EXHIBIT 3.2
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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
MSW ENERGY HOLDINGS LLC
dated as of April 30, 2004
among
HIGHSTAR RENEWABLE FUELS LLC,
MSW ACQUISITION LLC,
and
UNITED AMERICAN ENERGY HOLDINGS CORP.
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................................................2
1.1 Defined Terms..................................................................................2
ARTICLE II ORGANIZATIONAL MATTERS.....................................................................2
2.1 Formation......................................................................................2
2.2 Name...........................................................................................2
2.3 Principal Place of Business....................................................................2
2.4 Registered Office and Registered Agent.........................................................2
2.5 Term...........................................................................................2
2.6 Tax Status.....................................................................................2
ARTICLE III BUSINESS OF THE COMPANY....................................................................3
3.1 Business; Powers...............................................................................3
ARTICLE IV NAMES AND ADDRESSES OF MEMBERS.............................................................3
4.1 Names and Addresses of Members.................................................................3
ARTICLE V CONTRIBUTIONS TO THE COMPANY...............................................................3
5.1 Capital Contributions..........................................................................3
5.2 Additional Capital Contributions...............................................................3
5.3 No Withdrawal of Capital.......................................................................4
5.4 Required Capital Contributions.................................................................4
5.5 [Intentionally Omitted]........................................................................4
5.6 Maintenance of Capital Accounts................................................................4
ARTICLE VI DISTRIBUTIONS..............................................................................5
6.1 Distributions..................................................................................5
6.2 Dissolution....................................................................................5
6.3 Limitation Upon Distributions..................................................................5
6.4 Amounts Withheld...............................................................................5
6.5 Tax Distributions..............................................................................6
ARTICLE VII ALLOCATIONS................................................................................6
7.1 Profits and Losses.............................................................................6
7.2 Tax Allocations................................................................................9
7.3 Section 754 Election..........................................................................10
ARTICLE VIII MANAGEMENT OF THE COMPANY.................................................................10
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TABLE OF CONTENTS
(continued)
Page
8.1 Management....................................................................................10
8.2 Services......................................................................................11
8.3 Liability for Certain Acts....................................................................11
8.4 [Intentionally Omitted.]......................................................................11
8.5 Indemnity of Members, Employees and Other Agents..............................................11
8.6 Compensation..................................................................................12
8.7 Special Provisions............................................................................12
8.8 Independent Director..........................................................................14
ARTICLE IX RIGHTS AND OBLIGATIONS OF MEMBERS.........................................................14
9.1 Limitation on Liability and Authority.........................................................15
9.2 No Liability for Company Obligation...........................................................15
9.3 Priority and Return of Capital................................................................15
ARTICLE X ACCOUNTING AND TAX MATTERS................................................................15
10.1 Fiscal Year...................................................................................15
10.2 Books and Records; Audit......................................................................15
10.3 Reports.......................................................................................16
10.4 Tax Returns...................................................................................16
10.5 Tax Matters Member............................................................................16
10.6 Bank Accounts.................................................................................17
ARTICLE XI RESTRICTIONS ON TRANSFER..................................................................17
11.1 Restrictions on Transfers.....................................................................17
11.2 Substitute Member.............................................................................17
11.3 Withdrawal of Members.........................................................................17
ARTICLE XII DISSOLUTION AND TERMINATION...............................................................17
12.1 Dissolution...................................................................................17
12.2 Effect of Dissolution.........................................................................18
12.3 Winding Up, Liquidation and Distribution of Assets............................................18
12.4 Certificate of Cancellation...................................................................18
12.5 Return of Contribution; Nonrecourse Against Other Member......................................19
ARTICLE XIII REPRESENTATIONS AND WARRANTIES............................................................19
13.1 Representations and Warranties:...............................................................19
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TABLE OF CONTENTS
(continued)
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ARTICLE XIV MISCELLANEOUS PROVISIONS..................................................................19
14.1 Notices:......................................................................................19
14.2 Entire Agreement..............................................................................20
14.3 Modifications and Waivers.....................................................................20
14.4 Separable Provisions..........................................................................20
14.5 Counterparts..................................................................................20
14.6 Governing Law.................................................................................20
14.7 Further Assurances............................................................................20
14.8 Successors and Assigns........................................................................21
14.9 Third-Party Beneficiaries.....................................................................21
14.10 No Partnership Intended for Nontax Purposes; Membership Interests
not Securities; No Partnership Intended for Bankruptcy Purposes...............................21
14.11 [Intentionally Omitted].......................................................................21
14.12 Non-Recourse..................................................................................21
14.13 Amended and Restated LLC Agreement Superceded.................................................21
14.14 WAIVER OF JURY TRIAL..........................................................................21
Exhibit A Capital Contributions and Ownership Percentages
Exhibit B Members Agreement
Exhibit C Joinder Agreement
Appendix A Definitions
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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
MSW ENERGY HOLDINGS LLC
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(this "Agreement") OF MSW ENERGY HOLDINGS LLC, a Delaware limited liability
company (the "Company"), is made and entered into as of April 30, 2004 (the
"Effective Date"), among HIGHSTAR RENEWABLE FUELS LLC, a Delaware limited
liability company ("Highstar"), HIGHSTAR RENEWABLE FUELS I LLC, a Delaware
limited liability company ("Highstar I"), MSW ACQUISITION LLC, a Delaware
limited liability company (formerly known as MSW Acquisition Corp.) ("DLJMB"),
and UNITED AMERICAN ENERGY HOLDINGS CORP., a Delaware corporation (the "Managing
Member").
W I T N E S S E T H:
WHEREAS, on March 11, 2003, the Company was formed pursuant to a
Certificate of Formation filed with the Secretary of State of Delaware in
accordance with the provisions of the Delaware Limited Liability Company Act,
and the Members executed and delivered the Limited Liability Company Agreement
of the Company;
WHEREAS, on June 24, 2003 the Members executed and delivered an Amended
and Restated Limited Liability Company Agreement (the "Amended and Restated LLC
Agreement");
WHEREAS, on April 29, 2004, pursuant to a Joinder Agreement
countersigned by the Company, Highstar transferred to Highstar I a 39.89%
Membership Interest resulting in Highstar I becoming a Member of the Company;
WHEREAS, the Company (i) indirectly through MSW Energy Xxxxxx LLC, a
Delaware limited liability company and a wholly-owned subsidiary of the Company
(formerly known as Duke Energy Xxxxxx LLC) ("Xxxxxx"), owns a 49.8% membership
interest in Ref-Fuel Holdings LLC, a Delaware limited liability company
("Ref-Fuel Holdings"), and (ii) has agreed, pursuant to the Equity Purchase
Agreement dated as of March 19, 2003 (as the same may be amended from time to
time, the "Equity Purchase Agreement"), between the Company and Duke Energy
Global Markets, Inc., a Nevada corporation ("Duke"), to purchase, directly or
indirectly, Duke Energy Erie LLC, a Delaware limited liability company ("Erie"),
which in turn owns a 0.2% membership interest in Ref-Fuel Holdings;
WHEREAS, Ref-Fuel Holdings owns 100% of the outstanding membership
interests in American Ref-Fuel Company LLC, a Delaware limited liability company
("ARC Holdings"), which in turn owns, directly or indirectly, (i) all of the
general or limited partnership interests in American Ref-Fuel Company of
Delaware Valley, L.P., a Delaware limited partnership, American Ref-Fuel Company
of Hempstead, a New York general partnership, American Ref-Fuel Company of Essex
County, a New Jersey general partnership, American Ref-Fuel Company of Niagara,
L.P., a Delaware limited partnership, and American Ref-Fuel Company of
Southeastern Connecticut, a Connecticut general partnership, and (ii) 90% of the
partnership interests in SEMASS Partnership, a Massachusetts limited partnership
(the partnerships referred to in this paragraph are collectively referred to as
the "Purchased Project Partnerships");
WHEREAS, the Purchased Project Partnerships operate six waste-to-energy
facilities in the United States; and
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WHEREAS, the Members desire to amend and restated the Amended and
Restated LLC Agreement on the terms set forth herein to, among other things,
admit the Managing Member as a member of the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, the receipt, adequacy and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms.
(a) For purposes hereof, capitalized terms used herein shall have the
meanings assigned to such terms in Appendix A.
(b) The rules of interpretation set forth in Appendix A shall apply to this
Agreement and the exhibits hereto.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. The Company has been formed as a limited liability company
under and pursuant to the provisions of the Act, and the rights, duties,
obligations and liabilities of the Members shall be as provided in the Act,
except as otherwise provided herein.
2.2 Name. The name of the Company is MSW Energy Holdings LLC.
2.3 Principal Place of Business. The Company may locate its principal place
of business at such place or places as the Managing Member may from time to time
deem advisable.
2.4 Registered Office and Registered Agent. The Company's initial
registered office shall be at the office of its initial registered agent at The
Corporation Trust Company, 0000 Xxxxxx Xxxxxx, xx xxx Xxxx xx Xxxxxxxxxx, Xxxxxx
of New Castle, Delaware. The name of its initial registered agent at such
address is The Corporation Trust Company. The registered office and registered
agent may be changed by the Managing Member from time to time by filing the
address of the new registered office and/or the name of the new registered agent
with the Secretary of State of Delaware pursuant to the Act.
2.5 Term. The term of the Company commenced on the date its Certificate of
Formation was filed with the Secretary of State of Delaware and shall continue
until the filing of a Certificate of Cancellation with the Secretary of State of
Delaware as provided in Section 12.4.
2.6 Tax Status. The Members intend that the Company shall be treated as a
partnership for federal and state income tax purposes, rather than an
association taxable as a corporation, and neither the Members nor the Company
shall make any election pursuant to Section 301.7701-3(c) of the Regulations or
any similar state statute, regulation, rule or policy to be treated as other
than a partnership for federal and state income tax purposes.
