EXHIBIT A-2
----------------------------------------------
OPERATING AGREEMENT
OF
AMERICAN TRANSMISSION COMPANY, LLC
----------------------------------------------
DATED AS OF , 2000
------- --
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................................1
SECTION 1.1 Definitions.....................................................1
ARTICLE II FORMATION OF COMPANY...............................................12
SECTION 2.1 Name, Office and Registered Agent..............................12
SECTION 2.2 Governing Law..................................................12
SECTION 2.3 Purpose........................................................12
SECTION 2.4 Powers.........................................................14
SECTION 2.5 Restrictions...................................................14
SECTION 2.6 Adequacy of Transmission.......................................14
SECTION 2.7 Term...........................................................15
ARTICLE III MEMBERS AND CAPITAL CONTRIBUTIONS.................................15
SECTION 3.1 Members and Schedule A.........................................15
SECTION 3.2 Initial Capital Contributions..................................16
SECTION 3.3 Additional Members by Right....................................16
SECTION 3.4 Pre-emptive Rights.............................................17
SECTION 3.5 Contribution of Additional Transmission Assets.................18
SECTION 3.6 Voluntary Additional Capital Contributions.....................19
SECTION 3.7 Issuance to Corporate Manager..................................20
SECTION 3.8 Adjustment of Tax-Exempt Members' Capital......................22
SECTION 3.9 Capital Accounts...............................................23
SECTION 3.10 Initial Debt Financing.........................................24
SECTION 3.11 No Interest....................................................24
SECTION 3.12 No Third Party Beneficiary.....................................24
SECTION 3.13 Membership Units as Securities.................................25
SECTION 3.14 Month-End Convention...........................................25
ARTICLE IV RIGHTS, OBLIGATIONS AND POWERS OF THE CORPORATE MANAGER............25
SECTION 4.1 Management of the Company......................................25
SECTION 4.2 Authority of Corporate Manager.................................26
SECTION 4.3 Indemnification and Exculpation of Indemnitees.................26
SECTION 4.4 Liability of the Corporate Manager.............................27
SECTION 4.5 Company Obligations............................................28
SECTION 4.6 Outside Activities.............................................29
SECTION 4.7 Title to Company Assets........................................29
ARTICLE V ACCOUNTING, TAX AND FISCAL MATTERS..................................29
SECTION 5.1 Fiscal and Taxable Year........................................29
SECTION 5.2 Books..........................................................29
Page
SECTION 5.3 Records........................................................29
SECTION 5.4 Company Funds..................................................30
SECTION 5.5 Tax Returns....................................................30
SECTION 5.6 Tax Elections..................................................31
SECTION 5.7 Tax Matters, Tax Elections and Special Basis Adjustments.......31
SECTION 5.8 Access to Records..............................................31
ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS......................................31
SECTION 6.1 Allocations....................................................31
SECTION 6.2 Cash Available for Distribution................................33
SECTION 6.3 No Right to Distributions in Kind..............................34
SECTION 6.4 Limitations on Distributions...................................35
SECTION 6.5 Distributions Upon Liquidation.................................35
SECTION 6.6 Substantial Economic Effect....................................36
SECTION 6.7 Quarter-End Convention.........................................36
ARTICLE VII CHANGES IN CORPORATE MANAGER......................................36
SECTION 7.1 Transfer of the Corporate Manager's Member Interest............36
SECTION 7.2 Admission of a Substitute or Additional Corporate Manager......38
SECTION 7.3 Effect of Bankruptcy, Withdrawal or Liquidation of the
Corporate Manager............................................38
SECTION 7.4 Removal of a Corporate Manager.................................39
ARTICLE VIII RIGHTS AND OBLIGATIONS OF THE NON-MANAGING MEMBERS...............40
SECTION 8.1 Management of the Company......................................40
SECTION 8.2 Power of Attorney..............................................40
SECTION 8.3 Limitation on Liability of Non-Managing Members................40
SECTION 8.4 Redemption Right...............................................40
SECTION 8.5 Registration...................................................42
ARTICLE IX TRANSFER...........................................................46
SECTION 9.1 Purchase Not for Distribution..................................46
SECTION 9.2 Restrictions on Transfer of Member Interests...................46
SECTION 9.3 Permitted Transfers............................................47
SECTION 9.4 Admission of Substitute Member.................................48
SECTION 9.5 Rights of Assignees of Members Interests.......................49
SECTION 9.6 Effect of Bankruptcy or Termination of a Non-Managing Member...49
SECTION 9.7 Month-End Convention...........................................49
ARTICLE X AMENDMENTS; MERGER..................................................49
SECTION 10.1 Amendments.....................................................49
SECTION 10.2 Merger.........................................................50
ARTICLE XI MISCELLANEOUS......................................................50
SECTION 11.1 Notices........................................................50
ii
Page
SECTION 11.2 Entire Agreement...............................................50
SECTION 11.3 Interpretation and Construction................................51
SECTION 11.4 Counterparts...................................................51
SECTION 11.5 Binding on Successors..........................................51
SECTION 11.6 Severability...................................................51
SECTION 11.7 Rights and Remedies............................................51
SECTION 11.8 Economic Benefit...............................................51
Schedules and Exhibits
Schedule A List of Members and Member Units
Schedule B Illustrative XXXX Calculations
Schedule C 1999 Load Ratio Shares
Exhibit A Notice of Exercise of Redemption Right
Exhibit B Dispute Resolution Provisions
iii
AMERICAN TRANSMISSION COMPANY, LLC
OPERATING AGREEMENT
THIS OPERATING AGREEMENT of AMERICAN TRANSMISSION COMPANY, LLC, a
Wisconsin limited liability company (the "Company"), is made and entered into as
of , 2000, by and among the parties listed on Schedule A, for the
------ --
regulation of the affairs and conduct of the Company and certain relationships
with its Members.
RECITALS
1. Wisconsin Act 9, the 1999-2001 Biennial Budget Act, includes
provisions commonly referred to as the Reliability 2000 Legislation, which
authorized the organization of a new company to provide electric transmission
service.
2. Pursuant to the provisions of the Reliability 2000 Legislation,
electric transmission utilities were authorized to contribute their transmission
assets to such company, and certain other electric utilities were authorized to
make cash contributions to such company.
3. The initial parties listed on Schedule A have determined to
establish the Company for such purpose and have entered into this Operating
Agreement to govern the affairs of the Company and certain relationships with
its Members.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
-----------
In addition to the definitions contained in this Agreement, the
following terms used herein shall have the following meanings assigned to them.
"Act" means the Wisconsin Limited Liability Company Act, as amended
from time to time.
"Additional Securities" means any additional Corporate Shares (other
than Corporate Shares issued in connection with an exchange pursuant to Section
8.4 hereof) or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase Corporate Shares,
as set forth in Section 3.7(a)(ii).
"Administrative Expenses" means (i) all administrative and operating
costs and expenses incurred by the Company, (ii) those administrative costs and
expenses of the Corporate Manager, including any salaries or other payments to
directors, officers or employees of the Corporate Manager, and any accounting
and legal expenses of the Corporate Manager, which expenses, the Members have
agreed, are expenses of the Company and not the Corporate Manager, and (iii) to
the extent not included in clause (ii) above, Corporate Expenses.
"Affiliate" means, with respect to any Person:
(a) Any Person owning or holding directly or indirectly 5% or more of
the voting securities of such Person;
(b) Any Person in any chain of successive ownership of 5% or more of
the voting securities of such Person;
(c) Any corporation 5% or more of whose voting securities is owned by
any Person owning 5% or more of the voting securities of such Person or by any
Person in any chain of successive ownership of 5% or more of the voting
securities of such Person;
(d) Any Person who is an officer or director of such Person or of any
corporation in any chain of successive ownership of 5% or more of the voting
securities of such Person;
(e) Any corporation operating a servicing organization for furnishing
supervisory, construction, engineering, accounting, legal or similar services to
such Person, which corporation has one or more officers or one or more directors
in common with such Person, and any other corporation which has directors in
common with such Person if the number of directors of the corporation is more
than one-third of the total number of such Person's directors; or
(f) Any subsidiary of such Person.
"Agreement" means this Operating Agreement, as it may be amended from
time to time in accordance with its terms.
"Article 8" has the meaning provided in Section 3.13.
"Asset Contribution Agreement" means any of the asset contribution
agreements to be entered into between the Company and each of the Transmission
Utilities, which agreements provide for the contribution of such Transmission
Utility's Transmission Assets in exchange for Member Units.
"Capital Account" has the meaning provided in Section 3.9.
"Capital Contributions" means the aggregate contributions by a Member
to the capital of the Company as set forth on Schedule A, as amended from time
----------
to time.
"Capital Event" means (i) any Company transaction that does not result
in a carry-over of a Tax-Exempt Member's Capital Account, such as a liquidation
of the Company, sale of all or substantially all of its assets or a merger of
the Company into a corporation, (ii) the sale of all or a portion of the Units
held by a Tax-Exempt Member to a Member that directly or indirectly is a Person
subject to tax under Code Section 11, (iii) the exchange of all or a portion of
the Units held by a Tax-Exempt Member for Corporate Shares, or (iv) any other
event or occurrence where the Adjustment is no longer necessary to protect the
2
returns of the Members that are directly or indirectly taxable under Code
Section 11.
"Cash Amount" means an amount of cash per Member Unit equal to the
Value of the Corporate Shares Amount on the date of receipt by the Corporate
Manager of a Notice of Redemption.
"Cash Available for Distribution" shall mean, for any period, the
excess, if any, of (i) the cash receipts of the Company (other than from (A) the
Initial Financing, (B) financing pursuant to Section 3.5(d), or (C) a
Terminating Capital Transaction), receipts from the sale, exchange or other
disposition of Company assets, and amounts withdrawn from Reserves, over (ii)
disbursements of cash by the Company (other than distributions to Members and
amounts paid with receipts from (A) the Initial Financing, (B) financing
pursuant to Section 3.5(d), or (C) a Terminating Capital Transaction), including
the payment of operating expenses, debt service on loans, capital expenditures,
and amounts set aside for Reserves. The foregoing amounts are intended not to
exceed "operating cash flow distributions," as defined in Section 1.707-4(b) of
the Regulations.
"Chapter 196" means Chapter 196 of the Wisconsin Statutes, Regulation
of Public Utilities.
"Charter" means the Articles of Incorporation of the Corporate Manager
filed with the Wisconsin Department of Financial Institutions, as such Articles
may be amended or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time (or any corresponding provisions of succeeding law).
"Commission" means the United States Securities and Exchange
Commission.
"Company" means American Transmission Company, LLC, and its successors
and assigns.
"Company Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the
amount of Company Minimum Gain is determined by first computing, for each
Company nonrecourse liability, any gain the Company would realize if it disposed
of the property subject to that liability for no consideration other than full
satisfaction of the liability, and then aggregating the separately computed
gains. A Member's share of Company Minimum Gain shall be determined in
accordance with Regulations Section 1.704-2(g)(1).
"Company Record Date" has the meaning provided in Section 6.2(g).
"Contribution Value" means the net book value, as of the date of
contribution, of the Transmission Assets contributed by a Member pursuant to its
Asset Contribution Agreement, as reflected on the FERC Books of Account of the
Member (or with respect to a Member without an OATT, its regulatory books of
3
account relating to the Transmission Assets being contributed), as adjusted on a
dollar-for-dollar basis for (i) Deferred Taxes, and (ii) Deferred Investment Tax
Credits associated with those Transmission Assets. The Members agree that the
Contribution Values of the Transmission Assets contributed by MG&E, WEPCO, WPL
and WPS shall be further adjusted by increasing the number of Member Units to be
received by MG&E by 2/3 of the difference between the Contribution Value that
MG&E would have had had Deferred Investment Tax Credits not been taken into
account and what it had taking Deferred Investment Tax Credits into account,
subject to an aggregate reallocation of $708,727 of Contribution Value (prior to
the Initial Financing). The Member Units to be received by WEPCO and WPL shall
each be reduced by 45% of the amount reallocated, and the number of Member Units
to be received by WPS shall be reduced by 10% of the amount reallocated.
Contribution Value shall not otherwise be adjusted for the effect of any
required Code Section 704(c) allocations.
"Conversion Factor" means 1.0, provided that in the event that the
Corporate Manager (i) declares or pays a dividend on its outstanding Corporate
Shares in Corporate Shares or makes a distribution to all holders of its
outstanding Corporate Shares in Corporate Shares, (ii) subdivides its
outstanding Corporate Shares or (iii) combines its outstanding Corporate Shares
into a smaller number of Corporate Shares, the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by a fraction, the numerator of
which shall be the number of Corporate Shares issued and outstanding on the
record date for such dividend, distribution, subdivision or combination
(assuming for such purposes that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of which shall be
the actual number of Corporate Shares (determined without the above assumption)
issued and outstanding on such date and, provided further, that in the event
that an entity other than an Affiliate of the Corporate Manager shall become
Corporate Manager pursuant to any merger, consolidation or combination of the
Corporate Manager with or into another entity (the "Successor Entity"), the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by the
number of shares of the Successor Entity into which one Corporate Share is
converted pursuant to such merger, consolidation or combination, determined as
of the date of such merger, consolidation or combination. Any adjustment to the
Conversion Factor shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event; provided,
however, that if the Corporate Manager receives a Notice of Redemption after the
record date, but prior to the effective date of such dividend, distribution,
subdivision or combination, the Conversion Factor shall be determined as if the
Corporate Manager had received the Notice of Redemption immediately prior to the
record date for such dividend, distribution, subdivision or combination.
"Corporate Expenses" means (i) costs and expenses relating to the
formation and continuity of existence and operation of the Corporate Manager and
any Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be
included within the definition of Corporate Manager), including taxes, fees and
assessments associated therewith, any and all costs, expenses or fees payable to
any director, officer or employee of the Corporate Manager, (ii) costs and
expenses relating to any public offering and registration of securities by the
Corporate Manager and all statements, reports, fees and expenses incidental
thereto, including, without limitation, underwriting discounts and selling
commissions applicable to any such offering of securities, and any costs and
4
expenses associated with any claims made by any holders of such securities or
any underwriters or placement agents thereof, (iii) costs and expenses
associated with any repurchase of any securities by the Corporate Manager, (iv)
costs and expenses associated with the preparation and filing of any periodic or
other reports and communications by the Corporate Manager under federal, state
or local laws or regulations, including filings with the Commission, (v) costs
and expenses associated with compliance by the Corporate Manager with laws,
rules and regulations promulgated by any regulatory body, including the
Commission and any securities exchange, (vi) costs and expenses associated with
any 401(k) plan, incentive plan, bonus plan or other plan providing for
compensation for the employees of the Corporate Manager, (vii) costs and
expenses incurred by the Corporate Manager relating to any issuing or redemption
of Member Interests and (viii) all other operating or administrative costs of
the Corporate Manager incurred in the ordinary course of its business on behalf
of or in connection with the Company.
"Corporate Manager" means ATC Management Inc., a Wisconsin
Corporation, and any Person who becomes a substitute or additional Corporate
Manager as provided herein, and any of their successors as Corporate Manager.
"Corporate Share" means one share of common stock, Class A or Class B,
of the Corporate Manager.
"Corporate Shares Amount" means a number of Corporate Shares equal to
the product of the number of Member Units offered for redemption by a Redeeming
Member pursuant to a completed Notice of Redemption submitted by such Redeeming
Member to the Corporate Manager, multiplied by the Conversion Factor as adjusted
to and including the Specified Redemption Date; provided that in the event the
Corporate Manager issues to all holders of Corporate Shares rights, options,
warrants or convertible or exchangeable securities entitling the shareholders to
subscribe for or purchase Corporate Shares, or any other securities or property
(collectively, the "rights"), and the rights have not expired at the Specified
Redemption Date, then the Corporate Shares Amount shall also include the rights
issuable to a holder of the Corporate Shares Amount on the record date fixed for
purposes of determining the holders of Corporate Shares entitled to rights.
"Deferred Investment Tax Credits" means those unamortized deferred
investment tax credits (as defined in the Code) associated with the Transmission
Assets.
"Deferred Taxes" means the income tax liability or benefit associated
with the contributed Transmission Assets (that are reflected on the FERC Books
of Account (with respect to any Member with an OATT) and regulatory books of
account (with respect to all other Members) of the Member contributing such
Transmission Assets, as adjusted to the Operations Date) that (i) has been
deferred as a result of the difference between depreciation for accounting and
tax purposes, or (ii) results from the difference between the past accrual for
income taxes at a different rate than that currently applicable.
"Dispute Resolution Provisions" means those provisions for resolving
disputes among the Members and the Company and Corporate Manager set forth as
Exhibit B to this Agreement.
---------
5
"Effective Date" means the date the Company's articles of organization
are accepted for filing by the Wisconsin Department of Financial Institutions.
"Effective Period" has the meaning provided in Section 8.5(a)(ii).
"Electric Utility" means (i) a public utility as defined in ss. 196.01
of the Wisconsin Statutes, that is involved in the generation, transmission,
distribution or sale of electric energy, (ii) a municipal electric company
organized under ss. 66.073 of the Wisconsin Statutes, (iii) a wholesale electric
cooperative as defined in ss. 196.485(1)(k) of the Wisconsin Statutes, or (iv) a
Retail Electric Cooperative.
"Equity Accounting" means the accounting standard that allows a
Member, subject to certain conditions, to report its net investment in the
Company on such Member's balance sheet and its allocable share of the Company's
profits on such Member's income statement, as such standard is applied on the
Effective Date.
"Event of Bankruptcy" as to any Person means the filing of a petition
for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of
1978 or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within 90 days); insolvency or
bankruptcy of such Person as finally determined by a court proceeding; filing by
such Person of a petition or application to accomplish the same or for the
appointment of a receiver or a trustee for such Person or a substantial part of
its assets; commencement of any proceedings relating to such Person as a debtor
under any other reorganization, arrangement, insolvency, adjustment of debt or
liquidation law of any jurisdiction, whether now in existence or hereinafter in
effect, either by such Person or by another, provided that if such proceeding is
commenced by another, such Person indicates its approval of such proceeding,
consents thereto or acquiesces therein, or such proceeding is contested by such
Person and has not been finally dismissed within 90 days.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FERC" means the Federal Energy Regulatory Commission, or its
successor in interest.
