fifth, after the foregoing distributions have been made, (i)
if the Plan of Recapitalization has been completed that portion of the remaining
assets which is equal to 1/2 multiplied by a fraction the numerator of which is
the number of Class A Units and the denominator of which is the number of all
Units (other than Class B Units) shall be distributed to the Class A Members on
a pari passu basis based on their Class Interest Percentages and the remainder
to the Class B Members based on their Class Interest Percentages and (ii) if the
Plan of Recapitalization has not been completed, that portion (the "Amount") of
the remaining assets which is equal to 3/4 multiplied by a fraction the
numerator of which is the number of Initial Class A Units (as defined below) and
the denominator of which is the number of all Units (other than Class B Units)
shall be distributed to the Initial Class A Unitholders on a pari passu basis
based on their Class Interest Percentages (provided, however, that in the case
of distributions prior to January 1, 2002, unless the Plan of Recapitalization
has been terminated, 1/3 of the Amount shall be set aside by the Company and
shall be released by the Company to the Initial Class A Unitholders if and only
if the Plan of Recapitalization is terminated or has not occurred prior to
January 1, 2002, and shall be released and made generally available to the
Company if the Plan of Recapitalization occurs prior to January 1, 2002), that
portion of the remaining assets which is equal to 1/2 multiplied by a fraction
the numerator of which is the number of Class A Units (other than Initial Class
A Units) and the denominator of which is the number of all Units (other than
Class B Units) shall be distributed to the Class A Members (other than Initial
Class A Unitholders) on a pari passu basis based on their Class Interest
Percentages and the remainder to the Class B Members based on their Class
Interest Percentages; provided, however, that the Managing Member may amend
clauses 5.06(d)(ii)-(v)prior to the Funding Date so long as such amendment will
not cause the Initial Class A Unitholders to not be entitled on a pari passu
basis to at least 1/775th of all distributions (other than the distributions to
the Class B Members) per each Class A Unit acquired by such Initial Class A
Members when they first became Members (each, a "Initial Class A Unit;" and the
holders of the Initial Class A Units are referred to as the "Initial Class A
Unitholders") under such clauses and will not reduce the aggregate amount to be
distributed under such clauses with respect to all Units (other than Class B
Units).
(e) Subject to applicable law, the Managing Member shall cause
the Company to distribute Excluded Securities and Available Cash attributable to
the proceeds from the sale of Excluded Securities to the Class B Members, at
such times and in such amounts as shall be determined in the sole discretion of
the Managing Member in cash or in kind, as determined by the Managing Member,
based on their Class Interest Percentage.
(f) Any assets distributed in kind shall be valued for this
purpose at the Fair Market Value as of the date it is determined to make such a
distribution. Any such distributions to the Members in respect of their Capital
Accounts shall be made in accordance with the time requirements set forth in
Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).
(g) In all calculations of interest, simple interest
shall be used.
5.07 Limitations on Distribution. Notwithstanding any provisions of this
Article V to the contrary, no distribution shall be made if such distribution
would violate any contract or agreement to which the Company is then a party or
any law then applicable to the Company, including the provisions of the Act.
18
5.08 Withholding Taxes. The Company is authorized to withhold from
distributions to a Member, or with respect to allocations to a Member, and to
pay over to a Federal, state or local government, any amounts required to be
withheld pursuant to the Code or any provisions of any other Federal, state or
local law. Any amounts so withheld shall be treated as having been distributed
to such Member for all purposes of this Agreement, and shall be offset against
the current or next amounts otherwise distributable to such Member.
5.09 Reinvestment. The Company shall not invest dividends on the
Preferred Securities or the proceeds from the sale of any Preferred Securities
except in short-term money market funds.
ARTICLE VI.
TRANSFER OF MEMBERSHIP INTERESTS
6.01 Restrictions on Transfer.
------------------------
(a) General. Each Member agrees that such Member will not, directly or
indirectly, sell, hypothecate, give, bequeath, transfer, assign, pledge or in
any other way whatsoever encumber or dispose of (any such event, a "Transfer")
any Interests now or hereafter at any time owned by such Member (or any interest
therein) to another Person ("Transferee"), except to the extent such Transfer is
permitted by this Agreement. The Company shall not transfer upon its books any
Interests to any Person to the extent prohibited by this Agreement and any
purported transfer in violation hereof shall be null and void and have no
effect.
(b) Compliance with Securities Laws. No Member shall transfer any
Interest, and the Company shall not transfer on its books any Interest, unless
(a) the Transfer is made pursuant to an effective registration statement under
the Securities Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission ("SEC") thereunder, all as the same shall be
in effect at the time (the "Securities Act") and is in compliance with any
applicable state securities or blue sky laws or (b) such Member shall have
furnished the Company with an opinion of counsel, to the extent reasonably
required by the Company, which opinion and counsel shall be reasonably
satisfactory to the Company, to the effect that no such registration is required
because of the availability of an exemption from registration under the
Securities Act, and no such compliance is necessary; provided, however, that the
conditions set forth in this Section 6.01(b) shall not apply to any sale of an
Interest pursuant to an effective registration statement under the Securities
Act or, provided such sale is not to an affiliate of the Company, pursuant to
Rule 144 promulgated pursuant to the Securities Act, as such Rule may be amended
from time to time, or any other similar regulation hereafter adopted by the SEC
("Rule 144").