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ARTICLE III
BUSINESS OF THE COMPANY
3.1 Business; Powers. Subject to all other provisions of this Agreement,
including Section 8.7, the purposes of the Company shall be (i) to consummate
the Equity Purchase Agreement and own 50% of the outstanding membership
interests in Ref-Fuel Holdings (directly or through its Affiliates) (the
"Ref-Fuel Holdings Ownership Interest"), (ii) directly or through its
Affiliates, to maintain, finance, and/or otherwise operate and deal with its
interest in Ref-Fuel Holdings, (iii) directly or through its Affiliates, to
acquire, construct, develop, own, maintain, finance and/or otherwise operate
other facilities in the United States that utilize municipal solid waste for the
production and sale of electricity and ancillary services (together with the
facilities currently held by the Purchased Project Partnerships, the
"Facilities"), and develop, own and/or operate electric generation facilities at
any Facility currently held by any Purchased Project Partnership and in
connection therewith, the conduct of any waste collection business, including
the ownership of waste transfer stations, together with any businesses ancillary
to any of the foregoing, and (iv) directly or through its Affiliates, to sell,
exchange, transfer or otherwise dispose of any part of its interest in Ref-Fuel
Holdings, the Purchased Project Partnerships and/or the Facilities. The
Company's business objective shall be its long-term profitability and growth, as
distinct from the related businesses of its Members or their Affiliates. In
furtherance of its purposes set forth above, but subject to all other provisions
of this Agreement, the Company shall possess and may exercise all the powers and
privileges granted by the Act.
ARTICLE IV
NAMES AND ADDRESSES OF MEMBERS
4.1 Names and Addresses of Members. The names and addresses of the Members
are set forth on Exhibit A attached hereto and in Section 14.1, as such exhibit
and addresses may be amended or changed from time to time. On the date hereof,
the Managing Member has been admitted to the Company as the Managing Member
hereunder.
ARTICLE V CONTRIBUTIONS TO THE COMPANY
5.1 Capital Contributions. The Capital Contributions of the Members as of
the Effective Date are as set forth on Exhibit A hereto.
5.2 Additional Capital Contributions.
(a) Each Member shall make its proportionate share (determined in
accordance with Section 5.2(b)) of such Additional Capital Contributions as the
Managing Member shall determine to be necessary (to the extent the Company does
not otherwise have funds available therefor) for the Company to pay (A) its
annual fees in each jurisdiction in which it is qualified to do business and (B)
any corporate maintenance or registered agent fees to any nationally recognized
corporate service company or other Person, for each jurisdiction in which the
Company is qualified to do business. All Additional Capital Contributions shall
be Tendered and made on or before the respective Capital Call Date. All
Additional Capital Contributions made by the Members pursuant to this Section
5.2(a) shall be made pro rata based upon their Ownership --------------
Percentages. The Managing Member, in the case of Additional Capital
Contributions pursuant to this Section 5.2(a), shall -------------- give the
Members reasonable prior notice of the amount of the Additional Capital
Contribution and the Capital Call Date.
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(b) If the Company requires or otherwise desires to raise additional
capital for any purpose other that the purposes set forth in Section 5.2(a),
then the Company shall comply with Sections 2.02 and 4.05 of the Members
Agreement.
5.3 No Withdrawal of Capital. Except as specifically provided in this
Agreement, no Member shall have the right to withdraw all or any part of its
Capital Contributions from the Company, nor shall any Member have any right to
demand and receive property other than cash as a return of its Capital
Contributions. Except as specifically provided in this Agreement, no Member
shall have the right to receive interest on its Capital Contributions or its
Capital Account.
5.4 Required Capital Contributions. No Member shall have any obligation to
make any Capital Contributions other than as expressly set forth herein. In
particular, subject to Section 9.2, no Member shall have any obligation to
restore (to the Company or to any creditor of the Company) any deficit balance
in its Capital Account at any time, whether on liquidation or otherwise, and
such deficit balance shall not be considered a debt owed by such Member to the
Company or to any other Person for any purpose whatsoever.
5.5 [Intentionally Omitted].
5.6 Maintenance of Capital Accounts.
(a) A Capital Account shall be established and maintained for each Member
in accordance with this Section 5.6.
(b) The Capital Account for each Member shall be maintained in accordance
with Section 1.704-1(b)(2)(iv) of the Regulations and the following provisions:
(i) to such Member's Capital Account there shall be credited such Member's
Capital Contributions, such Member's distributive share of Profits and items of
income or gain specially allocated hereunder and the amount of any Company
liabilities that are assumed by such Member or that are secured by any Company
assets distributed to such Member;
(ii) to such Member's Capital Account there shall be debited the amount of
cash and the Book Value of any other property of the Company distributed to such
Member pursuant to any provision of this Agreement, such Member's distributive
share of Losses and items of loss, expense and deduction specially allocated
hereunder and the amount of any liabilities of such Member that are assumed by
the Company or that are secured by any property contributed by such Member to
the Company; and
(iii) in determining the amount of any liability for purposes of this
subsection (b), there shall be taken into account Section 752(c) of the Code and
any other applicable provisions of the Code and the Regulations.
(c) If all or a portion of any Membership Interest is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent such Capital Account relates to
the portion of the Membership Interest so transferred.
(d) If the Managing Member shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities that
are secured by contributed or distributed property or that are assumed by the
Company or the Members) are computed in order to comply with the Code and the
Regulations, the Managing Member may make such modification if, in the good
faith judgment of the Managing Member, it is not likely to have a material
adverse effect on the amounts distributable or the timing of distributions to
any Member. The Managing Member also shall make any appropriate modifications if
unanticipated events might otherwise cause this Agreement not to comply with
Section 1.704-1(b) of the Regulations.
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ARTICLE VI
DISTRIBUTIONS
6.1 Distributions. Subject to any contractual restrictions binding upon the
Company and its Subsidiaries, which restrictions shall not be amended or
modified in any manner to be more restrictive upon the Company or its
Subsidiaries (and new restrictions shall not be agreed to) without the consent
of the Managing Member, Distributable Cash shall be distributed to the Members
in the following order of priority, on a monthly basis to the extent
practicable, but in no event less frequently than quarterly; provided, however,
that all principal, interest and any other amounts outstanding under any Backup
Loan (whether or not due) shall be paid out of Distributable Cash prior to the
making of any distributions pursuant to this Section 6.1:
(a) first, to the Members to the extent of their respective Unpaid
Preferred Returns (or in proportion to the amounts so required to be
distributed, if the total amount available to be distributed under this Section
6.1(a) is less);
(b) second, to the Members to the extent of their respective Unpaid
Preferred Contributions (or in proportion to the amounts so required to be
distributed, if the total amount available to be distributed under this Section
6.1(b) is less); and
(c) third, to the Members in accordance with their respective Ownership
Percentages.
6.2 Dissolution. Notwithstanding Section 6.1, upon dissolution of the
Company as provided in Section 12.1, all distributions occurring after such
dissolution shall be made in accordance with Section 12.3.
6.3 Limitation Upon Distributions. No distributions shall be made to any
Member if prohibited by the Act or if such Member shall at the time of such
distribution be in material default of its obligations under this Agreement.
6.4 Amounts Withheld. Notwithstanding anything to the contrary in this
Agreement, to the extent that the Company is required pursuant to applicable
federal, state, local, or foreign law either to (i) pay tax (including estimated
tax) on a Member's allocable share of Profits or items of income or gain,
whether or not distributed, or (ii) withhold and pay over to any tax authority
any portion of a distribution otherwise distributable to a Member, the Company
may pay over such tax or such withheld amount to the relevant tax authority. Any
such tax or withheld amount so paid over shall reduce the applicable amount
otherwise distributable to such Member under Section 6.1 and/or Section 12.3
and, as necessary, shall offset the next distribution(s) to be made to that
Member under Section 6.1 and/or Section 12.3 on a dollar-for-dollar basis and
shall be deemed to have been distributed to that Member under Section 6.1 and/or
Section 12.3 when so applied.
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6.5 Tax Distributions. Subject to any contractual restrictions binding upon
the Company and its Subsidiaries, which restrictions shall not be amended or
modified in any manner to be more restrictive upon the Company or its
Subsidiaries (and new restrictions shall not be agreed to) without the consent
of the Managing Member, the Company shall make quarterly distributions to each
of the Members in an amount designed to assist such Members in satisfying their
tax liability (including, estimated income tax liability) arising from
allocations of income, gain, loss, deduction and credit of the Company for which
such an allocation is required (a "Tax Distribution").
(a) Amount of Distribution. In determining the amount of any Tax
Distribution, it shall be assumed that the items of income, gain, deduction,
loss and credit in respect of the Company were the only such items entering into
the computation of tax liability of the Members for the Fiscal Year in respect
of which the Tax Distribution was made and that the Members were subject to tax
at the highest marginal effective rate of federal, state and local income tax
applicable to a corporation doing business in New York, New York, taking account
of any difference in rates applicable to ordinary income and capital gains and
any allowable deductions in respect of such state and local taxes in computing
such Members' liability for federal income taxes. No account shall be taken of
any items of deduction or credit attributable to a Membership Interest that may
be carried back or carried forward from any other taxable year.
(b) Limitations on Tax Distributions. The amount to be distributed to a
Member as a Tax Distribution in respect of any Fiscal Year shall be computed as
if any distributions made pursuant to Section 6.1 during such Fiscal Year were a
Tax Distribution in respect of such Fiscal Year.
(c) Effect of Tax Distributions. Any Tax Distributions made pursuant to
this Section 6.5 shall be considered an advance against the next distribution
payable to the applicable Member pursuant to Section 6.1 and shall reduce such
distributions.
ARTICLE VII
ALLOCATIONS
7.1 Profits and Losses.
(a) Profits. Subject to Section 7.1(c), any Profits of the Company for any
Fiscal Year or any other period shall be allocated among the Members as follows:
(i) first, in inverse order and to the extent of any net prior allocations
of Losses under Sections 7.1(b)(ii)-(iv) (after taking into account previous
allocations of Profits under this Section 7.1(a)(i));
(ii) second, to the Members to the extent of their respective Unallocated
Preferred Returns (or in proportion to the amounts so required to be allocated,
if the total amount available to be allocated under this Section 7.1(a)(ii) is
less); and
(iii) third, to the Members in accordance with their respective Ownership
Percentages.