"FERC Books of Account" means those books of account pertaining to
transmission that are required by FERC to be maintained by companies that have
filed transmission tariffs with FERC.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of its status as the Corporate Manager or a director, officer or employee
of the Corporate Manager or the Company and (ii) such other Persons (including
Affiliates of the Company or the Corporate Manager) as the Corporate Manager may
designate from time to time, in its sole and absolute discretion.
6
"Initial Financing" means the Company's initial debt financing
contemplated in Section 3.10.
"IPO" means the closing of an offering of Corporate Shares that has
the effect of listing the Corporate Shares on the New York Stock Exchange,
American Stock Exchange, NASDAQ, or any of their successors in interest.
"Jurisdictional Area" means the geographic area that is served by the
Mid-America Inter-connected Network, Inc., or the Mid-Continent Area Power Pool
reliability council of the North American Electric Reliability Council.
"Land Right" means any right in real property, including fee simple
ownership or a right-of-way or easement, that has been required for a
Transmission Facility that is located or intended to be located on the real
property.
"Load Ratio Share" means, with respect to any Person, such Person's
firm electric usage in Wisconsin during 1999, as determined by dividing such
Person's kWh sales shown in Schedule C by the total kWh sales in Wisconsin shown
----------
in Schedule C, converting the quotient to a percentage and carrying such
----------
percentage to two decimal places using standard rounding conventions.
"Losses" has the meaning provided in Section 6.1(f).
"Majority in Interest" means the affirmative vote or consent of
Members holding Percentage Interests aggregating greater than 50%.
"Member Interest" means an ownership interest in the Company held by a
Member and includes any and all benefits to which the holder of such a Member
Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement.
"Member Nonrecourse Debt Minimum Gain" means "partner nonrecourse debt
minimum gain" as set forth in Regulations Section 1.704-2(i). A Member's share
of Member Nonrecourse Debt Minimum Gain shall be determined in accordance with
Regulations Section 1.704-2(i)(5).
"Member Unit" means a Member Interest in the Company having an initial
value of $10. The number of Member Units owned by each Member shall be as set
forth on Schedule A, as it may be amended from time to time.
"Members" means the Persons initially identified on Schedule A, their
successors and permitted assigns, those Persons admitted as Members in
accordance with Sections 3.1(b) or 3.3, and those Persons admitted as Substitute
Members in accordance with Section 9.4.
"MG&E" means Madison Gas & Electric Co., a Wisconsin corporation.
"MISO" means the Midwest Independent System Operator, the
establishment of which FERC has conditionally authorized in an order issued on
7
September 16, 1998, or any independent system operator or regional transmission
organization that has been approved under federal law to succeed the MISO.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System National Market System.
"Net Book Value" means the aggregate Capital Accounts of all the
Members kept in accordance with Section 3.9, less, with respect to the
Tax-Exempt Members, an amount equal to the excess, if any, of the Tax-Exempt
Investment Amount over the Tax-Exempt Ownership Interest.
"Net Contribution" shall have the meaning set forth in Section 3.8.
"Non-Managing Member" means any Person named as a Member on Schedule A
other than the Corporate Manager, and any Person who becomes a Substitute or
Additional Non-Managing Member, in such Person's capacity as a Non-Managing
Member in the Company.
"Notice of Redemption" means the Notice of Exercise of Redemption
Right substantially in the form attached as Exhibit A.
---------
"OATT" means Open Access Transmission Tariff.
"Operations Date" means the date that the Company commences
operations, as determined by the PSCW.
"Percentage Interest" means the percentage interest of each Member in
the Company, as determined by dividing the Member Units owned by such Member by
the total number of Member Units then outstanding.
"Person" means an individual, corporation, general or limited
partnership, joint venture, trust, unincorporated association, limited liability
company or any other legal or commercial entity.
"Profits" has the meaning provided in Section 6.1(f).
"PSCW" means the Public Service Commission of Wisconsin, or its
successor in interest.
"PUHCA" means the Public Utility Holding Company Act.
"Redeeming Member" has the meaning provided in Section 8.4(a).
"Redemption Amount" means either the Cash Amount or the Corporate
Shares Amount, as selected by the Corporate Manager pursuant to Section 8.4(b)
hereof.
"Redemption Right" has the meaning provided in Section 8.4(a).
"Redemption Shares" has the meaning provided in Section 8.5(a).
8
"Registrable Securities" means (i) any issued and outstanding shares
of common stock, and (ii) any shares of common stock issued or issuable directly
or indirectly with respect to the outstanding shares of common stock by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares constituting Registrable Securities, such shares will cease to
be Registrable Securities when they have been (x) effectively registered under
the Securities Act and disposed of in accordance with a registration statement
covering them or (y) sold to the public pursuant to Rule 144 (or by similar
provision under the Securities Act).
"Registration Statement" has the meaning provided in Section 8.5(a).
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such Regulations may be amended from time to time (including
corresponding provisions of succeeding Regulations).
"Reliability 2000 Legislation" means that portion of Wisconsin Act 9
(the 1999-2001 Biennial Budget Act) relating to public utility holding
companies, electric power transmission, public benefits and other aspects of
electric utility regulation.
"Reserves" means the amount of cash determined from time to time by
the Corporate Manager to be required by the Company for its operations,
including the construction of additional Transmission Facilities.
"Retail Electric Cooperative" means a cooperative organized under
Chapter 185 of the Wisconsin Statutes that provides retail electric service to
its members.
"Securities Act" means the Securities Act of 1933, as amended.
"Service" means the Internal Revenue Service.
"Specified Redemption Date" means the first business day of the month
that is at least 60 calendar days after the receipt by the Corporate Manager of
a Notice of Redemption.
"Subscription Agreement" means either of the subscription agreements
to be entered into between the Company and any Member that is not a Transmission
Utility, which agreements provide for the contribution of cash in exchange for
Member Units.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"Substitute Members" means those Persons admitted as Members in
accordance with Section 9.4.
"Successor Entity" has the meaning provided in the definition of
"Conversion Factor" contained herein.
9
"Tax-Exempt Investment Amount" means an amount determined as follows:
TEOI x TEIP
, where TEOI is the Tax-Exempt Ownership Interest and TEIP is the Tax-Exempt
Investment Percentage.
"Tax-Exempt Investment Percentage" means a percentage determined as
follows:
RIOUER%
---------
IIOUER%
, where RIOUER% is the Reduced IOU Equity Return Percentage and IIOUER% is the
Increased IOU Equity Return Percentage. The Reduced IOU Equity Return Percentage
means a percentage determined as follows:
ER%-((ER%-((ER%-(AMORT )x TEPI x EITR%))x(1-TEPI))
-----
IOUCRB)
------------------------------------------------
IOUCV / IOUCRB
, where ER% is equal to the FERC authorized equity return; AMORT is equal to the
amount of Deferred Investment Tax Credit and Deferred Taxes; EITR% is equal to
the effective income tax rate applied to the Company by FERC; IOUCV is equal to
the Contribution Value attributable to Member other than Tax-Exempt Members; and
IOUCRB is equal to the amount of the rate base contributed by all Members other
than Tax-Exempt Members.
The Increased Equity Return Percentage means a percentage determined as follows:
(ER%-(ER% x TEPI x EITR%)) x TEPI
, where ER% and EITR% are defined above, and TEPI is equal to the aggregate
Percentage Interests of all the Tax-Exempt Members.
"Tax-Exempt Member" means a Member that is exempt from federal income
taxation.
"Tax Matters Member" has the meaning provided in Section 5.6.
"Tax-Exempt Ownership Interest" means an amount determined as follows:
IOUCV x ( TEPI
-------
1-TEPI )
10
, where IOUCV is equal to the Contribution Value attributable to Members other
than Tax-Exempt Members, and TEPI is equal to the aggregate Percentage Interests
of all of the Tax-Exempt Members.
"Terminating Capital Transaction" means the sale, exchange or other
disposition of all or substantially all of the assets of the Company, after
which transaction the Company is dissolved and terminated.
"Trading Day" means a day on which the principal national securities
exchange on which a security is listed or admitted to trading is open for the
transaction of business or, if a security is not listed or admitted to trading
on any national securities exchange, shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Transfer" has the meaning provided in Section 9.2.
"Transmission Area" means the area of Wisconsin that, on January 1,
1997, was served by the Mid-America Interconnected Network, Inc. reliability
council of the North American Electric Reliability Council.
"Transmission Assets" means the Transmission Facilities and associated
Land Rights, and inventory and spare parts relating thereto.
"Transmission-Dependent Utility" means an Electric Utility that is not
a Transmission Utility and that is dependent on the transmission system of
another Person for delivering electricity to the electric utility's customers.
"Transmission Facility" means any pipe, pipeline, duct, wire, line,
conduit, pole, tower, equipment or other structure used for the transmission of
electric power that is contributed to or owned or leased by the Company.
"Transmission Utility" means a cooperative organized under Chapter 185
of the Wisconsin Statutes or a public utility (as defined in ss. 196.01 of the
Wisconsin Statutes) that owns a Transmission Facility in Wisconsin and that
provides transmission service in Wisconsin.
"Value" means, with respect to any security, the average of the daily
market price of such security for the ten consecutive Trading Days immediately
preceding the date of such valuation. The market price for each such Trading Day
shall be: (i) if such security is listed or admitted to trading on any
securities exchange or the NASDAQ, the closing sale price, regular way, on such
day, or if no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, on such day, (ii) if such security is not listed
or admitted to trading on any securities exchange or the NASDAQ, the last
reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the Company, or (iii) if such security
is not listed or admitted to trading on any securities exchange or the NASDAQ
and no such last reported sale price or closing bid and asked prices are
available, the average of the reported high bid and low asked prices on such
11
day, as reported by a reliable quotation source designated by the Company, or if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than ten
days prior to the date in question) for which prices have been so reported;
provided that if there are no bid and asked prices reported during the ten days
prior to the date in question, the value of the security shall be determined by
the Corporate Manager acting in good faith on the basis of such quotations and
other information as it considers, in its reasonable judgment, appropriate; and
provided that the Value of a share of Class B Common Stock (as defined in the
Charter) shall be deemed to be equal to the Value of a share of Class A Common
Stock (as defined in the Charter). In the event the security includes any
additional rights, then the value of such rights shall be determined by the
Corporate Manager acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
"WEPCO" means Wisconsin Electric Power Company, a Wisconsin
corporation.
"WPL" means Wisconsin Power and Light Company.
"WPPI" means Wisconsin Public Service, Inc., a Wisconsin [statutory
corporation].
"WPS" means Wisconsin Public Service Corp., a Wisconsin corporation.
ARTICLE II
FORMATION OF COMPANY
SECTION 2.1 Name, Office and Registered Agent.
---------------------------------
The name of the Company shall be AMERICAN TRANSMISSION COMPANY, LLC.
The Company's initial registered office is located at , Madison,
----------------
Wisconsin , and its registered agent is ,
------------ -----------------------
whose business office is identical with the Company's registered office. The
Company's principal office and place of business is located at
, Milwaukee, Wisconsin , or such other
----------------------------------- ------
places as the Corporate Manager may determine.
SECTION 2.2 Governing Law.
-------------
This Agreement and all questions with respect to the rights and
obligations of the Members, the construction, enforcement and interpretation
hereof, and the formation, administration and termination of the Company shall
be governed by the provisions of the Act and other applicable laws of the State
of Wisconsin and the Federal Power Act.
SECTION 2.3 Purpose.
--------
(a) The sole purpose of the Company is the planning, constructing,
operating, maintaining and expanding of Transmission Facilities to provide for
an adequate and reliable transmission system that meets the needs of all users
that are dependent on the transmission system, and that supports effective
12
competition in energy markets without favoring any market participant, and to
engage in any and all other activities incidental or appropriate thereto.
(b) Subject to obtaining appropriate federal or state regulatory
approvals and to the extent not inconsistent with the obligations set forth in
Section 2.3(c), the Company may acquire, own, lease, construct and expand
Transmission Assets in any jurisdiction and may conduct operations in any
jurisdiction where it owns, operates, leases or otherwise acquires Transmission
Assets.
(c) The Company undertakes and acknowledges that it shall:
(i) Apply for any approvals under federal law that are necessary
for the Company to begin operations no later than January 1, 2001;
(ii) Have the exclusive duty to provide transmission service in
those areas where it owns or leases Transmission Assets, which service
shall be under the authority of MISO when it shall begin operations,
as determined by the PSCW;
(iii) (A) contract with each Transmission Utility to provide
reasonable and cost-effective operation and maintenance services with
respect to the Transmission Assets contributed by it for three years
following the Operations Date; and (B) agree to an extension of such
three-year period as the Company and the contracting Transmission
Utility deem appropriate;
(iv) Assume the obligations of a Transmission Utility under any
agreement of such Transmission Utility to provide transmission service
over its Transmission Facilities or credits for the use of
Transmission Facilities, provided that the Company may modify any such
agreement to the extent allowed under the agreement and to the extent
allowed under state or federal law;
(v) Apply for membership in MISO as a single zone for pricing
purposes that includes the Transmission Area and, upon a determination
that MISO has begun operations, transfer operational control of its
Transmission Facilities to MISO;
(vi) Remain a member of MISO for at least the six-year transition
period that is specified in the agreement establishing MISO that was
conditionally approved by FERC;
(vii) Elect to be included in a single zone for the purpose of
any tariff administered by MISO; provided, however, that if the
transmission charges or rates of any Transmission Utility in the
Transmission Area are 10% or more below the average transmission
charges or rates of the Transmission Utilities in the Transmission
Area on November 5, 1999, the Company shall, after consulting with
each Transmission Utility, prepare a plan for phasing in a combined
single zone rate for the purpose of pricing network use by users of
the transmission system operated by MISO, and shall seek plan approval
by FERC and MISO. Such plan shall phase in an average cost-price for
13
the combined single zone in equal increments over a five-year period,
except that transmission service shall be provided to all users of the
transmission system on a single-zone basis during the phase-in period.
SECTION 2.4 Powers.
-------
The Company shall have all the powers incident and appropriate to the
performance of its purposes as set forth in Section 2.3, and all other powers of
limited liability companies under the Act. Without limiting the foregoing, the
Company shall have all the powers of a transmission company under Chapter 196,
and as appropriate, under analogous provisions of other states' laws where the
Company is conducting business.
SECTION 2.5 Restrictions.
------------
(a) The Company may not:
(i) Sell or transfer its Transmission Assets located in the
Transmission Area to, or merge such Transmission Assets with, another
Person, unless (A) such Transmission Assets are sold, transferred or
merged on an integrated basis and in a manner that ensures that the
Company's Transmission Facilities in the Transmission Area are
planned, constructed, operated, maintained and controlled as a single
transmission system and (B) the successor agrees to be bound by the
provisions of Section 2.6;
(ii) Except upon the unanimous approval of the Members, bypass
the distribution facilities of an Electric Utility or provide service
directly to a retail customer or member of a retail cooperative that
provides service in the Transmission Area;
(iii) Own electric generation facilities, or sell, market or
broker electric capacity or energy in the Transmission Area, or as
determined by the PSCW, except that, if authorized or required by
FERC, the Company may purchase or resell Ancillary Services obtained
from third parties and engage in redispatch activities that are
necessary to relieve transmission constraints or operate a control
area.
(b) Notwithstanding Section 2.3, the Company may not begin operations
until it provides an opinion to PSCW from a nationally recognized investment
banking firm that the Company is able to finance, at a reasonable cost, its
start-up costs, working capital and operating expenses, and the cost of any new
facilities that are planned.
SECTION 2.6 Adequacy of Transmission.
------------------------
Subject to applicable regulatory approvals, including adherence to
least-cost planning requirements and principles, and subject to the oversight
and direction of MISO where applicable, the Company shall have a public utility
duty to operate, maintain, plan and construct its transmission system so that
the system is adequate (i) to support effective competition in energy markets
without favoring any market participant; (ii) to deliver on a reliable basis the
reasonable, projected needs of all of the loads on the electric distribution
systems connected to and dependent upon the Company's facilities for delivery of
14
reliable, low-cost and competitively-priced electricity to such distribution
systems; and (iii) to provide needed support to the distribution systems
interconnected to the Company's system, where a transmission addition is the
least-cost electric solution to an improvement need, including but not limited
to, the reliability needs of the distribution systems that are owned by the
initial Non-Managing Members or their members. In meeting this obligation, the
Company shall treat the needs of each electric distribution system
interconnected to the Company's system, and the electric loads on each system,
in a non-discriminatory manner. The costs of additions to the Company's
transmission system to meet this adequacy obligation shall not be directly
assigned or charged to a distribution system or to end users separately, except
in circumstances where approved or required by FERC.
SECTION 2.7 Term.
-----
(a) The Company shall have perpetual existence unless sooner
dissolved or terminated as provided herein. Subject to any approvals required
under state or federal law, the Company shall be dissolved upon the first to
occur of the following events:
(i) The determination by the Corporate Manager to dissolve and
terminate the Company in accordance with Section 183.0901(1) of the
Act; or
(ii) The entry of a decree of judicial dissolution under Section
183.0902 of the Act.
(b) The bankruptcy, insolvency, dissociation or dissolution of one or
more of the Non-Managing Members shall not dissolve the Company.
(c) Upon the dissolution of the Company for any reason, the Corporate
Manager shall proceed promptly to wind up the affairs of and liquidate the
Company. The Corporate Manager shall have reasonable discretion to determine the
time, manner and terms of any sale or sales of the Company's property pursuant
to such liquidation.
ARTICLE III
MEMBERS AND CAPITAL CONTRIBUTIONS
SECTION 3.1 Members and Schedule A.
----------------------
(a) The name and address of each of the initial Members are listed on
Schedule A.