(c) Agreement to be Bound. No Transfer of Interests by a Member shall be
effective (and the Company shall not transfer on its books any Interest) unless
the Transferee shall have executed and delivered to the Company, as a condition
precedent to such transfer, an instrument or instruments in form and substance
satisfactory to the Company confirming that the Transferee agrees to be bound,
as a Member, by the terms of this Agreement and accepts the rights and
obligations set forth hereunder.
19
6.02 Right of First Offer. Any Member desiring to sell all or part of its
Interest (the "Selling Member") on account of an Involuntary Withdrawal must
offer in writing such part of its Interest to the Class B Members, as follows:
(a) Such offer for sale (the "Offer") shall be addressed by the Selling
Member to the Class B Members at their addresses listed in this Agreement (or to
such other address that they shall designate in writing in accordance with
Section 12.01 hereof). Such Offer shall formally notify (the "Notice") the Class
B Members of the Selling Member's willingness to sell or otherwise dispose of
all or any part of its Interest (the "Purchasable Interest") free and clear of
all liens, for an all cash purchase price stated in the Notice (the "Purchase
Price").
(b) The Class B Members shall have, for a period of ten (10) days after
the receipt of the Notice, the right to acquire the Purchasable Interest offered
for the Purchase Price, under the terms set forth in Section 6.03 below.
(c) If the Class B Members elects to purchase the Purchasable Interest
being offered, they shall notify the Selling Member as promptly as practicable
but in any event no later than within ten (10) days after the receipt of the
Notice which notice shall specify a date for the closing in accordance with the
terms of Section 6.03 below. Thereafter, a closing shall take place in
accordance with Section 6.03 of this Agreement. If the Class B Members do not
elect to purchase the Purchasable Interest being offered, they shall immediately
so notify the Selling Member.
(d) If the Class B Members shall fail to exercise the right herein
granted to purchase all of the Purchasable Interest being offered in accordance
with the procedures set forth in this Section 6.02, the Selling Member shall
have the right for a period of 90 days thereafter to sell the Purchasable
Interest as was being offered to the Class B Members to any Person for an all
cash price not less than the Purchase Price.
6.03 Payment and Terms. Payment by the Class B Members for the sale by a Selling
Member under Section 6.02 shall be made in the manner set forth in the Offer and
in accordance with the following provisions:
(a) The closing shall take place at the office of the Company within 30
days of the Notice.
(b) At the closing, the Selling Member shall transfer to the
Transferee(s), the Purchasable Interest being sold, free and clear of all
encumbrances. Upon such transfer, the Transferee(s), subject to the terms and
conditions hereof, shall deliver to the Selling Member a certified or bank
cashier's check or wire transfer for the Purchase Price.
(c) If the Selling Member shall fail to attend the closing or to tender
the transfer of the Purchasable Interest, the closing shall go forward in its
absence. In such event, written notice of the closing shall be given by the
Transferee to the Selling Member, and the notice shall further inform the
Selling Member that the check in payment for the Purchasable Interest being sold
will be held by the Transferee pending the execution and delivery of appropriate
transfer documentation by such Selling Member. The Selling Member shall not be
entitled to any interest on any amount so held by the Transferee.
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(d) All Indebtedness, including accrued and unpaid interest, if any,
owed by a Selling Member to the Company (the "Selling Member Indebtedness")
shall become due and payable immediately at the time such Person transfers or
has transferred at least fifty percent of such Member's initial Interest on a
cumulative basis. No transfer shall be effective unless the Selling Member
Indebtedness has been satisfied.
6.04 Permitted Transfers. Subject to the provisions of Section 6.05, the
following transfers of Interests are permitted at any time (each a "Permitted
Transfer").
(a) Transfer by any Member who is a natural person to such Member's
spouse or children or to a trust the sole beneficiaries of which are his or her
spouse and/or children provided that such Member shall maintain voting control
with respect to such Interest pursuant to an agreement or instrument acceptable
to the Company;
(b) Transfer by reason of the death of any Member to such Member's heirs
or estate.
(c) Transfer by any Member that is not a natural person to an Affiliate.
(d) Transfer of a Class B Interest.
(e) Transfer by Xxxxxxxx Xxxxxxxxx or Xxxx Xxxxxxxxx of a Class A
Interest on or before the first anniversary of the date hereof, which transfer
shall not be subject to the approval of the Members.
6.05 Additional Requirements of Transfer. Any Transfer permitted by this
Agreement shall be further subject to and conditioned upon full compliance by
the transferor and Transferee with each of the following conditions:
(a) Each Transferee shall have executed an agreement in form and
substance reasonably satisfactory to the Company, by which such Transferee shall
have agreed to become a party to and bound by the terms and conditions of this
Agreement.
(b) Any Transfer, conveyance or other taxes resulting from such
Transfer, and any costs or expenses incurred by the Company in connection with
such Transfer shall be borne, jointly and severally, by the transferor and/or
the Transferee and each transferor and Transferee do hereby jointly and
severally agree to indemnify and hold harmless each other party hereto from such
taxes and jointly and severally indemnify and hold harmless the Company from
such costs or expenses, and agree to promptly reimburse the Company or such
other party, as the case may be, for any such taxes, costs or expenses.