(b) Losses. Subject to Section 7.1(c), any Losses of the Company for any
Fiscal Year or other period shall be allocated among the Members as follows:
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(i) first, in inverse order and to the extent of any net prior allocations
of Profits under Section 7.1(a)(ii)-(iii) (after taking into account previous
allocations of Losses under this Section 7.1(b)(i)); provided, however, that any
allocations of Profits reversed by allocations of Losses under this Section
7.1(b)(i) shall be treated as never having been made for all purposes of this
Article VII;
(ii) second, to the Members in proportion to the positive balances in their
respective Common Capital Accounts until no Member's Common Capital Account
balance is greater than zero;
(iii) third, to the Members in proportion to the positive balances in their
respective Capital Accounts until no Member's Capital Account balance is greater
than zero; and
(iv) fourth, to the Members in accordance with their respective Ownership
Percentages.
(c) Special Rules. Notwithstanding the general allocation rules set forth
in Sections 7.1(a) and 7.1(b), the following special allocation rules shall
apply under the circumstances described:
(i) Limitation on Loss Allocations. The Losses allocated to any Member
pursuant to Section 7.1(b) with respect to any Fiscal Year shall not exceed the
maximum amount of Losses that can be so allocated without causing such Member to
have a negative Adjusted Capital Account at the end of such Fiscal Year if any
other Member has a positive Adjusted Capital Account balance. All Losses in
excess of the limitation set forth in this Section 7.1(c)(i) shall be allocated
(1) first, to those Members who will not be subject to this limitation, in the
ratio that their Ownership Percentages bear to each other, and (2) second, any
remaining amount to the Members in the manner required by the Code and the
Regulations.
(ii) Qualified Income Offset. If in any Fiscal Year a Member unexpectedly
receives an adjustment, allocation or distribution described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such adjustment,
allocation or distribution causes that Member's Adjusted Capital Account to
become negative (or increases the negative balance in that Member's Adjusted
Capital Account), then such Member shall be allocated items of income and gain
(consisting of a pro rata portion of each item of Company income, including
gross income and gain) in an amount and manner sufficient to eliminate the
deficit balance in such Member's Adjusted Capital Account as quickly as
possible. The preceding sentence is intended to constitute a "qualified income
offset" within the meaning of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted and applied in a manner consistent therewith.
(iii) Nonrecourse Deductions and Chargebacks. Notwithstanding any other
provision of this Agreement to the contrary, nonrecourse deductions (as defined
in Section 1.704-2(b)(1) of the Regulations) shall be allocated to the Members
pro rata in accordance with their respective Ownership Percentages.
Notwithstanding any other provision of this Agreement to the contrary, if there
is a net decrease in Company Minimum Gain during a Fiscal Year or part thereof,
the Members shall be allocated items of income and gain in accordance with
Section 1.704-2(f) of the Regulations. The preceding sentence is intended to
comply with the minimum gain chargeback requirements of Section 1.704-2(f) of
the Regulations and shall be interpreted and applied in a manner consistent
therewith.
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(iv) Member Nonrecourse Deductions and Chargebacks. Notwithstanding any
other provision of this Agreement to the contrary, any partner nonrecourse
deductions (as defined in Section 1.704-2(i)(1) of the Regulations) shall be
allocated to the Member who (in his, her or its capacity, directly or
indirectly, as lender, guarantor, or otherwise) bears the economic risk of loss
with respect to the loan to which such partner nonrecourse deductions are
attributable in accordance with Section 1.704-2(i) of the Regulations.
Notwithstanding any other provision of this Agreement, if during a Fiscal Year
or part thereof there is a net decrease in partner nonrecourse debt minimum gain
(as that term is defined in Section 1.704-2(i)(2) of the Regulations), that
decrease shall be charged back among the Members in accordance with Section
1.704-2(i)(4) of the Regulations. The preceding sentence is intended to comply
with the partner nonrecourse debt minimum gain chargeback requirement of Section
1.704-2(i)(4) of the Regulations and shall be interpreted and applied in a
manner consistent therewith.
(v) Curative Allocations. The allocations set forth in Sections 7.1(c)(i)
through 7.1(c)(iv) (the "Regulatory Allocations") are intended to comply with
certain requirements of Section 704(b) of the Code and the Regulations
thereunder. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 7.1(c)(v). Notwithstanding any other
provisions of this Section 7.1(c) (other than the Regulatory Allocations), the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss, and deduction among the Members so that, to the extent
possible, subject to Sections 7.1(c)(i) through 7.1(c)(iv), the net amount of
such allocations of other items and the Regulatory Allocations to each Member
shall be equal to the net amount that would have been allocated to such Member
if the Regulatory Allocations had not occurred.
(vi) Change in Regulations. If the Regulations that require the Regulatory
Allocations are hereafter changed or if new Regulations are hereafter adopted,
and such changed or new Regulations, in the opinion of tax counsel for the
Company, make it necessary to revise the Regulatory Allocations or provide
further special allocation rules in order to avoid a significant risk that a
material portion of any allocation set forth in this Article VII would not be
respected for federal income tax purposes, the Members shall make such
reasonable amendments to this Agreement as, in the opinion of such counsel, are
necessary or desirable, taking into account the interests of the Members as a
whole and all other relevant factors, to avoid or reduce significantly such risk
to the extent possible without materially changing the amounts allocable and
distributable to any Member pursuant to this Agreement.
(vii) Change in Members' Interests. In the event of a transfer of a
Membership Interest or a change in a Member's Ownership Percentage during any
Fiscal Year, allocations among the Members shall be made in accordance with
their Ownership Percentages from time to time during such Fiscal Year in
accordance with Section 706 of the Code, using the methodology determined by the
Managing Member; provided, however, that in the event of a transfer by Highstar
or Highstar I or a change in Highstar's or Highstar I's Ownership Percentage
during any Fiscal Year, the methodology used will be mutually agreeable to the
Managing Member and Highstar.
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(viii) Terminating Allocations. Notwithstanding the provisions of Sections
7.1(a) and 7.1(b), any Profits or Losses from the disposition (by sale,
exchange, distribution, or other disposition) of all or substantially all of the
assets of the Company in one or a series of related transactions (and, if
necessary, any other items of gross Company income, gain, loss, or deduction
incurred in the year of such transaction(s)) shall be allocated to the Members
so that, immediately before the making of any liquidating distributions to the
Members under Section 12.3, each Member's Capital Account equals, as nearly as
possible, the respective amount to which that Member is entitled under Section
12.3(c)(iii).
(d) Optional Capital Account Restoration Obligation. Notwithstanding any
other provision of this Agreement, if an item of loss, deduction, income or gain
would be allocated from or to a Member in a manner other than in accordance with
the Member's Ownership Percentage as a result of such Member having a negative
Adjusted Capital Account balance, such Member shall be entitled, at its sole
option, to elect to agree to unconditionally restore a deficit balance (or
portion thereof) in its Capital Account by providing written notice of such
election to the Company and the other Members such that such Member shall not
incur a negative Adjusted Capital Account; provided, however, that such Member
may eliminate such deficit restoration obligation (in whole or in part) if,
after such elimination, such Member does not then have a negative Adjusted
Capital Account by providing written notice thereof to the Company and the other
Member. This Section 7.1(d) is intended to meet the requirements of Section
1.704-1(b)(2) of the Regulations such that a Member shall not be denied an
allocation of loss or deduction or be allocated income or gain as the result of
having a negative Adjusted Capital Account.
(e) Excess Nonrecourse Liabilities. For purposes of calculating Members'
shares of "excess nonrecourse liabilities" of the Company (within the meaning of
Section 1.752-3 of the Regulations), the Members intend that they be considered
as sharing profits of the Company in proportion to their respective Ownership
Percentages.
7.2 Tax Allocations.
(a) In General. Except as set forth in Section 7.2(b), allocations for tax
purposes of items of income, gain, loss, deduction, and credits, shall be made
in the same manner as the applicable allocation of Profit or Loss set forth in
Section 7.1. Allocations pursuant to this Section 7.2 are solely for purposes of
federal, state and local income taxes and shall not affect, or in any way be
taken into account in computing, any Member's Capital Account or share of
Profits, Losses, other items, Distributable Cash or other distributions pursuant
to any provision of this Agreement.
(b) Special Rules.
(i) Section 704(c) and Capital Account Revaluation Allocations. The Members
agree that to the full extent possible with respect to the allocation of
depreciation and gain for federal (and state and local) income tax purposes
only, Section 704(c) of the Code and Section 1.704-3(b) of the Regulations shall
apply with respect to noncash property contributed to the Company by any Member.
For purposes hereof, any allocation of income, loss, gain or any item thereof to
a Member pursuant to Section 704(c) of the Code shall affect only its tax basis
in its Membership Interest and shall not affect its Capital Account in the
Company. In addition to the foregoing, if Company assets are reflected in the
Capital Accounts of the Members at a Book Value that differs from the adjusted
tax basis of the assets (e.g., because of a revaluation of the Members' Capital
Accounts under Section 1.704-1(b)(2)(iv)(f) of the Regulations), allocations of
depreciation, amortization, income, gain or loss with respect to such property
shall be made among the Members in a manner consistent with the principles of
Section 704(c) of the Code and this Section 7.2(b)(i).
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(ii) Tax Credits. Any tax credits shall be allocated among the Members in
accordance with Section 1.704-1(b)(4)(ii) of the Regulations, unless the
applicable Code provision shall otherwise require.
(c) Conformity of Reporting. The Members are aware of the income tax
consequences of the allocations made by this Section 7.2 and shall be bound by
this Section 7.2 in reporting their shares of Company profits, gains, income,
losses, deductions, credits and other items for income tax purposes.
7.3 Section 754 Election. To the extent and at the times provided by law,
at the request of a Member which is transferring a Membership Interest, the
Managing Member, on behalf of the Company, shall elect in a timely manner
pursuant to Section 754 of the Code and pursuant to corresponding provisions of
applicable state and local tax laws, to adjust the tax bases of the assets of
the Company pursuant to Sections 734 and 743 of the Code.