----------
(b) The Company may, upon approval of the Corporate Manager, admit
such additional Persons as Members after the Operations Date upon such terms and
conditions as the Corporate Manager deems appropriate, provided, however, that
with respect to the issuance of Member Units for cash, it shall first have
complied with the provisions of Section 3.6.
15
(c) The Corporate Manager shall amend Schedule A upon the admission
of additional Members and upon any adjustment in the Members' Capital
Contributions, number of Member Units and Percentage Interests.
SECTION 3.2 Initial Capital Contributions.
-----------------------------
(a) Each Member that currently owns Transmission Assets in the
Transmission Area agrees to transfer to the Company, on or before the Operations
Date, all Transmission Assets currently owned by it in the State of Wisconsin,
all pursuant to separate Asset Contribution Agreements with the Company.
(b) The Corporate Manager agrees to purchase for $10 each the number
of Units set forth in its Subscription Agreements.
(c) Each Tax-Exempt Member shall be entitled to purchase that number
of Member Units that would enable it to receive a Percentage Interest equal to
its Load Ratio Share. The purchase price for each Unit shall equal the product
of $10 and the Tax-Exempt Investment Percentage.
(d) If a member of WPPI contributes Transmission Assets to the
Company in accordance with Section 3.3, WPS will have the option, within 30 days
of the date that such Transmission Assets are contributed, to purchase
additional Member Units in the Company so as to enable it to obtain a Percentage
Interest in the Company equal to what it would have had had such WPPI members
not been allowed to contribute such Transmission Assets.
(e) The number of Units initially issued to each Member, the amount
of each Member's Capital Contribution or Contribution Value, and the Percentage
Interest of each Member is set forth by each Member's name on Schedule A.
(f) The Members agree that the number of Units issued in exchange for
Transmission Assets reflects the fair value of such Transmission Assets as of
the Operations Date.
(g) The Members agree that the exact number of Units issued to each
Member may not be determinable as of the Operations Date. Within 90 days after
the Operations Date, the Company shall make such investigations and examine and
audit such records as it deems necessary or appropriate in order to establish
the definitive Contribution Value of the Transmission Assets, the corresponding
Percentage Interests and the Tax-Exempt Investment Amount. Upon completion of
such investigation and examination, the Company shall notify Members of the
correct number of Units held by each Member, and the records of the Company
shall be retroactively adjusted. Any disputes with respect to the correct
initial allocation of Percentage Interests shall be resolved pursuant to the
Dispute Resolution Provisions.
SECTION 3.3 Additional Members by Right.
---------------------------
(a) Until the Operations Date, any Electric Utility, other than a
public utility Affiliate or owner or operator of a wholesale merchant plant (as
defined in Wisconsin Statutes ss. 196.491(1)(w)), shall have the right to
16
transfer all of its Transmission Assets located in the Jurisdictional Area on
the same terms and conditions as a contribution of Transmission Assets by a
public utility Affiliate under the Asset Contribution Agreement.
(i) If a Person that contributes Transmission Assets is a
Tax-Exempt Entity, it shall also pay cash for each Unit received by it
in exchange for Transmission Assets in an amount equal to ($10 x
Tax-Exempt Investment Percentage) - $10.
(ii) If a Transmission-Dependent Utility contributes Transmission
Assets, and the Contribution Value thereof results in such
Transmission-Dependent Utility having a Percentage Interest that is
less than its Load Ratio Share, it shall be entitled to purchase
additional Units in accordance with Section 3.3(b), to the extent that
its Percentage Interest is less than its Load Ratio Share.
(b) Until the Operations Date, a Transmission-Dependent Utility or
Retail Electric Cooperative may purchase a Percentage Interest in the Company
that is no greater than such Person's share of Load Ratio Share; provided,
however, that if a Transmission Dependent Utility or Retail Electric Cooperative
has members that elect to invest cash in the Company based upon their respective
Load Ratio Shares, such Transmission-Dependent Utility or Retail Electric
Cooperative shall reduce its Load Ratio Shares by the Load Ratio Shares of its
investing members. The purchase price for each Member Unit shall equal the
product of $10 and the Tax-Exempt Investment Percentage.
(c) In order to facilitate the receipt of appropriate regulatory
approvals, any Person that proposes to make an investment pursuant to this
Section 3.3 shall advise the Company in writing prior to October 1, 2000, and
shall unconditionally commit to do so by notice to the Company on or before
November 1, 2000. If notice and all necessary information with respect to the
Transmission Assets, if applicable, are not provided to the Company on or before
November 1, 2000, the Company shall have no obligation to admit such Person as a
Member as of the Operations Date. Instead, provided such Person has given notice
by the Operations Date, the Company and such Person shall proceed in good faith
to obtain all required approvals, and such Person shall only become a Member
upon receipt of such approvals and upon execution of all documents or
instruments appropriate to reflect such Person's admission.
SECTION 3.4 Pre-emptive Rights.
------------------
(a) Purchase of Right.
(i) Any Member that has elected to receive distributions
approximating 100% of its allocable share of Company Profits pursuant
to Section 6.2(c) may, in such Member's sole discretion, contribute
cash to the Company in an amount equal to the amount determined in
6.2(d) for additional Member Units.
(ii) Until the IPO, any Tax-Exempt Member shall have the right to
maintain its initial Percentage Interest by paying cash for additional
Member Units upon the contribution of additional Transmission Assets
17
located in the State of Wisconsin, whether contributed by initial
Members or any new Member.
(b) Member Unit Price.
(i) The price for Member Units issued pursuant to Section
3.4(a)(i) shall equal the price at which such Member's Member Units
were redeemed.
(ii) The price for Member Units issued pursuant to Section
3.4(a)(ii) shall equal the product of the price at which the Company
is then issuing Member Units to others that is causing the dilution
and the Tax-Exempt Investment Percentage.
(c) Notice. Until the IPO, the Corporate Manager shall give prompt
notice to each Tax-Exempt Member of any proposed contribution of Transmission
Assets that would dilute a Tax-Exempt Member's interest and permit it to
maintain its Percentage Interest in accordance with Section 3.4(a)(ii). If it
desires to maintain its Percentage Interest, such Tax-Exempt Member shall,
within 20 days thereafter, advise the Corporate Manager of its intention to
purchase additional Member Units.
(d) Payment of Purchase Price. Any additional Member Units purchased
shall be paid for within 30 days following the contribution giving rise to such
right to purchase additional Units. Failure to purchase additional Member Units
within the time specified shall terminate a Member's rights pursuant to this
Section 3.4. Payment shall be made by wire transfer of clearing house funds, if
so specified by the Company, and otherwise by check payable to the order of the
Company.
SECTION 3.5 Contribution of Additional Transmission Assets.
-----------------------------------------------
(a) Under Construction. Certain Transmission Utilities have conveyed
Transmission Assets under construction to the Company pursuant to the Asset
Contribution Agreement.
(i) The Company hereby undertakes to use its best commercial
efforts to complete such projects in a timely manner following the
Operations Date.
(ii) If the contributing Member desires to complete any such
project on behalf of the Company, the Company and the contributing
Member agree to negotiate in good faith the terms and conditions upon
which the project would be completed by the contributing Member.
(b) Upon Completion. Each Transmission Utility Member shall
contribute or cause to be contributed to the Company upon completion any
Transmission Assets under construction as of the Operations Date, but not
contributed as of such date. The Transmission Assets shall be valued at their
Contribution Value, and Member Units issued in exchange therefor at a price of
$10 per Member Unit.
18
(c) Outside Wisconsin. Each Transmission Utility Member or Affiliate
shall have the right, within one year after the Operations Date, to contribute
to the Company Transmission Assets located in jurisdictions outside Wisconsin.
The Transmission Assets shall be valued at their Contribution Value, and Member
Units issued in exchange therefor at a price of $10 per Member Unit. As a
condition to exercising such right, the contributing Member shall cause to be
issued an opinion of counsel recognized as experts with respect to PUHCA (which
may be counsel to the Company) that the contribution of such assets would not
cause any of the Members to lose its exemption under PUHCA; provided, however,
that this condition shall not be required following the effective date of any
repeal of PUHCA.
(d) Nature of Contribution. The parties intend that any contribution
of Transmission Assets after the Effective Date with an unleveraged Contribution
Value in excess of $[3] million shall be credited as if it were subject to
indebtedness in an amount equal to approximately 50% of the unleveraged
Contribution Value of the Transmission Assets being contributed. To that end,
the Company and the contributing Member shall endeavor to agree on an
arrangement whereby either (i) the contributing Member incurs indebtedness and
assigns such indebtedness to the Company, which shall assume such indebtedness,
or (ii) the Company issues indebtedness and distributes, within 90 days
thereafter, the proceeds to the contributing Member. The contributing Member
shall be permitted to guarantee such indebtedness, but shall not receive any
compensation therefor.
(e) Dispute. Any dispute regarding Contribution Value shall be
resolved pursuant to the Dispute Resolution Provisions.
SECTION 3.6 Voluntary Additional Capital Contributions.
-------------------------------------------
(a) No Member may be required at any time to contribute any
additional amounts or assets to the Company in excess of that set forth in
Section 3.2 or 3.5(a).
(b) If the Corporate Manager determines that additional equity
capital is required for Company operations and activities, and shall determine
not to effect an IPO at that time or otherwise obtain funding in accordance with
the provisions of Section 3.7, the Corporate Manager shall issue a call notice
to the Members advising them of the total funding that the Company seeks, each
Member's pro rata share thereof (based upon its Percentage Interest), the price
per Member Unit and the date upon which such voluntary contributions are to be
payable, which shall be a date not less than 30 days subsequent to the date of
such notice.
(c) Each Member shall have the right, but not the obligation, to
contribute its pro rata share for additional Member Units thereof by giving
notice to the Company within 15 days following receipt of such call notice from
the Corporate Manager. If fewer than all the Members agree to contribute their
pro rata amounts, then the other Members that do contribute their pro rata
amounts shall have the right to contribute such additional amounts for
additional Member Units in accordance with their Percentage Interests (excluding
the Percentage Interests of the non-participating Members).
19
(d) Each Member shall make payment of its portion of the capital call
on or before 11:00 a.m., central time, on the due date. Payment shall be made by
wire transfer of clearing house funds, if so designated in the call notice, and
otherwise by check payable to the order of the Company.
(e) Except as provided in Section 3.4 or Section 3.7, no Member shall
have the right to make additional cash contributions to the Company after the
Operations Date.
SECTION 3.7 Issuance to Corporate Manager.
-----------------------------
The Corporate Manager may contribute additional capital to the
Company, from time to time, and receive additional Member Interests in respect
thereof, in the manner contemplated in this Section 3.7.
(a) Issuances of Additional Company Interests.
(i) General. The Corporate Manager is hereby authorized to cause
-------
the Company to issue such additional Member Interests in the form of
Member Units for any Company purpose at any time or from time to time
to the Members (including the Corporate Manager) for such
consideration and on such terms and conditions as shall be established
by the Corporate Manager in its sole and absolute discretion, all
without the approval of any Members. Any additional Member Interests
issued thereby may be issued in one or more classes, or one or more
series of any of such classes, with such designations, preferences and
relative, participating, optional or other special rights, powers and
duties, including rights, powers and duties senior to Member
Interests, all as shall be determined by the Corporate Manager in its
sole and absolute discretion and without the approval of any Member,
including without limitation, (i) the allocations of items of Company
income, gain, loss, deduction and credit to each such class or series
of Member Interests; (ii) the right of each such class or series of
Member Interests to share in Company distributions; and (iii) the
rights of each such class or series of Member Interests upon
dissolution and liquidation of the Company; provided, however, that no
-------- -------
additional Member Interests shall be issued to the Corporate Manager
unless:
A. the additional Member Interests are issued in connection
with an issuance of Corporate Shares of or other interests
in the Corporate Manager, which shares or interests have
designations, preferences and other rights, all such that
the economic interests are substantially similar to the
designations, preferences and other rights of the additional
Member Interests issued to the Corporate Manager by the
Company in accordance with this Section 3.7 and (B) the
Corporate Manager shall make a Capital Contribution to the
Company in an amount equal to the proceeds raised in
connection with the issuance of such shares of stock of or
other interests in the Corporate Manager;
B. the additional Member Interests are issued in exchange for
property owned by the Corporate Manager with a fair market
20
value, as determined by the Corporate Manager, in good
faith, equal to the value of the Member Interests; or
C. additional Member Interests are issued to all Members in
proportion to their respective Percentage Interests.
Without limiting the foregoing, the Corporate Manager is expressly authorized to
cause the Company to issue Member Units for less than fair market value, so long
as the Corporate Manager concludes in good faith that such issuance is in the
best interests of the Corporate Manager and the Company.
(ii) Upon Issuance of Additional Securities. The Corporate
--------------------------------------
Manager shall not issue any additional Corporate Shares (other than
Corporate Shares issued in connection with an exchange pursuant to
Section 8.4 hereof) or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or
purchase Corporate Shares (collectively, "Additional Securities")
other than to all holders of Corporate Shares, unless (A) the
Corporate Manager shall cause the Company to issue to the Corporate
Manager Member Interests or rights, options, warrants or convertible
or exchangeable securities of the Company having designations,
preferences and other rights, all such that the economic interests are
substantially similar to those of the Additional Securities, and (B)
the Corporate Manager contributes the proceeds from the issuance of
such Additional Securities and from any exercise of rights contained
in such Additional Securities to the Company. Without limiting the
foregoing, the Corporate Manager is expressly authorized to issue
Additional Securities for less than fair market value, and to cause
the Company to issue to the Corporate Manager corresponding Member
Interests, so long as (x) the Corporate Manager concludes in good
faith that such issuance is in the best interests of the Corporate
Manager and the Company, including without limitation, the issuance of
Corporate Shares and corresponding Member Units pursuant to an
employee share purchase plan providing for employee purchases of
Corporate Shares at a discount from fair market value or employee
stock options that have an exercise price that is less than the fair
market value of the Corporate Shares, either at the time of issuance
or at the time of exercise, and (y) the Corporate Manager contributes
all proceeds from such issuance to the Company. For example, in the
event the Corporate Manager issues Corporate Shares for a cash
purchase price and contributes all of the proceeds of such issuance to
the Company as required hereunder, the Corporate Manager shall be
issued a number of additional Member Units equal to the product of (A)
the number of such Corporate Shares issued by the Corporate Manager,
the proceeds of which were so contributed, multiplied by (B) a
fraction, the numerator of which is 100%, and the denominator of which
is the Conversion Factor in effect on the date of such contribution.
(b) Certain Contributions of Proceeds of Issuance of Corporate
Shares. In connection with any and all issuances of Corporate Shares, the
Corporate Manager shall make Capital Contributions to the Company of the
proceeds therefrom, provided that if the proceeds actually received and
contributed by the Corporate Manager are less than the gross proceeds of such
21
issuance as a result of any underwriter's discount or other expenses paid or
incurred in connection with such issuance, then the Corporate Manager shall make
a Capital Contribution of such net proceeds to the Company but shall receive
additional Member Units with a value equal to the aggregate amount of the gross
proceeds of such issuance pursuant to Section 3.7(a) hereof. Upon any such
Capital Contribution by the Corporate Member, the Corporate Manager's Capital
Account shall be increased by the actual amount of its Capital Contribution
pursuant to Section 3.9 hereof.
(c) Redemption of Corporate Shares. In the event the Corporate
Manager redeems any Corporate Shares, then the Corporate Manager shall cause the
Company to purchase from the Corporate Manager a number of Member Units as
determined based on the application of the Conversion Factor on the same terms
that the Corporate Manager redeemed such Corporate Shares. Moreover, if the
Corporate Manager makes a cash tender offer or other offer to acquire Corporate
Shares, then the Corporate Manager shall cause the Company to make a
corresponding offer to the Corporate Manager to acquire an equal number of
Member Units held by the Corporate Manager. In the event any Corporate Shares
are redeemed by the Corporate Manager pursuant to such offer, the Company shall
redeem an equivalent number of the Corporate Manager's Member Units for an
equivalent purchase price based on the application of the Conversion Factor.
SECTION 3.8 Adjustment of Tax-Exempt Members' Capital.
-----------------------------------------
(a) [At least annually,] whenever the Company changes the rate that it
charges its customers, or upon the occurrence of a Capital Event with respect to
a Tax-Exempt Member, the Company shall calculate the Tax-Exempt Investment
Amount for each Tax-Exempt Member, as well as such Tax-Exempt Member's aggregate
Capital Contributions (including the Contribution Value of any Transmission
Assets contributed by it and any amounts previously paid pursuant to this
Section 3.8), reduced by any distributions pursuant to this Section 3.8 and the
Tax-Exempt Ownership Interest corresponding to any reduction in the number of
Member Units held by such Tax-Exempt Member ("Net Contribution"), and
(i) If a Member's Net Contribution is less than its Tax-Exempt
Investment Amount, the Member shall pay the difference to the Company
within 30 days of such Notice.
(ii) If a Member's Net Contribution exceeds its Tax-Exempt
Investment Amount, the Company shall pay the difference to the Member
within 30 days of such notice.
(iii) The Company may set off any amounts owed to it by a
Tax-Exempt Member against amounts otherwise distributable to it
pursuant to Section 6.2.
(b) The Company shall provide each Tax-Exempt Investor with all
necessary work papers used to compute the Tax-Exempt Investment Amount and Net
Contribution of each Member. Such amounts shall be determined consistent with
the terms of this Agreement, as illustrated in Schedule B. The Tax-Exempt
----------
22
Investment Amount for each Tax-Exempt Member shall be determined by multiplying
each Member's Tax-Exempt Ownership Interest by the Tax-Exempt Investment
Percentage.
SECTION 3.9 Capital Accounts.