(c) The transferor and Transferee shall have delivered to the Company
such other agreements, instruments and other documents (including opinions of
counsel reasonably satisfactory to the Company) as the Company shall request in
order to demonstrate compliance of any such transfer with the provisions of this
Agreement and applicable law.
(d) The Managing Member shall cooperate in admitting any Person who
acquires an Interest in compliance with this Article VI as a Member of the
Company.
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(e) Notwithstanding anything to the contrary herein, no Transfer shall
be permitted under this Agreement if in the reasonable opinion of tax counsel to
the Company it would result in materially adverse tax consequences to the
Company or the Members.
6.06 Transferees Bound. Any Interest owned by a transferee shall for all
purposes be subject to the terms of this Agreement, whether or not such
transferee has executed a consent to be bound by this Agreement, provided
nothing in this Section 6.06 shall be deemed to authorize any transfer
prohibited by this Agreement.
6.07 Assignee Status. Any Transferee who is not admitted as a Member of
the Company shall have the status of an Assignee.
ARTICLE VII.
MEMBERSHIP WITHDRAWAL;
ADMISSION OF NEW MEMBERS
7.01 Withdrawal.
----------
A Member may not withdraw from the Company without the written
consent of the Managing Member; provided, however, that so long as there are any
Class A Members the Managing Member may not withdraw from the Company without
the written consent of Class A Members holding 90% or more of the Class A Units.
7.02 Admission of New Members.
------------------------
A person may become a new Member of the Company upon (i)
receiving the consent of the Managing Member to such admission and to the amount
of the Capital Contribution to be made by such new Member, (ii) making the
Capital Contribution to the Company and (iii) executing a signature page to this
Operating Agreement which by its terms (a) binds such new Member to the terms
and conditions set forth herein, (b) recites the Capital Contribution to be made
by such new Member and (c) sets forth the Interest to be received by such new
Member in exchange for his Capital Contribution.
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ARTICLE VIII.
VOTING, QUORUM, AND
MEETINGS OF MEMBERS
-------------------
8.01 Powers of Members. Except as otherwise provided in Section 8.02 hereof or
the Act, the Members in their individual capacity as Members of the Company
shall have no right or power to take part in the management of the Company
including the power to transact any business in the Company's name, sign
documents for or otherwise bind the Company. Subject to the provisions of the
Act and the Certificate, the Members hereby delegate any or all such powers to
the Managing Member of the Company to carry out the business affairs of the
Company on the Members' behalf. Any power not expressly reserved to the Members
or delegated to the Officers of the Company shall remain with the Managing
Member. The Managing Member shall be Energy Systems Investors II LLC, subject to
the provisions of Article III.
8.02 Voting and Approval Rights.
The only matters to be submitted to the Members shall be matters
expressly required to be submitted to the Members pursuant to this Agreement and
the provisions of the Act; provided, however, that following the Funding Date
the matters set forth on Schedule 8.02 must be (i) recommended by the Managing
Member and (ii) approved in writing by Class A Members holding 76% or more of
the Class A Units.
8.03 Voting Power.
Subject to Section 8.02, all Members shall be entitled to vote
on any matter submitted to a vote of the Members. Each Member shall vote in
proportion to its Interest Percentage. If a quorum of the Class A Members and
the Class B Members exists, the affirmative vote of the majority of the Class A
Units and Class B Units represented at the meeting and entitled to vote on the
subject matter shall be the act of the Class A Members and Class B Members
respectively as to such matter, unless the vote of a greater or lesser amount or
approval by other voting groups is required by the Act, the Certificate, or this
Operating Agreement.
8.04 Quorum.
Members owing a majority of the Units entitled to vote on the
subject matter, in person or by proxy, shall constitute a quorum for the
transaction of business as to such subject matter by such Members.
8.05 Meetings of Members.
Upon the written request of the Managing Member, the Company
shall call a meeting of the Members.
8.06 Place of Meeting.
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The Managing Member may designate any place, either in or out
of the State of Delaware, as the place of meeting for any meeting of Members. If
no designation is made the place of meeting shall be the Company's principal
office. Telephonic meetings are permitted.
8.07 Notice of Meetings.
Written notice stating the date, time and place of the meeting
and a description of the purpose or purposes for which the meeting is called,
shall be mailed, unless oral notice is reasonable under the circumstances, not
fewer than ten nor more than thirty days before the date of the meeting, by or
at the direction of the Managing Member to each Member of record entitled to
vote at the meeting. If mailed, such notice is effective when mailed addressed
to the Member's address shown in the Company's current record of the Member,
with postage prepaid.
8.08 Action Without a Meeting.
Any action required or permitted to be approved by a certain
Class(es) by vote may be taken without a meeting by written consent of Members
of such Class(es) having not less than the minimum of votes that would be
necessary to authorize or take such action at a meeting. The consent shall set
forth the actions so taken and be signed by such Members of such Class(es).
8.09 Waiver of Notice.
(a) a Member may waive any notice required by this Operating Agreement before or
after the date and time stated in the notice. The waiver must be in writing, be
signed by the Member entitled to the notice, and be delivered to the Managing
Member.