ARTICLE VIII
MANAGEMENT OF THE COMPANY
8.1 Management.
(a) Managing Member. Subject to Section 2.07 of the Stockholders Agreement
and Section 8.7, and except as otherwise provided herein, the overall management
and control of the Company shall be exercised by the Managing Member, who shall
have the right, power, and authority, acting solely by itself and without the
necessity of approval by any other person, to carry out any and all of the
purposes of the Company specified in Section 3.1 and to perform or refrain from
performing any and all acts that the Managing Member may deem necessary,
appropriate, desirable, or incidental thereto. So long as any Senior Secured
Note remains outstanding, the Company shall also have an Independent Director.
The Managing Member shall not be required to obtain the consent of or notify the
Independent Director with respect to any matter, except with respect to the
matters requiring the vote or consent of the Independent Director pursuant to
this Agreement. The Company shall not, and shall not have the power or authority
and shall not be authorized to, take any action expressly specified herein as
requiring the affirmative vote or written consent of the Independent Director
absent the currently effective appointment of and affirmative vote or written
consent of such Independent Director. No Member (other than the Managing Member)
shall participate in the management, control, or direction of the operations,
business, or affairs of the Company, be involved in or transact any business for
the Company, or have the power to act for or on behalf of or to bind the
Company, such powers being vested solely and exclusively in the Managing Member
(subject to the Managing Member's right to delegate such powers pursuant to
Section 8.1(b)). Solely for purposes of (i) taking any action that requires the
approval of the Board of Directors of the Company pursuant to the terms of, and
as defined in, the indenture for the Company's 8-1/2% Senior Secured Notes due
2010, or pursuant to any other the Note Document and (ii) the definition of
Continuing Directors (as defined in such indenture), the Board of Directors of
the Managing Member shall be and hereby is deemed to constitute the Board of
Directors of the Company. For purposes of Section 8.7, the Board of Directors of
the Company shall be composed of the members of the Board of Directors of the
Managing Member and the Independent Director.
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(b) Officers. The Managing Member may (i) elect one or more officers of the
Company with such titles as the Managing Member may deem necessary, appropriate,
or desirable, and (ii) delegate any or all of its rights, powers, and authority
to one or more of such officers as the Managing Member may from time to time
determine.
8.2 Services. Subject to Section 8.7, with the prior written consent of the
Managing Member, any other Member or its Affiliates may provide services to the
Company at market prices and on market terms, in accordance with the general
procedures for approval of contractual obligations of the Company. Entity
Services Group, LLC (or any successor thereto) shall be entitled to customary
compensation for furnishing an employee to act as the Independent Director.
8.3 Liability for Certain Acts. Each Member shall act in good faith with
respect to the Company and with such care as an ordinary prudent person in a
like position would use under similar circumstances. No Member has guaranteed
nor shall it have any obligation with respect to the return of a Member's
Capital Contributions, and no Member has guaranteed profits from the operation
of the Company. No Member shall be liable to the Company or to any other Member
for any loss or damage sustained by the Company or any Member, except for (i)
any loss or damage resulting from intentional misconduct, gross negligence or a
knowing violation of law by such Member or its officers, directors, agents or
Affiliates or (ii) a transaction for which such Member, or its officers,
directors, agents or Affiliates received a personal benefit in violation or
breach of the provisions of this LLC Agreement or any other breach or
non-compliance by a Member or any of its Affiliates of its obligations hereunder
or any provision hereof. In no event shall any Member be liable to the Company
or to any other Member for any indirect or consequential damages sustained by
the Company or any other Member.
8.4 [Intentionally Omitted.]
8.5 Indemnity of Members, Employees and Other Agents.
(a) To the fullest extent permitted under the Act, the Company shall
indemnify the Company's officers and employees, the Managing Member, the other
Members and their respective officers, employees, agents and representatives
(and the respective officers, directors, employees, agents, members, managers,
stockholders and Affiliates of each of the foregoing) (each of the foregoing, an
"Indemnitee") in connection with the management of the Company when the same
shall be acting within the scope of their authority conferred by the provisions
of this Agreement or pursuant to a duly authorized delegation of authority from
the Managing Member; provided, however, that no such indemnification shall be
available in respect of any loss or damage to the extent that such loss or
damage is determined to have been primarily caused by the gross negligence,
willful misconduct or bad faith of the Person claiming indemnification or for
which a Member is liable to the Company or another Member under Section 5.02 of
the Members Agreement or Section 8.3.
(b) To the extent that an Indemnitee is successful on the merits or
otherwise in any Proceeding, such Indemnitee shall be indemnified by the Company
against all expenses actually and reasonably incurred by such Indemnitee or on
such Indemnitee's behalf in connection therewith. If an Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all Claims, issues or matters in such Proceeding,
the Company shall indemnify such Indemnitee against all expenses actually and
reasonably incurred by him or on his behalf in connection with each successfully
resolved Claim, issue or matter. For purposes of this Section 8.5(b) and without
limitation, the termination of any Claim, issue or matter in
such a Proceeding by dismissal or withdrawal with or without prejudice, shall be
deemed to be a successful result as to such Claim, issue or matter.
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(c) The Company shall advance all reasonable expenses incurred by or on
behalf of an Indemnitee in connection with any Proceeding within 20 days after
the receipt by the Company of a statement or statements from the Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the expenses incurred by the Indemnitee and shall include or
be preceded or accompanied by an undertaking by or on behalf of any Indemnitee
to repay any expenses advanced if it shall ultimately be determined that such
Indemnitee is not entitled to be indemnified against such expenses.
8.6 Compensation. No Member shall be entitled to compensation for actions
taken on behalf of the Company; provided, however, that the Managing Member or,
if so delegated, the Members shall, subject to Section 8.7, be reimbursed for
all reasonable and necessary expenses incurred on behalf of the Company.
8.7 Special Provisions. Notwithstanding any other provision of this LLC
Agreement, as long any Senior Secured Note remains outstanding, the following
shall apply:
(a) The purpose for which the Company is organized is limited solely to (i)
owning, holding and managing the Duke/UAE Ownership Interest and the capital
stock of Finance Co., (ii) entering into and performing, and complying with, its
obligations under, in connection with, contemplated by or necessitated by the
Note Documents, this LLC Agreement, the Equity Purchase Agreement, the Equity
Contribution Agreement, the Essex Side Agreement, and certain other agreements
related to the Company Letter of Credit, (iii) selling, exchanging,
transferring, and refinancing the Duke/UAE Ownership Interest to the extent
contemplated or permitted by the Note Documents, (iv) engaging in any other
transaction or business contemplated or permitted by the Note Documents, and (v)
transacting any and all lawful business for which a limited liability company
may be organized under the laws of the State of Delaware that is incident,
necessary and appropriate to accomplish the foregoing.
(b) The Company has not incurred and will not incur any indebtedness other
than (i) pursuant to the Note Documents, and (ii) other indebtedness
contemplated or permitted by the Note Documents.
(c) The Company shall not voluntarily dissolve or liquidate or engage in
any consolidation, merger, conveyance, transfer or sale of assets outside of the
ordinary course of its business, except as contemplated or permitted by the Note
Documents.
(d) The Company shall:
(i) maintain its books and records separate from any other Person;
(ii) maintain its bank accounts separate from any other Person, except as
contemplated or permitted by the Note Documents;
(iii) not commingle its assets with those of any other Person and shall
hold all of its assets in its own name;
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(iv) conduct its business in its own name;
(v) maintain separate financial statements, showing its assets and
liabilities separate and apart from those of any other Person and shall not have
its assets listed on the financial statement of any other Person;
(vi) file its tax returns separate from those of any other Person, unless
otherwise required by law;
(vii) pay its own liabilities and expenses only out of its own funds;
(viii) observe all limited liability company and other organizational
formalities;
(ix) employ or deal with any Member or any Affiliate, to the extent it
chooses to employ or deal with such Person at all, only on a fair and arms'
length basis and shall not enter into any transaction with its Members or any
Affiliate of any of its Members other than on an arms' length basis, reflecting
terms and conditions no less favorable to the Company than those negotiated
between unrelated parties, except as (A) contemplated or permitted by the Note
Documents or (B) approved by each of the representatives to the Board of
Directors appointed by the disinterested Member(s);
(x) not enter into or be a party to any transaction with any Member or
Affiliate thereof, or, where relevant, such Member's or Affiliate's members,
officers, directors, shareholders, or Affiliates, as the case may be, except on
terms and conditions which are intrinsically fair and are no less favorable to
it than would generally be obtained in a comparable arms' length transaction
with an unrelated third party, except as (A) contemplated or permitted by the
Note Documents or (B) approved by each of the representatives to the Board of
Directors appointed by the disinterested Member(s);
(xi) pay the salaries of its own employees only from its own funds;
(xii) maintain a sufficient number of employees in light of its
contemplated business operations;
(xiii) not assume, guarantee or become obligated for the debts of any other
Person, except as contemplated or permitted by the Note Documents;
(xiv) not hold out its credit as being available to satisfy the obligations
of any other Person, except as contemplated or permitted by the Note Documents;
(xv) not acquire the obligations or securities of its Affiliates or
Members, other than (1) Xxxxxx, Erie and Finance Co. or (2) as contemplated or
permitted by the Note Documents;
(xvi) not make any gifts, loans, or fraudulent conveyances to any other
Person or buy or hold evidence of indebtedness issued by any other Person (other
than cash and investment-grade securities), except as contemplated or permitted
by the Note Documents;
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(xvii) allocate fairly any overhead expenses for office space or business
facilities or equipment that are shared with an Affiliate, including paying for
office space and services performed by any employee of an Affiliate, except as
contemplated or permitted by the Note Documents;
(xviii) use separate stationery, invoices, and checks bearing its own name;
(xix) not pledge its assets for the benefit of any other Person, other than
as contemplated or permitted by the Note Documents;
(xx) hold itself out as a separate entity;
(xxi) correct any known misunderstanding regarding its separate identity;
(xxii) act solely in its own name, through its own officials, agents or
representatives where relevant;
(xxiii) not hold itself out to the public, to any creditors, or to any
governmental agency as a "division" or "part" of any entity or entities, or more
generally as part of a single integrated enterprise with any other entity; and
(xxiv) subject to Section 5.2, use its commercially reasonable efforts to
maintain adequate capital in light of its contemplated business operations.