----------------
(a) A separate capital account (a "Capital Account") shall be
established and maintained for each Member in accordance with Regulations
Section 1.704-1(b)(2)(iv). Without limiting the foregoing, Capital Accounts
shall be maintained in accordance with the following provisions: (i) to each
Member's Capital Account there shall be credited such Member's cash Capital
Contributions and the Contribution Value of any Transmission Assets, such
Member's distributive share of Profits and any items in the nature of income or
gain which are specially allocated pursuant to Section 6.1(b), (c) or (d)
hereof, and the amount of any Company liabilities assumed by such Member or
which are secured by any Company asset distributed to such Member, (ii) to each
Member's Capital Account there shall be debited the amount of cash and the fair
market value as determined by the Corporate Manager, in its sole discretion, of
any Company asset distributed to such Member pursuant to any provision of this
Agreement, such Member's distributive share of Losses and any items in the
nature of expenses or losses which are specially allocated pursuant to Section
6.1(b), (c) or (d) hereof, and the amount of any liabilities of such Member
assumed by the Company or that are secured by any asset contributed by such
Member to the Company. The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations.
(b) When a new or existing Member acquires an additional Membership
Interest, the Corporate Manager shall determine the potential "Shift in Value"
by multiplying the Company's unrealized gain or loss (calculated by multiplying
(x) the difference between (A) the Net Book Value and (B) the implied value of
the Company, based upon the price per Member Unit of Member Units issued in
exchange for such additional Membership Interest times the total number of
Member Units outstanding, by (y) the difference between the contributing
Member's new Percentage Interest and its previous Percentage Interest).
(i) If a new or existing Member acquires an additional Membership
Interest, and (A) the resulting potential Shift in Value exceeds [3]%
of the Net Book Value, or (B) if the aggregate Shift in Value for
which no adjustment has been made exceeds [3]% of the Net Book Value,
the Corporate Manager shall revalue the property of the Company to its
fair market value (as determined by the Corporate Manager, in its sole
and absolute discretion, and taking into account Code Section 7701(g))
in accordance with Regulations Section 1.704(b)(2)(iv)(f).
(ii) If (A) a new or existing Member acquires an additional
Membership Interest in exchange for more than a de minimis Capital
-- -------
Contribution that is not covered by 3.9(b)(i), (B) the Company
distributes to a Member more than a de minimis amount of Company
-- -------
property as consideration for a Membership Interest or (C) the Company
is liquidated within the meaning of Regulation Section
1.704-1(b)(2)(ii)(g), the Corporate Manager may, in its sole and
23
absolute discretion, revalue the property of the Company to its fair
market value (as determined by the Corporate Manager, in its sole and
absolute discretion, and taking into account Code Section 7701(g)) in
accordance with Regulations Section 1.704-1(b)(2)(iv)(f).
(iii) When the Company's property is revalued by the Corporate
Manager, the Capital Accounts of the Members shall be adjusted in
accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g),
which generally require such Capital Accounts to be adjusted to
reflect the manner in which the unrealized gain or loss inherent in
such property (that has not been reflected in the Capital Accounts
previously) would be allocated among the Members pursuant to Section
6.1 if there were a taxable disposition of such property for its fair
market value (as determined by the Corporate Manager, in its sole and
absolute discretion, and taking into account Code Section 7701(g)) on
the date of the revaluation.
SECTION 3.10 Initial Debt Financing.
----------------------
(a) The Company shall use its best efforts to issue, within 90 days
following the Operations Date, long-term debt in an amount equal to
approximately 50% of its total initial capitalization.
(b) The net proceeds of such financing shall be distributed to the
Members that contributed Transmission Assets in accordance with their respective
Percentage Interests, exclusive of the Percentage Interests held by Members that
did not contribute Transmission Assets, and the Corporate Manager shall revise
Schedule A to reflect such distribution. Member Units redeemed shall be valued
at the initial value, as set forth in the definition of Member Unit.
SECTION 3.11 No Interest.
-----------
No interest shall be paid on Capital Contributions or on the balance
in each Member's Capital Account.
SECTION 3.12 No Third Party Beneficiary.
--------------------------
No creditor or other third party having dealings with the Company
shall have the right to enforce the right or obligation of any Member to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns. None of the
rights or obligations of the Members herein set forth to make Capital
Contributions shall be deemed an asset of the Company for any purpose by any
creditor or other third party, nor may such rights or obligations be sold,
transferred or assigned by the Company or pledged or encumbered by the Company
to secure any debt or other obligation of the Company or of any of the Members.
In addition, it is the intent of the parties hereto that no distribution to any
Member shall be deemed a return of money or other property in violation of the
Act. However, if any court of competent jurisdiction holds that, notwithstanding
the provisions of this Agreement, any Member is obligated to return such money
24
or property, such obligation shall be the obligation of such Member and not of
the Corporate Manager. Without limiting the generality of the foregoing, a
deficit Capital Account of a Member shall not be deemed to be a liability of
such Member or an asset or property of the Company.
SECTION 3.13 Membership Units as Securities.
------------------------------
Membership Units will not be evidenced by certificates, writings,
instruments or other documents. Membership Units shall be deemed to be
"securities" as that term is defined in Article 8 of the Uniform Commercial Code
as codified at Chapter 408 of the Wisconsin Statutes ("Article 8"). The creation
and perfection of a security interest in Membership Units will be governed by
Article 8.
SECTION 3.14 Month-End Convention.
--------------------
For purposes of this Agreement, all Capital Contributions, other than
the initial Capital Contributions, shall be deemed to be received at the end of
the month in which they actually are received by the Company.
ARTICLE IV
RIGHTS, OBLIGATIONS AND
POWERS OF THE CORPORATE MANAGER
SECTION 4.1 Management of the Company.
-------------------------
(a) Except as otherwise expressly provided in this Agreement, the
Corporate Manager shall have full, complete and exclusive discretion to manage
and control the business of the Company for the purposes herein stated, and
shall make all decisions affecting the business and assets of the Company.
Subject to the restrictions specifically contained in this Agreement, the powers
of the Corporate Manager shall include, without limitation, the authority to
take all actions on behalf of the Company as provided in Section 2.4 and to take
such other action, execute, acknowledge, swear to or deliver such other
documents and instruments, and perform any and all other acts that the Corporate
Manager deems necessary or appropriate for the formation, continuation and
conduct of the business and affairs of the Company. The Corporate Manager shall
have all powers as a manager under the Act to do all things necessary and
convenient to carry out the Company's business to the fullest extent provided by
the Act.
(b) Except as otherwise provided herein, to the extent the duties of
the Corporate Manager require expenditures of funds to be paid to third parties,
the Corporate Manager shall not have any obligations hereunder except to the
extent that Company funds are reasonably available to it for the performance of
such duties, and nothing herein contained shall be deemed to authorize or
require the Corporate Manager, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Company.
25
SECTION 4.2 Authority of Corporate Manager.
------------------------------
Subject to applicable regulatory approvals, the Corporate Manager may
appoint, employ, contract or otherwise deal with any Person for the transaction
of the business of the Company, which Person may, under supervision of the
Corporate Manager, perform any acts or services for the Company as the Corporate
Manager may approve.
SECTION 4.3 Indemnification and Exculpation of Indemnitees.
----------------------------------------------
(a) The Company shall indemnify an Indemnitee from and against any
and all expenses (including fees, costs charges, disbursements, attorneys fees
and any other expenses incurred in connection with a proceeding) and liabilities
(including any obligation to pay a judgment, settlement, penalty, assessment,
forfeiture or fine, including an excise tax assessed with respect to an employee
benefit plan, and reasonable expenses) arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Company in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the Indemnitee failed to deal fairly with the Company or
its Members in connection with a matter in which the Indemnitee has a material
conflict of interest; (ii) the Indemnitee violated criminal law, unless the
Indemnitee had reasonable cause to believe that its conduct was lawful or had no
reasonable cause to believe that the conduct was unlawful; (iii) the matter
relates to a transaction from which the Indemnitee derived an improper personal
profit; or (iv) the Indemnitee engaged in willful misconduct. The termination of
any proceeding by judgment, order or settlement does not create a presumption
that the Indemnitee did not meet the requisite standard of conduct set forth in
this Section 4.3(a). The termination of any proceeding by conviction or upon a
plea of nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the Indemnitee acted in
a manner contrary to that specified in this Section 4.3(a). Any indemnification
pursuant to this Section 4.3(a) shall be made only out of the assets of the
Company.
(b) The Company may reimburse an Indemnitee for reasonable expenses
incurred by an Indemnitee who is a party to a proceeding in advance of the final
disposition of the proceeding upon receipt by the Company of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Company as authorized
in this Section 4.3 has been met, and (ii) a written undertaking by or on behalf
of the Indemnitee to repay the amount if it shall ultimately be determined that
the standard of conduct has not been met.
(c) The indemnification provided by this Section 4.3 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Members, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity.
(d) The Company may purchase and maintain insurance, on behalf of the
Indemnitees and such other Persons as the Corporate Manager shall determine,
against any liability that may be asserted against or expenses that may be
incurred by such Person in connection with the Company's activities, regardless
26
of whether the Company would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 4.3, the Company shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Company or the Corporate
Manager also imposes duties on, or otherwise involves services by, it to the
plan or participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 4.3; and actions taken
or omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose that is not opposed to the best interests of the Company.
(f) In no event may an Indemnitee subject the Non-Managing Members to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 4.3 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 4.3 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) Any amendment, modification or repeal of this Section 4.3 or any
provision hereof shall be prospective only and shall not in any way affect the
indemnification of an Indemnitee by the Company under this Section 4.3 as in
effect immediately prior to such amendment, modification or repeal with respect
to matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when claims relating to such matters may arise or be
asserted.
SECTION 4.4 Liability of the Corporate Manager.
----------------------------------
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the Corporate Manager shall not be liable for monetary damages to the
Company or any Members for losses sustained or liabilities incurred as a result
of actions or omissions consistent with the standard to which directors of a
Wisconsin corporation are held. The Corporate Manager shall not be in breach of
any duty that the Corporate Manager may owe to the Non-Managing Members or the
Company or any other Persons under this Agreement or of any duty stated or
implied by law or equity provided the Corporate Manager, acting in good faith,
abides by the terms of this Agreement.
(b) The Non-Managing Members expressly acknowledge that the Corporate
Manager is acting on behalf of the Company and the Corporate Manager's
shareholders collectively, that the Corporate Manager is under no obligation to
consider the separate interests of the Non-Managing Members (including, without
27
limitation, the tax consequences to Non-Managing Members or the tax consequences
of some, but not all, of the Non-Managing Members) in deciding whether to cause
the Company to take (or decline to take) any actions. In the event of a conflict
between the interests of the shareholders of the Corporate Manager on one hand
and the Non-Managing Members on the other, the Corporate Manager shall endeavor
in good faith to resolve the conflict in a manner not adverse to either the
shareholders of the Corporate Manager or the Non-Managing Members. The Corporate
Manager shall not be liable for monetary damages for losses sustained,
liabilities incurred or benefits not derived by Non-Managing Members in
connection with such decisions, provided that the Corporate Manager has acted in
good faith.
(c) Subject to its obligations and duties as Corporate Manager set
forth in Section 4.1 hereof, the Corporate Manager may exercise any of the
powers granted to it under this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The Corporate
Manager shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by it in good faith.
(d) Notwithstanding any other provisions of this Agreement or the
Act, any action of the Corporate Manager on behalf of the Company or any
decision of the Corporate Manager to refrain from acting on behalf of the
Company, undertaken in the good faith belief that such action or omission is
necessary or advisable in order to protect the ability of the Company to
continue to be classified as a partnership for federal, state and local income
tax purposes, is expressly authorized under this Agreement and is deemed
approved by all of the Non-Managing Members.
(e) Any amendment, modification or repeal of this Section 4.4 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the Corporate Manager's liability to the Company and the
Non-Managing Members under this Section 4.4 as in effect immediately prior to
such amendment, modification or repeal with respect to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when claims relating to such matters may arise or be asserted.
SECTION 4.5 Company Obligations.
-------------------
(a) Except as provided in this Section 4.5 and elsewhere in this
Agreement (including the provisions of Article VI regarding distributions,
payments and allocations to which it may be entitled), the Corporate Manager
shall not be compensated for its services as Corporate Manager of the Company.
(b) Subject to Section 4.6, all Corporate Expenses and Administrative
Expenses shall be obligations of the Company, and the Corporate Manager shall be
entitled to reimbursement by the Company for any expenditure (including
Corporate Expenses and Administrative Expenses) incurred by it on behalf of the
Company that shall be made other than out of the funds of the Company.
28
SECTION 4.6 Outside Activities.
------------------
The Corporate Manager's activities shall be limited to serving as
Corporate Manager of the Company and its Subsidiaries.
SECTION 4.7 Title to Company Assets.
-----------------------
Title to Company assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Company as an entity,
and no Member, individually or collectively, shall have any ownership interest
in such Company assets or any portion thereof. Title to any or all of the
Company assets may be held in the name of the Company, the Corporate Manager or
one or more nominees, as the Corporate Manager may determine, including
Affiliates of the Corporate Manager. The Corporate Manager hereby declares and
warrants that any Company assets for which legal title is held in the name of
the Corporate Manager or any nominee or Affiliate of the Corporate Manager shall
be held by the Corporate Manager for the exclusive use and benefit of the
Company in accordance with the provisions of this Agreement; provided, however,
that the Corporate Manager shall use its best efforts to cause beneficial and
record title to such assets to be vested in the Company as soon as reasonably
practicable. All Company assets shall be recorded as the property of the Company
in its books and records, irrespective of the name in which legal title to such
Company assets is held.
ARTICLE V
ACCOUNTING, TAX AND FISCAL MATTERS
SECTION 5.1 Fiscal and Taxable Year.
-----------------------
The Company hereby adopts the calendar year, January 1 through and
including December 31, as its fiscal and tax year, except as otherwise may be
required by Code Section 706.
SECTION 5.2 Books.
------
The books and records of the Company shall be kept in accordance with
usual and customary accounting practices on the accrual method and in accordance
with GAAP, FERC's Uniform System of Accounts, and applicable tax requirements.
SECTION 5.3 Records.
--------
(a) The Company shall keep at its principal place of business all of
the following:
(i) A list, kept in alphabetical order, of each past and present
Member and manager. The list shall include the full name and
last-known mailing address of each Member or manager, the date on
which the person became a Member or manager and the date, if
applicable, on which the Person ceased to be a Member or manager.
29
(ii) A copy of the Company's articles of organization and all
amendments to the articles.
(iii) Copies of the Company's federal, state and local income or
franchise tax returns and financial statements, if any, for the four
most recent years or, if such returns and statements are not prepared
for any reason, copies of the information and statements provided to,
or which should have been provided to, the Members to enable them to
prepare their federal, state and local income tax returns for the four
most recent years.
(iv) Copies of this Agreement, all amendments hereto and any
operating agreements no longer in effect.
(b) Upon reasonable request, a Member may, at the Member's own
expense, inspect and copy during ordinary business hours any Company record
required to be kept under Section 5.3(a).
(c) The Corporate Manager shall provide, to the extent that the
circumstances render it just and reasonable, true and full information of all
things affecting the Members to any Member or to the legal representative of any
Member upon reasonable request of the Member or the legal representative.
(d) The failure of the Company to keep or maintain any of the records
or information required under this Section shall not be grounds for imposing
liability on any Person for the debts and obligations of the Company.
SECTION 5.4 Company Funds.
-------------
The funds of the Company shall be kept in the name of the Company in
one or more separate bank accounts with banks or trust companies as selected by
the Corporate Manager. Withdrawals from such bank accounts shall be made only by
Persons approved by the Corporate Manager.
SECTION 5.5 Tax Returns.
-----------
(a) The Corporate Manager shall cause the Company to timely file all
Company income tax returns required to be filed by the jurisdictions in which
the Company conducts business or derives income. By [June 30] of each year, the
Corporate Manager shall cause to be furnished to each Person who was a Member
during the prior fiscal year all available information necessary for inclusion
in such person's income tax returns for such year.
(b) Within 45 days following the end of each fiscal quarter, the
Corporate Manager shall cause to be forwarded to each Person who was a Member
during such quarter, a statement setting forth such Member's share of taxable
income for such quarter, it being understood that all such numbers shall be
estimates and subject to year-end adjustment, and the Corporate Manager shall
have no liability with respect to such numbers as long as they were provided in
good faith.
30
SECTION 5.6 Tax Elections.
-------------
(a) The Members intend that the Company be treated as a partnership
for U.S. federal income tax purposes. Absent the unanimous vote of the
Non-Managing Members, no election shall be made by the Company or any Member for
the Company to be treated as a corporation, or an association taxable as a
corporation, under the Code or any provisions of any state or local laws.
(b) Subject to Section 5.6(a), the Corporate Manager shall have the
right, in its sole discretion but after consultation with the Members affected
thereby, at any time to make or not to make elections for income tax purposes
that are authorized or permitted by any law or regulation (including Code
Section 754).
SECTION 5.7 Tax Matters, Tax Elections and Special Basis Adjustments.
---------------------------------------------------------
ATC Management Inc. shall be the initial tax matters member (the "Tax
Matters Member") of the Company within the meaning of Code Section 6231. The Tax
Matters Member shall have the right and obligation to take all actions
authorized and required, respectively, by the Code for the Tax Matters Member,
and shall manage any administrative tax proceedings conducted at the Company
level by the Internal Revenue Service with respect to Company matters. All
expenses and fees incurred by the Tax Matters Member on behalf of the Company
not otherwise reimbursed shall constitute Corporate Expenses.
Subject to the provisions of Section 5.6, all other elections required
or permitted to be made by the Company under the Code may be made by the Tax
Matters Member in accordance with any tax agreement among the Members or in the
absence of such agreement, in such manner as determined by the Tax Matters
Member, in the exercise of its reasonable discretion, and permitted by the
provisions of the Code.
SECTION 5.8 Access to Records.
-----------------
Each Member agrees to provide the Company with reasonable access to
such Member's books and records as they pertain to the Transmission Assets
contributed by such Member.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations.
-----------
(a) Profit and Loss. Profit and Loss of the Company of each fiscal
---------------
year of the Company shall be allocated to the Members in accordance with their
respective Percentage Interests.