(b) a Member's attendance at a meeting: (i) waives objection to lack of notice
or defective notice of the meeting, unless the Member at the beginning of the
meeting or promptly upon the Member's arrival objects to holding the meeting or
transacting business at the meeting, and (ii) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the Member objects to considering the
matter when it is presented.
ARTICLE IX.
TERM AND TERMINATION
9.01 Term of Agreement. The term of this Agreement shall be the period ending on
the earlier of (A) the date which is the fourth anniversary of the Effective
Date (as such term is defined in the Merger Agreement unless the Company elects
to effectuate an All Class Redemption pursuant to Section 9.04), or, (B) unless
the Company elects to effectuate a Class A Redemption pursuant to Section 9.03
hereof, the Early Termination Trigger Date, unless terminated sooner as herein
provided.
9.02 Termination.
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(a) This Agreement shall terminate with respect to the Company and
all Members upon the occurrence of any of the following events:
(i) The determination of the Managing Member, at its option,
during a Premium Trading Period, to terminate the Company;
(ii) The merger or consolidation of the Company with, or the
acquisition of all or substantially all of the Interests or assets of the
Company by, a Person at least fifty percent (50%) of the voting securities of
which are beneficially owned by Persons other than Persons who beneficially
owned Interests in the Company immediately prior to such merger, consolidation
or acquisition provided however, that Section 5.06 shall survive any such
termination resulting from a sale of substantially all of the assets of the
Company.
(iii) The execution of a written instrument by the Company
and each of the Members then holding Interests; or
(iv) Subject to Section 8.01 hereof, any public offering of
membership interests in or other equity securities of the Company.
(b) This Agreement shall automatically terminate with respect to a
Member in the event that its interest in its Interest completely terminates and,
upon such complete termination, such Member shall have no further rights or
obligations hereunder other than those rights and obligations arising prior to
such termination. If such Member subsequently acquires or reacquires any
Interests, it shall automatically become bound once again by the terms of this
Agreement. This paragraph (b) in no event shall be interpreted so as to relieve
a Member of liability for its breach of or failure to comply with any term or
provision hereof arising or existing prior to or at the time of the termination
of this Agreement.
9.03 Class A Redemption.
During any Premium Trading Period, the Company is entitled to,
upon the resolution of the Managing Member, to effectuate a Class A Redemption
of any or all of the Class A Interests, from time to time during such period or
periods (provided, however, that if less than all of the Class A Interests are
to be redeemed, such Interests shall be redeemed pro rata or by lot as
determined by the Managing Member in its sole discretion) and following an Early
Termination Trigger Date, the Company is entitled to, upon the resolution of the
Managing Member, to effectuate a Class A Redemption of all of the Class A
Interests, as follows:
(a) Notice of redemption of the Class A Interests, specifying
the date fixed for redemption (the "Redemption Date") and place of redemption,
shall be given by first class mail to the holders of all of the Class A
Interests in the case of a redemption following an Early Termination Trigger
Date or, in the case of Premium Trading Period, holders of those Class A
Interests to be redeemed (the "Redeemed Members"), at their addresses of, not
more than 30 calendar days prior to the Redemption Date.
(b) Notice of redemption of the Class A Interests having been
given as provided in Section 9.03(b), then all rights of the Redeemed Members
(except the right to receive the redemption price) shall cease with respect to
such Interests on the Redemption Date and such Interests shall not, after the
Redemption Date, be deemed to be outstanding and shall not have the status of
Class A Membership Interests.
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(c) The Company shall determine the per Unit redemption price
(the "Redemption Price"), which will be such amount as would be receivable by
one Class A Membership Unit if a Liquidating Distribution were made pursuant to
Section 10.02(a) hereof on the Redemption Date; provided, however, (subject to
the next proviso) that the fair market value of the Company's assets will be
valued as of the first trading day prior to the date of the redemption notice
and provided further, that the Preferred Shares and Common Stock will be valued
in accordance with Section 9.03(e).
(d) The Company shall provide the Redeemed Members with the
Redemption Price for each of their Class A Interests on the Redemption Date by
delivering cash or assets, which may include Securities, selected by the
Managing Member, which shall be valued by the Managing Member in accordance with
Section 9.03(c) and (e); provided, however, that, except in the case of
redemption following an Early Termination Trigger Date, the Redemption Price
shall be paid entirely in Preferred Securities or securities issued upon
conversion or exchange of the Preferred Securities, or in cash derived from the
sale of Preferred Securities or securities issued upon conversion or exchange of
the Preferred Securities to a third party not affiliated with the Company or the
Managing Member.
(e) Each Preferred Share will be valued on the basis of the Fair
Market Value of the shares of Common Stock into which it could be converted if
it were converted 6 trading days prior to the date of the redemption notice.
Shares of Common Stock (including both shares held by the Company and shares
issuable if Preferred Shares were converted will be valued on the basis of the
average Fair Market Value of the Common Stock for the five consecutive trading
days ending as of the first trading day prior to the date of the redemption
notice.
