Exhibit 10.4
AMENDED AND RESTATED OPERATING AGREEMENT OF ADA-NEXCOAL, LLC
This Amended and Restated Operating Agreement of ADA-NexCoal, LLC
("Agreement") is made and entered into to be effective as of November 3, 2006
(the "Effective Date"), by and among ADA-ES, Inc., a Colorado corporation
("ADA"), NexGen Refined Coal, LLC, a Wyoming limited liability company
("NexGen") as members (each individually a "Member" and collectively the
"Members") and ADA-NexCoal, LLC, a Colorado limited liability company (the
"Company"). ADA, NexGen and the Company are hereinafter sometimes referred to
each individually herein as a "party" and collectively as the "parties."
RECITALS:
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A. ADA has formed the Company under the laws of the State of Colorado for
the purpose of engaging in the Business described herein.
B. ADA and the Company are parties to that certain Operating Agreement
dated as of November 3, 2006 (the "Existing LLC Agreement").
C. ADA owns One Hundred (100) Units of membership interests in the Company,
representing, without limitation, one hundred percent (100%) of the rights to
profits and losses of the Company, all capital of the Company, all rights to
receive distributions of the Company's assets, and all rights to participate in
the management of the Company, for which it paid $1000.00 in cash and entered
into a License Agreement dated as of November 3, 2006 (the "License Agreement"),
a copy of which is attached hereto as Exhibit D.
D. NexGen and ADA are entering into that certain Purchase and Sale
Agreement (the "Purchase Agreement"), pursuant to which ADA will sell, and
NexGen will purchase, fifty (50) of ADA's Units in the Company, which will
amount to fifty percent (50%) of the total membership interests to be
outstanding, all in accordance with and subject to the conditions set forth in,
the Purchase Agreement.
E. NexGen and ADA have agreed to amend and restate the Existing LLC
Agreement to set forth their mutual understanding and agreement regarding the
matters set forth herein.
ARTICLE I
FORMATION OF THE COMPANY
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1.1 Name and Formation. The name of the Company is ADA-NexCoal, LLC. The
Company was formed by the filing of Articles of Organization of the Company (the
"Articles") with the Secretary of State of the State of Colorado on, October 31,
2006, pursuant to the Colorado Limited Liability Company Act (the "Act"). The
Company's Business (as hereafter defined) may be conducted under such other
names as the Members may from time to time agree to be necessary or advisable.
The rights and liabilities of the parties hereto shall be as provided in the Act
except as herein otherwise expressly provided.
1.2 Principal Place of Business; Qualification. The principal place of
business of the Company shall be located at 0000 XxxxxXxxx Xxx, Xxxx X,
Xxxxxxxxx, XX 00000. The Company may locate its place(s) of business and
registered office at any other place or places as the Board may from time to
time deem necessary or advisable. The Company shall qualify to do business in
such states in which such qualification is necessary.
1.3 Registered Office and Registered Agent. The Company's registered office
and registered agent in Colorado shall be Xxxx X. XxXxxxxxx, with an address of
0000 XxxxxXxxx Xxx, Xxxx X, Xxxxxxxxx, XX 00000.
1.4 Term. The term of existence of the Company shall be unlimited, subject
to being dissolved in accordance with the provisions of this Agreement.
1.5 Purposes and Powers.
(a) Purposes. The purposes and character of the business of the
Company shall be to (i) enter into the Transaction Agreements (as hereafter
defined), (ii) accept contributions by the Members in accordance with the
provisions of this Agreement, (iii) engage in the Business (as hereafter
defined), and (v) engage in other business consistent with or in furtherance of
the foregoing, as may be necessary or appropriate to accomplish the purposes set
forth herein or as may be approved by the Board from time to time. The Company
will not engage in any other business or activity not within the scope of the
preceding sentence or otherwise permitted or contemplated by this Agreement
(whether or not permitted by the Articles) unless approved by the Board or if
required, the Members in accordance with Section 6.2 hereof.
(b) Powers. The Company shall have all powers which are necessary or
desirable to carry out the purposes and Business of the Company, to the maximum
extent the same are available and may be legally exercised by limited liability
companies under the Act.
1.6 Limits of Company Activities; Independent Activities.
Except as set forth in Sections 11.8 and 11.9, the Members hereby agree
that no other provision in this Agreement shall be deemed to restrict in any way
the rights of any of the Members or any Manager, officer, shareholder or
Affiliate of any of the Members from conducting, engaging or participating in
any other activity, trade or business, independently or with others, whether or
not any such activity, trade or business is adverse to, competes with or is
complementary with, the Business or the business of any Subsidiary of the
Company or of any other Member or any of a Member's Affiliates, and neither the
Company nor the other Members shall have any rights in or to any such trade,
business or activity or the income or profits derived therefrom.
1.7 Default Rules Under the Act. Regardless of whether this Agreement
specifically refers to a particular Default Rule: (i) if any provision of this
Agreement conflicts with a Default Rule, the provision of this Agreement
controls and such Default Rule is hereby modified or negated accordingly, and
(ii) if it is necessary to construe a Default Rule as modified or negated in
order to effectuate any provision of this Agreement, such Default Rule is hereby
modified or negated accordingly.
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1.8 Existing LLC Agreement. This Agreement completely amends, restates and
supersedes the Existing LLC Agreement.
1.9 Title to Property. All real and personal property, whether tangible or
intangible, owned by the Company shall be owned by the Company as an entity and
no Member shall have any ownership interest in such property in its individual
name, and each Member's interest in the Company shall be personal property for
all purposes. Except as otherwise provided in this Agreement, the Company shall
hold all of its real and personal property in the name of the Company and not in
the name of any Member.
1.10 Intent. It is the intent of the Members that the Company be operated
in a manner consistent with its treatment as a partnership for federal and state
income tax purposes. The Company shall take all appropriate actions to ensure
that the Company will be treated as a partnership for federal and state income
tax purposes, including the making of available tax elections. No election may
be made to treat the Company as an association taxable as a corporation for
federal or state income tax purposes without obtaining the unanimous written
consent of all of the Members pursuant to Section 6.2. Neither the Company nor
any Member shall take any action inconsistent with the express intent of the
parties hereto as set forth in this Section 1.10.
ARTICLE II
DEFINITIONS AND RULES OF CONSTRUCTION
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2.1 Definitions.
The terms defined in this Article II, wherever used and capitalized in this
Agreement, have the meanings set forth below. Certain other capitalized terms
are defined in the text of this Agreement in the Section where such terms are
first used, and such definitions shall apply throughout this Agreement wherever
such terms are used.
"AAA" shall have the meaning ascribed to such term in Section 5.1(d).
"Act" shall mean the statutes governing limited liability companies in the
State of Colorado, which, as of the Effective Date, is Chapter 80 of Title 7 of
the Colorado Revised Statutes.
"ADA" has the meaning in the preamble hereof.
"ADA Managers" has the meaning ascribed to such term in Section 5.1(c).
"Affiliate" of a Person means (i) any Person directly or indirectly owning,
controlling or holding with power to vote fifty percent (50%) or more of the
outstanding voting securities of such Person; (ii) any Person fifty percent
(50%) or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such Person; (iii) any Person
directly or indirectly controlling, controlled by, or under common control with
such Person; or (iv) any officer, Manager or partner of any company which is an
Affiliate of such Person under (i), (ii) or (iii) above.
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"Agreement" means this Amended and Restated Operating Agreement of the
Company as adopted on the Effective Date and as the same may be further amended
or restated from time to time.
"Annual Business Plan" shall mean the annual business plan developed and
adopted by the Board of Managers, as approved by the Members which shall set
forth the projected revenues, expenses and capital needs of the Company for the
succeeding twelve (12) month period (or such other period as stated therein).
The first Annual Business Plan shall be approved by the Members and thereafter
adopted by the Board as soon as reasonably practicable following the Effective
Date, and shall cover the period described therein. Thereafter, an Annual
Business Plan shall be adopted to become effective as of December 31 of each
calendar year, and shall cover the succeeding twelve (12) month period
thereafter.
"Appraiser" has the meaning given that term in Section 9.2(c).
"Appraised Value" has the meaning given that term in Section 9.2(c).
"Articles" shall have the meaning ascribed to such term in Section 1.1
hereof.
"Bankruptcy" means the filing by a Person of a petition commencing a
voluntary case under the Bankruptcy Code; a general assignment by a Person for
the benefit of creditors; an admission in writing by a Person of its inability
to pay debts as they become due; the seeking or acquiescence by a Person in the
appointment of any trustee, receiver, or liquidator for the Person or for any
part of the Person's property; or the commencement against a Person of an
involuntary case under the Bankruptcy Code, or a proceeding under any
receivership, composition, readjustment, liquidation, insolvency, dissolution or
similar law or statute, if not dismissed or vacated within 60 days.
"Bankruptcy Code" shall mean Title 11 of the United States Code.
"Board Decision Threshold" means $25,000.
"Board of Managers" or "Board" shall mean the Managers appointed pursuant
to Section 5.1(c) hereof.
"Bona Fide Offer" means an offer in writing, from a third party that is
financially capable of closing the proposed acquisition either itself or through
reasonably available and confirmed financing (as shown by said third party),
which third party is not an Affiliate of a Member and which offer is capable of
being accepted and, when accepted, will result in an enforceable agreement, for
the purchase of all of the Transferor's Units.
"Business" means either the Chemicals Business or the Section 45 Business,
as such terms are defined in the License Agreement. As of the Effective Date,
the Company shall be deemed a Chemicals Business, but as part of such Business,
it shall use commercially reasonable efforts to become a Section 45 Business as
soon as practicable. Upon receipt of the PLR (as defined in the definition of
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Section 45 Business), the Company shall, without any further action from the
Board or any Party, be deemed a Section 45 Business. As a Section 45 Business,
the Company may continue to engage in the Chemicals Business, but for all
purposes, it shall be considered a Section 45 Business. Notwithstanding the
definitions of Chemicals Business and Section 45 Business, the Business of the
Company shall be limited to (i) developing, marketing and deploying the
Technology, and (ii) organizing, owning, operating, managing, selling, and
otherwise dealing, either directly or through one or more Subsidiaries of the
Company, in one or more businesses based on the Technology.