(e) Notwithstanding any other provision of this LLC Agreement to the
contrary, and any provision of law that so empowers the Company or the Members,
the Company shall not, without the unanimous vote or consent of all of the
members to the Board of Directors, which vote must include the Independent
Director, institute any Bankruptcy Action.
(f) There shall be an Independent Director serving on the Board of
Directors. Initially, such Independent Director shall be Xxxxxx X. Panccione.
Should such initial Independent Director or a successor thereto resign, the
Members shall appoint a new Independent Director.
(g) In the event that there is a dissolution or other event terminating the
interest of one or more of the Members, the Company shall not dissolve so long
as one Member remains.
(h) Notwithstanding that the Company is not then insolvent, the Independent
Director shall take into account the interests of the Company's creditors.
(i) The Members shall amend the provisions specified in this Section 8.7
and Section 12.1 only if the Company provides prior written notice to each of
the rating agencies then providing a rating on the Senior Secured Notes.
8.8 Independent Director. Notwithstanding anything to the contrary in this
Agreement, the Independent Director shall have no right to approve or manage any
aspect of the Company's business or operations except as expressly set forth in
Section 8.7(e).
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ARTICLE IX
RIGHTS AND OBLIGATIONS OF MEMBERS
9.1 Limitation on Liability and Authority. Each Member's liability shall be
limited as set forth in this Agreement, the Act and other applicable law. Each
Member agrees that it will not exercise its authority under the Act to bind or
commit the Company to agreements, transactions or other arrangements, or hold
itself out as an agent of the Company, unless such Member is acting expressly
within the scope of its authority under this Agreement or an express duly
authorized delegation of authority by the Managing Member.
9.2 No Liability for Company Obligation. No Member will have any liability
for any debts or losses of the Company except as provided by law relating to
liability for wrongful distributions or pursuant to Section 7.1(d) relating to a
Member's Capital Account restoration option.
9.3 Priority and Return of Capital. Except as is expressly provided herein,
no Member shall have priority over any other Member, either as to the return of
Capital Contributions or as to Profits, Losses, or distributions. This Section
9.3 shall not apply to any Backup Loans.
ARTICLE X
ACCOUNTING AND TAX MATTERS
10.1 Fiscal Year. The Company's annual accounting period (the "Fiscal
Year") shall be the calendar year, unless otherwise approved by the Managing
Member or otherwise required by the Code.
10.2 Books and Records; Audit.
(a) The Company shall maintain or cause to be maintained separate records
and accounts. Such records and accounts shall show a true and accurate record of
all operations, costs and expenditures, charges made, credits made and received,
and income derived in connection with the operation of the Company in accordance
with GAAP consistently applied. Subject to Section 8.7, the Company may cause
accountants who are employees of one or more Members to keep the Company's books
and records, or the Company may hire third-party accountants to keep the
Company's books and records. The Company shall use the accrual method of
accounting in preparation of its annual reports and for tax purposes and shall
keep its books accordingly.
(b) Without limiting the generality of the foregoing, the Company shall
keep or cause to be kept the following records at the principal place of
business of the Company:
(i) a current list of the full name and last known address of each Member;
(ii) a copy of the Certificate of Formation of the Company and all
amendments thereto;
(iii) copies of the Company's federal, state, and local income tax returns
and reports, if any, for the six most recent years;
(iv) copies of written consents of the Managing Member;
(v) a copy of this Agreement, together with any amendments thereto; and
(vi) copies of all financial statements of the Company for the three most
recent years.
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(c) Each Member shall, at its sole expense, have the right, upon reasonable
advance notice to the Managing Member, to examine, copy and audit the Company's
books and records during normal business hours.
10.3 Reports. Within 120 days after the end of each Fiscal Year and 60 days
after the end of each of the first three fiscal quarters of each Fiscal Year,
the Company shall furnish each Member with a copy of the balance sheet of the
Company as of the last day of the applicable period, and a statement of income
or loss for the Company for such period, which shall be prepared from the books
and records of the Company in accordance with GAAP consistently applied. The
Company's year-end annual statements shall be audited by a firm of independent
certified public accountants of national standing, unless the Managing Member
shall determine that such audit is not required. Such annual financial
statements shall also include a statement showing any item of income, deduction,
credit, or loss allocable for federal income tax purposes pursuant to the terms
of this Agreement. The Members understand that the Company will frequently
depend on Ref-Fuel Holdings, its direct and indirect subsidiaries and other
Persons that are not under the Company's control to provide timely and accurate
information in connection with the preparation of financial, tax, and other
reports or information concerning the Company's investments, and that (as a
result of matters outside of its control) the Company may be unable to deliver
reports and other information within the respective periods required by this
Section 10.3 or 10.4. In such circumstances, the Company shall use its
commercially reasonable efforts to provide the required reports or information
as soon as reasonably practicable after the specified period, but shall not be
deemed to breach this Section 10.3 or 10.4 as a result of such delivery delays.
10.4 Tax Returns. The Company shall prepare and timely file all tax returns
required to be filed by the Company pursuant to the Code and all other tax
returns deemed necessary and required in each jurisdiction in which the Company
does business. Copies of such returns, together with any schedules or other
information that each Member may require in connection with preparation of such
Member's own tax affairs, shall be furnished to the Members within 150 days
after the end of each Fiscal Year.
10.5 Tax Matters Member.
(a) If the Company is not treated as a "partnership" within the meaning of
Section 6231(a)(1)(A) of the Code by reason of Section 6231(a)(1)(B)(i) of the
Code, the Members shall cause the Company to make and keep in effect an election
under Section 6231(a)(1)(B)(ii) of the Code, which election shall be effective
beginning with the first taxable year of the Company, to have the provisions of
Sections 6221 through 6234 of the Code apply to the Company and its Members. The
Managing Member shall serve as the "tax matters partner" of the Company within
the meaning of Section 6231(a)(7) of the Code (such Member, acting in such
capacity, the "Tax Matters Member"). The Tax Matters Member shall not take any
action that may be taken by a "tax matters partner" under Sections 6221 through
6234 of the Code unless (i) it has first given the other Members written notice
of the contemplated action at least ten Business Days prior to the applicable
due date of such action and (ii) it has received the written consent of the
Members to such contemplated action. The Tax Matters Member shall not bind any
Member to a settlement agreement without first obtaining the written consent of
such Member. The Tax Matters Member shall file or cause to be filed the
Company's income tax returns on a timely basis.
The Tax Matters Member shall, within ten days after the
receipt of any notice from the Internal Revenue Service in any
administrative proceeding at the Company level relating to the
determination of any Company item of income, gain, loss, deduction or
credit, mail a copy of such notice to each Member. The Tax Matters
Member shall take such action as may be necessary to cause each other
Member to become a "notice partner" within the meaning of Section
6231(a)(8) of the Code. The Tax Matters Member shall promptly (and in
any event within ten days) forward to each other Member copies of all
significant written communications it may receive in such capacity.
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(b) The Tax Matters Member shall be indemnified by the Company with respect
to any action taken by it in its capacity as Tax Matters Member by applying,
mutatis mutandis, the provisions of Section 8.5. The Tax Matters Member shall
not charge the Company a fee for its services except as permitted under Section
8.2, but the Company shall reimburse the Tax Matters Member for its reasonable,
documented out-of-pocket expenses related to its duties as Tax Matters Member.
10.6 Bank Accounts. The funds of the Company shall not be commingled with
the funds of any Member or any other Person, and the Company shall not employ or
permit any other Person to employ such funds in any manner except for the
benefit of the Company. Except as otherwise provided in the Note Documents, the
bank accounts of the Company shall be maintained in the name of the Company in
such banking institutions as are approved by the Managing Member, and
withdrawals shall be made only in the regular course of Company business and as
otherwise authorized in this Agreement on such signature or signatures as the
Managing Member may determine.
ARTICLE XI
RESTRICTIONS ON TRANSFER
11.1 Restrictions on Transfers. Restrictions on the transfer of interests
in the Company are set forth in the Members Agreement.
11.2 Substitute Member. Any transferee or other acquirer of a Membership
Interest in accordance with the Members Agreement shall automatically become a
substitute Member in respect of the Membership Interest transferred upon the
execution and delivery of a Joinder Agreement in the form attached hereto as
Exhibit C and shall have all powers of such transferring Member in respect of
the Membership Interest transferred as are conferred herein, including, without
limitation, the power to vote its Membership Interest on any matter on which the
vote of the Members is required or permitted. The Company shall not register any
Transfer of a Membership Interest or issue any new Membership Interest unless
the proposed Transfer or issuance is in compliance with the Members Agreement.
11.3 Withdrawal of Members. No Member shall have any right to withdraw or
resign from the Company, unless such Member transfers its entire Membership
Interest to one or more transferees, all of whom have been admitted as
substituted Members in accordance with Section 11.2 in which case such Member
shall be deemed to have automatically withdrawn from the Company and resigned as
a Member.
ARTICLE XII
DISSOLUTION AND TERMINATION
12.1 Dissolution. Subject to Section 8.7, the Company shall be dissolved
upon the occurrence of any of the following events:
(i) the sale of all or substantially all of the property of
the Company;
(ii) the written agreement of all Members for the Company to
terminate and be dissolved; or
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(iii) upon the Bankruptcy of a Member, unless the Members
owning a majority of the aggregate Ownership Percentages of all Members
(excluding the Ownership Percentage of the Member that is the subject
of the Bankruptcy) elect to continue the business of the Company within
90 days after such event.
12.2 Effect of Dissolution. Upon dissolution, the Company shall cease to
carry on its business, except as permitted or required by the Act. Upon
dissolution, the Liquidating Trustee shall file a statement of commencement of
winding up pursuant to the Act and publish the notice permitted by the Act.
12.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution of the Company, no further business shall be conducted
except for the taking of such action as shall be necessary for the winding up of
the affairs of the Company and the distribution of its assets to the Members
pursuant to this Article XII. The Managing Member shall appoint a Liquidating
Trustee. The Liquidating Trustee shall have full authority to wind up the
affairs of the Company and to make distributions as provided herein. For so long
as any Senior Secured Note is outstanding, the Company shall not liquidate
without first obtaining the approval of the Indenture Trustee. The Indenture
Trustee may continue to exercise all of its rights under the Note Documents
until all of the Senior Secured Notes have been paid in full or otherwise
completely discharged.