9.04 All Class Redemption.
No earlier than 30 days prior to the fourth anniversary of the
Effective Date, the Company is entitled to, upon the resolution of the Managing
Member, to effectuate a redemption of all of the Interests other than Class B
Interests (the "Non-Class B Interests"), as follows:
(a) Notice of redemption of the Non-Class B Interests,
specifying that the date fixed for redemption will be the fourth anniversary of
the Effective Date and the place of redemption, shall be given by first class
mail to the holders of all of Non-Class B Interests, at their addresses of, not
more than 30 calendar days prior to the fourth anniversary of the Effective
Date.
(b) Notice of redemption of the Class A Interests having been
given as provided in Section 9.04(a), then all rights of the holders of
Non-Class B Interests (except the right to receive the redemption price) shall
cease with respect to such Interests on the fourth anniversary of the Effective
Date and such Interests shall not, after the fourth anniversary of the Effective
Date, be deemed to be outstanding and shall not have the status of Membership
Interests.
(c) The Company shall determine the per Unit redemption price
(the "Section 9.04 Redemption Price"), which will be such amount as would be
receivable by one Membership Unit if a Liquidating Distribution were made
pursuant to Section
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10.02(a) hereof on the fourth anniversary of the Effective Date; provided,
however, (subject to the next proviso) that the fair market value of the
Company's assets will be valued as of the first trading day prior to the date of
the redemption notice and provided further, that the Preferred Shares and Common
Stock will be valued in accordance with Section 9.03(e).
(d) The Company shall provide the holders of Non-Class B
Interests with the Section 9.04 Redemption Price for each of their Non-Class B
Interests on the fourth anniversary of the Effective Date by delivering cash or
assets, which may include Securities, selected by the Managing Member, which
shall be valued by the Managing Member in accordance with Section 9.03 (e) and
9.04(c).
9.05 Redemptions. Other than as specifically provided in this Agreement the
Company shall not have the right to require Members to resell their Units to the
Company. The Company shall not, as long as there are any Class A Members, redeem
or repurchase any Class B Units without the written consent of Class A Members
holding 90% or more of the Class A Units.
ARTICLE X.
DISSOLUTION
10.01 Events Requiring Dissolution.
The Company shall be dissolved upon the happening of any of
the following events:
(a) termination in accordance with expiration of its period of
duration as set forth in Section 9.01 hereof;
(b) the occurrence of any event which would make unlawful under the
laws of Delaware or the United States of America the continuing existence of the
Company;
(c) the affirmative vote of each of (i) the Class B Members voting
as a Class and (ii) the Members (other than the Class B Members ) voting
together as one Class; or
(d) the entry of a decree of judicial dissolution pursuant to the
Act.
10.02 Liquidating Distribution.
(a) If the Company is dissolved and its affairs are to be wound up, the
Managing Member shall (1) sell or otherwise liquidate all of the Company's
assets as promptly as practicable (except to the extent the Managing Member may
determine to distribute any assets to the Members in kind), (2) allocate any net
profits or net losses resulting from such sales to the Members' Capital Accounts
in accordance with Article V hereof, (3) discharge all liabilities of the
Company (other than liabilities to Members), whether by payment or the making of
27
reasonable provision for payment thereof, including all costs relating to the
dissolution, winding up, and liquidation and distribution of assets, (4)
establish such reserves as may be reasonably necessary to provide for
contingent, conditional and unmatured liabilities of the Company (for purposes
of determining the Capital Accounts of the Members, the amounts of such reserves
shall be deemed to be an expense of the Company), (5) discharge any liabilities
of the Company to the Members other than on account of their Interests and their
interest in the Company's capital or profits, and (6) distribute the remaining
assets in the following order and manner:
(i) If any assets of the Company are to be distributed in kind, the net
Fair Market Value of such assets as of the date of dissolution. Such assets
shall be deemed to have been sold as of the date of dissolution for their Fair
Market Value, and the Capital Accounts of the Members shall be adjusted to
reflect gain or loss realized on such deemed sale.
(ii) The remaining assets attributable to the Preferred Securities and
the proceeds therefrom shall be distributed to the Members in cash or in kind,
as determined by the Managing Member, as follows:
(A) first, on a pari passu basis, to the Class A Members an
amount equal to (1) the product of (A) the Rate of Return and (B) the number of
years during the period commencing on the Effective Date and ending on the date
of distribution and (C) the Initial Capital Contribution made by such Class A
Members less (2) distributions with respect to such previously made pursuant to
Section 5.06(b)(ii);
(B) second, after the foregoing distributions have been made,
the remaining assets shall be distributed to the Members on a pari passu basis
based on their Interest Percentage until their Capital Accounts are reduced to
zero; and
(C) third, after the foregoing distributions have been made, (i)
if the Plan of Recapitalization has been completed, that portion of the
remaining assets which is equal to 1/2 multiplied by a fraction the numerator of
which is the number of Class A Units and the denominator of which is the number
of all Units (other than Class B Units) shall be distributed to the Class A
Members on a pari passu basis based on their Class Interest Percentages and the
remainder to the Class B Members based on their Class Interest Percentages and
(ii) if the Plan of Recapitalization has not been completed, that portion (the
"Portion") of the remaining assets which is equal to 3/4 multiplied by a
fraction the numerator of which is the number of Initial Class A Units (as
defined below) and the denominator of which is the number of all Units (other
than Class B Units) shall be distributed to the Initial Class A Unitholders on a
pari passu basis based on their Class Interest Percentages (provided, however,
that in the case of distributions prior to January 1, 2002, unless the Plan of
Recapitalization has been terminated, 1/3 of the Portion shall be set aside by
the Company and shall be released by the Company to the Initial Class A
Unitholders if and only if the Plan of Recapitalization is terminated or has not
occurred prior to January 1, 2002, and shall be released and made generally
available to the Company if the Plan of Recapitalization occurs prior to January
1, 2002), that portion of the remaining assets which is equal to 1/2 multiplied
by a fraction the numerator of which is the number of Class A Units (other than
Initial Class A Units) and the denominator of which is the number of all Units
(other than Class B Units) shall be distributed to the Class A Members (other
than Initial Class A Unitholders) on a pari passu basis based on their Class
28
Interest Percentages and the remainder to the Class B Members based on their
Class Interest Percentages; provided, however, that the Managing Member may
amend clause 10.02 (a) (ii) prior to the Funding Date so long as such amendment
will not cause the Initial Class A Unitholders to not be entitled on a pari
passu basis to at least 1/775th of all distributions (other than the
distributions to the Class B Members) per each Initial Class A Unit under such
clauses and will not reduce the aggregate amount to be distributed under such
clauses with respect to all Units (other than Class B Units).