"Capital Account" shall have the meaning set forth in Section 3.5(a).
"Capital Call" shall have the meaning set forth in Section 3.2.
"Capital Contribution" means any contribution by a Member to the capital of
the Company in cash or property whenever made.
"Chairman" means the Member elected as Chairman of a Members' meeting in
accordance with Section 6.5.
"Change of Control" shall mean in the case of a Person, (i) any
consolidation or merger of such Person with or into any other Person, or any
other corporate reorganization, in which its equity holders immediately prior to
such consolidation, merger or reorganization, own less than 50% of the voting
power immediately after such consolidation, merger or reorganization, or (ii) a
sale, lease or other disposition of all or substantially all of its assets,
other than (A) the sale of inventory in the ordinary course of business, or (B)
the sale, lease or other disposition of such Person's assets other than
inventory in any calendar year having an aggregate fair market value not in
excess of 75% of the fair market value of such Person's total assets unless
otherwise determined by the Board, which shall apply the rebuttable presumption
that a sale of assets comprised of less than 75% of the fair market value of a
Person is not a Change of Control. It is specifically understood that the
Company may form subsidiary entities to carry on the Business, and the sale of
any such subsidiary, in whole or in part, shall not be deemed a Change of
Control, even if the specifics of the transaction fall within the definition of
Change of Control set forth above.
"Chemicals Business" shall have the meaning set forth in Section 1.3 of the
License Agreement, a copy of which is attached hereto as Exhibit D.
"Code" means the Internal Revenue Code of 1986, as amended. All references
to particular sections of the Code shall be deemed to include reference to
corresponding provisions of subsequent federal tax law, as set forth in the
Code, the Regulations, and the published interpretations thereof.
"Company" means ADA-NexCoal, LLC, a Colorado limited liability company.
"Company Option Period" has the meaning set forth in Section 9.2(a).
"Confidential Information" has the meaning set forth in Section 11.8(a).
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"Damages" shall have the meaning ascribed to such term in Section 5.7(b).
"Default Amount" shall have the meaning ascribed to such term in Section
3.3 hereto.
"Default Interest Rate" means the lesser of (a) the Prime Rate, plus 600
basis points, and (b) the maximum non-usurious rate of interest under applicable
Law.
"Default Rule" means a provision of the Act that would apply to the Company
unless otherwise provided in, or modified by, the Agreement.
"Defaulting Member" shall have the meaning ascribed to such term in Section
3.3 hereto.
"Disability" shall mean the physical or mental impairment to the extent
that the person in question becomes unable, despite any reasonable accommodation
required by law, to perform the essential functions of his position with the
Company including, without limitation, his or her role as a Manager.
"Effective Date" shall have the meaning ascribed to such term in the
preamble hereto.
"Existing LLC Agreement" shall have the meaning set forth in the recitals
hereto.
"Fiscal Year" means the Company's fiscal year, which shall end on December
31 of each year.
"Force Majeure" means an act of God, war, terrorism, hostilities, riot,
fire, explosion, accident, flood or sabotage; lack of adequate fuel, power, raw
materials, containers or transportation for reasons beyond such party's
reasonable control; labor trouble, strike, lockout or injunction (provided that
neither party shall be required to settle a labor dispute against its own best
judgment); compliance with governmental laws, regulations, or orders requiring
unreasonable effort or expense; breakage or failure of machinery or apparatus;
or any other cause whether or not of the class or kind enumerated above,
including, but not limited to, a severe economic decline or recession, which
prevents or materially delays the performance of this Agreement in any material
respect arising from or attributable to acts, events, non-happenings, omissions,
or accidents beyond the reasonable control of the party affected, provided,
however, that Force Majeure shall not relieve any party of the obligation to
make any payments required hereunder unless such event affects normal banking
transactions.
"Indemnitee" shall have the meaning set forth in Section 10.1(a).
"Law" means such United States or State statutes, regulations, rules,
ordinances, or other Laws (as the same have been interpreted by the courts) that
are applicable to this Agreement, the other Transaction Agreements, the parties
hereto or the Business.
"License Agreement" means that certain License Agreement, dated as of
November 3, 2006, by and between ADA and the Company pursuant to which ADA
granted the Company an exclusive royalty-free license to use the Licensed
Property, all in accordance with the terms thereof, a copy of which is attached
hereto as Exhibit D.
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"Licensed Property" shall have the meaning ascribed to such term in the
License Agreement.
"Lien" means any mortgage, deed of trust, lien (statutory or otherwise),
pledge, hypothecation, charge, deposit arrangement, preference, priority,
security interest, option, right of first refusal or other transfer restriction
or encumbrance of any kind (including preferential purchase rights, conditional
sales agreements or other title retention agreements, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction to evidence any of the foregoing).
"LOI" means that certain letter agreement re: "Joint Venture Proposal for
ADA-ES, Inc. and NexGen Resources Corporation" dated as of June 26, 2006, as the
same was executed by the parties thereto.
"Manager" has the meaning ascribed to such term in Section 5.1.
"Member" means each of the Persons named in the introductory paragraph and
shall include Persons acquiring new Units as authorized herein, and those
Persons acquiring Units in the Company after the Effective Date who have
succeeded to all or part of the Units as a Permitted Transferee pursuant to this
Agreement. The Members and their respective Unit ownership and Sharing Ratios
are as set forth in Exhibit B, as the same may be updated or amended from time
to time.
"Member Loans" has the meaning set forth in Section 3.9.
"Member Option Period" has the meaning set forth in Section 9.2(b).
"NexGen" has the meaning in the preamble hereof.
"NexGen Managers" has the meaning ascribed to such term in Section 5.1(c).
"Non-Defaulting Members" shall have the meaning ascribed to such term in
Section 3.3 hereto.
"Non-payment Election" shall have the meaning ascribed to such term in the
Purchase Agreement.
"Non-transferring Member" has the meaning set forth in Section 9.2(b).
"Non-voting Units" means Units that have no associated voting, consent or
approval rights and only represent an economic interest in the Company.
"Non-voting Member" means a Person owning only Non-voting Units and who has
been admitted as a Member of the Company in accordance with all requirements of
this Agreement.
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"Notice to Sell" has the meaning set forth in Section 9.3.
"Offered Units" has the meaning set forth in Section 9.3.
"Officer" means a Person appointed as an officer of the Company by the
Managers pursuant to Section 5.4.
"Option Notice" has the meaning set forth in Section 9.2(b).
"Option Seller" has the meaning set forth in Section 9.2(c).
"Option Units" has the meaning set forth in Section 9.2.
"Participating Member" shall have the meaning ascribed to such term in
Section 3.3(a) hereto.
"Permitted Transfer" shall have the meaning ascribed to such term in
Section 9.1.
"Permitted Transferee" shall have the meaning ascribed to such term in
Section 9.1.
"Person" means an individual, business entity (including, without
limitation, a corporation, limited partnership, general partnership, registered
limited partnership, registered limited liability partnership or limited
liability company), business trust, estate, trust, association, joint venture,
government, governmental subdivision or agency, or any other legal or commercial
entity organized or existing in any jurisdiction.
"Profit" or "Loss" means the income or loss of the Company as determined
under the capital accounting rules of Section 704 of the Code, and those
Treasury Regulations relating to the computation of items of income, gain,
deduction and loss promulgated thereunder.
"Proceeding" shall have the meaning ascribed to such term in Section
5.7(b).
"Purchase Agreement" has the meaning set forth in the recitals hereto.
"Purchase Price" has the meaning set forth in Section 9.2(c).
"Purchasing Members" shall have the meaning ascribed to such term in
Section 9.2(b).
"Regulations" means the Income Tax Regulations promulgated by the
Department of the Treasury in connection with the interpretation and enforcement
of the Code, as such regulations may be amended from time to time.
"Representatives" shall have the meaning ascribed to such term in Section
11.8.
"Section 45 Business" shall have the meaning set forth in Section 1.11 of
the License Agreement, a copy of which is attached hereto as Exhibit D.
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"Securities Act" shall mean The Securities Act of 1933, as amended.
"Sharing Ratio" means the sharing ratio of a Member, expressed as a
percentage of the total, in allocations of Profits, Losses and other items of
income, gain, loss or deduction and distributions of cash and property.. The
initial Sharing Ratio shall be equal to the ownership by each Member of Units,
expressed as a ratio equal to the number of such Member's Units over the total
number of outstanding Units, as set forth on Exhibit B. Thereafter, the Sharing
Ratio shall be adjusted and Exhibit B shall be amended or updated from time to
time to reflect the Sharing Ratio in effect at any given time, as required by
this Agreement, based on (i) the Capital Contributions made by each Member and
the ownership of Units that reflect such Capital Contributions, and (ii)
Transfers of Units.
"Stalemate" has the meaning set forth in Section 5.1(d)
"Stalemate Determination" has the meaning set forth in Section 5.1(d)
"Subsidiary" or "Subsidiaries" means the operating company or companies
formed by the Company subsequent to the Effective Date that are wholly-owned
(directly or indirectly) by the Company.
"Supply Agreement" means that certain Chemicals, Equipment and Technical
Engineering Services Supply Agreement, dated as of the date hereof, by and
between ADA and the Company, in substantially the form attached hereto as
Exhibit 1 to the License Agreement.
"Tax Distribution" has the meaning set forth in Section 4.3.
"Tax Matters Partner" or "TMP" shall have the meaning set forth in Section
7.3.
"Technology" has the meaning ascribed to such term in the License
Agreement.
"Trade Secrets" has the meaning set forth in Section 11.8(a).
"Transaction Agreements" shall means this Agreement, the Purchase
Agreement, the License Agreement, the Supply Agreement, as the same are in
effect as of the Effective Date.
"Transfer" means, as a noun, the sale, assignment, gift, exchange,
transfer, pledge, hypothecation, change in beneficial interest of any trust or
estate, distribution from any trust or estate, or any other disposition of an
asset or, with respect to Units, the Units or any part thereof, directly or
indirectly, or (with respect to a Member) the sale, exchange, gift, pledge,
hypothecation, or other change of an ownership interest in a Member, and as a
verb, voluntarily or involuntarily, to transfer, sell, gift, exchange, pledge,
hypothecate grant a security interest, consent to a charging order, or otherwise
dispose of, whether directly or indirectly.