(b) Minimum Gain Chargeback. Notwithstanding any provision to the
-----------------------
contrary, (i) any expense of the Company that is a "nonrecourse deduction"
within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in
31
accordance with the Members' respective Percentage Interests, (ii) any expense
of the Company that is a "partner nonrecourse deduction" within the meaning of
Regulations Section 1.704-2(i)(2) shall be allocated to the Member that bears
the "economic risk of loss" of such deduction in accordance with Regulations
Section 1.704-2(i)(1), (iii) if there is a net decrease in Company Minimum Gain
within the meaning of Regulations Section 1.704-2(f)(1) for any Company taxable
year, then, subject to the exceptions set forth in Regulations Section
1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated
among the Members in accordance with Regulations Section 1.704-2(f) and the
ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is
a net decrease in Member Nonrecourse Debt Minimum Gain within the meaning of
Regulations Section 1.704-2(i)(4) for any Company taxable year, then, subject to
the exceptions set forth in Regulations Section 1.704(2)(g), items of gain and
income shall be allocated among the Members in accordance with Regulations
Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section
1.704-2(j). A Member's "interest in partnership profits" for purposes of
determining its share of the nonrecourse liabilities of the Company within the
meaning of Regulations Section 1.752-3(a)(3) shall be such Member's Percentage
Interest.
(c) Qualified Income Offset. If a Member receives in any taxable year
-----------------------
an adjustment, allocation or distribution described in subparagraphs (4), (5) or
(6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a
deficit balance in such Member's Capital Account that exceeds the sum of such
Member's shares of Company Minimum Gain and Member Nonrecourse Debt Minimum
Gain, as determined in accordance with Regulations Sections 1.704-2(g) and
1.704-2(i), such Member shall be allocated specially for such taxable year (and,
if necessary, later taxable years) items of income and gain in an amount and
manner sufficient to eliminate such deficit Capital Account balance as quickly
as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d). After the
occurrence of an allocation of income or gain to a Member in accordance with
this Section 6.1(c), to the extent permitted by Regulations Section 1.704-1(b),
items of expense or loss shall be allocated to such Member in an amount
necessary to offset the income or gain previously allocated to such Member under
this Section 6.1(c).
(d) Capital Account Deficits. Loss shall not be allocated to a Member
------------------------
to the extent that such allocation would cause a deficit in such Member's
Capital Account (after reduction to reflect the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Member's
shares of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain. Any
Loss in excess of that limitation shall be allocated to the other Members in
accordance with their respective Percentage Interests. After the occurrence of
an allocation of Loss to a Member in accordance with this Section 6.1(d), to the
extent permitted by Regulations Section 1.704-1(b), Profit shall be allocated to
such Member in an amount necessary to offset the Loss previously allocated to
each Member under this Section 6.1(d).
(e) Varying Interests. If a Member transfers any part or all of its
-----------------
Membership Interest during a fiscal year of the Company, the distributive shares
of the various items of Profit and Loss allocable among the Members during such
fiscal year shall be allocated between the transferor and the transferee Member
either (i) as if the Company's fiscal year had ended on the date of the transfer
or (ii) based on the number of days of such fiscal year that each was a Member.
32
If the Members' Percentage Interests are adjusted during a fiscal year of the
Company, the Profits and Losses for such fiscal year shall be allocated between
the part of the year ending on the day when the adjustment occurs and the part
of the year beginning on the following day either (i) as if the taxable year had
ended on the date of the adjustment or (ii) based on the number of days in each
part. The allocation of Profits and Losses for the earlier part of the year
shall be based on the Percentage Interests before adjustment, and the allocation
of Profits and Losses for the later part shall be based on the adjusted
Percentage Interests. The Corporate Manager, in its sole and absolute
discretion, shall determine which method shall be used to allocate the
distributive shares of the various items of Profit and Loss.
(f) Definition of Profit and Loss. "Profit" and "Loss" and any items
-----------------------------
of income, gain, expense or loss referred to in this Agreement shall be
determined in accordance with federal income tax accounting principles, as
modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss
shall not include items of income, gain and expense that are specially allocated
pursuant to Sections 6.1(b), 6.1(c) or 6.1(d). All allocations of income,
profit, gain, loss and expense (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items set
forth in this Section 6.1, except as otherwise required by Code Section 704(c)
and Regulations Section 1.704-1(b)(4). The Company shall use the [traditional]
method for allocating items of income, gain and expense as required by Code
Section 704(c) with respect to the properties acquired by the Company pursuant
to the Asset Contribution Agreements. With respect to other properties acquired
by the Company, the Corporate Manager shall have the authority, as provided in
Section 5.6, to elect the method to be used by the Company for allocating items
of income, gain and expense as required by Code Section 704(c) with respect to
such properties, and such election shall be binding on all Members.
SECTION 6.2 Cash Available for Distribution.
-------------------------------
(a) Distributions of Cash Available for Distribution to the Members
shall be made in accordance with their respective Percentage Interests and at
such times and in such amounts as the Corporate Manager shall determine.
(i) The Corporate Manager hereby declares its intention, subject
to the requirements of the Act, to distribute Cash Available for
Distribution to the Members on a quarterly basis in an amount
approximating 80% of the Company's profits for such quarter.
(ii) Until the IPO, the record date for a distribution shall be
at the end of a quarter of a fiscal year of the Company, and the
payment date within 15 days thereafter. Upon an IPO, the Corporate
Manager shall set such record dates and payment dates as may be
required or appropriate, consistent with the distribution of cash on a
quarterly basis.
(b) Any Member that loses the right to use Equity Accounting may,
prior to October 1 of any year, notify the Corporate Manager that such Member
has elected to receive a distribution of Cash Available for Distribution equal
to 100% of its allocable share of the Company's profits for that year. Any
33
Member may provide the Corporate Manager with standing instructions to that
effect that shall prevail unless and until revoked by such Member.
(c) For any year during which a Member's election pursuant to Section
6.2(b) is in effect, the Corporate Manager will, subject to the requirements of
the Act and Section 6.2(f), distribute Cash Available for Distribution to such
Member during that year in an amount approximating 100% of such Member's
allocable share of profits for the year.
(d) Any amounts received by a Member pursuant to Section 6.2(c) that
are in excess of amounts distributed pursuant to Section 6.2(a) shall be applied
in redemption of all or a portion of the Member Units held by such Member,
effective as of the end of the preceding calendar quarter. For purposes of this
Section 6.2(d), each Member Unit shall be valued based upon the aggregate Net
Book Value as of the end of the preceding calendar quarter, divided by the
number of Member Units outstanding as of the end of the preceding calendar
quarter.
(e) The Members acknowledge that the Corporate Manager's estimate of
quarterly profits of the Company may not be precise, and consequently, recognize
the right and obligation of the Corporate Manager to make an adjusting
distribution annually once the Company's audited financial statements have been
prepared.
(f) If the Company has insufficient Cash Available for Distribution
to pay all amounts pursuant to Section 6.2(a) and Section 6.2(c), it shall pay
amounts pursuant to Section 6.2(a) before paying any amounts pursuant to Section
6.2(c). The Company shall use its best efforts to pay amounts pursuant to
Section 6.2(c), but shall not be obligated to borrow funds to enable it to do
so. The Company shall pay such amounts as soon as it is able to do so, subject
to the prior obligation to make distributions pursuant to Section 6.2(a).
(g) If a new or existing Member acquires an additional Membership
Interest in exchange for a Capital Contribution on any date other than the
record date for a Company distribution (the "Company Record Date"), the cash
distribution attributable to such additional Membership Interest relating to the
Company Record Date next following the issuance of such additional Membership
Interest shall be reduced in the proportion to (i) the number of days that such
additional Membership Interest is not held by such Member bears to (ii) the
number of days between such Company Record Date and the immediately preceding
Company Record Date.
(h) In no event may a Member receive a distribution of cash with
respect to a Member Unit if such Member is entitled to receive a cash dividend
as the holder of record of a Company Share for which all or part of such Member
Unit has been or will be redeemed.
SECTION 6.3 No Right to Distributions in Kind.
---------------------------------
No Member shall be entitled to demand property other than cash in
connection with any distributions by the Company. No Member shall be entitled to
withdraw from the Company in accordance with Section 183.0802(3)(a) of the Act,
and except as provided in Section 6.2(c), no Member shall be entitled to obtain
the return of any part of its Capital Contribution in the Company.
34
SECTION 6.4 Limitations on Distributions.
----------------------------
Notwithstanding any of the provisions of this Article VI, no Member
shall have the right to receive from the Company, and the Company shall not have
the right to make, a distribution to any Member, if after giving effect to the
distribution, any of the following would occur:
(a) The Company would be unable to pay its debts as they become due
in the usual course of business; or
(b) The fair value of the Company's total assets would be less than
the sum of its total liabilities plus the amount that would be needed, if the
Company were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of Members, if any, whose preferential
rights are superior to those of the Members receiving the distribution.
SECTION 6.5 Distributions Upon Liquidation.
------------------------------
Upon liquidation of the Company in connection with a Terminating
Capital Transaction or otherwise, after payment of, or adequate provision for,
debts and obligations of the Company, any remaining assets of the Company shall
be distributed to the Members in the following order of priority:
(a) First, toward satisfaction of all outstanding debts and other
obligations of the Company;
(b) Second, to return to each Tax-Exempt Member the difference, if
any, between its Tax-Exempt Investment Amount and its Tax-Exempt Ownership
Interest; and
(c) Third, the balance, if any, to the Members with positive Capital
Accounts in accordance with, and proportional to, their respective positive
Capital Account balances.
For purposes of this Section 6.5, the Capital Account of each Member shall be
determined after the following adjustments: (i) all adjustments made in
accordance with Sections 6.1 and 6.2 resulting from Company operations and from
all sales and dispositions of all or any part of the Company's assets, (ii) the
distribution to Tax-Exempt Members as provided in Section 6.5(b), and (iii)
allocating to the Corporate Manager an amount equal to the excess of (A) the
value of the Member Units it received in exchange for Capital Contributions of
the proceeds of an issuance of Company Shares over (B) the actual amount of its
Capital Contributions (i.e., as a result of any underwriters' discount or other
expenses paid or incurred in connection with such issuance). Any distributions
pursuant to this Section 6.5 shall be made by the end of the Company's taxable
year in which the liquidation occurs (or, if later, within 90 days after the
date of the liquidation). To the extent deemed advisable by the Corporate
Manager, appropriate arrangements (including the use of a liquidating trust) may
be made to assure that adequate funds are available to pay any contingent debts
or obligations.
The distributions set forth in this Section 6.5(b) are intended to comply with
the requirement of Regulations Section 1.704-1(b)(2)(ii)(b)(2) that liquidating
distributions be made in accordance with positive Capital Accounts. It is
35
intended that such distributions will result in the Members receiving aggregate
distributions equal to the amount of distributions that would have been received
if the liquidating distributions were made pursuant to Section 6.2. However, if
the balances in the Capital Accounts do not result in such intention being
satisfied, items of income, gain, loss, deduction and credit will be reallocated
among the Members for the fiscal year of the liquidation (and, at the option of
the Corporate Manager, if necessary, prior fiscal years) so as to cause the
balances in the Capital Accounts to be in the amounts necessary so that such
result is achieved.
SECTION 6.6 Substantial Economic Effect.
---------------------------
It is the intent of the Members that the allocations of Profit and
Loss under the Agreement have substantial economic effect within the meaning of
Code Section 704(b) as interpreted by the Regulations promulgated pursuant
thereto. Article VI and other relevant provisions of this Agreement shall be
interpreted in a manner consistent with such intent.
SECTION 6.7 Quarter-End Convention.
----------------------
For purposes of this Agreement, all distributions shall be deemed to
be made at the end of the quarter to which they relate; provided, however, that
the proceeds from any debt financing shall be deemed to be made at the end of
the month to which they relate.
ARTICLE VII
CHANGES IN CORPORATE MANAGER
SECTION 7.1 Transfer of the Corporate Manager's Member Interest.
----------------------------------------------------
(a) The Corporate Manager shall not transfer all or any portion of
its Member Interest or withdraw as Corporate Manager except as provided in or in
connection with a transaction contemplated by Section 7.1(b).
(b) Except as otherwise provided in Section 7.1(c) hereof, the
Corporate Manager shall not engage in any merger, consolidation or other
combination with or into another Person or sale of all or substantially all of
its assets, in each case which results in a change of control of the Corporate
Manager (a "Transaction"), unless:
(i) With respect to a Transaction during the first three years
following the Operations Date, the consent of all the Non-Managing
Members is obtained, and with respect to a Transaction occurring
subsequent to the third anniversary of the Operations Date, the
consent of Non-Managing Members holding more than 50% of the
Percentage Interests of the Non-Managing Members is obtained;
(ii) as a result of such Transaction all Non-Managing Members
will receive for each Member Unit an amount of cash, securities or
other property equal to the product of the Conversion Factor and the
greatest amount of cash, securities or other property paid in the
36
Transaction to a holder of one Corporate Share in consideration of one
Corporate Share, provided that if, in connection with the Transaction,
a purchase, tender or exchange offer ("Offer") shall have been made to
and accepted by the holders of more than 50% of the outstanding
Corporate Shares, each holder of Member Units shall be given the
option to exchange its Member Units for the greatest amount of cash,
securities or other property that a Non-Managing Member would have
received had it (A) exercised its Redemption Right and (B) sold,
tendered or exchanged pursuant to the Offer the Corporate Shares
received upon exercise of the Redemption Right immediately prior to
the expiration of the Offer; or
(iii) the Corporate Manager is the surviving entity in the
Transaction and either (A) the holders of Corporate Shares do not
receive cash, securities or other property in the Transaction or (B)
all Non-Managing Members (other than the Corporate Manager or any
Subsidiary) receive an amount of cash, securities or other property
(expressed as an amount per Corporate Share) that is no less than the
product of the Conversion Factor and the greatest amount of cash,
securities or other property (expressed as an amount per Corporate
Share) received in the Transaction by any holder of Corporate Shares.
(c) Notwithstanding Section 7.1(b), the Corporate Manager may merge
with or into or consolidate with another entity if immediately after such merger
or consolidation (i) substantially all of the assets of the successor or
surviving entity (the "Survivor"), other than Member Units held by the Corporate
Manager, are contributed, directly or indirectly, to the Company as a Capital
Contribution in exchange for Member Units with a fair market value equal to the
value of the assets so contributed as determined by the Survivor in good faith
and (ii) the Survivor expressly agrees to assume all obligations of the
Corporate Manager hereunder. Upon such contribution and assumption, the Survivor
shall have the right and duty to amend this Agreement as set forth in this
Section 7.1(c). The Survivor shall in good faith arrive at a new method for the
calculation of the Cash Amount, the Corporate Shares Amount and Conversion
Factor for a Member Unit after any such merger or consolidation so as to
approximate the existing method for such calculation as closely as reasonably
possible. Such calculation shall take into account, among other things, the kind
and amount of securities, cash and other property that was receivable upon such
merger or consolidation by a holder of Corporate Shares or options, warrants or
other rights relating thereto, and to which a holder of Member Units could have
acquired had such Member Units been exchanged immediately prior to such merger
or consolidation. Such amendment to this Agreement shall provide for adjustment
to such method of calculation, which shall be as nearly equivalent as may be
practicable to the adjustments provided for with respect to the Conversion
Factor. The Survivor also shall in good faith modify the definition of Corporate
Shares and make such amendments to Section 8.4 hereof so as to approximate the
existing rights and obligations set forth in Section 8.4 as closely as
reasonably possible. The above provisions of this Section 7.1 shall similarly
apply to successive mergers or consolidations permitted hereunder.
In respect of any transaction described in the preceding paragraph,
the Corporate Manager is required to use its commercially reasonable efforts to
structure such transaction to avoid causing the Non-Managing Members to
recognize income or gain for federal income tax purposes by virtue of the
37
occurrence of or their participation in such transaction, provided such efforts
are consistent with the exercise of the board of the Corporate Manager's
fiduciary duties to the shareholders of the Corporate Manager under applicable
law.
(d) Notwithstanding Section 7.1(b),
(i) a Corporate Manager may transfer all or any portion of its
Member Interest to (A) a wholly-owned Subsidiary of such Corporate
Manager or (B) the owners of all of the ownership interests of such
Corporate Manager and following a transfer of all of its Member
Interest, may withdraw as Corporate Manager; and
(ii) the Corporate Manager may engage in a transaction required
by law or by the rules of any national securities exchange on which
the Corporate Shares are listed to be submitted to the vote of the
holders of the Corporate Shares.
SECTION 7.2 Admission of a Substitute or Additional Corporate Manager.
---------------------------------------------------------
A Person shall be admitted as a substitute or additional Corporate
Manager of the Company only if the following terms and conditions are satisfied:
(a) the Person to be admitted as a substitute or additional Corporate
Manager shall have accepted and agreed to be bound by all the terms and
provisions of this Agreement by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in order to effect
the admission of such Person as a Corporate Manager and all other actions
required by herein in connection with such admission shall have been performed;
and
(b) if the Person to be admitted as a substitute or additional
Corporate Manager is an entity, it shall have provided the Company with evidence
satisfactory to counsel for the Company of such Person's authority to become a
Corporate Manager and to be bound by the terms and provisions of this Agreement.
SECTION 7.3 Effect of Bankruptcy, Withdrawal or Liquidation of the Corporate
----------------------------------------------------------------
Manager.
-------
(a) Upon the occurrence of an Event of Bankruptcy as to the Corporate
Manager (and its removal pursuant to Section 7.4(a) hereof) or the withdrawal,
removal or liquidation of the Corporate Manager, the Company shall be dissolved
and terminated unless the Company is continued pursuant to Section 7.3(b)
hereof. The merger of the Corporate Manager with or into any entity that is
admitted as a substitute or successor Corporate Manager pursuant to Section 7.2
hereof shall not be deemed to be the withdrawal, liquidation or removal of the
Corporate Manager.