(b) Upon dissolution of the Company, the Liquidating Trustee shall either
sell the assets of the Company at the best price available, or the Liquidating
Trustee may distribute to the Members all or any portion of the Company's assets
in kind. The property of the Company shall be liquidated as promptly as is
consistent with obtaining the fair value thereof. If any assets are to be
distributed in kind, the Liquidating Trustee shall ascertain the Fair Market
Value of such assets (based upon a single appraisal, in the case of a
disagreement, at the expense of the Company). Each Member's Capital Account
shall be charged or credited, as the case may be, for the net gain or net loss
on the sale of the assets or in the case of an in-kind distribution, any net
gain or net loss deemed recognized on such deemed sale, as if such asset had
been sold for cash at such Fair Market Value and the net gain or net loss
recognized thereby shall be allocated to and among the Members in accordance
with Article VII.
(c) All assets of the Company shall be applied and distributed by the
Liquidating Trustee in the following order:
(i) first, to the creditors of the Company (including any Member who has
made a Backup Loan that remains outstanding);
(ii) second, to setting up the reserves that the Liquidating Trustee may
deem reasonably necessary for contingent or unforeseen liabilities or
obligations of the Company; and
(iii) third, to the Members in accordance with Section 6.1.
12.4 Certificate of Cancellation. When all debts, liabilities and
obligations of the Company have been paid and discharged or adequate provisions
have been made therefor and all of the remaining property and assets of the
Company have been distributed to the Members, a Certificate of Cancellation
shall be executed and filed with the Secretary of State of Delaware in
accordance with Section 18-203 of the Act.
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12.5 Return of Contribution; Nonrecourse Against Other Members. Except as
provided by law or as expressly provided in this Agreement, upon dissolution,
each Member shall look solely to the assets of the Company for the return of its
Capital Contribution. If the assets of the Company remaining after the payment
or discharge of the debts and liabilities of the Company is insufficient to
return the cash contribution of one or more Members, such Member or Members
shall have no recourse against any other Member except as expressly provided
herein.
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties. Each Member hereby represents and
warrants to the other Members that:
(a) Such Member is duly organized and validly existing under the laws of
the state of its organization and has the requisite power and authority to enter
into and carry out the terms of this Agreement;
(b) All actions required to be taken by such Member to execute and deliver
this Agreement and to perform its obligations hereunder as of the date hereof
have been duly taken, and no further approval of any board, court, or other body
is necessary in order to permit such Member to consummate this Agreement and the
transactions contemplated hereby and thereby, and this Agreement has been duly
authorized, executed and delivered by such Member, and constitutes the legal,
valid and binding obligation of such Member, enforceable against such Member in
accordance with its terms;
(c) To the. best of such Member's knowledge, there is no action, Proceeding
or investigation, pending or threatened (nor any basis therefore) that
questions, directly or indirectly, the validity or enforceability of this
Agreement as to such Member or that would materially and adversely affect any
Project Partnership; and
(d) Such Member is not an "investment company" or a company "controlled" by
an investment company within the meaning of the Investment Company Act of 1940.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Notices. All notices or other communications required or permitted by
this Agreement shall be in writing and shall be deemed to have been duly given
upon receipt if delivered in person, by facsimile transmission, by Federal
Express or other reputable overnight courier, or mailed by certified or
registered mail, return receipt requested, postage pre-paid, and addressed as
follows:
if to Highstar or Highstar I:
Highstar Renewable Fuels LLC
Highstar Renewable Fuels I LLC
c/o AIG Global Asset Management Holdings Corp.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx or Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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if to DLJMB:
MSW Acquisition LLC
c/o DLJ Merchant Banking III, Inc.
Eleven Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxx Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as may be specified by a party hereto pursuant
to notice given by such party in accordance with the provisions of this
Section 14.1.
14.2 Entire Agreement. This Agreement and the Members Agreement contain the
entire agreement and understanding of the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and understandings
of the parties relating to the subject matter hereof and thereof.
14.3 Modifications and Waivers. No amendment or other modification of any
provision of this Agreement shall be valid or binding unless it is in writing
and signed by each of the parties hereto. No waiver of any provision of this
Agreement shall be valid or binding unless it is in writing and signed by the
party waiving compliance with such provision. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver of any partial exercise of any such right, power
or privilege preclude any further exercise thereof or the exercise of any other
such right, power or privilege. No waiver of any breach, term or condition of
this Agreement by any party shall constitute a subsequent waiver of the same or
any other breach, term or condition.
14.4 Separable Provisions. If any provision of this Agreement shall be held
invalid or unenforceable by a court of competent jurisdiction, the remainder
nevertheless shall remain in full force and effect.
14.5 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware without regard to its
principles of conflicts of laws. Any legal action or proceeding with respect
this Agreement shall be brought in the courts of the United States for the
Southern District of New York, and, by execution and delivery of this Agreement,
each party hereto hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the exclusive jurisdiction of such
courts. Each party hereto irrevocably waives any objection which it may now or
hereafter have to the laying of venue of the aforesaid actions or proceedings
arising out of or in connection with this Agreement in the courts referred to in
this Section 14.6 and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
14.7 Further Assurances. Each of the parties shall execute such agreements,
instruments and other documents and take such further actions as may be
reasonably required or desirable to carry out the provisions and the
transactions contemplated by this Agreement, including but not limited to the
execution of such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization, and cooperating in obtaining any third
party consents and approvals necessary in order to accomplish and give full
force and effect to the transactions contemplated hereby.
20
14.8 Successors and Assigns. Each and all of the covenants, terms,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective successors and assigns.
14.9 Third-Party Beneficiaries. The provisions of this Agreement shall only
be for the benefit of, and enforceable by, the Company and its Members and shall
not inure to the benefit of or be enforceable by any third party.
14.10 No Partnership Intended for Nontax Purposes; Membership Interests not
Securities; No Partnership Intended for Bankruptcy Purposes. The Members have
formed the Company under the Act and expressly do not intend hereby to form a
partnership under either the Delaware Uniform Partnership Act or the Delaware
Uniform Limited Partnership Act. The Members do not intend to be partners to one
another, or partners as to any third party, for any purpose other than federal,
state, local or foreign tax purposes. To the extent any Member, by word or
action, represents to another person that any other Member is a partner or that
the Company is a partnership, the Member making such wrongful representation
shall be liable to any other Member who incurs personal liability by reason of
such wrongful representation. No Membership Interest shall constitute a security
within the meaning of Article 8 or Article 9 of the Uniform Commercial Code as
in effect in any state, including the States of Delaware and New Jersey. For
purposes of Section 303(b)(3)(A) of the federal Bankruptcy Code, 11 U.S.C. sec.
101 et seq., the Company shall not be treated as a "partnership", nor shall any
of the Members be treated as a "general partner" in a "partnership".
14.11 [Intentionally Omitted].
14.12 Non-Recourse. Notwithstanding any other provision of this Agreement
to the contrary, no Member nor any Person acting on its behalf may assert any
claim or cause of action against any controlling Person, officer, director,
stockholder, manager, member, partner, agent, employee, or other representative
of any other Member in connection with, arising out of, or relating to this
Agreement. All duties and liabilities (fiduciary and otherwise) of the Members
and their respective Affiliates are restricted to those expressly stated in this
Agreement.
14.13 Amended and Restated LLC Agreement Superceded. This Agreement shall,
as of the Effective Date, amend and restate the Amended and Restated LLC
Agreement in its entirety and the rights and obligations of the parties
evidenced by the Amended and Restated LLC Agreement shall be evidenced by this
Agreement.
14.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING (INCLUDING
COUNTERCLAIMS) RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS OR RELATIONSHIPS HEREBY CONTEMPLATED OR
OTHERWISE IN CONNECTION WITH THE ENFORCEMENT OF ANY RIGHTS OR OBLIGATIONS
HEREUNDER.
[Signature Page Follows]
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representative as of the Effective
Date.
HIGHSTAR RENEWABLE FUELS LLC
By:_________________________________
Name:
-------------------------------
Title:
------------------------------
HIGHSTAR RENEWABLE FUELS I LLC
By:_________________________________
Name:
-------------------------------
Title:
------------------------------
MSW ACQUISITION LLC
By:_________________________________
Name:
-------------------------------
Title:
------------------------------
UNITED AMERICAN ENERGY HOLDINGS CORP.
By:_________________________________
Name:
-------------------------------
Title:
------------------------------
1
EXHIBIT A
CAPITAL CONTRIBUTIONS AND OWNERSHIP PERCENTAGE
----------------------------------------------
Member Capital Contribution Ownership Percentage
----- -------------------- --------------------
Highstar Renewable Fuels LLC $150,000.20 0.10%
Highstar Renewable Fuels I LLC $59,835,079.78 39.89%
MSW Acquisition LLC $90,000,120.00 60.00%
United American Energy Holdings Corp. $15,000.02 0.01%
1
EXHIBIT B
MEMBERS AGREEMENT
See Attached.
1
EXHIBIT C
JOINDER AGREEMENT
This Joinder Agreement (this "Joinder Agreement") is made as of the
date written below by the undersigned (the "Joining Party") in accordance with
the Second Amended and Restated Limited Liability Company Agreement (the "LLC
Agreement") of MSW Energy Holdings LLC (the "Company") dated as of April 30,
2004, among the Company, Highstar Renewable Fuels LLC, Highstar Renewable Fuels
I LLC, MSW Acquisition LLC and United American Energy Holdings Corp., as the
same may be amended from time to time. Capitalized terms used, but not defined,
herein shall have the meaning ascribed to such terms in the LLC Agreement.
The Joining Party hereby acknowledges, agrees and confirms that, by its
execution of this Joinder Agreement, the Joining Party shall be deemed to be a
party to and "Member" under the LLC Agreement as of the date hereof and shall
have all of the rights and obligations of the Member from whom it has acquired
Membership Interest (to the extent permitted by the LLC Agreement) as if it had
executed the LLC Agreement. The Joining Party hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
contained in the LLC Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement
as of the date written below.