(iii) The remaining assets not attributable to the Preferred Securities
and the proceeds there from shall be distributed to the Class B Members in cash
or in kind, as determined by the Managing Member, based on their Class Interest
Percentage
in accordance with the positive balance of each Member's Capital Account as
determined after taking into account all Capital Account adjustments for the
Company's taxable year during which the liquidation occurs and the allocations
and distributions provided for in Article V hereof. Any assets distributed in
kind shall be valued for this purpose at the fair market value as determined
pursuant to Section 10.02(a)(i). Any such distributions to the Members in
respect of their Capital Accounts shall be made in accordance with the time
requirements set forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).
(b) Notwithstanding anything to the contrary in this Agreement, upon a
liquidation of the Company within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g), if any Member has a negative Capital Account (after giving
effect to all contributions, distributions, allocations and other Capital
Account adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any
contribution to the capital of the Company, and the negative balance of such
Member's Capital Account shall not be considered a debt owed by such Member to
the Company or to any other person for any purpose whatsoever.
(c) Upon completion of the winding up, liquidation and distribution of
the assets, the Company shall be deemed terminated.
(d) The Managing Member shall comply with any applicable requirements of
applicable law pertaining to the winding up of the Company and the final
distribution of its assets.
10.03 Claims of the Members. The Members shall look solely to the Company's
assets for the return of their Capital Contributions or satisfaction of any
obligations respecting any loans made by a Member to the Company, and if the
assets of the Company remaining after payment of or due provision for all debts,
liabilities and obligations of the Company are insufficient to return such
Capital Contributions or to satisfy any obligation respecting such loans, the
Members and former Members shall have no recourse against any Member, the
Managing Member or their Affiliates.
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ARTICLE XI.
TAX MATTERS
11.01 Preparation of Tax Returns.
The Managing Member shall arrange for the preparation and
timely filing of all returns of Company income, gains, deductions, losses and
other items required of the Company for federal and state income or franchise
tax purposes and shall use all reasonable efforts to furnish, within 90 days of
the close of each taxable year of the Company, the tax information reasonably
required by Members for federal and state income or franchise tax reporting
purposes. The classification, realization and recognition of income, gain,
losses and deductions and other items shall be accounted for on the cash basis
for federal income tax purposes.
11.02 Tax Elections.
Except as otherwise provided herein, the Managing Member shall
in its sole discretion determine whether to make any available election pursuant
to the Code. All Members agree that the Company will be treated as a partnership
for federal income tax purposes and no election will be made to treat the
Company as an association for federal income tax purposes.
11.03 Tax Controversies.
Subject to the provisions hereof, the Managing Member is
hereby designated the "Tax Matters Partner" (as defined in Section 6231 of the
Code) for the Company, and is authorized and required to represent the Company
(at the Company's expense) in connection with all examinations of the Company's
affairs by tax authorities, including, without limitation, resulting
administrative and judicial proceedings, and to expend Company funds for
professional services and costs associated therewith. Each Member and Assignee
agrees to cooperate with the Tax Matters Partner and to do or refrain from doing
any or all things reasonably required by the Tax Matters Partner to conduct such
proceedings.
11.04 Withholding.
Notwithstanding any other provision of this Operating
Agreement, the Managing Member shall be authorized to take any action that they
determine in their sole discretion to be necessary or appropriate to cause the
Company to comply with any withholding requirements established under the Code
or any other federal, state or local law, including, without limitation,
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that
the Company is required to withhold and pay over to any taxing authority any
amount resulting from the allocation or distribution of income to any Member or
Assignee (including, without limitation, by reason of Section 1446 of the Code),
the amount withheld shall be treated as a distribution of cash in the amount of
such withholding from such Member or Assignee.
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ARTICLE XII.
GENERAL PROVISIONS
12.01 Addresses and Notices.
Any notice, offer, consent, demand, request or other
communication required or permitted to be given or made to a Member or Assignee
under this Operating Agreement shall be made in writing and shall be deemed
given or made when delivered in person or by overnight courier service next
business day delivery to the Member at the address or facsimile number provided
to the Company by the Member or to such other address or number as the Member or
Assignee may hereafter designate by written notice.