"Transfer Notice" has the meaning set forth in Section 9.2(a).
"Transferor" shall have the meaning ascribed to such term in Section
9.3(a).
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"Units" means units of membership interest in the Company, which
cumulatively represent all of the membership interests in the Company,
including, without limitation, the Unit owner's undivided right to share in the
profits and losses of the Company and the right to receive distributions of
assets and, in the case of Voting Units only, the right to participate in the
management of the Company. Units may be issued only in accordance with Section
5.6. The term "Units" herein shall be deemed to refer to Voting Units and
Non-voting Units, as appropriate, and as the context requires.
"Voting Member" means a Person owning Voting Units and who has been
admitted as a Member of the Company in accordance with all requirements of this
Agreement.
"Voting Units" means Units that have all associated voting, consent or
approval rights in addition to an economic interest in the Company and all other
rights associated with Units in the Company.
2.2 Rules of Construction.
(a) Section References. When a reference is made in this Agreement to
an Article, Section, Paragraph, Exhibit or Schedule such reference shall be to
an Article, Section or Paragraph of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. Unless otherwise indicated, the words
"herein," "hereof," "hereunder" and other words of similar import refer to this
Agreement as a whole, and not to any particular Article, Section, Paragraph or
clause in this Agreement.
(b) Construction. Unless the context of this Agreement clearly
requires otherwise: (i) references to the plural include the singular and vice
versa, (ii) the masculine shall include feminine and neuter, and the neuter
shall include the masculine and feminine, and (iii) "including" is not limiting.
(c) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or any provision of this Agreement.
(d) No Interpretation Against Author. For purposes of contract
interpretation or construction, the parties to this Agreement agree they are
joint authors and draftspersons of this Agreement.
(e) Conflicts with Related Documents. The relationship of the parties
is being memorialized in this Agreement and in the other Transaction Agreements.
In the event of a conflict between any term(s) or provision(s) of this Agreement
and anything contained in any of the other Transaction Agreements, this
Agreement shall be overriding and controlling.
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ARTICLE III
CAPITAL CONTRIBUTIONS AND ACCOUNTS; MEMBER LOANS
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3.1 Initial Capital Contributions and Ownership Structure. Prior to the
Effective Date, in accordance with the Existing LLC Agreement, ADA previously
contributed One Thousand Dollars ($1000.00) and the Licensed Property to the
Company pursuant to the terms of the License Agreement, in receipt for which ADA
received One Hundred Units in the Company, representing one hundred percent
(100%) of the membership interests. In accordance with the Purchase Agreement
NexGen has agreed to purchase Fifty (50) of ADA's Units, and following such
purchase NexGen will own fifty percent (50%) of the total membership interests
in the Company. The Members agree that the Unit ownership and the Sharing Ratios
of the Members, on the Effective Date, shall be as set forth in Exhibit B
hereto.
3.2 Additional Capital Contributions; Adjustment of Sharing Ratios.
(a) Additional Capital Contributions. The Board shall consider any
capital requirements of the Company and will notify the Members, no less than
thirty (30) days prior to the need therefor, of any projected need for
additional Capital Contributions in order to fund operations or to further the
purposes of the Company. Additional Capital Contributions shall be required only
if approved by all of the Members in writing and, if not previously approved as
part of the Annual Business Plan, the Board shall give the Members notice of the
additional capital call ("Capital Call") and will include in such notice, in
reasonable detail, the purpose or purposes for which additional capital is
required and the number of additional Units, if any, to be issued as a result,
whether such Units will be Voting Units or Non-voting Units, and the
consideration to be paid for such Units. Except as otherwise provided herein or
in a resolution or agreement adopted by the Members in accordance with this
Agreement, the Members will have the preemptive right to acquire any additional
Units to be issued in return for additional capital, in accordance with Section
6.6(b) hereof.
(b) Adjustment of Sharing Ratios. In the event the Members determine
not to issue additional Units in return for additional Capital Contributions,
the Sharing Ratios then in effect shall be adjusted in proportion to the
respective amounts of additional capital contributed by each Member in response
to a Capital Call, subject to the provisions of Section 3.3 in the event a
Member fails to timely make all or any portion of a Capital Call.
3.3 Failure to Make a Required Additional Capital Contribution. If a Member
(the "Defaulting Member") does not contribute by the time required, all or any
portion of an additional Capital Contribution that such Defaulting Member is
required to make pursuant to a Capital Call under Section 3.2(a) (the "Default
Amount"), then the Company shall forthwith notify the other Members (the
"Non-Defaulting Members"), and the Non-Defaulting Members may take any of the
following actions:
(a) Within 20 days after the Defaulting Members' default, the
Non-Defaulting Members may advance, in each Non-Defaulting Member's sole
discretion, an aggregate amount not in excess of the Default Amount in such
proportions as they may agree, or if they cannot agree, pro rata in accordance
with their respective Sharing Ratios (with any Non-Defaulting Member making such
an advance referred to as a "Participating Member").
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(b) Notwithstanding Section 3.3(a), if one or more Participating
Members advance the entire Default Amount, the provisions of this Section 3.3(b)
shall be the exclusive remedy for the failure by the Defaulting Member to make
such Capital Call. The Members holding a majority of the Voting Interests of the
Participating Members shall make an election within 10 days after the last
Participating Member makes an advance with respect to the Default Amount as to
whether all such advances are designated as being made under the provisions of
Section 3.3(b)(i) or are designated as being made under the provisions of
Section 3.3(b)(ii), and shall send a written notice to the Defaulting Member of
such election within office (5) days if the end of such 10-day period.
(i) Advances designated under this Section 3.3(b)(i) shall
constitute a loan from the Non-Defaulting Members to the Defaulting Member and a
Capital Contribution of that sum to the Company by the Defaulting Member
pursuant to the applicable provisions of this Agreement, with the following
results:
(A) the principal balance of the loan and all accrued unpaid
interest thereon shall be due and payable in whole on the tenth day after
written demand therefor by Participating Members holding a majority of the
Voting Interests of the Participating Members to the Defaulting Member;
(B) at any time prior to the payment of the loan and all
accrued interest thereon, the Participating Members holding a majority of the
Voting Interests of all Participating Members may elect to deem the unpaid
amount of the loan and the interest thereon a Capital Contribution by the
Participating Members, in which case the provisions of Section 3.3(b)(ii) shall
thereafter apply to such Capital Contribution;
(C) the amount loaned shall bear interest at the Default
Interest Rate from the date that the Participating Members advance the entire
Default Amount until the date that the loan, together with all interest accrued
on it, is repaid to the Non-Defaulting Members (or until the date such loan is
converted into a Capital Contribution pursuant to clause (B) above);
(D) all distributions from the Company that otherwise would
be made to the Defaulting Member (whether before or after dissolution of the
Company and whether before or after demand for payment is made pursuant to
clause (A) above) instead shall be paid to the Participating Members pro rata
until the loan and all interest accrued thereon have been paid in full to the
Participating Members (with payments being applied first to accrued and unpaid
interest and then to principal);
(E) the Defaulting Members shall be deemed to have granted a
security interest to the Participating Members in and to all Units and any other
interests held by the Defaulting Members in the Company, and the Participating
Members shall have the right to exercise all rights of a secured party under the
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Uniform Commercial Code of the State of Colorado, as well as any other rights
and remedies granted to them pursuant to this Agreement or available to them at
law or in equity as the Participating Members holding a majority of the Voting
Interests of all Participating Members may deem appropriate to obtain payment by
the Defaulting Members of the loan, including all accrued and unpaid interest
thereon, all at the cost and expense of the Defaulting Members (which shall
include all reasonable costs and attorney fees incurred by the Participating
Members in collecting any amounts due from any Defaulting Member);
(F) the Defaulting Members shall take any and all steps and
perform any and all acts reasonably requested by the Participating Members to
allow the Participating Members to perfect the security interest granted and
described in the foregoing paragraph, including, without limitation, signing and
delivering to the Participating Members any documents necessary to evidence or
perfect such security interest, including allowing a transcript of this Section
3.3 to be prepared and filed with any Person as evidence of the security
interest so granted, and allowing the Participating Members to prepare and file
such financing statements with the State of Colorado (or elsewhere) as may be
necessary or desirable to place such security interest of record; in addition,
the Defaulting Members shall deliver to the Participating Members any
certificates evidencing the Units; and
(G) during the period any interest or principal with respect
to any loan made to a Defaulting Member pursuant to this Section 3.3(b)(i)
remains outstanding, all rights of such Defaulting Member to vote, veto or
consent to any matter with respect to the Company, including any matter to be
acted upon pursuant to this Agreement or the Act, shall be suspended, and
neither the Sharing Ratio nor Voting Interest of such Defaulting Member shall be
deemed outstanding for purposes of determining whether a quorum exists at any
meeting of the Members or whether any specified percentage or majority of votes
required to adopt, consent to or approve any matter has been obtained; provided,
however, such suspension shall be effective only to the extent permitted by
applicable Law.
(ii) Advances designated under this Section 3.3(b)(ii) shall be
treated as a Capital Contribution by the Participating Members and shall be
credited to the Capital Accounts of the Participating Members making the
advances. The Sharing Ratio of the Defaulting Member shall be adjusted (but not
below zero) to the following ratio (expressed as a percentage):
(The Total Capital Contributions of the Defaulting Member)
----------------------------------------------------------
(The Total Capital Contributions of All Members)
For purposes of this Section 3.3(b)(ii):
13
"Total Capital Contributions By the Defaulting Member" means the aggregate
Capital Contributions to the Company made since the inception of the Company
with respect to Units then owned by the Defaulting Member; and
"Total Capital Contributions By All Members" means the aggregate Capital
Contributions of the Members (including the Capital Contributions made by the
Defaulting Members and all other Members, including the Participating Members
pursuant to this Section 3.3(b)(ii)) since the inception of the Company.