(b) Following the occurrence of an Event of Bankruptcy as to the
Corporate Manager (and its removal pursuant to Section 7.4(a) hereof) or the
withdrawal, removal or liquidation of the Corporate Manager, the Non-Managing
Members, within 90 days after such occurrence, may elect to continue the
business of the Company by selecting, subject to Section 7.2 hereof and any
other provisions of this Agreement, a substitute Corporate Manager by consent of
a majority in interest of the Non-Managing Members. If the Non-Managing Members
38
elect to continue the business of the Company and admit a substitute Corporate
Manager, the relationship with the Members and of any Person who has acquired an
interest of a Member in the Company shall be governed by this Agreement.
SECTION 7.4 Removal of a Corporate Manager.
------------------------------
(a) Except upon unanimous agreement of the Members, the Non-Managing
Members may not remove the Corporate Manager, with or without cause. Upon the
occurrence of an Event of Bankruptcy as to the Corporate Manager, the Corporate
Manager shall be deemed to be removed automatically.
(b) If a Corporate Manager has been removed pursuant to this Section
7.4 and the Company is continued pursuant to Section 7.3 hereof, such Corporate
Manager shall promptly transfer and assign its Member Interest in the Company to
the substitute Corporate Manager approved by a majority in interest of the
Non-Managing Members in accordance with Section 7.3(b) hereof and otherwise
admitted to the Company in accordance with Section 7.2 hereof. At the time of
assignment, the removed Corporate Manager shall be entitled to receive from the
substitute Corporate Manager the fair market value of the Member Interest of
such removed Corporate Manager as reduced by any damages caused to the Company
by such Corporate Manager. Such fair market value shall be determined by an
appraiser mutually agreed upon by the Corporate Manager and a majority in
interest of the Non-Managing Members within 10 days following the removal of the
Corporate Manager. In the event that the parties are unable to agree upon an
appraiser, the removed Corporate Manager and a majority in interest of the
Non-Managing Members each shall select an appraiser. Each such appraiser shall
complete an appraisal of the fair market value of the removed Corporate
Manager's Member Interest within 30 days of the Corporate Manager's removal, and
the fair market value of the removed Corporate Manager's Member Interest shall
be the average of the two appraisals; provided, however, that if the higher
appraisal exceeds the lower appraisal by more than 20% of the amount of the
lower appraisal, the two appraisers, no later than 40 days after the removal of
the Corporate Manager, shall select a third appraiser who shall complete an
appraisal of the fair market value of the removed Corporate Manager's Member
Interest no later than 60 days after the removal of the Corporate Manager. In
such case, the fair market value of the removed Corporate Manager's Member
Interest shall be the average of the two appraisals closest in value.
(c) The Member Interest of a removed Corporate Manager, during the
time after bankruptcy until transfer under Section 7.4(b), shall be converted to
that of a special Non-Managing Member; provided, however, such removed Corporate
Manager shall not have any rights to participate in the management and affairs
of the Company, and shall not be entitled to any portion of the income, expense,
profit, gain or loss allocations or cash distributions allocable or payable, as
the case may be, to the Non-Managing Member. Instead, such removed Corporate
Manager shall receive and be entitled only to retain distributions or
allocations of such items that it would have been entitled to receive in its
capacity as Corporate Manager, until the transfer is effective pursuant to
Section 7.4(b).
39
(d) All Members shall have given and hereby do give such consents,
shall take such actions and shall execute such documents as shall be legally
necessary and sufficient to effect all the foregoing provisions of this Section.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF THE NON-MANAGING MEMBERS
SECTION 8.1 Management of the Company.
-------------------------
Except to the extent provided in Section 10.1, the Non-Managing
Members shall not participate in the management or control of Company business
nor shall they transact any business for the Company, nor shall they have the
power to sign for or bind the Company, such powers being vested solely and
exclusively in the Corporate Manager.
SECTION 8.2 Power of Attorney.
-----------------
Each Non-Managing Member hereby irrevocably appoints the Corporate
Manager its true and lawful attorney-in-fact, who may act for each Member and in
its name, place and stead, and for its use and benefit, to sign, acknowledge,
swear to, deliver, file or record, at the appropriate public offices, any and
all documents, certificates and instruments as may be deemed necessary or
desirable by the Corporate Manager to carry out fully the provisions of this
Agreement and the Act in accordance with their terms, which power of attorney is
coupled with an interest and shall survive the death, dissolution or legal
incapacity of the Non-Managing Member, or the transfer by the Member of any part
or all of its Member Interest.
SECTION 8.3 Limitation on Liability of Non-Managing Members.
-----------------------------------------------
No Non-Managing Member shall be liable for any debts, liabilities,
contracts or obligations of the Company. A Non-Managing Member shall be liable
to the Company only to make payments of its Capital Contribution, if any, as and
when due hereunder. After its Capital Contribution is fully paid, no
Non-Managing Member shall, except as otherwise required by the Act, be required
to make any further Capital Contributions or other payments or lend any funds to
the Company.
SECTION 8.4 Redemption Right.
----------------
(a) Subject to Sections 8.4(b), 8.4(c), and 8.4(d), each Non-Managing
Member shall have the right, commencing on the third anniversary of the
Operations Date (the "Redemption Right"), to require the Company to redeem on a
Specified Redemption Date all or a portion of the Member Units held by such
Non-Managing Member at a redemption price equal to and in the form of the Cash
Amount to be paid by the Company, provided that such Member Units shall have
been outstanding for at least twelve months immediately prior to such third
anniversary. The Redemption Right shall be exercised pursuant to a Notice of
Redemption delivered to the Company (with a copy to the Corporate Manager) by
the Non-Managing Member who is exercising the Redemption Right (the "Redeeming
40
Member"); provided, however, that the Company shall not be obligated to satisfy
such Redemption Right if the Corporate Manager elects to purchase the Member
Units subject to the Notice of Redemption; and provided, further, that no
Non-Managing Member may deliver more than two Notices of Redemption during each
calendar year. A Non-Managing Member may not exercise the Redemption Right for
less than 5,000 Member Units or, if such Non-Managing Members holds less than
5,000 Member Units, all of the Member Units held by such Member. The Redeeming
Member shall have no right, with respect to any Member Units so redeemed, to
receive any distribution paid with respect to Member Units if the record date
for such distribution is on or after the Specified Redemption Date.
(b) Notwithstanding the provisions of Section 8.4(a), a Non-Managing
Member that exercises the Redemption Right shall be deemed to have offered to
sell the Member Units described in the Notice of Redemption to the Corporate
Manager, and the Corporate Manager may, in its sole and absolute discretion,
elect to purchase directly and acquire such Member Units by paying to the
Redeeming Member either the Cash Amount or the Corporate Shares Amount, as
elected by the Corporate Manager (in its sole and absolute discretion), on the
Specified Redemption Date, whereupon the Corporate Manager shall acquire the
Member Units offered for redemption by the Redeeming Member and shall be treated
for all purposes of this Agreement as the owner of such Member Units. If the
Corporate Manager shall elect to exercise its right to purchase Member Units
under this Section 8.4(b) with respect to a Notice of Redemption, it shall so
notify the Redeeming Member within five Business Days after the receipt by the
Corporate Manager of such Notice of Redemption.
In the event the Corporate Manager shall exercise its right to
purchase Member Units with respect to the exercise of a Redemption Right in the
manner described in the first sentence of this Section 8.4(b), the Company shall
have no obligation to pay any amount to the Redeeming Member with respect to
such Redeeming Member's exercise of such Redemption Right, and each of the
Redeeming Member, the Company and the Corporate Manager shall treat the
transaction between the Corporate Manager and the Redeeming Member for federal
income tax purposes as a sale of the Redeeming Member's Units to the Corporate
Manager. Each Redeeming Member agrees to execute such documents as the Corporate
Manager may reasonably require in connection with the issuance of Corporate
Shares upon exercise of the Redemption Right.
(c) Any Cash Amount to be paid to a Redeeming Member pursuant to this
Section 8.4 shall be paid on the Specified Redemption Date; provided, however,
that the Corporate Manager may elect to cause the Specified Redemption Date to
be delayed for up to an additional 180 days to the extent required for the
Corporate Manager to cause additional Corporate Shares to be issued to provide
financing to be used to make such payment of the Cash Amount. Notwithstanding
the foregoing, the Corporate Manager agrees to use its best efforts to cause the
closing of the acquisition of redeemed Member Units hereunder to occur as
quickly as reasonably possible.
(d) The exercise by Members of their Redemption Rights shall be
subject to the provisions of Section 9.2(c).
41
SECTION 8.5 Registration.
------------
(a) Shelf Registration of the Corporate Shares. Upon the earlier of
the fourth anniversary of the Operations Date or the one-year anniversary of the
IPO, the Corporate Manager agrees to file with the Commission a shelf
registration statement under Rule 415 of the Securities Act (a "Registration
Statement"), or any similar rule that may be adopted by the Commission, covering
the resale of all of the Corporate Shares that may be issued upon redemption of
such Member Units pursuant to Section 8.4 ("Redemption Shares") in the event
that the Non-Managing Members, as a group, request registration covering the
resale of at least 500,000 Corporate Shares; provided however, that only two
such registrations may occur each year. The Non-Managing Members also may
request "piggyback" registration of their Redemption Shares. Upon any of such
requests, the Corporate Manager will:
(i) provide written notice of such request within 10 days of
the receipt of such request to the Non-Managing Members not a party to
the request;
(ii) use its best efforts to have such Registration
Statement declared effective by the Commission and to keep it
effective for a period of 180 days (the "Effective Period");
(iii) give each holder of Redemption Shares, their
underwriters, if any, and their counsel and accountants a reasonable
opportunity to participate in the preparation of the Registration
Statement and give such persons reasonable access to its books,
records, officers and independent public accountants;
(iv) furnish to each holder of Redemption Shares such
numbers of copies of prospectuses, and supplements or amendments
thereto, and such other documents as such holder reasonably requests;
(v) register or qualify the securities covered by the
Registration Statement under the securities or blue sky laws of such
jurisdictions within the United States as any holder of Redemption
Shares shall reasonably request, and do such other reasonable acts and
things as may be required of it to enable such holders to consummate
the sale or other disposition in such jurisdictions of the Redemption
Shares; provided, however, that the Corporate Manager shall not be
required to (i) qualify as a foreign corporation or consent to a
general or unlimited service or process in any jurisdictions in which
it would not otherwise be required to be qualified or so consent or
(ii) qualify as a dealer in securities;
(vi) furnish, at the request of the holders of Redemption
Shares, on the date Redemption Shares are delivered to the
underwriters for sale pursuant to such registration, or, if such
Redemption Shares are not being sold through underwriters, on the date
the Registration Statement with respect to such Redemption Shares
becomes effective, (A) a securities opinion of counsel representing
the Corporate Manager for the purposes of such registration covering
such legal matters as are customarily included in such opinions and
(B) letters of the firm of independent public accountants that
certified the financial statements included in the Registration
42
Statement, addressed to the underwriters, covering substantially the
same matters as are customarily covered in accountants' letters
delivered to underwriters in underwritten public offerings of
securities and such other financial matters as such holders (or the
underwriters, if any) may reasonably request;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission;
(viii) enter into and perform an underwriting agreement with
the managing underwriter, if any, selected as provided herein,
containing customary (A) terms of offer and sale of the securities,
payment provisions, underwriting discounts and commissions and (B)
representations, warranties, covenants, indemnities, terms and
conditions; and
(ix) keep the holders of the Redemption Shares advised as to
the initiation and progress of the Registration Statement.
The Corporate Manager further agrees to supplement or make amendments
to each Registration Statement, if required by the Commission's rules,
regulations or instructions applicable to the registration form utilized by the
Corporate Manager or by the Securities Act or rules and regulations thereunder
for such Registration Statement. Notwithstanding the foregoing, if for any
reason the effectiveness of a Registration Statement is delayed or suspended or
it ceases to be available for sales of Redemption Shares thereunder, the
Effective Period shall be extended by the aggregate number of days of such
delay, suspension or unavailability.
(b) Listing on Securities Exchange. If the Corporate Manager shall
list or maintain the listing of any Corporate Shares on any securities exchange
or national market system, it will at its expense and as necessary to permit the
registration and sale of the Redemption Shares hereunder, list thereon, maintain
and, when necessary, increase such listing to include such Redemption Shares.
(c) Registration Not Required. Notwithstanding the foregoing, the
Corporate Manager shall not be required to file or maintain the effectiveness of
a registration statement relating to Redemption Shares after the first date upon
which, in the opinion of counsel to the Corporate Manager, all of the Redemption
Shares covered thereby could be sold by the holders thereof in any period of
three months pursuant to Rule 144 under the Securities Act, or any successor
rule thereto.
(d) Allocation of Expenses. The Company shall pay all expenses in
connection with the Registration Statement, including without limitation (i) all
expenses incident to filing with the National Association of Securities Dealers,
Inc., (ii) registration fees, (iii) printing expenses, (iv) accounting and legal
fees and expenses, except to the extent holders of Redemption Shares elect to
engage accountants or attorneys in addition to the accountants and attorneys
engaged by the Corporate Manager or the Company, (v) accounting expenses
incident to or required by any such registration or qualification and (vi)
expenses of complying with the securities or blue sky laws of any jurisdictions
in connection with such registration or qualification; provided, however, the
Company shall not be liable for (A) any discounts or commissions to any
43
underwriter or broker attributable to the sale of Redemption Shares, or (B) any
fees or expenses incurred by holders of Redemption Shares in connection with
such registration that, according to the written instructions of any regulatory
authority, the Company is not permitted to pay.
(e) Indemnification.
(i) In connection with the Registration Statement, the Corporate
Manager and the Company agree to indemnify holders of Redemption
Shares within the meaning of Section 15 of the Securities Act, against
all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) caused by any untrue, or alleged
untrue, statement of a material fact contained in the Registration
Statement, preliminary prospectus or prospectus (as amended or
supplemented if the Corporate Manager shall have furnished any
amendments or supplements thereto) or caused by any omission or
alleged omission, to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by any untrue statement, alleged
untrue statement, omission, or alleged omission based upon information
furnished to the Corporate Manager expressly for use therein. The
Corporate Manager and each officer, director and controlling person of
the Corporate Manager shall be indemnified by each holder of
Redemption Shares covered by the Registration Statement for all such
losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) caused by any such untrue, or
alleged untrue, statement or any such omission, or alleged omission,
based upon information furnished to the Corporate Manager expressly
for use therein in a writing signed by the holder.
(ii) Promptly upon receipt by a party indemnified under this
Section 8.6(e) of notice of the commencement of any action against
such indemnified party in respect of which indemnity or reimbursement
may be sought against any indemnifying party under this Section
8.5(e), such indemnified party shall notify the Corporate Manager in
writing of the commencement of such action, but the failure to so
notify the Corporate Manager shall not relieve it of any liability
that it may have to any indemnified party otherwise than under this
Section 8.5(e) unless such failure shall materially adversely affect
the defense of such action. In case notice of commencement of any such
action shall be given to the Corporate Manager as above provided, the
Corporate Manager shall be entitled to participate in and, to the
extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense of such action at its own
expense, with counsel chosen by it and reasonably satisfactory to such
indemnified party. The indemnified party shall have the right to
employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified
party unless (i) the Corporate Manager or the Company agrees to pay
the same, (ii) the Corporate Manager fails to assume the defense of
such action with counsel reasonably satisfactory to the indemnified
party or (iii) the named parties to any such action (including any
impleaded parties) have been advised by such counsel that
representation of such indemnified party and the Corporate Manager by
44
the same counsel would be inappropriate under applicable standards of
professional conduct (in which case the Corporate Manager shall not
have the right to assume the defense of such action on behalf of such
indemnified party). No indemnifying party shall be liable for any
settlement entered into without its consent.
(f) Contribution.
(i) If for any reason the indemnification provisions contemplated
by Section 8.5(e) are either unavailable or insufficient to hold
harmless an indemnified party in respect of any losses, claims,
damages or liabilities referred to therein, then the party that would
otherwise be required to provide indemnification or the indemnifying
party (in either case, for purposes of this Section 8.5(f), the
"Indemnifying Party") in respect of such losses, claims, damages or
liabilities, shall contribute to the amount paid or payable by the
party that would otherwise be entitled to indemnification or the
indemnified party (in either case, for purposes of this Section
8.5(f), the "Indemnified Party") as a result of such losses, claims,
damages, liabilities or expense, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and the
Indemnified Party, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and
Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact related
to information supplied by the Indemnifying Party or Indemnified
Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party. In no event shall any holder of
Redemption Shares covered by the Registration Statement be required to
contribute an amount greater than the dollar amount of the proceeds
received by such holder from the sale of Redemption Shares pursuant to
the registration giving rise to the liability.
(ii) The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 8.5(f) were
determined by pro rata allocation (even if the holders or any
underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. No person or entity determined to have committed
a fraudulent misrepresentation (within the meaning ofss.11(f) of the
Securities Act) shall be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(iii) The contribution provided for in this Section 8.5(f) shall
survive the termination of this Agreement and shall remain in full
force and effect regardless of any investigation made by or on behalf
of any Indemnified Party.
45
ARTICLE IX
TRANSFER
SECTION 9.1 Purchase Not for Distribution.
-----------------------------
(a) Each Member hereby represents and warrants to the Company that
the acquisition of its Member Interest is made as a principal for its account
and not with a view to the resale or distribution of such Member Interest.
(b) Each Member agrees that it will not sell, assign or otherwise
transfer its Member Interest or any fraction thereof, whether voluntarily or by
operation of law or at judicial sale or otherwise, to any Person who does not
make the representations and warranties to the Company set forth in Section
9.1(a) above and similarly agree not to sell, assign or transfer such Member
Interest or fraction thereof to any Person who does not similarly represent,
warrant and agree.
SECTION 9.2 Restrictions on Transfer of Member Interests.
--------------------------------------------
(a) Except as permitted pursuant to Section 9.3, no Member may offer,
sell, assign, or otherwise transfer all or any portion of its Member Interest,
whether voluntarily or by operation of law or at judicial sale or otherwise
(collectively, a "Transfer"), until the third anniversary of the Operations
Date; provided, however, that the foregoing shall not prohibit the pledge or
hypothecation of any Member's interest for financing purposes. Any such
purported Transfer shall be considered to be null and void ab initio and shall
not be given effect.