12.02 Titles and Captions.
All article or section titles or captions in this Operating
Agreement are for convenience only. They shall not be deemed part of this
Operating Agreement and in no way define, limit, extend or describe the scope or
intent of any provisions hereof.
12.03 Pronouns and Plurals.
Whenever the context may require, any pronoun used in this
Operating Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
12.04 Governing Law; Successors; and Severability.
This Operating Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and, subject to the
restrictions on transferability set forth in this Operating Agreement, shall
bind and inure to the benefit of the heirs, executors, personal representatives,
successors and assigns of the Members. The rights and liabilities of the Members
and the Managing Member under this Operating Agreement shall be as provided by
Delaware law.
12.05 Entire Agreement.
This Operating Agreement constitutes the sole operating
agreement of the Company and constitutes the entire agreement among the parties.
This Operating Agreement supersedes any prior agreements or understandings, oral
or written, between the parties with respect to the limited liability company
formed herein, all of which are hereby canceled.
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12.06 Amendment.
(a) Agreement May Be Modified. This Agreement may be modified
only as provided in this Section 12.06. Subject to Section 12.06(b) no Member
shall have any vested rights in this Agreement which may not be modified through
an amendment to this Agreement.
(b) Amendment or Modification of Agreement. Subject to Section
5.06 and Section 8.02, this Agreement may be amended or modified from time to
time only by a written instrument adopted by the Managing Member; provided that
any modifications of this Agreement which increases the financial obligations or
liabilities of any Class of Members or reduces the economic rights or voting
rights of any Class of Members must be consented to by the Class of Members so
affected; provided further that this paragraph shall not in any way restrict the
Managing Member or the Officers from issuing prior to the Funding Date
additional Class A Units and Class B Units and admitting Additional Members
within the authorized number of Class A Units and Class B Units set forth in
Section 4.01 hereof.
12.07 Joinder of Future Spouses.
Each Member agrees, promptly upon his or her marriage or
remarriage, as the case may be, to endeavor to have his or her spouse ("Spouse")
execute a counterpart of this Operating Agreement in order to evidence his or
her intent to be bound hereby, to evidence such Spouses' knowledge of the
Operating Agreement's existence and contents, to acknowledge that this Operating
Agreement is fair, equitable and in such Spouse's best interests, and to bind
the community interest of each Spouse, if any, and the heirs, beneficiaries,
administrators, executors, legal representatives and assigns of such Spouse to
this Operating Agreement and to evidence that the respective community interest
of a Spouse, if any, in and to any Interests held by a Member or any interest
therein are covered by and embraced by the terms and provisions of this
Operating Agreement in all respects. Each Spouse will thereby further
specifically designate his or her Member spouse as manager of any and all
interest in the Company which constitutes the community or separate property of
each Spouse and his or her Member spouse and agrees that such Member spouse
shall have the sole right to exercise the rights, powers and privileges granted
under this Operating Agreement relating to such interest in the Company until
the death of such Spouse or dissolution of the marriage of such Spouse and
Member spouse. Nothing herein shall require the execution of this Operating
Agreement by the Spouse of any Member whose Interest is held as the separate
property of such Member.
12.08 Dispute Resolution.
Any dispute arising out of or relating to this Operating
Agreement or the breach, termination or validity hereof shall be finally settled
by binding arbitration conducted expeditiously in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as in effect from time
to time, and judgment upon the award rendered by the arbitrators may be entered
by any court having jurisdiction thereof. The place of arbitration shall be in
New York, New York.
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Notwithstanding anything to the contrary contained herein, the
provisions of this Section 12.08 shall not apply with regard to any equitable
remedies to which the Company or any Member may be entitled hereunder.
12.09 Activities. No Member or Officer of the Company shall be restricted in
its, his or her right to engage in any business activity whatsoever (including
activities competitive with the Company) by virtue of its, his or her Membership
or its, his or her Officer status in the Company.
ARTICLE XIII.
INDEMNIFICATION; AFFILIATE TRANSACTIONS
13.01 Indemnification of Members, Managing Members and Officers.
(a) A Member, Managing Member or Officer shall not be liable to the
Company or any other Member, Managing Member or Officer for any act or omission
based upon errors of judgment or other fault in connection with the business or
affairs of the Company if the Member's, Managing Member's or Officer's conduct
shall not have constituted fraud or willful misconduct.