The Sharing Ratio of the Participating Members shall be increased, pro rata in
accordance with the proportionate amount of the advances made by the
Participating Members, by an aggregate percentage equal to the reduction in the
Sharing Ratio of the Defaulting Member. Appropriate adjustments shall also be
made in the Capital Accounts of the Members to reflect the foregoing.
(c) In the event Non-Defaulting Members elect not to make up all of
the Default Amount, the Company shall have the right to take any action
available at law or in equity against the Defaulting Member for failure to make
the required Capital Contribution, including suing for damages, specific
performance or any combination of available remedies. All remedies available to
the Company shall be cumulative, and the election of any one shall not preclude
the availability of another, to the extent permitted under applicable law. In
any action brought by the Company to enforce its rights hereunder, the
prevailing party in such action shall be entitled to recover all costs and fees
(including reasonable attorney fees) incurred by it in connection with such
action, including any appeals.
3.4 No Third Party Right to Enforce. No Person other than the Company and a
Member shall have the right to enforce any obligation of a Member to contribute
capital hereunder and specifically no lender or other third party shall have any
such rights.
3.5 Capital Accounts.
(a) A separate Capital Account ("Capital Account") shall be
established and maintained for each Member, including any substituted or
additional Member who shall hereafter acquire an interest in the Company, in
accordance with the following provisions:
(i) Each Member's Capital Account shall be increased by, the
amount of any money contributed by the Member to the Company, the fair market
value of any property contributed by the Member to the Company, the amount of
net profits allocated to the Member, and the amount of any Company liabilities
assumed by such Member (or taken subject to, if property is distributed to the
Member by the Company);
(ii) Each Member's Capital Account shall be decreased by the
amount of any money distributed to the Member by the Company, the fair market
value of any property distributed to the Member by the Company, the amount of
net losses allocated to the Member, and the amount of any Member liabilities
assumed by the Company (or taken subject to if property is contributed to the
Company by the Member).The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulations under Section 704(b) of the Code and, to the extent
not inconsistent with the provisions of this Agreement, shall be interpreted and
applied in a manner consistent with such Regulations.
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(b) Except as required by the Act, no Member shall have any liability
for the return of the capital contribution of any other Member. A Member who has
more than one membership interest in the Company shall have a single Capital
Account that reflects all such Interests, regardless of the class of Interest
owned and regardless of the time or manner in which the Interests were acquired.
3.6 No Interest on Capital. No interest shall be paid by the Company on the
contributions to the capital of the Company by the Members, as reflected in
their Capital Accounts from time to time.
3.7 Creditor's Interest in Company. No creditor of the Company (including,
without limitation, a creditor who makes a loan to the Company or a creditor who
provides goods or services to the Company) shall have or acquire, at any time as
a result of making the loan, any direct or indirect interest in the profits,
capital or property of the Company other than as a creditor.
3.8 Return of Capital. No Member shall have the right to demand the return
of any Capital Contribution. Except as otherwise provided in this Agreement, no
Member shall have priority over any other Member either as to the return of
Capital Contributions or as to any cash or other distributions by the Company.
Except as otherwise provided in this Agreement, no Member shall have the right
to (i) receive property other than cash as a return of Capital Contributions or
as any other distributions, (ii) withdraw any part of the Member's Capital
Contributions or (iii) receive any funds or property of the Company.
3.9 Member Loans. From and after the Effective Date, if the Company
requires funds in addition to the funds available from Capital Contributions to
be made by the Members pursuant to Section 3.1 or Section 3.2 or from third
party lenders to accomplish its purposes, the Board will give the Members
written notice thereof which will specify (i) the amount of funds requested,
(ii) the purpose for which the funds are required, and (iii) the date required.
Within ten (10) days from the date of the notice, any Member desiring to make a
"Member Loan" (herein so-called) to the Company will give written notice of its
intent to the Board together with the amount of the Member Loan the particular
Member desires to make. No Member shall be required to make a Member Loan to the
Company. If more than one Member elects to make such a loan, they shall make the
Member Loans in proportion to their respective Sharing Ratios. Member Loans will
be funded at the time specified in the notice and will bear interest at a
negotiated rate but not more than the maximum rate allowed under applicable law
and shall not be considered as part of the Company's equity or Members' Capital
Contributions. Member Loans will be repaid prior to any distributions to Members
except Tax Distributions (which will be paid before payments are required to be
made on Member Loans), with any payments being applied first to interest then to
principal. If more than one Member Loan is outstanding, the payments shall be
made in such order and in accordance with such priority as has been agreed to by
the Board and the Company with respect to each such Member Loan. Any such loan
shall be subordinate to any loans from any then existing third-party lender to
the Company if required by such lender, and shall be repaid prior to any other
distributions to the Members.
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ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
-----------------------------
4.1 General. The allocations of income and gain, as set forth herein, are
intended to be applicable after deducting amounts determined by the Board to be
payable to Officers and others as compensation in the form of salary and/or
bonuses.
4.2 Allocations. Subject to the foregoing and except as may otherwise be
required by the Code and Regulations, all items of income, gain, loss, deduction
and credit of the Company shall be allocated as follows:
(a) Income and Gain. Net income and gain of the Company for any Fiscal
Year (or part thereof for which it is appropriate to determine net income and
gain and for which such net income and gain must be allocated) will be allocated
to the Members in accordance with their respective Sharing Ratios subject,
however, to the principles set forth in Section 4.1, above.
(b) Losses and Deductions. Net losses, deductions and credits of the
Company for any Fiscal Year shall be allocated to the Members in accordance with
their respective Sharing Ratios subject, however, to the principles set forth in
Section 4.1, above.
(c) Additional Federal Income Tax and Allocation Concepts. The Board
shall cooperate in connection with implementing the general intent and
principles set forth in Section 4.1 and shall, to the extent reasonably
required, consult with accountants for the Company, as necessary or applicable.
The Board will take reasonable actions to attempt to comply with applicable
provisions of the Code and Regulations in connection with any special allocation
which may be necessary or appropriate for such purpose including, without
limitation, any allocations required pursuant to Section 704(c) of the Code and
Section 1.704-1(b)(2) of the Regulations.
4.3 Distributions.
(a) Distributions will be made to the Members at such time or times as
may be appropriate, as approved by the Board. As used herein, "Tax
Distributions" means a distribution of cash to the Members, if available, of an
amount reasonably estimated as the maximum amount necessary to pay the federal
and state tax liability on the ordinary income of the Members, exclusive of
environmental taxes, for a year in which such liability is attributable to an
allocation of income of the Company pursuant to Section 4.1 and 4.2. The amount
and timing of the Tax Distributions will be reasonably determined by the Board,
and, when so determined, will be paid to the Members pro-rata, in accordance
with their respective Sharing Ratios.
(b) If the Company receives a promissory note or similar instrument as
payment of any part of the sale price for a division, subsidiary, business
segment or any other transaction involving a significant disposition of Company
16
assets, the promissory note or similar instrument will be distributed to the
Members in proportion to their Sharing Ratios as soon as sufficient proceeds
have been received by the Company from the promissory note or similar instrument
to pay whatever is determined by the Board to be appropriate with respect to the
establishment of the division, the subsidiary or business segment.
4.4 Incorrect Payments. To the extent any payments made pursuant to this
Article IV are incorrectly paid, as previously or later determined by the
Company's books and records , any Member who receives more than should have been
paid to such Member shall promptly repay the amount of any such incorrect
payment, and any such repaid amounts shall be redistributed pursuant to this
Article IV or the Managers may offset the excess payments against future
distributions to the Member receiving such excess payments.
4.5 Limitation Upon Distributions. No distribution shall be declared and
paid unless, the Company remains in compliance with all applicable Laws
including, but not limited to the Act, and banking requirements.
ARTICLE V
BOARD OF MANAGERS; POWERS AND DUTIES OF MANAGERS;
APPOINTMENT OF OFFICERS
------------------------------------------------
5.1 Board of Managers.
(a) General. The Members have established the Company as a
manager-managed limited liability company under the Act. The Company shall be
managed by a committee of four Persons, which shall manage the Company and its
business and affairs (this committee is referred to as the "Board" and the
Persons appointed to the Board are referred to as the "Managers"). The Managers
shall be representatives of the Members which appoint them, and shall derive all
of their right, power and authority under this Agreement as a result of a
delegation of such right, power and authority by the Members to the Managers.
Except as specifically provided in this Agreement, the Board may exercise all
powers of the Company and may do all such lawful acts and things as are not
specifically required by statute or by this Agreement to be exercised or done by
the Members. The Managers shall manage the affairs of the Company in a prudent
and businesslike fashion and, subject to Section 5.6, shall use their reasonable
efforts to carry out the purposes and Business of the Company. The Board may
delegate authority to act to any one Manager, in accordance with the provisions
of this Agreement.
(b) Duties. Each Manager shall carry out their respective duties in
good faith, in a manner that he or she believes to be in the best interests of
the Company, and with such care as an ordinarily prudent Person in a like
position would use under similar circumstances. Each Manager shall devote such
time to the Business and affairs of the Company as it may determine, in
reasonable discretion, is necessary for the efficient carrying on of the
Company's Business.
(c) Appointment and Qualifications. The Board shall consist of four
Managers. Initially ADA shall be entitled to appoint two (2) Managers (the "ADA
Managers"), and NexGen shall be entitled to appoint two (2) Managers (the
17
"NexGen Managers"). This arrangement shall continue for so long as ADA and
NexGen hold an equal number of Units. In the event a Member holds a lesser
number of Units than another Member, then the Member holding the lesser number
shall immediately, and without any further action by the Company, the Board or
the other Member, relinquish the right to appoint one (1) Manager and the other
Member shall immediately be entitled to appoint one (1) additional Manager.
Managers shall be appointed by the respective Members annually, for the term
beginning with the annual meeting of the Board as described in Section
5.2(a)(ii) hereof, and each Manager shall hold office until his or her successor
shall have been appointed and qualified or until his or her earlier death,
resignation or removal. Managers shall be natural persons, over the age of
eighteen (18), but Managers need not be Members of the Company. The Managers of
the Company as of the date hereof are listed on the attached Schedule 5.1(c).