(b) Prior to the consummation of any Transfer under this Article IX,
the transferor and/or the transferee shall deliver to the Corporate Manager such
opinions, certificates and other documents as the Corporate Manager shall
reasonably request in connection with such Transfer.
(c) Notwithstanding any other provision of this Agreement, including
the provisions of Section 8.4 and Section 9.3, no Member may effect a Transfer
of its Member Interest, in whole or in part:
(i) If, in the opinion of legal counsel for the Company, such
proposed Transfer would require the registration of the Member
Interest under the Securities Act or would otherwise violate any
applicable federal or state securities or blue sky law (including
investment suitability standards);
(ii) If in the opinion of legal counsel for the Company, such
Transfer would cause the Company to be regarded as a publicly-traded
partnership under Code Section 7704; or
(iii) If such proposed Transfer would cause a termination of the
partnership for tax purposes under Code Section 708(b)(1)(B) (because
of the Transfer in any 12-month period of 50% or more of the capital
and profits of the Company).
46
(d) Any Member that desires to Transfer all or any portion of its
Member Interest other than for financing purposes (including exchanging Member
Units for Corporate Shares) shall notify the Corporate Manager of its intention
to Transfer, the number of Member Units proposed to be sold, and the date on
which the Transfer is proposed to occur, which shall be at least 45 days after
the date of such notice. The Corporate Manager shall thereupon promptly provide
such information to the other Members. Any Member that proposes to sell its
Members Interests within the ensuing 12 months after the proposed date of sale
shall notify the Corporate Manager of the number of Member Units proposed to be
sold by such Member.
(i) If the total number of Member Units proposed to be
transferred by all the Members is less than 50% of the total number of
outstanding Member Units, then all such Members shall be entitled to
Transfer the Member Units proposed to be transferred by them.
(ii) If the total number of Member Units proposed to be
transferred by all the Members equals or exceeds 50% of the total
number of outstanding Member Units, then each such Member shall be
entitled to Transfer that number of Units proposed to be transferred
by it multiplied by a fraction the numerator of which is such Member's
Percentage Interest and the denominator of which is all such Members'
Percentage Interests.
(iii) If any Member does not Transfer at least [one-half] the
number of Units proposed to be sold by it within 90 days of the date
specified in such Member's notice to the Corporate Manager, such
Member will not be permitted to sell any Member Units owned by it for
the 12-month period commencing on the date specified in such Member's
notice to the Corporate Manager.
SECTION 9.3 Permitted Transfers.
-------------------
(a) During the first three years following the Operations Date, any
Member may offer all or any portion of its Member Interest to other Members at a
price per Member Unit equal to the quotient of the Net Book Value as of the end
of the most recent calendar quarter divided by the number of Member Units
outstanding as of such date.
(i) Upon the request of any Member specifying the number of
Member Units proposed to be sold (which shall be irrevocable), the
Company shall advise the other Members of the proposed sale and the
number of Member Units allocated for purchase by each Member based
upon their Percentage Interests, exclusive of the selling Member. Each
Member shall have 20 days to indicate its interest in purchasing all
or a portion of the number of Member Units allocated to it. If any
Member Units remain unsold, the Company shall advise the remaining
Members, which shall have the right to purchase the remaining Member
Units in accordance with their respective Percentage Interests
exclusive of the selling Member and non-purchasing Members.
(ii) The closing for any such sale shall occur within 45 days
following the initial notice to the Members of the sale.
47
(b) Subject to any required regulatory approvals, any Member may
transfer its Member Interest to one or more of its directly or indirectly
100%-owned Affiliates or, in the case of a Member that has members, to another
entity owned by such members.
(c) A Member may Transfer its Member Interest in connection with such
Member's merger, consolidation, or sale of all or substantially all of its
assets, so long as the surviving or purchasing entity shall execute a
counterpart of this Agreement to evidence its assent hereto.
SECTION 9.4 Admission of Substitute Member.
------------------------------
(a) Subject to the other provisions of this Article IX, an assignee
of the Member Interest of a Non-Managing Member (which shall be understood to
include any purchaser, transferee, donee or other recipient of any disposition
of such Member Interest) shall be deemed admitted as a Member of the Company
only with the consent of the Corporate Manager (which shall not be unreasonably
withheld) and upon the satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound by
the terms and provisions of this Agreement by executing a counterpart
or an amendment thereof, including a revised Schedule A, and such
other documents or instruments as the Corporate Manager may require in
order to effect the admission of such Person as a Member.
(ii) To the extent required, an amended certificate evidencing
the admission of such Person as a Member shall have been signed,
acknowledged and filed for record to the extent required by the Act.
(iii) The assignee shall have delivered a letter containing the
representation set forth in Section 9.1(a) hereof and the agreement
set forth in Section 9.1(b) hereof.
(iv) If the assignee is an entity, the assignee shall have
provided the Corporate Manager with evidence satisfactory to counsel
for the Company of the assignee's authority to become a Member under
the terms and provisions of this Agreement.
(v) The assignee shall have executed a power of attorney
containing the terms and provisions set forth in Section 8.2 hereof.
(vi) The assignee shall have paid all legal fees and other
expenses of the Company and the Corporate Manager and filing and
publication costs in connection with its substitution as a Member.
(b) For the purpose of allocating Profits and Losses and distributing
cash received by the Company, a Substitute Member shall be treated as having
become, and appearing in the records of the Company as, a Member at the end of
the month in which the filing of the certificate described in Section 9.4(a)(ii)
hereof occur or if no such filing is required, the later of the date specified
in the transfer documents or the date on which the Corporate Manager has
received all necessary instruments of transfer and substitution.
48
(c) The Corporate Manager shall cooperate with the Person seeking to
become a Substitute Member by preparing the documentation required by this
Section and making all official filings and publications. The Company shall take
all such action as promptly as practicable after the satisfaction of the
conditions in this Article IX to the admission of such Person as a Member of the
Company.
SECTION 9.5 Rights of Assignees of Members Interests.
----------------------------------------
(a) Subject to the provisions of Sections 9.2 and 9.3 hereof, except
as required by operation of law, the Company shall not be obligated for any
purposes whatsoever to recognize the assignment by any Member of its Member
Interest until the Company has received notice thereof.
(b) Any Person who is the assignee of all or any portion of a Member
Interest, but does not become a Substitute Member and desires to make a further
assignment of such Member Interest, shall be subject to all the provisions of
this Article IX to the same extent and in the same manner as any Member desiring
to make an assignment of its Member Interest.
SECTION 9.6 Effect of Bankruptcy or Termination of a Non-Managing Member.
------------------------------------------------------------
The occurrence of an Event of Bankruptcy as to a Non-Managing Member
or the dissolution or termination of a Non-Managing Member shall not cause the
termination or dissolution of the Company, and the business of the Company shall
continue. The trustee or receiver of a bankrupt Non-Managing Member, or its
representative shall have the rights of such Member for the purpose of settling
or managing its property and such power as the bankrupt, dissolved or terminated
Member possessed to assign all or any part of its Member Interest and to join
with the assignee in satisfying conditions precedent to the admission of the
assignee as a Substitute Member.
SECTION 9.7 Month-End Convention.
--------------------
For purposes of this Agreement, all transfers of Member Interests
shall be deemed to take place at the end of the month in which the transfer
actually occurs.
ARTICLE X
AMENDMENTS; MERGER
SECTION 10.1 Amendments.
-----------
This Agreement may be amended with the consent of a majority of the
Members per capita; provided, however, that the following amendments shall
require the consent of all of the Members:
(a) any amendment to modify the provisions of Section 3.4, 3.5, 3.6,
3.8 or 9.3(a) with respect to the ability of a Member to increase its Percentage
Interest in the Company;
49
(b) any amendment to modify the provisions of Article VI relating to
the allocation of Profits and Losses and the distribution of cash to Members,
except in accordance with Section 3.7;
(c) any amendment of the Adjustment formula, or the circumstances
when the Adjustment is required, or required to be returned;
(d) any amendment that would impose on the Members any obligation to
make additional Capital Contributions to the Company;
(e) any amendment that would remove the Corporate Manager;
(f) any amendment to Section 2.6; or
(g) any amendment to this Article X.
SECTION 10.2 Merger.
-------
Subject to any applicable regulatory approvals, the Corporate Manager,
without the consent of the Members, may (i) merge or consolidate the Company
with or into any other domestic or foreign partnership, limited partnership,
limited liability company or corporation in a transaction pursuant to Section
7.1(b), (c) or (d) hereof, or (ii) sell the assets of the Company; provided,
however, that, until the third anniversary of the Operations Date, any merger,
consolidation, or sale of all or substantially all of the assets of the Company
shall require the consent of all the Members.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Notices.
--------
All notices, consents, requests, demands, offers, reports and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and considered properly given or made when personally
delivered to the person entitled thereto, when sent by certified or registered
United States mail in a sealed envelope, with postage prepaid, or when sent by
overnight courier, addressed, if to the Company, at its address set forth in
Section 2.1, and if to a Member, to the address set forth opposite such member's
name on Schedule A. Any Member may change his address by giving notice to the
Corporate Manager. The Company may change its address by giving notice to each
of its Members.
SECTION 11.2 Entire Agreement.
----------------
This Agreement embodies the entire understanding and agreement among
the Members concerning the Company, and supersedes any and all prior
negotiations, understanding or agreements in regard thereto.
50
SECTION 11.3 Interpretation and Construction.
-------------------------------
The headings and captions in this Agreement are inserted for
convenience and identification only and are in no way intended to define, limit
or expand the scope and intent of this Agreement or any provision hereof. The
references to Sections and Articles in this Agreement are to the Sections and
Articles of this Agreement, except where otherwise indicated. Where the context
so requires, the masculine shall include the feminine and the neuter, and
singular shall include the plural.
SECTION 11.4 Counterparts.
------------
This Agreement may be executed in multiple counterpart copies, each of
which shall be considered an original and all of which shall constitute one and
the same instrument.
SECTION 11.5 Binding on Successors.
---------------------
This Agreement and all of the terms and provisions hereof shall be
binding upon, and inure to the benefit of, the Members and their respective
heirs, executors, administrators, trustees, successors and assigns.
SECTION 11.6 Severability.
------------
If any provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be held invalid or unenforceable in
any jurisdiction, the validity and enforceability of the remainder of this
Agreement or the application of such provision to any other persons or
circumstances shall not be affected thereby, and each provision of this
Agreement shall be valid and enforceable to the extent permitted by law in every
jurisdiction.
SECTION 11.7 Rights and Remedies.
-------------------
The rights and remedies provided this Agreement are cumulative, and
the use of any one right or remedy by any party shall not preclude or waive its
right to the use of any or all other rights and remedies. Such rights and
remedies are given to such party in addition to any other rights and remedies
such party may have by law, rule, regulation or otherwise.
SECTION 11.8 Economic Benefit.
----------------
(a) This Agreement evidences the intent of the Members with respect
to the matters covered hereby, and reflects the agreed allocation of benefits
and burdens among the Members. If, as a consequence of regulatory reviews or
approvals, certain changes are required, the Members agree to negotiate in good
faith so as to restore, as much as practically feasible, the original allocation
of benefits and burdens among the Members.
(b) Each Member agrees that the agreements set forth herein and in
the other documents pertaining to the formation of the Company and the Corporate
Manager reflect extensive negotiations and compromises among the Members. To
that end, each Member agrees that any filings by it with any regulatory
51
authority will not contradict the positions set forth herein and in the other
formation documents, and further, that any filings by it with any regulatory
authority will support, to the extent applicable, the positions set forth herein
and in the other formation documents.
52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ATC MANAGEMENT, INC.
By:
-------------------------------------
Name:
Title:
WISCONSIN ELECTRIC POWER COMPANY
By:
-------------------------------------
Name:
Title:
WISCONSIN POWER AND LIGHT COMPANY
By:
-------------------------------------
Name:
Title:
WISCONSIN PUBLIC SERVICE CORP.
By:
-------------------------------------
Name:
Title:
MADISON GAS & ELECTRIC CO.
By:
-------------------------------------
Name:
Title:
WISCONSIN PUBLIC POWER, INC.
By:
-------------------------------------
Name:
Title:
[OPERATING AGREEMENT]
SCHEDULE A
Member Initial Capital Number of Units Percentage
------ Contribution or --------------- Interest
Contribution Value ----------
------------------
ATC Management Inc. $ %
------ ------ ------
-----------------------
-----------------------
Milwaukee, WI
--------
Wisconsin Electric Power $ %
Company ------ ------ ------
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Wisconsin Power and Light $ %
Company ------ ------ ------
000 Xxxx Xxxxxxxxxx
Xxxxxxx, XX 00000
Wisconsin Public Service $ %
Corp. ------ ------ ------
000 Xxxxx Xxxxx Xxxxxx
[P.O. Box 19001, 54307]
Xxxxx Xxx, XX 00000
Madison Gas & Electric Co. $ %
X.X. Xxx 0000 ------ ------ ------
Xxxxxxx, XX 00000-0000
Wisconsin Public Power Inc. $ %
0000 Xxxxxxxxx Xxxxxx Xxxxx ------ ------ ------
Xxx Xxxxxxx, XX 00000-0000
Schedule A-1
EXHIBIT A
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section 8.4 of the Operating Agreement (the
"Agreement") of American Transmission Company, LLC (the "Company"), the
undersigned hereby irrevocably (i) presents for redemption Member Units
--------
in the Company in accordance with the terms of the Agreement and the Redemption
Right referred to in Section 8.4 thereof, (ii) surrenders such Member Units and
all right, title and interest therein and (iii) directs that the Cash Amount or
Corporate Shares Amount (as defined in the Agreement), as determined by the
Corporate Manager (as defined in the Agreement), deliverable upon exercise of
the Redemption Right, be delivered to the address specified below, and if
Corporate Shares (as defined in the Agreement) are to be delivered, such
Corporate Shares be registered or placed in the name(s) and at the address(es)
specified below.
Dated: ,
-------- -- -----
Name of Member:
------------------------------
(Signature of Member)
------------------------------
(Mailing Address)
------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
------------------------------
If Corporate Shares are to be issued, issue to:
---------------------------------
Please insert social security or identifying number:
----------------------------
Name:
---------------------------------------------------------------------------
Exhibit A-1
EXHIBIT B
DISPUTE RESOLUTION
ARTICLE I
APPLICABILITY AND DEFINITIONS
SECTION 1.1 Applicability.
-------------
The dispute resolution procedures set forth herein shall be
applicable, under the conditions hereinafter provided, to all disputes relating
to the interpretation and application of the terms and conditions of the Transco
Agreements arising between or among the Members and between the Members and the
Company; provided, however, that these dispute resolution procedures do not
apply to any matters covered by the dispute resolution procedures of the OATT.
Nothing in this Exhibit is intended to restrict or expand existing state or
federal laws or regulatory authorities.
SECTION 1.2 Definitions.
-----------
Capitalized terms used herein and not defined herein shall have the
respective meanings assigned to such terms in the Operating Agreement to which
these Dispute Resolution Provisions are attached. The following terms shall have
the meanings set forth below:
"COMMITTEE" means the Alternative Dispute Resolution Committee
established by the Board of Directors of the Corporate Manager in accordance
with Article V to this Exhibit.
"FPA" means the Federal Power Act, as amended.
"MEMBERS" means the Members of the Company, including the Corporate
Manager acting in its capacity as manager.
"OATT" means Open Access Transmission Tariff of the Company.
"PROCEDURES ARBITRATOR" has the meaning provided in Section 4.7(b).
"TRANSCO AGREEMENTS" means the Operating Agreement, the Asset
Contribution Agreement, the Facilities Operations & Maintenance Agreement, [List
Others], and all Schedules, Exhibits and Appendices to such Agreements.
EXHIBIT B-1
ARTICLE II
INFORMAL DISPUTE RESOLUTION PROCEDURES
SECTION 2.1 When Required.
-------------
Any dispute subject to the procedures specified in this Exhibit shall
be subject first to the informal dispute resolution procedures specified herein.
SECTION 2.2 Procedures.
----------
(a) The Company and each Member shall designate an employee or
representative who shall be its initial contact for resolving disputes involving
them as to matters governed by the Transco Agreements. Each party to such a
dispute shall first raise all issues regarding the dispute with the designated
representative of the other party or parties to such dispute. The designated
representatives shall work together to resolve the relevant issues in a manner
that meets the interests of such parties, or until the issues are referred to
the designated officers of the parties as set forth in Section 2.2(b).
(b) The Company and each Member shall designate a representative who
shall review disputes subject to this Exhibit that its designated
representatives are unable to resolve. In the case of the Company, this officer
shall be designated by the Board of Directors of the Corporate Manager. The
applicable officers of the parties involved in such dispute shall work together
to resolve the disputes so referred in a manner that meets the interests of such
parties, either until such resolution is reached, or until an impasse is
declared by any party to such dispute.
ARTICLE III
MEDIATION
SECTION 3.1 When Required.
-------------
Any dispute subject to this Exhibit shall be subject to non-binding
mediation subsequent to informal dispute resolution, but prior to the initiation
of arbitration, regulatory, judicial, or other dispute resolution proceedings,
unless the Committee shall determine, from the nature of the dispute, the
positions of the parties, and other relevant facts and circumstances, that
mediation would be highly unlikely to lead to resolution of the dispute.
SECTION 3.2 Procedures.
----------
(a) The parties to a dispute subject to this Exhibit, that cannot be
resolved under the informal dispute resolution procedures specified in Article
II of this Exhibit, shall notify the Committee in writing of the existence and
nature of the dispute prior to commencing mediation of the dispute. The
EXHIBIT B-2
Committee shall have ten days in which to determine that mediation would be
highly unlikely to lead to resolution of the dispute. Absent such a
determination, at the expiration of such ten-day period, such parties shall
proceed to mediation as provided in this Article III.
(b) A neutral mediator shall be selected by the Chair of the
Committee after consultation with the parties involved in the dispute. The Chair
of the Committee also may consult with the other representatives on the
Committee concerning the selection of a mediator. The mediator selected shall
(i) be knowledgeable in the subject matter of the dispute, and (ii) have no
official, financial, or personal conflict of interest with respect to the
parties or the issues involved in the dispute, unless such interest is fully
disclosed in writing to all parties involved in the dispute and all such parties
waive in writing any objection to the interest.