(b) To the fullest extent permitted by law, each Member, Managing Member
and Officer shall be indemnified and held harmless by the Company from and
against any and all losses, claims, damages, settlements" and other amounts
(collectively, "Losses") arising from any and all claims (including attorneys'
fees and expenses, as such fees and expenses are incurred), demands, actions,
suits or proceedings (civil, criminal, administrative or investigative), in
which he may be involved, as a party or otherwise, by reason of the management
of the affairs of the Company, whether or not he continued to be a Member,
Managing Member or Officer or involved in management of the affairs of the
Company at the time any such liability or expense is paid or incurred; provided
that the Member, Managing Member or Officer shall not be entitled to the
foregoing indemnification if a court of competent jurisdiction shall have
determined that such Losses resulted primarily from the fraud or willful
misconduct of such Member, Managing Member or Officer. The termination of a
proceeding by judgment, order, settlement or conviction under a plea of nolo
contendere, or its equivalent, shall not, of itself, create any presumption that
such Losses resulted primarily from the fraud or willful misconduct of the
Member, Managing Member or Officer or that the conduct giving rise to such
liability was not in the best interest of the Company The Company shall also
indemnify a Member, Managing Member or Officer who was or is a party or is
threatened to be made a party to any threatened, pending or completed action by
or in the right of the Company to procure a judgment in its favor by reason of
the fact that such Member, Managing Member or Officer is or was an agent of the
Company, against any Losses incurred by such Member, Managing Member or Officer
in connection with the defense or settlement of such action; provided that no
Member, Managing Member or Officer shall be entitled to the foregoing
33
indemnification if a court of competent jurisdiction shall have determined that
any such Losses resulted from the fraud or willful misconduct of such Member,
Managing Member or Officer. The Company may advance to the Member, Managing
Member or Officer any expenses (including, without limitation, attorneys' fees
and expenses) incurred as a result of any demand, action, suit or proceeding
referred to in this paragraph (b) provided that (i) the legal action relates to
the performance of duties or services by the Member, Managing Member or Officer
on behalf of the Company; and (ii) the Member, Managing Member or Officer
provides a written undertaking to repay to the Company the amounts of such
advances in the event that the Member, Managing Member or Officer is determined
to be not entitled to indemnification hereunder
(c) The indemnification provided by paragraph (b) of this Section 13.01
shall not be deemed to be exclusive of any other rights to which a Member,
Managing Member or Officer may be entitled under any agreement, as a matter of
law, in equity or otherwise, and shall continue as to a Member, Managing Member
or Officer who has ceased to have an official capacity and shall inure to the
benefit of the heirs, successors and administrators of the Member, Managing
Member or Officer
(d) Any indemnification pursuant to this Section 13.01 will be payable
only from the assets of the Company.
13.02 Transactions with a Member, Managing Member or Officer.
A Member, Managing Member or Officer, on behalf of the
Company, may enter into contracts or transactions with himself or herself or any
of his or her Affiliates, provided that any such contract or transaction shall
be on terms no more favorable to the Member, Managing Member or Officer or his
or her Affiliates than generally afforded to unrelated parties in a similar
transaction.
ARTICLE XIV.
SUBJECT TO ALL LAWS
14.01 Subject to All Laws.
The provisions of this Operating Agreement shall be subject to
all valid and applicable laws, including, without limitation, the Act, as now or
hereafter amended, and in the event that any of the provisions of this Operating
Agreement are found to be inconsistent with or contrary to any such valid laws,
the latter shall be deemed to control and this Operating Agreement shall be
deemed modified accordingly, and, as so modified, to continue in full force and
effect.
34
SIGNATURE PAGE
IN WITNESS WHEREOF, each of the undersigned has executed or
caused to be executed by itself or an officer or agent duly authorized, the
Amended and Restated Operating Agreement on the date or dates set forth below.
Dated: ENERGY SYSTEMS INVESTORS LLC
By:_______________________________
Name:
Title:
Dated: THE INITIAL CLASS B MEMBERS:
ENERGY SYSTEMS INVESTORS II LLC
By:_______________________________
Name:
Title:
Dated: XXXXXXXX XXXXXXXXX
_______________________________
SPOUSE:
________________________________
Dated: XXXXX XXXXXXXXX
35
_______________________________
THE INITIAL CLASS A MEMBERS:
Dated: MEMBER:
By: _______________________________
Name:
Title:
ated: SPOUSE:
By:________________________________
Name:
Title:
THE ADDITIONAL INITIAL CLASS A MEMBERS:
Dated: MEMBER:
By: _______________________________
Name:
Title:
Dated: SPOUSE:
By:________________________________
Name:
Title:
36
SIGNATURE PAGE FOR ADDITIONAL
MEMBERS CONSENTING TO THE AMENDED AND RESTATED OPERATING
AGREEMENT OF ENERGY SYSTEMS INVESTORS LLC
IN WITNESS WHEREOF, the new Member has executed this Amended
and Restated Operating Agreement effective for all purposes as of the ____ day
of ___________________, 2001.
The undersigned member has entered into transactions pursuant
to which it will be issued membership interests as set forth on Schedule 1 in
Energy Systems Investors LLC, a Delaware limited liability company (the
"Company"), under the Energy Systems Investors Amended and Restated Operating
Agreement dated as of [ ], 2001 (the "Operating Agreement"). This page
constitutes the signature page to the Operating Agreement respecting such
members.
The undersigned hereby represents and warrants that the person
executing the Operating Agreement has all requisite authority to enter into the
Operating Agreement.
IN WITNESS WHEREOF, the undersigned has executed or caused to
be executed by itself or an officer or agent duly authorized, the Amended and
Restated Operating Agreement on the date or dates set forth below.
Dated: ENERGY SYSTEMS INVESTORS LLC
By:_________________________
Name:
Title:
Dated: MEMBER:
By: ______________________________
Name:
Title:
Dated: SPOUSE:
By: _______________________________
Name:
Title:
37