(d) Stalemate. In the event the Managers on the Board are unable to
agree upon a matter to be decided by the Board (a "Stalemate"), the Managers
agree to engage in discussions to attempt in good faith to negotiate a
resolution of the matter in question. The meeting to do so shall be held
promptly, but in no event later than ten (10) business days after the
determination that a Stalemate on an issue has occurred (a "Stalemate
Determination"). If the Managers are unable to resolve the Stalemate after
reasonable attempts have been made, which shall be no more than thirty (30) days
after the date of the Stalemate Determination (unless a longer or shorter time
is agreed upon by unanimous consent of the Board), the Board shall utilize the
services of the American Arbitration Association ("AAA"), in Denver, Colorado,
to appoint an arbitrator to resolve the Stalemate. The Board shall immediately
contact the AAA and open a proceeding to appoint a single arbitrator to decide
the Stalemate. The arbitrator so appointed shall be chosen by the Members by
mutual agreement from a list of proposed arbitrators designated by the AAA, who
have expertise in the area of the Company's Business, and to the extent
feasible, taking into account the specific matter to be determined by the
arbitrator. If the Board cannot agree on an arbitrator by consent, one shall be
appointed by the AAA in accordance with its Commercial Rules. The Board and the
arbitrator shall meet as soon as practicable after the appointment of the
arbitrator, and shall agree on the parameters of the proceeding to decide the
Stalemate, with emphasis on a determination being made in as expeditious and
cost-effective a manner as possible. Each of the Managers shall be entitled to
present relevant information to assist the arbitrator in reaching a decision.
The decision of the arbitrator shall be in writing, and shall be binding on the
Board and the Members. No appeal of such decision shall be taken to a court or
other adjudicatory body by and Manager, Member or other Person. All costs and
expenses of the arbitration shall be borne by the Company.
(e) Vacancies. In the event of a vacancy in the office of any ADA
Manager, a successor shall be elected to hold office for the unexpired term of
such Manager by ADA. In the event of a vacancy in the office of any NexGen
Manager (except in the case of a vacancy resulting from a Withdrawal Election),
a successor shall be elected to hold office for the unexpired term of such
Manager by NexGen.
(f) Removal. Except as otherwise provided in this Section 5.1(f), an
ADA Manager may only be removed by ADA and a NexGen Manager may only be removed
by NexGen, except that upon a Withdrawal Election, ADA shall have the right to
remove one (1) NexGen Manager and to fill the resulting vacancy with one (1)
Manager appointed by ADA, who shall thereafter be deemed an "ADA Manager" for
all purposes hereunder. Notwithstanding the foregoing, an individual Manager may
18
be removed by the affirmative vote of the Board (i) if such Manager is an
employee of the Company, upon the occurrence of an event that would be cause for
termination of the Manager's employment for cause, (ii) if the Manager is not an
employee of the Company, (A) if the Manager willfully breaches or habitually
neglects his or her duties pursuant to this Agreement, (B) if the Manager
commits an act of dishonesty or moral turpitude with respect to the Company or
its Business, or fraud outside Company Business (as finally determined by a
non-appealable order of a court of competent jurisdiction or as determined by a
unanimous Board decision without voting privilege from the suspected Manager),
or (C) as a result of the Manager's repeated failure to comply with the policies
and procedures adopted from time to time by the Company or the terms and
conditions of this Agreement and which adversely affect the performance of the
Manager's duties or responsibilities, or (iii) due to the Disability of the
Manager.
(g) Resignation. A Manager may resign at any time by giving written
notice to that effect to the Board. Any such resignation shall take effect at
the time of the receipt of that notice or any later effective time specified in
that notice; and, unless otherwise specified in that notice, the acceptance of
the resignation shall not be necessary to make it effective. Any vacancy caused
by any such resignation or by the death of any Manager or any vacancy for any
other reason shall be filled as provided in Section 5.1(e) hereof, and any
Manager so elected to fill any such vacancy shall hold office until his
successor is elected and qualified or until his or her earlier death,
resignation or removal.
5.2 Actions by Board.
(a) Action by Meetings.
(i) All meetings of the Board shall be held at the principal
office of the Company or at such other place within or without the State of
Colorado as may be determined by the Managers, in accordance with this Article
V, and set forth in the respective notice or waivers of notice of such meeting.
(ii) The annual meeting of the Board shall be held immediately
following the annual meeting of the Members as set forth in Article VI. Such
annual meeting shall be conducted in the same manner as provided in this
Agreement for special meetings of the Board, except that the purposes of such
meeting need be enumerated in the notice of such meeting only to the extent
required by law in the case of annual meetings.
(iii) Special meetings of the Board may be called by any Manager
upon at least five business days (if the meeting is to be held in person) or
three business days (if the meeting is to be held by conference, telephone or
similar communications) oral or written notice to the Managers, or upon such
shorter notice as may be approved by all of the Managers. Any Manager may waive
such notice as to himself or herself. A record shall be maintained of each
meeting of the Board. Business transacted at all special meetings shall be
confined to the purposes stated in the notice.
19
(iv) Any meeting of the Board may be held in person and by means
of a conference, telephone or similar communication equipment by means of which
all Managers and other persons participating in the meeting can hear each other,
and such telephone or similar participation in a meeting shall constitute
presence in person at the meeting.
(v) Written or printed notice stating the place, day and hour of
the meeting and, in the case of special meetings, the purpose or purposes for
which the meeting is called, shall be delivered not less than five (5) days
before the date of the meeting (except as otherwise provided in (iii) above),
and may be given telephonically, via facsimile, personally, by mail, by
commercial delivery service or electronic mail, by or at the direction of the
person calling the meeting, to each Manager. If given by a means other than
United States Mail, such notice will be effective only upon receipt by the
Manager to whom given during normal business hours on a business day unless
actually received by the Manager during a time other than normal business hours
on a business day or on a day other than a business day, in which case notice
will be deemed given as of the start of the next business day. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the Manager at his last known address as it appears on the records
of the Company, with postage prepaid. If given telephonically, a confirmation of
the telephone call shall be delivered via mail, facsimile or email at the last
address, facsimile number or email address shown in the records of the Company
for the Manager being notified. Attendance of a Manager at any meeting shall
constitute a waiver of notice of such meeting, except where a Manager attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
(vi) A majority of the Managers shall constitute a quorum at the
meetings of the Board. Once a quorum is present at the meeting of the Board, the
subsequent withdrawal from the meeting of any Manager prior to adjournment, or
the refusal of any Manager to vote shall not affect the presence of a quorum at
the meeting. If, however, such quorum shall not be present at any meeting of the
Board, the Managers at such meeting shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
the requisite number of Managers shall be present.
(vii) At any meeting of the Board at which a quorum is present,
the affirmative vote of a majority of the Managers shall be the act of the
Board, unless the vote of a greater number is required by this Agreement. For
purposes of voting of the Board on each matter to be brought before the Board
for a vote, each Manager shall have one vote. In the event of a Stalemate, the
provisions of Section 5.1(d) shall apply to resolve the Stalemate.
(viii) Minutes of all meetings of the Board shall be kept and
distributed to each Manager as soon as reasonably practicable following each
meeting. If no objection is raised in writing following receipt of minutes or in
any event at the next meeting of the Board of Managers, then such minutes shall
be deemed to be accurate and shall be binding on the Managers and the Company
with respect to the matters dealt with therein.
(ix) Any Manager or the Member who elected such Manager may
designate in writing an individual to act as the temporary substitute for such
Manager at any meeting of the Board which such Manager is unable to attend, and
20
attendance at any meeting of the Board by any such designated individual shall
be deemed to constitute attendance at such meeting by the Manager for whom such
individual is designated. Any such designated individual who attends a meeting
of the Board as a temporary substitute as aforesaid shall have all the powers
that the absent Manager has in respect of that meeting and any matters to be
acted upon at such meeting.
(b) Actions Without a Meeting and Telephone Meetings. Notwithstanding
any provision contained in this Article V, all actions of the Board provided for
herein may be taken by written consent without a meeting, or any meeting thereof
may be held by means of a conference telephone or other method or device
provided that all Managers participating may simultaneously hear each other
during the meeting (and any Manager participating through such means will be
deemed to be present in person at the meeting). Any such action which may be
taken by the Board without a meeting shall be effective only if the written
consent or consents are in writing, setting forth the action so taken, and are
signed by at least one ADA Manager, on behalf of the ADA Managers and at least
one NexGen Manager, on behalf of the NexGen Managers. In the event action is
taken by less than all of the Managers, the Managers who did not participate in
taking the action shall be given written notice of the action not more than ten
(10) days after the taking of the action without a meeting; provided that the
failure to give such notice will not invalidate the action so taken.
(c) Access to Information. Upon request, the Officers shall supply to
a Member or Manager (i) any information required to be available to the Members
under the Act, and (ii) any other information requested by such Member or
Manager regarding the Company or its activities, provided that obtaining the
information described in this clause (ii) is not unduly burdensome to the
Company. During ordinary business hours, each Member and Manager and their
authorized representative shall have access to all books, records and materials
in the Company's offices regarding the Company or its activities.
(d) Limitation on Actions. Nothing contained herein shall be construed
as permitting any action to be taken by the Managers unless and until any
required approvals of the Members have been obtained pursuant to Section 6.2.
(e) Insurance. The Company shall maintain or cause to be maintained in
force at all times, for the protection of the Company, the Managers and the
Members to the extent of their insurable interests, such insurance as the Board
believes is warranted for the operations being conducted.
5.3 Annual Business Plan. The Board shall, as soon as practicable after the
Effective Date, develop the first Annual Business Plan, which shall be presented
and approved by the Members to cover the period set forth therein. Thereafter,
an Annual Business Plan shall be formulated, presented, approved by the Members
and adopted by the Board to become effective as of January 1st of each calendar
year, and shall cover the succeeding twelve (12) month period thereafter.