Date: _____________ ___, ______
[NAME OF JOINING PARTY]
By:
-----------------------------------------
Name:
Title:
Address for Notices:
AGREED ON THIS [___] day of [_________], 200[_]:
MSW ENERGY HOLDINGS LLC
By:
------------------------------
Name:
Title:
1
APPENDIX A
DEFINITIONS
The terms defined in this Appendix A relate, to the extent used
therein, to this Agreement (as defined below). Unless otherwise indicated, such
terms include the plural as well as the singular. Any agreement defined or
referred to below shall include each amendment, modification and supplement
thereto, and each waiver, approval and consent in respect thereof, as may become
effective from time to time, except where otherwise indicated, and shall include
all Appendices, Exhibits, Schedules and other attachments thereto and
instruments, agreements or other documents incorporated therein. Any term
defined in this Appendix A below by reference to any document shall be deemed to
be amended herein to the extent that such term is subsequently amended in such
document. If any such document is subsequently amended, modified or terminated,
the affected parties to any agreement to which this Appendix A is attached shall
in good faith select another comparable definition for any term theretofore
defined below by reference to such document.
Unless the context otherwise requires: a reference to any law or
governmental regulation includes any amendment, modification or successor
thereto; a reference to any Person includes its successors and assigns;
accounting terms not otherwise defined have the meanings assigned to them by
United States GAAP applied on a consistent basis by the accounting entity to
which they refer; unless otherwise indicated, all references to Sections,
Articles, other subdivisions, Appendices, Schedules and Exhibits shall mean and
refer to the respective Sections, Articles, other subdivisions, Appendices,
Schedules and Exhibits in or attached to the agreement or document in which such
reference appears; the words "include," "includes" and "including" are not
limiting and shall be deemed to be followed by the words "without limitation"
whether or not in fact followed by such words or words of like import; and the
terms "hereof," "herein," "hereunder" and comparable terms refer to the entire
agreement with respect to which such terms are used and not to any particular
article, section or other subdivision thereof.
If, and to the extent that, this Agreement shall be amended, modified
or supplemented from time to time, this Appendix A shall be, or be deemed to
have been, amended, modified or supplemented concurrently with the execution and
delivery of each such amendment, modification or supplement of this Agreement in
order to conform the definitions herein and therein to the new or amended,
modified or supplemented definitions set forth in or required by each such
amendment to this Agreement.
"Act" means the Delaware Limited Liability Company Act, Title 6 of the
Delaware Code, Sections 18-101 et seq., as the same may be amended from time to
time.
"Additional Capital Contribution" means such Capital Contribution as
may be made by a Member from time to time in accordance with Section 5.2(a)
(other than the Capital Contributions of the Members referred to in Section
5.1).
"Adjusted Capital Account" means, with respect to any Member, the
balance, if any, in such Member's Capital Account as of the end of the relevant
Fiscal Year or part thereof, after giving effect to the following adjustments:
(1) such Capital Account shall be deemed to be increased by any amounts
that such Member is obligated to restore to the Company (pursuant to this
Agreement or otherwise) or is deemed to be obligated to restore pursuant to (A)
the penultimate sentence of Section 1.704-2(g)(1) of the Regulations, or (B) the
penultimate sentence of Section 1.704-2(i)(5) of the Regulations; and
1
(ii) such Capital Account shall be deemed to be decreased by the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
"Affiliate" means with respect to. any Person, any other Person who,
directly or indirectly, controls such first Person or is controlled by said
Person or is under common control with said Person, where "control" means power
and ability to direct, directly or indirectly, or share equally in or cause the
direction of, the management and/or policies of a Person, whether through
ownership or control of more than 50% of the voting shares or other equivalent
interests of the controlled Person, by contract (including proxy) or otherwise.
"Agreement" or "LLC Agreement" means the Second Amended and Restated
Limited Liability Company Agreement of MSW Energy Holdings LLC dated as of April
30, 2004, as the same may be amended or modified.
"Amended and Restated LLC Agreement" has the meaning specified in the
recitals of this Agreement.
"ARC Holdings" has the meaning specified in the recitals to this
Agreement.
"Backup Loan" has the meaning specified in the Members Agreement.
"Bankruptcy" means the events specified in Sections 18-304(a) and (b)
of the Act and, in the case of the events specified in Section 18-304(b), upon
the passage of the periods specified therein.
"Bankruptcy Action" means:
(i) commencing any case, proceeding or other action on behalf of the
Company under any existing or future law of any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors;
(ii) instituting proceedings to have the Company adjudicated as bankrupt or
insolvent;
(iii) consenting to the institution of bankruptcy or insolvency proceedings
against the Company;
(iv) filing a petition or consent to a petition seeking reorganization,
arrangement, adjustment, winding-up, dissolution, composition, liquidation or
other relief on behalf of the Company of its debts under any federal or state
law relating to bankruptcy;
(v) seeking or consenting to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for the
Company or a substantial portion of its properties; or
(vi) making any assignment for the benefit of the Company's creditors,
except security interests granted pursuant to the Note Documents and the
granting of other security interests permitted by the Note Documents.
"Book Value" means, with respect to any asset of the Company, the
adjusted basis of such asset as of the relevant date for federal income tax
purposes, except as follows:
2
(vii) the initial Book Value of any asset contributed by a Member to the
Company shall be the fair market value of such asset at the time of
contribution, as agreed to by the Managing Member and the contributing Member;
(viii) the Book Values of all Company assets (including intangible assets
such as goodwill) shall be adjusted to equal their respective fair market
values, as determined by the Managing Member, as of the following times:
(A) the purchase of an additional interest in the Company by any new or
existing Member in exchange for more than a de minimis Capital Contribution;
(B) the distribution by the Company to a Member of more than a de minimis
amount of money or Company property as consideration for an interest in the
Company; and
(C) the liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations; and
provided, however, that adjustments pursuant to subclauses (A) and (B)
of this clause (ii) shall be made only if the Managing Member
determines that those adjustments are necessary or appropriate to
reflect the relative economic interests of the Members in the Company;
(ix) the Book Value of any Company asset distributed to any Member shall be
the gross fair market value of such asset on the date of distribution, as
determined by the Managing Member; and
(x) if the Book Value of an asset has been determined or adjusted pursuant
to subsection (i) or (ii) above, such Book Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset for purposes of
computing Profits and Losses and other items allocated pursuant to Section 7.1
(and not the depreciation, amortization, or other cost recovery deductions
allowable for federal income tax purposes).
The foregoing definition of Book Value is intended to comply with the
provisions of Section 1.704-1(b)(2)(iv) of the Regulations and shall be
interpreted and applied consistently therewith.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks are authorized or required to be closed in New York, New York.
"Capital Account" means, with respect to any Member, the capital
account of that Member established and maintained pursuant to Section 5.6.
"Capital Call Date" means the Business Day specified by the Managing
Member.
"Capital Contribution" means the amount of money and the initial Book
Value of other property contributed by a Member to the Company (including the
amount of any Backup Loan(s) made by that Member that have been converted into
Preferred Interests as described in the Members Agreement).
"Claim" means any demand, demand letter, claim, action, notice of
noncompliance or violation, or other proceeding.
3
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Capital Account" means, with respect to any Member, that
Member's Capital Account minus that Member's Unpaid Preferred Contribution.
"Common Interest" or "Common Interests" has the meaning specified in
the Members Agreement.
"Company" has the meaning specified in the preamble to this Agreement.
"Company Letter of Credit" has the meaning specified in the Members
Agreement.
"Company Minimum Gain" means partnership minimum gain (as that term is
defined in Section 1.704-2(b)(2) of the Regulations) with respect to the
Company.
"Depreciation" means, for each Fiscal Year or part thereof, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
Fiscal Year or part thereof, except that if the Book Value of an asset differs
from its adjusted basis for federal income tax purposes at the beginning of such
Fiscal Year or part thereof, the depreciation, amortization or other cost
recovery deduction for such Fiscal Year or part thereof shall be an amount that
bears the same ratio to such beginning Book Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such Fiscal Year
or part thereof bears to such beginning adjusted tax basis. If such asset has a
zero beginning adjusted tax basis or if the federal income tax depreciation,
amortization or other cost recovery deduction for such Fiscal Year or part
thereof is zero, the Depreciation shall be determined under a method reasonably
selected by the Managing Member.
"Distributable Cash" means, with respect to any period, all cash (i)
derived by the Company from normal business operations, (ii) received by the
Company as proceeds from any Company or any Company Subsidiary financing,
refinancing or other extraordinary event (including cash received from the sale
of all or substantially all the Company's or any of the Company's Subsidiaries'
property, but excluding Capital Contributions), other than cash received by the
Company as the result of any Backup Loan, or (iii) withdrawn from the Company
reserves during such period, minus (w) all expenses (other than depreciation and
other similar noncash expenses) incurred incident to the normal operation of the
Company's business, (x) all capital expenditures made by the Company during such
period, (y) all payments of principal and interest made by the Company during
such period with respect to the Company's and the Company's Subsidiaries' loans,
excluding Backup Loans except as provided in the Members Agreement, and (z) all
amounts set aside during such period for the creation of or addition to such
reserves as the Managing Member deems necessary for the reasonable needs and
prudent operation of the Company's business, or as the appropriate managing body
deems necessary for the reasonable needs of any of the Company's Subsidiaries'
business.
"DLJMB" has the meaning specified in the preamble to this Agreement.
"Dollars" and the "$" symbol mean currency of the United States of
America.
"Duke" has the meaning specified in the recitals to this Agreement.
"Duke/UAE Ownership Interest" means the Ref-Fuel Holdings Ownership
Interest.
"Effective Date" has the meaning specified in the preamble to this
Agreement.
4
"Equity Contribution Agreement" means the Equity Contribution
Agreement, dated as of April 30, 2001, among Duke Capital Corporation, United
American Energy Corp., Duke/UAE Ref-Fuel LLC and Duke/UAE Holdings LLC (now
known as American Ref-Fuel Company LLC), as amended.