(c) The parties involved in the dispute shall attempt in good faith
to resolve their dispute in accordance with the procedures and timetable
established by the mediator. In furtherance of the mediation efforts, the
mediator may, among other actions:
(i) Require representatives of such parties who have the
authority to settle such dispute to meet for face-to-face discussions,
with or without the mediator;
(ii) Act as an intermediary between such parties;
(iii) Require such parties to submit written statements of issues
and positions;
(iv) Require such parties to exchange relevant information with
respect to the dispute; and
(v) If requested by such parties at any time in the mediation
process, provide a written recommendation on resolution of the dispute
including, if requested, the mediator's assessment of the merits of
the principal positions being advanced by each such party.
(d) If the parties are unable to resolve the dispute at or in
connection with this meeting, then, (i) any party involved in the dispute may
commence such arbitration proceedings, or such judicial, regulatory, or other
proceedings as may be appropriate as permitted by the provisions of Section 4.1
of this Exhibit; (ii) the statements made by any party in connection with such
mediation shall not be admissible for any purpose in any subsequent arbitration,
administrative, judicial or other proceeding; (iii) the recommendation of the
mediator shall have no further force or effect and shall not be admissible for
any purpose in any subsequent arbitration, administrative, judicial, or other
proceeding; and (iv) the mediator may not be compelled to testify concerning the
mediation in any subsequent arbitration, judicial, or other proceeding.
EXHIBIT B-3
SECTION 3.3 Costs.
------
The costs of the time, expenses, and other charges of the mediator and
common costs of the mediation process shall be borne by the parties involved in
the dispute, with each side (treating all parties as aligned with either the
plaintiff side or the defendant side of the dispute) in the mediated matter
bearing one-half of such costs. Each party involved in the dispute shall bear
its own costs and attorney's fees incurred in connection with any mediation
under this Article III.
ARTICLE IV
ARBITRATION
SECTION 4.1 When Required.
-------------
Any dispute subject to this Exhibit that has not been resolved through
the informal or mediation procedures specified herein shall be resolved by
arbitration in accordance with the procedures specified herein; provided,
however, that any dispute involving the obligation to build or enlarge
transmission facilities shall be subject to resolution by the appropriate
regulatory authority if (a) the regulatory authority has (i) jurisdiction over
the subject matter of the dispute, (ii) jurisdiction to grant the relief sought
by one or more parties to the dispute, and (iii) jurisdiction over the party
from which such relief is sought; and (b) at least one of the parties to the
dispute demands that the matter be submitted to such regulatory authority; and
provided, further, that any assertion that any provision of one of the Transco
Agreements is contrary to any federal or state law or regulation shall only be
heard by a court or agency having jurisdiction thereof and over the parties,
unless all parties consent to arbitration of such assertion. A party seeking to
invoke jurisdiction of a regulatory authority over a dispute for which
arbitration has been demanded by another party shall so notify the other parties
involved in the dispute within 14 days of receiving the demand for arbitration,
and shall thereafter have a further 60 days in which to make the necessary
filing to commence proceedings at such regulatory authority. If the filing
necessary to commence proceedings before such regulatory authority is not made
within the foregoing 60-day period, then the party seeking to invoke
jurisdiction of a regulatory authority shall be deemed to have consented to
arbitration, and the dispute shall revert to arbitration.
SECTION 4.2 Initiation.
----------
Subject to the appeal and reconsideration provisions of this Exhibit
and to the provisions of Sections 4.2 and 4.3, a party to a dispute wishing to
commence arbitration shall send a written demand for arbitration via first class
registered mail, return receipt requested, to an officer or managing or general
agent (or other agent authorized by appointment or law to receive service of
process) of each party to the dispute, and to the secretary of the Committee.
The demand for arbitration shall state each claim for which arbitration is being
demanded, the relief being sought, a brief summary of the grounds for such
EXHIBIT B-4
relief, and the basis for the claim, and shall identify all other parties to the
dispute.
SECTION 4.3 Selection of Arbitrator.
-----------------------
The Committee shall maintain a list of arbitrators that contains an
odd number of names, and contains at least five names of Persons whom the
Committee believes are generally qualified, by reason of their temperament and
experience, to resolve disputes among the parties. Upon an arbitration demand
being made by one or more parties, the Committee shall provide the list to the
parties to the dispute. The party or parties demanding arbitration on the one
hand, and the party or parties responding to the demand for arbitration on the
other, shall each (treating all parties as aligned with either the plaintiff
side or the defendant side of the dispute) take turns (with the plaintiff
proceeding first) crossing names off the list until one arbitrator remains, who
shall thereupon be engaged as arbitrator with respect to the dispute.
SECTION 4.4 Procedures.
----------
The Committee shall compile and make available to the arbitrator and
the parties standard procedures for the arbitration of disputes, which may be
modified or adopted for use in a particular proceeding as the parties mutually
agree or as the arbitrator deem appropriate. Upon selection of the arbitrator,
arbitration shall go forward in accordance with applicable procedures.
SECTION 4.5 Intervention.
------------
The arbitrator may permit any Member to intervene in the proceeding
upon the filing of a timely application which demonstrates that the Member has a
direct interest that will be materially affected by the decision of the
arbitrator and that it will not be represented adequately by an existing party
to the proceeding. Any Member seeking to intervene in a dispute shall indicate
in its intervention papers whether it believes that it should be aligned with
either the plaintiff side or the defendant side of the dispute. Any party to the
dispute may challenge such proposed alignment. The arbitrator shall determine
the actual alignment of the parties to a dispute based upon the comparability of
the specific positions advanced by each party concerning the issues involved in
the dispute.
SECTION 4.6 Summary Disposition and Interim Measures.
----------------------------------------
(a) The procedures for arbitration of a dispute shall provide a means
for summary disposition of a demand for arbitration, or response to a demand for
arbitration, that in the reasoned opinion of the arbitrator does not have a good
faith basis either in law or fact. If the arbitrator determines that a demand
for arbitration, or response to a demand for arbitration, does not have a good
faith basis either in law or fact, the arbitrator shall have discretion to award
the costs of the time, expenses, and other charges of the arbitrator to the
prevailing party.
EXHIBIT B-5
(b) The procedures for the arbitration of a dispute shall provide a
means for summary disposition without discovery if there is no dispute as to any
material fact, or with such limited discovery as the arbitrator shall determine
is reasonably likely to lead to the prompt resolution of any disputed issues of
material fact.
(c) The procedures for arbitration of a dispute shall permit any
party to a dispute to request the arbitrator to render a written interim
decision requiring that any action or decision that is the subject of a dispute
not be put into effect, or imposing such other interim measures as the
arbitrator deem necessary or appropriate, to preserve the rights and obligations
secured by the Transco Agreements during the pendency of the arbitration
proceeding. The arbitrator may grant or deny, in whole or in part, a request for
such a written interim decision. Members and the Company shall be bound by any
such written decision pending the outcome of the arbitration proceeding.
SECTION 4.7 Discovery of Facts.
------------------
(a) The arbitration procedures for the resolution of a dispute shall
include adequate provision for the discovery of relevant facts, including the
taking of testimony under oath, production of documents and things, and
inspection of land and tangible items. The nature and extent of such discovery
shall be determined as provided herein and shall take into account (i) the
complexity of the dispute, (ii) the extent to which facts are disputed, and
(iii) the amount of money in controversy.
(b) The arbitrator shall be responsible for establishing the timing,
amount, and means of discovery, and for resolving discovery and other
pre-hearing disputes. If a dispute involves contested issues of fact, promptly
after the selection of the arbitrator, the arbitrator shall convene a meeting of
the parties for the purpose of establishing a schedule and plan of discovery and
other pre-hearing actions.
SECTION 4.8 Evidentiary Hearing.
-------------------
The procedures established by the arbitrator shall provide for an
evidentiary hearing, with provision for the cross-examination of witnesses,
unless all parties consent to the resolution of the matter on the basis of a
written record. The forms and methods for taking evidence shall be as agreed by
the parties, or if the parties cannot agree, as established by the arbitrator.
The arbitrator may require such written or other submissions from the parties as
shall be deemed appropriate, including submission of the direct testimony of
witnesses in written form. The arbitrator may exclude any evidence that is
irrelevant, immaterial, or unduly repetitious, and, except to the extent
hereinafter otherwise provided, shall exclude any material which is covered by
the attorney-client privilege, the accountant-client privilege, other
evidentiary privileges, or the attorney-work product doctrine. Any party or
parties may arrange for the preparation of a record of the hearing and, except
to the extent otherwise provided, shall pay the costs thereof. Such party or
EXHIBIT B-6
parties shall have no obligation to provide, or to agree to the provision of, a
copy of the record of the hearing to any party that does not pay a proportionate
share of the cost of the record. At the request of any party, the arbitrator
shall determine a fair and equitable allocation of the cost of the preparation
of a record between or among the parties to the proceeding who are willing to
share such costs.
SECTION 4.9 Confidentiality.
---------------
(a) Any document or other information requested from another party in
the course of an arbitration proceeding, and not otherwise available to the
receiving party, including any such information contained in documents or other
means of recording information created during the course of the proceeding, may
be designated "Confidential" by the producing party to the extent that it
contains information of a proprietary nature. The party designating documents or
other information as "Confidential" shall have 20 days from the request for such
material to submit a request to the arbitrator to establish such requirements
for the protection of such documents or other information designated as
"Confidential" as may be reasonable and necessary to protect the confidentiality
and commercial value of such information and the rights of the parties. Prior to
the decision of the arbitrator on a request for confidential treatment,
documents or other information designated as "Confidential" need not be
produced. "Confidential" information shall not be used by the arbitrator, or
anyone working for or on behalf of any of the foregoing, for any purpose other
than the arbitration proceeding, and shall not be disclosed in any form to any
Person not involved in the arbitration proceeding without the prior written
consent of the party producing the information, or as permitted by the
arbitrator.
(b) Any Person receiving a request or demand for disclosure, whether
by compulsory process, discovery request, or otherwise, of documents or
information obtained in the course of an arbitration proceeding that have been
designated "Confidential" and that are subject to a non-disclosure requirement
under this Exhibit, or that are subject to a decision of the arbitrator, shall
immediately inform the Person from which the information was obtained, and shall
take all reasonable steps to afford the Person from which the information was
obtained an opportunity to protect the information from disclosure. Any person
disclosing information in violation of this Exhibit or requirements established
by the arbitrator shall be deemed to waive any right to introduce or otherwise
use such information in any judicial, regulatory, or other legal or dispute
resolution proceeding, including the proceeding in which the information was
obtained.
(c) Nothing in this Exhibit shall preclude any Person from using
documents or information properly and previously obtained outside of an
arbitration proceeding, or otherwise public, for any legitimate purpose,
notwithstanding that the information was also obtained in the course of the
arbitration proceeding.
EXHIBIT B-7
SECTION 4.10 Timetable.
----------
Promptly after the selection of the arbitrator, the arbitrator shall
set a date for resolution of the dispute, which shall be not later than eight
months (or such earlier date as may be agreed to by the parties) from the date
of the selection of the arbitrator, with other dates, including the dates for an
evidentiary hearing, or other final submissions of evidence, set in light of
this date. The date for the evidentiary hearing, or other final submission of
evidence, shall not be changed absent extraordinary circumstances. The
arbitrator shall have the power to impose sanctions for dilatory tactics or
undue delay in completing the arbitration proceedings.
SECTION 4.11 Decisions.
----------
The arbitrator shall issue either an oral decision that is transcribed
or a written decision, which may, at the arbitrator's discretion, include
findings of fact. The arbitration decision shall be based on (i) the evidence in
the record; (ii) the terms of the relevant Transco Agreements, including any
principle, standard, requirement, procedure, plan, or other right or obligation
established by or pursuant to those Transco Agreements; (iii) applicable federal
and state legal standards, including the FPA and any applicable state and FERC
regulations and decisions; and, (iv) relevant decisions in previous arbitration
proceedings under the Transco Agreements which shall be available subject to
applicable confidentiality provisions. All decisions of the arbitrator shall be
maintained by the Committee and shall, subject to any applicable confidentiality
provisions, be made available on request to all Members, to the Company and to
federal and state regulatory authorities. The arbitrator shall have no authority
to revise or alter any provision of any Transco Agreement. Any arbitration
decision that affects matters subject to the jurisdiction of the FERC under
section 205 or section 206 of the FPA shall be filed with the FERC and any
arbitration decision that affect matters subject to the jurisdiction of a state
authority shall be filed with that authority.
SECTION 4.12 Costs.
------
Unless the arbitrator shall decide otherwise, the costs of the time,
expenses, and other charges of the arbitrator shall be borne by the parties to
the dispute, with each side on an arbitrated issue bearing one-half of such
costs, and each party to an arbitration proceeding shall bear its own costs and
fees. The arbitrator may require all of the costs of the time, expenses, and
other charges of the arbitrator, plus all or a portion of the costs of
arbitration, attorneys' fees, and the costs of mediation, if any, to be paid by
any party that substantially loses on an issue determined by the arbitrator to
have been raised without a substantial basis.
EXHIBIT B-8
SECTION 4.13 Enforcement.
-----------
The decision of the arbitrator shall be final, binding and not
appealable, except to the extent provided in Chapter 788 of the Wisconsin
Statutes. Any party may petition any state or federal court having jurisdiction
to enter judgment upon the arbitration award.
SECTION 4.14 FERC or State Regulatory Jurisdiction.
-------------------------------------
If a party fails to invoke FERC or applicable state regulatory
jurisdiction of a dispute involving matters subject to FERC or state regulatory
jurisdiction within 60 days in accordance with Section 4.2 of this Exhibit, the
party shall be deemed to have waived its right to invoke such jurisdiction;
provided, however, that this waiver only applies to the party and does not
affect any right that the FERC may have to act on its own. If such party
nonetheless invokes FERC or applicable state regulatory jurisdiction following
the arbitration proceedings provided for herein, that party shall be responsible
for all attorneys' fees incurred by other parties to the dispute and the
Company, whether or not the FERC or state regulatory authority concludes that
such party has waived its right to invoke FERC or state regulatory jurisdiction.
ARTICLE V
ALTERNATE DISPUTE RESOLUTION COMMITTEE
SECTION 5.1 Membership.
----------
(a) The Committee shall be composed of [six] representatives selected
by the Board of Directors of the Corporate Manager, which shall use its best
efforts to select a Committee that reflects the diversity, in terms of size,
type of entity, and geographic location, of the Members. No more than one
representative on the Committee may be a representative of the same Member.
(b) Representatives on the Committee shall serve for terms of three
years, beginning on the first day of the month following the annual meeting of
the Board of Directors, and may serve additional terms, except that, of the
representatives first elected to the Committee, [two] representatives shall
serve terms of one year, and [two] representatives shall serve terms of [two]
years.
SECTION 5.2 Voting Requirements.
-------------------
Approval of adoption of measures by the Committee shall require
two-thirds of the votes of the representatives present and voting, but in no
event less than [three] votes. Two-thirds of the representatives on the
Committee shall constitute a quorum for the conduct of the business of the
Committee.
EXHIBIT B-9
SECTION 5.3 Officers.
---------
At the first meeting of the Committee following the annual meeting of
the Board of Directors, the representatives on the Committee shall choose a
Chair and Vice Chair from among the representatives on the Committee. The Chair
and the Vice Chair shall each serve a term of three years, unless earlier
terminated by a two-thirds vote of the representatives of the Committee. The
Chair of the Committee shall preside at meetings of the Committee, and shall
have the power to call meetings of the Committee and to exercise such other
powers as are specified in this Exhibit or authorized by the Committee.
SECTION 5.4 Meetings.
---------
The Committee shall meet at such times and places as determined by the
Committee, or at the call of the Chair. The Chair shall call a meeting of the
Committee upon the request of two or more members of the Committee.
SECTION 5.5 Responsibilities.
----------------
The duties of the Committee include, but are not limited to, the
following:
(a) Maintain a pool of persons qualified by temperament and
experience, and with technical or legal expertise in matters likely to be the
subject of disputes, to serve a mediators and arbitrators under this Exhibit;
(b) Determine the rates and other costs and charges that shall be
paid to mediators and arbitrators for, or in connection with, their services;
(c) Select mediators for disputes;
(d) Determine if mediation is not warranted in a particular dispute;
(e) Provide to the parties involved in a dispute lists of arbitrators
qualified by temperament and experience, and with appropriate technical or legal
expertise, to resolve particular disputes, such lists to include only neutral
persons who have no official, financial, or personal interest or conflict of
interest with respect to the parties or the issues involved in the dispute;
(f) Compile and make available to Members, arbitrators, and other
interested parties suggested procedures for the arbitration of disputes in
accordance with Section 4.4 of this Exhibit;
(g) Maintain and make available to Members, mediators, arbitrators,
and other interested parties, subject to any applicable confidentiality
provisions, the written decisions required by Section 4.11 of this Exhibit;
EXHIBIT B-10
(h) Establish such procedures and schedules, in addition to those
specified herein, as it shall deem appropriate to further the prompt, efficient,
fair, and equitable resolution of disputes; and
(i) Provide such oversight and supervision of the dispute resolution
processes and procedures instituted pursuant to this Exhibit as may be
appropriate to facilitate the prompt, efficient, fair, and equitable resolution
of disputes.
SECTION 5.6 American Arbitration Association.
--------------------------------
Whenever the Company is a party to any dispute, any party whose
interests are not aligned with the Company may demand that the Committee
instruct the American Arbitration Association to provide the parties with a list
of arbitrators pursuant to Section 4.3 in lieu of the Company supplying such
list. In addition, in connection with such dispute, the Committee shall not
perform any of those responsibilities charged to it pursuant to Section 5.5,
excepting only those that are administrative or mechanical in nature, and shall
instead obligate a neutral third party to perform such responsibilities.
EXHIBIT B-11