21
5.4 Appointment of Committees and Officers.
(a) In the event the Board determines that it is reasonably necessary
or appropriate for the conduct of the Business of the Company (including, for
example, audit review, compensation recommendations, execution and delivery of
contracts or other documents, federal or applicable state income or other tax
returns) the Board may appoint a committee of the Managers or an officer or
officers ("Officer") and, if so appointed, such committees and/or Officers shall
have such duties and authority as provided by the Board upon such appointment.
Committee members and Officers shall serve at the discretion of the Board and
may be removed with or without cause upon approval of the Board, subject,
however to the terms and conditions of any applicable employment agreement. The
salaries or other compensation, if any, of the Officers of the Company shall be
fixed from time to time by the Board. Notwithstanding the foregoing, any
Officers or committees appointed and acting pursuant to this Section 5.4 shall
be subject to the limitations and approval requirements set forth in Sections
5.6 and 6.2.
(b) No third party dealing with the Company shall be required to
ascertain whether an Officer is acting in accordance with the provisions of this
Agreement. All third parties may rely on a document executed by an Officer as
binding the Company. The foregoing provisions shall not apply to third parties
who are Affiliates of a Member, Manager or Officer.
5.5 Compensation. The Managers shall be entitled to such compensation as
shall be set forth in the Annual Business Plan.
5.6 Board Decisions. No Officer, Manager, Member or any other Person shall
have the authority to bind or take any action on behalf of the Company with
respect to any of the following matters unless such matter, in each case and
from time to time, has been approved by the Board:
(a) any sale or Change of Control of any Subsidiary or division of the
Company;
(c) the purchase, lease or other acquisition of real property the cost
of which exceeds the Board Decision Threshold;
(d) the incurrence of any indebtedness (including contractual vendor
financing), other than trade payables incurred in the ordinary course of
business in any Fiscal Year in an aggregate amount of less than the Board
Decision Threshold;
(e) the creation of any Lien on any property or assets of the Company
other than (i) purchase money security interests and other Liens created or
existing at the time of acquisition of an asset, but only to the extent the
aggregate indebtedness of the Company secured by all such purchase money
security interests and such other Liens does not exceed at any time the Board
Decision Threshold; and (ii) material mans', mechanics', contractors',
operators', tax and similar Liens or charges arising in the ordinary course of
business or by operation of law;
(f) the providing of any guaranty (or other obligations that, in
economic effect, are substantially equivalent to a guaranty) of any amount owed
by or any obligation of any Person, but only to the extent the aggregate amount
of such guaranty or other obligation does not exceed at any time the Board
Decision Threshold;
22
(g) the settlement of any claim against the Company for a settlement
in excess of the Board Decision Threshold;
(h) the commencement of any lawsuit, arbitration or other legal action
against any Person, except a suit or legal action against a Member. A suit or
legal action against a Member does not require Board approval unless the purpose
of such action is to collect amounts due the Company from the Member or to
enforce any right of the Company hereunder. Any Member shall be entitled to
bring a suit on behalf of itself, or on behalf of the Company as, or in the
nature of, a derivative suit, against another Member;
(i) the Company entering into a business or expanding the current
business of the Company outside the scope of the Business;
(j) entering into any futures, swap or other hedging arrangements of
any type, or financial derivative instruments or agreements of any type where
the total potential liability exposure of the Company exceeds the Board Decision
Threshold;
(k) the approval of any contract or transaction between the Company
and any Member or Manager or their respective Affiliates, or any amendment or
modification of any such contract or transaction;
(l) any removal of or designation of a successor to the TMP pursuant
to Section 7.3;
(m) the designation, removal or replacement of any Officers of the
Company pursuant to Section 5.4 and the approval of any compensation of any such
Officers;
(n) the filing by the Company of any petition for relief under the
United States Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy or similar law;
(o) making any other decision with respect to the Company that
specifically requires the approval of the Board or Members pursuant to this
Agreement;
(p) entering into any contract, agreement or other obligation of any
nature or duration in which the aggregate financial obligation of the Company
actually or potentially exceeds the Board Decision Threshold.
5.7 Exculpation and Indemnification.
(a) In carrying out duties hereunder, no Manager or Officer shall be
liable to the Company nor to any Member for its good faith actions, or failure
to act, nor for any errors of judgment, nor for any act or omission believed in
good faith to be within the scope of authority conferred by this Agreement, but
shall only be liable for fraud, willful misconduct, or gross negligence in the
performance of his or her duties under this Agreement.
23
(b) (i) Subject to the limitations and conditions of the Act and this
Section 5.7, the Company shall indemnify, defend, save and hold harmless each
Person who was or is made a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative,
(hereinafter a "Proceeding"), or any appeal in such a Proceeding or any inquiry
or investigation that could lead to such a Proceeding, by reason of the fact
that such Person, or a Person of whom he is the legal representative, is or was
a Manager or Officer of the Company, or while a Manager of the Company is
serving as an Officer of the Company, or is or was serving at the request of the
Company as a Manager, Officer, partner, venturer, proprietor, trustee, employee,
agent or similar position of another foreign or domestic limited liability
company, corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, against judgments, penalties
(including excise and similar taxes and punitive damages), losses, claims,
liabilities, fines, damages, settlements and reasonable fees and expenses
(including, without limitation, attorneys' fees) and other amounts
(collectively, "Damages") actually incurred by such Person in connection with
such Proceeding, and indemnification under this Section 5.7 shall continue as to
a Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity hereunder. The rights granted pursuant to this Section 5.7
shall be deemed contract rights, and no amendment, modification or repeal of
this Section 5.7 shall have the effect of limiting or denying any such rights
with respect to actions taken, omissions, or Proceedings arising prior to any
such amendment, modification or repeal. It is expressly acknowledged that the
indemnification provided in this Section 5.7 could involve indemnification for
negligence or strict liability. Notwithstanding the foregoing, the Company's
indemnification of a Manager as to third party claims shall be only with respect
to such loss, liability, or damage that is not otherwise compensated by
insurance carried for the benefit of the Company and shall be limited to the net
assets of the Company, and no Member shall have any personal liability
whatsoever on account thereof.
(ii) The right to indemnification conferred in this Section 5.7
shall include the right to be paid or reimbursed by the Company the reasonable
expenses incurred by a Person of the type entitled to be indemnified under
clause (b)(i) above who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such Person in advance of the final disposition of a Proceeding shall be
made only upon delivery to the Company of a written affirmation by such Person
of his good faith belief that he has met the standard of conduct necessary for
indemnification under this Section 5.7 and a written undertaking, by or on
behalf of such Person, to repay all amounts so advanced if it shall ultimately
be determined that such indemnified Person is not entitled to be indemnified
under this Section 5.7 or otherwise.
(iii) The Company, by adoption of a resolution of the Board, may
indemnify and advance expenses to an Officer, employee or agent of the Company
to the same extent and subject to the same conditions under which it may
indemnify and advance expenses to a Manager under this Section 5.7; and, the
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Company may indemnify and advance expenses to Persons who are not or were not
Managers, or Officers, employees or agents of the Company but who are or were
serving at the request of the Company as a manager, Manager, officer, partner,
venturer, proprietor, trustee, employee, agent or similar position of another
foreign or domestic limited liability company, corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person to the same extent that
it may indemnify and advance expenses to the Manager under this Section 5.7.
(iv) Notwithstanding any other provision of this Section 5.7, the
Company may pay or reimburse expenses incurred by the Manager in connection with
his appearance as a witness or other participation in a Proceeding at a time
when he is not a named defendant or respondent in the Proceeding.
(v) The right to indemnification and the advancement and payment
of expenses conferred in this Section 5.7 shall not be exclusive of any other
right which a Manager or other Person indemnified pursuant to clause (b)(iii)
above may have or hereafter acquire under any law (common or statutory),
provision of this Agreement or the other Transaction Agreements or otherwise.
(vi) The Company may purchase and maintain insurance, at its
expense, to protect itself and any Person who is or was serving as a Manager, or
as an Officer, employee or agent of the Company or is or was serving at the
request of the Company as a manager, Manager, officer, partner, venturer,
proprietor, trustee, employee, agent or similar position of another foreign or
domestic limited liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any expense, liability or loss, whether or not the Company would have the power
to indemnify such Person against such expense, liability or loss under this
Section 5.7.
(vii) If this Section 5.7 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless the Manager and other
Person indemnified pursuant to this Section 5.7 as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by any
applicable portion of this Section 5.7 that shall not have been invalidated and
to the fullest extent permitted by applicable law.
5.8 Reliance. In performing his or her duties, each of the Managers and
the Officers shall be entitled to rely in good faith on the provisions of this
Agreement and on information, opinions, reports or statements (including
financial statements and information, opinions, reports or statements as to the
value or amount of the assets, liabilities, Profit or Loss of the Company or any
facts pertinent to the existence and amount of assets from which distributions
to Members might properly be paid), of the following other Persons or groups:
(i) one or more other Officers or employees of the Company, (ii) any attorney,
independent accountant or other Person employed or engaged by the Company, or
(iii) any other Person who has been selected with reasonable care by or on
25
behalf of the Company, in each case as to matters which such relying Person
reasonably believes to be within such other Person's professional or expert
competence. No individual who is a Manager or an Officer of the Company, or any
combination of the foregoing, shall be personally liable under any judgment of a
court, or in any other manner, for any debt, obligation or liability of the
Company, whether that liability or obligation arises in contract, tort or
otherwise, solely by reason of being a Manager or an Officer of the Company or
any combination of the foregoing.
ARTICLE VI
MEMBERS; TYPES OF UNITS;
ISSUANCE OF UNITS AND OPTIONS TO PURCHASE UNITS
-----------------------------------------------
6.1 Members. The Members and any Person to whom additional Units are
granted shall be Members and such term shall include such other Person as may be
admitted as a Member in the Company in accordance with the terms of this
Agreement.
6.2 Authority and Power. Except as expressly provided below, it is not
intended that the Members will participate in the conduct of the business of the
Company or have any power or authority, by reason of their status as a Member,
to bind or obligate the Company or to take part in the operations, activities,
contracts, decisions or other matters involving the business of the Company,
except with respect to the following matters, which shall require the
affirmative vote or consent of all of the Members:
(a) To effect a Change of Control of the Company.