"Equity Purchase Agreement" has the meaning specified in the recitals
to this Agreement.
"Erie" has the meaning specified in the recitals to this Agreement.
"Essex Side Agreement" means the Agreement, dated as of June 30, 2003,
between the Company and Duke Capital Corporation.
"Facilities" has the meaning specified in Section 3.1.
"Fair Market Value" means the value of any specified interest or
property, which shall not in any event be less than zero, that would be obtained
in an arm's length transaction for cash between an informed and willing buyer
and an informed and willing seller, neither of whom is under any compulsion to
purchase or sell, respectively, and without regard to the particular
circumstances of the buyer or seller, but taking into account discounts for
minority interests, restrictions on transfer, lack of marketability, and other
similar factors typically considered in valuing securities in a privately held
enterprise. In determining the Fair Market Value of any Member's Membership
Interest, the value shall be determined assuming that the Company is an ongoing
business enterprise. Fair Market Value of a Member's Membership Interest shall
be determined in the following order of descending priority:
(a) by agreement of the buyer and seller;
(b) if the buyer and seller shall not agree upon a value pursuant to
subsection (a) above within 10 days in advance of the date the Fair Market Value
is required to be determined, by a qualified appraiser selected by mutual
agreement of the buyer and seller; or
(c) if the buyer and seller shall not agree upon a qualified appraiser
within 15 days after the date the Fair Market Value is required to be
determined, by taking the arithmetic average of the value assigned by three
qualified appraisers, one selected by the buyer and the other selected by the
seller (or all Persons whose interests are aligned in respect of such
determination), and the third selected by agreement of the two appraisers so
selected; provided, however, that, if the -------- ------- appraised value
assigned by any appraiser selected by the buyer or the seller shall be less than
90% or more than 110% of the appraised value assigned by the third appraiser,
then such first value shall, for purposes of this subsection (c) be increased to
90% or decreased to 110%, as applicable, of the appraised value assigned by such
third appraiser. If either the buyer or the seller shall fail to appoint an
appraiser pursuant to this subsection (c) within 15 days after the date the Fair
Market Value determination is required, then the appraiser, if any, appointed by
the other Person shall make the determination of Fair Market Value.
If the Fair Market Value is determined by an appraiser selected by
mutual agreement, the seller shall pay the cost of the appraiser. If the Fair
Market Value is determined by the average of three appraisals, the seller shall
pay the costs of the appraiser selected by the seller and the appraiser selected
by the other two appraisers, and the buyer shall pay the cost of the appraiser
selected by it.
"Finance Co." means MSW Energy Finance Co., Inc., a Delaware corporation
and a wholly-owned Subsidiary of the Company.
"Fiscal Year" means the annual accounting period specified in Section
10.1.
5
"Foreign Utility Company" is any entity which satisfies the
requirements of the Securities and Exchange Commission for designation as a
"Foreign Utility Company."
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any federal, state, local or foreign
governmental department, commission, board, bureau, authority, agency, court,
instrumentality or judicial or regulatory body or entity.
"Highstar" has the meaning specified in the preamble to this Agreement.
"Highstar I" has the meaning specified in the preamble to this
Agreement.
"Xxxxxx" has the meaning specified in the recitals to this Agreement.
"Indemnitee" has the meaning specified in Section 8.5(a).
"Indenture Trustee" means Xxxxx Fargo Bank Minnesota, National
Association, in its capacity as the indenture trustee, pursuant to the
Indenture, to be dated as of June 25, 2003, among the Company, Finance Co.,
Xxxxxx and Xxxxx Fargo Bank Minnesota, National Association, as trustee.
"Independent Director" means an individual who: (i) is not and has not
been employed by the Company or any of its Affiliates as a director, officer or
employee (other than in the capacity of an Independent Director) within the five
years immediately prior to such individual's appointment as an Independent
Director; (ii) is not affiliated with a significant customer or supplier of the
Company or any of its Affiliates; (iii) is not affiliated with a company of
which the Company or any of its Affiliates is a significant customer or
supplier; (iv) does not have significant personal service contract(s) with the
Company or any of its Affiliates; (v) is not affiliated with a tax-exempt entity
that received significant contributions from the Company or any of its
Affiliates; (vi) is not a beneficial owner at the time of such individual's
appointment as an Independent Director, or at any time thereafter while serving
as Independent Director, of more than 5% of the outstanding Membership
Interests; and (vii) is not a spouse, parent, sibling or child of any person
described by (i) through (vi). An individual that otherwise satisfies the
foregoing shall not be disqualified from serving as an Independent Director if
such individual is an employee of Entity Services Group, LLC and Entity Services
Group, LLC provides services on behalf of the Company or its Affiliates as a
registered agent in Delaware or elsewhere or other services in the ordinary
course of business.
"Initial Closing Date" has the meaning specified in the Equity Purchase
Agreement.
"Liquidating Trustee" means the Person appointed by the Managing Member
to act in the capacity provided in Article XII.
"LLC QF" means a "qualifying small power producer" or "qualifying
cogenerator" (in each case within the meaning of PURPA) in which the Company
holds, directly or indirectly, an equity interest.
"Managing Member" has the meaning specified in the preamble to this
Agreement.
"Member" means each of the Persons that are parties to this Agreement,
and any other Person that hereafter becomes a Member in accordance with Section
11.2.
6
"Members Agreement" means the Members Agreement dated as of April 30,
2004, among Highstar, DLJMB and the Managing Member, a copy of which is attached
hereto as Exhibit B, as the same may be amended from time to time.
"Membership Interest" means a Member's entire interest in the Company.
"Note Documents" means the Purchase Agreement, dated as of June 11,
2003, among the Company, Finance Co. and Credit Suisse First Boston LLC and the
Note Documents (as defined in the Indenture, dated as of June 25, 2003, among
the Company, Finance Co., Xxxxxx and Xxxxx Fargo Bank Minnesota, National
Association, as trustee), and all other orders, directions, requests, receipts,
certificates, or other agreements, instruments, papers and documents entered
into in connection with or contemplated by any of the Note Documents.
"Ownership Percentage" means, in respect of any Member, the percentage
set forth opposite such Member's name on Exhibit A to this Agreement, as such
exhibit may be amended from time to time.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.
"Preferred Contribution" means, with respect to any Member, the
principal and accrued and unpaid interest amounts of any Backup Loan(s) made by
that Member that have been converted into Preferred Interests as described in
the Members Agreement.
"Preferred Interests" means that portion of the Membership Interests of
any Member hereunder issued with respect to the amount of any Backup Loan(s)
made by that Member that have been converted into Preferred Interests as
described in the Members Agreement. Preferred Interests shall not be convertible
into Common Interests and shall have no voting rights other than those provided
to a class of Membership Interests under the Act.
"Preferred Return" means, with respect to any Member, a cumulative
return equal to 25% per annum on that Member's Unpaid Preferred Contribution,
with any Unpaid Preferred Return to be compounded annually on the last day of
each Fiscal Year for purposes of computing the Preferred Return in subsequent
Fiscal Years. The Preferred Return shall accrue daily and shall be computed on
the basis of a 365 or 366-day year, as the case may be.
"Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing and any other
proceeding (including any appeals from any of the foregoing) whether civil,
criminal, administrative or investigative that arise out of or otherwise relate
to this Agreement and the terms hereof.
"Profits" and "Losses" means, for each Fiscal Year or part thereof, the
taxable income or loss of the Company for such Fiscal Year or part thereof
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable income or
loss), with the following adjustments:
(xi) any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Profits shall be added to such
taxable income or tax loss;
7
(xii) any expenditures of the Company described in Section 705(a)(2)(B) of
the Code or treated as such pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations and not otherwise taken into account in computing Profits or Losses
shall be subtracted from such taxable income or loss;
(xiii) Depreciation for such Fiscal Year or part thereof shall be taken
into account in lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss;
(xiv) gain or loss resulting from any disposition of Company property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed with reference to the Book Value of the property disposed of,
rather than the adjusted tax basis of such property;
(xv) if the Book Value of any Company asset is adjusted in accordance with
clauses (ii) or (iii) of the definition of "Book Value" above, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Profits or Losses; and
(xvi) such taxable income or loss shall be deemed not to include any
income, gain, loss, deduction or other item thereof allocated pursuant to
Section 7.1(c).
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Article VII shall be
determined by applying rules analogous to those set forth in clauses
(i) through (vi) above.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
"Purchased Project Partnerships" has the meaning specified in the
recitals to this Agreement.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended.
"Ref-Fuel Holdings" has the meaning specified in the recitals to this
Agreement.
"Ref-Fuel Holdings Ownership Interest" has the meaning specified in
Section 3.1.
"Regulations" means the Federal Income Tax Regulations promulgated
under the Code, as such Regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning specified in Section
7.1(c)(v).
"Senior Secured Notes" means the Two Hundred Million Dollar
($200,000,000) original principal amount 8 1/2% Senior Secured Notes Due 2010
issued by the Company and Finance Co.
"Stockholders Agreement" has the meaning specified in the Members
Agreement.
"Subsidiary" means, with respect to any Person, a Person that directly,
or indirectly through one or more intermediaries, and through greater than 50%
equity ownership, controls or is controlled by, or is under common control with
the Person specified.
"Tax Matters Member" has the meaning specified in Section 10.5(a).
8
"Tax Distribution" has the meaning specified in Section 6.5.
"Tender" means a full and unconditional offer to make a required
Additional Capital Contribution in accordance with the terms and conditions of
Section 5.2(a), and the verbs Tender and Tendered shall have correlative
meanings.
"Transfer" has the meaning specified in the Members Agreement.
"Unallocated Preferred Return" means, with respect to any Member, that
Member's Preferred Return minus the cumulative aggregate amount allocated to
that Member under Section 7.1(a)(ii).
"Unpaid Preferred Contribution" means, with respect to any Member, that
Member's Preferred Contribution minus the cumulative aggregate amount
distributed to that Member under Section 6.1(b).
"Unpaid Preferred Return" means, with respect to any Member, that
Member's Preferred Return minus the cumulative aggregate amount distributed to
that Member under Section 6.1(a).