(b) To act in contravention of or in a manner not authorized by this
Agreement.
(c) To dissolve or liquidate the Company.
(d) To file a voluntary petition or otherwise initiate proceedings to
have the Company adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Company, or file
a petition seeking or consenting to reorganization or relief of the Company as
debtor under any applicable federal or state law relating to bankruptcy,
insolvency, or other relief for debtors with respect to the Company, or seek or
consent to the appointment of any trustee, receiver, conservator, assignee,
sequestrator, custodian, liquidator (or other similar official) of the Company
or of all or any substantial part of the properties and assets of the Company,
or make any general assignment for the benefit of creditors of the Company, or
admit in writing the inability of the Company to pay its debts generally as they
become due or declare or effect a moratorium on the Company debt or take any
action in furtherance of any action.
(e) Amend this Agreement or the Articles in a manner that adversely
affects one or more Members.
(f) Change the purposes of the Company as stated in Section 1.5.
(g) The issuance or grant to any Person of (i) any additional Units
(whether or not as Voting Units) or other security of the Company, (ii) the
right to receive or subscribe for Units, or (iii) any security convertible into
or exchangeable for Units, which is not issued and outstanding as of the
Effective Date.
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(h) To perform any act that would subject any Member to any liability
to which such Member has not consented.
6.3 Voting; Approval of the Members. Each Member holding Voting Units shall
initially be entitled to one vote for each Voting Unit held by such Member on
each matter expressly provided by this Agreement to be brought before the
Members for a vote or approval. At such time as the Sharing Ratios of the
Members holding Voting Units are no longer directly proportional to the number
of Voting Units held by the Members, the Members holding Voting Units shall be
entitled to cast that number of votes based on their respective Sharing Ratios,
with the total number of votes to be cast equal to 100, and each Member casting
that number of votes equal to their respective Sharing Ratios (including
fractional votes), expressed as a percentage.
6.4 Liability to Third Parties. No Member, in its capacity as a Member,
shall be liable for the debts, obligations or liabilities of the Company,
including under a judgment decree or order of a court.
6.5 Actions by Members.
(a) Action by Meetings.
(i) All meetings of the Members shall be held at the principal
office of the Company or at such other place within or without the State of
Colorado as may be determined by the Managers, in accordance with this Article
VI, and set forth in the respective notice or waivers of notice of such meeting.
(ii) The annual meeting of the Members of the Company shall be
held at such time and date as shall be designated by the Chairman, from time to
time and stated in the notice of the meeting. The "Chairman" shall be elected on
Approval by the Members and shall continue in such capacity until a successor is
elected; provided that the Chairman may be removed and replaced at any time upon
Approval of the Members. Until otherwise designated, Xxxxxxx XxXxxx shall serve
as Chairman. Such annual meeting shall be called in the same manner as provided
in this Agreement for special meetings of the Members, except that the purposes
of such meeting need be enumerated in the notice of such meeting only to the
extent required by law in the case of annual meetings.
(iii) Special meetings of the Members may be called by the
Chairman, the Managers (by vote of a majority), or any Member holding at least
ten percent (10%) of the outstanding Voting Units. Members who own only
Non-voting Units or who own less than ten percent (10%) of the outstanding
Voting Units shall not be entitled to call a meeting of the Members. Non-voting
Units will not be counted for purposes of determining the ten percent (10%)
requirement. Business transacted at all special meetings shall be confined to
the purposes stated in the notice.
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(iv) Written or printed notice stating the place, day and hour of
the meeting and, in the case of special meetings, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the date of the meeting, either personally or by
mail, by or at the direction of the person calling the meeting, to each Member
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to the
Member at his address as it appears on the transfer records of the Company, with
postage prepaid.
(v) Members holding a majority of the outstanding Voting Units of
the Company at the time of the meeting shall constitute a quorum at the meetings
of the Members, except as otherwise provided by law or the Certificate. Once a
quorum is present at the meeting of the Members, the subsequent withdrawal from
the meeting of any Member prior to adjournment or the refusal of any Member to
vote shall not affect the presence of a quorum at the meeting. If, however, such
quorum shall not be present at any meeting of the Members, the Members entitled
to vote at such meeting shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until the holders
of the requisite amount of Units shall be present or represented. At any meeting
of the Members at which a quorum is present, the vote of the Members owning a
majority of the Units entitled to vote who are at the meeting (in person or by
proxy) shall be the act of the Members, unless the vote of a greater number is
required by law, the Certificate or this Agreement. Members may vote or appear
at a meeting of the Members either in person or by written proxy held by and
appointing another Member as proxy provided that the Member holding the proxy is
present in person or by telephone.
(vi) For purposes of voting on matters other than a matter for
which the affirmative vote of the holders of a specified portion of the Units
entitled to vote is required by the Act or this Agreement, at any meeting of the
Members at which a quorum is present, the act of Members shall be the
affirmative vote of those Members entitled to vote holding a majority of the
Units present and voting at the meeting.
(vii) The Chairman shall make, at least ten (10) days before each
meeting of Members, a complete list of the Members entitled to vote at such
meeting, or any adjournment of such meeting, arranged in alphabetical order,
with the address of and the Units held by each, which list, for a period of ten
(10) days prior to such meeting, shall be kept on file at the registered office
of the Company and shall be subject to inspection by any Member at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to inspection of any
Member during the whole time of the meeting. However, failure to comply with the
requirements of this Section shall not affect the validity of any action taken
at such meeting.
(viii) The Company shall be entitled to treat the holder of
record of any Units as the holder in fact of such Units for all purposes, and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such Units on the part of any other person, whether or not it shall
have express or other notice of such claim or interest, except as expressly
provided by this Agreement or the laws of the State of Colorado.
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(b) Actions Without a Meeting and Telephone Meetings. Notwithstanding
any provision contained in this Article VI, all actions of the Members provided
for herein may be taken by written consent without a meeting, or any meeting
thereof may be held by means of a conference telephone or other method or device
provided that all Members participating may simultaneously hear each other
during the meeting (and any Member participating through such means will be
deemed to be present in person at the meeting). Any such action which may be
taken by the Members without a meeting shall be effective only if the written
consent or consents are in writing, set forth the action so taken, and are
signed by the holder or holders of Units constituting not less than the minimum
amount of Units that would be necessary to take such action at a meeting at
which the holders of all Units entitled to vote on the action were present and
voted. In the event action is taken by less than all of the Members entitled to
vote on the action, the Members who did not participate in taking the action
shall be given written notice of the action not more than then (10) days after
the taking of the action without a meeting; provided that the failure to give
such notice will not invalidate the action so taken.
6.6 Admission of Additional Members; Creation of Additional Units and
Options.
(a) Authorized Units; Modification of Units; Issuance of Additional
Units. The Members shall determine, from time to time, the number of authorized
Units of the Company and the attributes of any such authorized Units. On the
date of this Agreement, the Members agree that Exhibit B reflects the number of
Units authorized, issued and outstanding, and that all of such Units have the
same rights, including voting rights. Additional Members may be admitted,
existing Units may be modified, additional Units may be issued and/or created
only as approved by the Members and, when so approved and when a new member (or
members) is admitted, Exhibits A, B and C shall be updated to reflect the
appropriate information, and as so amended, shall be attached to, and become a
part of, this Agreement.
(b) Preemptive Rights.
(i) Each existing Member shall have the preemptive right to
acquire its pro rata share of any Units or other securities which are proposed
to be issued by the Company from and after the Effective Date, on the same terms
and conditions set by the Board in accordance with, and as notified pursuant to,
Section 3.2.
(ii) If the Company proposes to issue any Units or other
securities, it shall give each Member written notice of its intention,
describing the securities, the price and the terms and conditions upon which the
Company proposes to issue the same. Each Member shall have fifteen (15) days
from the giving of such notice to agree to purchase its pro rata share of the
securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of securities to be purchased. Notwithstanding the foregoing, the Company shall
not be required to offer or sell such securities to any Member who would cause
the Company to be in violation of applicable federal securities laws by virtue
of such offer or sale.
29
(iii) If not all of the Members elect to purchase their pro rata
share of the securities, then the Company shall promptly notify in writing the
Members who do so elect and shall offer such Members the right to acquire such
unsubscribed securities. The Members shall have five (5) days after receipt of
such notice to notify the Company of its election to purchase all or a portion
thereof of the unsubscribed securities. If the Members fail to exercise in full
the rights of first refusal, the Company shall have ninety (90) days thereafter
to sell the securities in respect of which the Member's rights were not
exercised, at a price and upon general terms and conditions not materially more
favorable to the purchasers thereof than specified in the Company's notice to
the Members pursuant to Section 6.6(b)(ii) hereof. If the Company has not sold
such securities within ninety (90) days of the notice provided pursuant to
Section 6.6(b)(ii), the Company shall not thereafter issue or sell any
securities, without first offering such securities to the Members in the manner
provided above.
(iv) The preemptive rights of each Member under this Section 6.6
may be transferred only to the same parties and shall be subject to the same
restrictions as any Transfer of Units, pursuant to Section 9.1 and Section 9.3.
(c) Rights Attributable to Units. Units created or issued pursuant
hereto will have such rights as approved by the Board including, without
limitation, voting rights. If any Units issued by the Company in accordance
herewith have any characteristics which are different from previously issued
Units (other than voting rights), such Units shall be described in an amendment
or addendum to this Agreement, which shall be as approved by the Board and the
Members in accordance with Section 6.2.
(d) Certificates Representing Units. The Board may, at its election
and discretion, issue or cause the Company to issue certificates representing
Units to the Members. In such event, the certificates shall be issued
sequentially with respect to Voting Units, with Non-voting Units being issued in
a different sequence. Any certificates issued shall clearly state that the
rights of the holder of the Units are described in this Agreement and the Act,
and that transfer of Units, if at all, shall be only in accordance with this
Agreement and applicable securities laws. The certificates shall contain such
other information as may be directed by the Board.
6.7 Restrictions on Transfer. No Transfer of Units may be made by any
Member except in accordance with and as provided by Article IX and applicable
securities laws.
6.8 Effect of a Non-payment Election by NexGen under the Purchase
Agreement. Immediately upon the occurrence of a Non-payment Election (as defined
in the Purchase Agreement) by NexGen, (i) one (1) of the NexGen Managers shall
resign as a Manager and such vacancy shall be filled by ADA, and (ii) NexGen
shall be deemed to have resigned as the Tax Matters Partner. Upon a Non-payment
Election, Exhibit B and Schedule 5.1(c) shall be immediately amended to reflect
the Transfer of Units resulting from the Non-Payment Election.
30
6.9 Duties of Members.
(a) NexGen's Duties to the Company.
(i) From and after the Effective Date until the earlier to occur
of (a) the termination of this Agreement, (b) NexGen making a Non-payment
Election, (c) the Board determining that the Company will only have a Chemicals
Business because there is no reasonable likelihood that the Company will become
a Section 45 Business or (d) the Members unanimously agreeing that they no
longer desire to pursue becoming a Xxxxxxx 00 Xxxxxxxx, XxxXxx shall perform in
good faith the duties described on Schedule 6.9(a)(i) for the Company. It is
understood, agreed and acknowledged that the duties described on Schedule
6.9(a)(i) shall be performed by NexGen on behalf of the Company and its Members
and that NexGen shall not be entitled to receive, and shall not submit request
for, compensation or reimbursement from the Company or any of the Members or
their Affiliates for any of such duties, nor shall NexGen be entitled to credit
in the form of a Capital Contribution for performing such duties.
(ii) In the event the Board determines that the Company only has
a Chemicals Business because the Board has determined that there is no
reasonable likelihood that the Company will become a Section 45 Business or the
Members unanimously have agreed that they no longer desire to pursue becoming a
Section 45 Business, from and after that point in time, until the earlier to
occur of (i) the termination of this Agreement, or (ii) NexGen making a
Non-payment Election, NexGen shall perform in good faith the duties described on
Schedule 6.9(a)(ii) for the Company. It is understood, agreed and acknowledged
that the duties described on Schedule 6.9(a)(ii) shall be performed by NexGen on
behalf of the Company and its Members and that NexGen shall not be entitled to
receive, and shall not submit request for, compensation or reimbursement from
the Company or any of the Members or their Affiliates for, any of such duties,
nor shall NexGen be entitled to credit in the form of a Capital Contribution for
performing such duties.
(b) ADA's Duties to the Company. From and after the Effective Date
until the earlier to occur of (i) the termination of this Agreement, or (ii) a
Non-payment Election on the part of NexGen, ADA shall perform in good faith the
duties described on Schedule 6.9(b) for the Company. It is understood, agreed
and acknowledged that the duties described on Schedule 6.9(b) shall be performed
by ADA on behalf of the Company and its Members and that ADA shall not be
entitled to receive, and shall not submit request for, compensation or
reimbursement from the Company or any of the Members or their Affiliates for,
any of such duties, nor shall ADA be entitled to credit in the form of a Capital
Contribution for performing such duties.
(c) Cessation of Above-Described Duties. Notwithstanding any other
provision of this Agreement, neither party shall be obligated to perform any of
the duties described in Sections 6.9(a) or 6.9(b) without compensation or credit
as a Capital Contribution after a Non-payment Election by NexGen.
(d) NexGen's Reimbursable Services. From and after the Effective Date
until the earlier to occur of (i) the Board determining that the Company only
has a Chemicals Business because there is no reasonable likelihood that the
Company will become a Section 45 Business, (ii) ADA and NexGen unanimously
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agreeing that they no longer desire to pursue becoming a Section 45 Business,
(iii) the termination of this Agreement, or (iii) NexGen making a Non-payment
Election, unless otherwise mutually agreed by the parties, NexGen shall perform
in good faith the duties and provide the services described on Schedule 6.9(d)
hereto for the Company, in exchange for which the Company shall pay NexGen a
commercially reasonable hourly rate, based on the nature of the services being
provided and the cost that would be chargeable for similar services being
provided by an unaffiliated provider in the Denver metropolitan area.
(e) Force Majeure. If either party is prevented or delayed in the
performance of any of its obligations by Force Majeure and if such party gives
written notice thereof to the other party within twenty (20) days of the first
day of such event specifying the matters constituting Force Majeure, together
with such evidence as it reasonably can give, then the party so prevented or
delayed will be excused from the performance or punctual performance, as the
case may be, as from the date of such notice for so long as such Force Majeure
continues; provided, however, that Force Majeure shall not relieve any party of
the obligation to make any payments required hereunder unless normal banking
transactions are not available.
(f) Travel and Associated Business Expenses. Notwithstanding anything
to the contrary contained herein, the reasonable travel and associated business
expenses of Member personnel contributing their time and expertise to the
Business (per Schedules 6.9(a)(i), 6.9(a)(ii), 6.9(b) and 6.9(d)), whether or
not such expenses are incurred in connection with a duty that is
non-reimbursable or reimbursable, shall be deemed a business expense of the
Company and paid to the party incurring such reasonable expense upon submission
to the Company of appropriate supporting documentation.
ARTICLE VII
RECORDS, FINANCIAL STATEMENTS AND FISCAL YEAR
---------------------------------------------
7.1 Records. The Board shall cause to be kept accurate and complete books
of account of the Company wherein shall be recorded all of the contributions to
the capital of the Company and all of the transactions of the Company. All
Company records shall be kept at the principal place of business of the Company,
and each Voting Member and its authorized representatives shall have, at all
times during reasonable business hours, free access to and the right to inspect
and copy such records. Non-voting Members shall have such access to records of
the Company as is required or given pursuant to the Act.
7.2 Financial Statements.
(a) Monthly Financial Statements. On or before the thirtieth (30th)
day following the end of each month, the Board (or a designated Officer) shall
prepare or cause the Company's bookkeeper or accountant to prepare, and deliver
to the Board and the Members, financial statements as of the end of the
preceding month, consisting of the following statements: balance sheet;
statement of operations (profit and loss); and statement of cash flows. The
profit and loss and cash flow statements shall include cumulative figures for
the year to date. Such financial statements shall be prepared in accordance with
GAAP. In addition, the Board (or a designated Officer) shall prepare and provide
the Members with a monthly and year-to-date statement showing actual versus
budgeted expenditures by categories, prepared in a manner consistent with the
approved written budget as set forth in the Annual Business Plan.
32
(b) Annual Financial Statements. On or before the forty fifth (45th )
day following the end each Fiscal Year, the Board (or a designated Officer)
shall prepare or cause the Company's bookkeeper or accountant to prepare, and
deliver annual financial statements (in draft form) to the Members as of the end
of the preceding year and for the entire year then ended, consisting of the
following statements: balance sheet; statement of operations (profit and loss);
statement of cash flows; and statement of capital accounts for each Member. Such
financial statements shall be prepared in accordance with GAAP. The Members
shall review such draft financial statements and shall tender any comments
thereto to the Board, who shall then finalize the statements so that they may be
submitted for audit.
(c) Audit. Upon the request of either Member, the Company shall cause
the annual financial statements of the Company to be audited by a certified
public accountant to be appointed by the Members, which accountant shall be
qualified to audit financial statements to be included in filings under the
Securities Act. The expense of any such audit shall be borne by the Company.
7.3 Tax Returns; Tax Matters Partner. The Board shall cause all income tax
returns required to be prepared and timely filed by the Company with the
appropriate taxing authorities. The Board shall also cause to be prepared
Schedules K-1 to Form 1065 or similar schedules showing the amount of Company
income, gain, loss, deduction or credit allocated or charged to such Member
pursuant hereto and the amount of any distributions made to such Member during
such Fiscal Year, and shall use reasonable efforts to deliver such tax returns
and schedules to the Members within seventy-five (75) days after the end of the
Fiscal Year. All Members shall provide to the Company within ten (10) days after
the date requested any and all information needed by the Company in order to
prepare properly the income tax returns for the Company in accordance with the
effective applicable rules and regulations pertaining thereto. NexGen is hereby
designated as "Tax Matters Partner" ("TMP") for federal tax purposes and the TMP
shall have the authority to represent the Company and the Members in this
regard. The Members agree to cooperate with the Tax Matters Partner with respect
to the conduct of any proceedings regarding tax matters. Notwithstanding the
foregoing, the Tax Matters Partner shall not have any authority to change any
tax returns, compromise any position of the Company with the Internal Revenue
Service or otherwise bind the Company or any Member unless Approved by the
Members. The Tax Matters Partner will promptly give each Member copies of any
notices or correspondence received in his role as such and shall promptly notify
each Member of and give the Members owning at least ten percent (10%) of the
Voting Units an opportunity to participate in and have full and complete access
and input to any and all proceeding, filings, or other matters arising in
connection with said role. The Tax Matters Partner may be removed and replaced
by the Members. In the event the Company has been dissolved and wound up, or is
otherwise unable to fund expenses incurred in a proceeding concerning tax
matters, each Member shall be responsible for its pro-rata share of any and all
amounts reasonably incurred by the Tax Matters Partner in any such proceeding,
based on the percentage ownership of the Members at the time, or as such
interests existed at the time of dissolution of the Company, if applicable. The
Members (or former members, in the case where the Company has been dissolved and
wound up), shall immediately pay such amounts upon request of the Tax Matters
Partner.
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7.4 Bank Accounts. The Managers shall open and maintain a bank account or
accounts in the name of the Company in a commercial bank, the deposits of which
are insured by an agency of the United States Government, in which shall be
deposited all funds of the Company. The Managers shall designate one or more
persons to have the authority to disburse funds from such accounts for the
Company purposes specified in this Agreement. There shall not be deposited in
any such accounts any funds other than funds belonging to the Company and no
other funds shall in any way be commingled with such funds. The Company may
invest such funds, as it deems appropriate, in short-term certificates of
deposit, government obligations or prime grade commercial paper.
ARTICLE VIII
DISSOLUTION AND LIQUIDATION
---------------------------
8.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of the
following events, whichever occurs earliest:
(i) The sale or other disposition of all or substantially all of
the assets of the Company and (if any deferred payment is received in connection
with such sale or other disposition) the receipt of the final installment or
other deferred payment from such sale or other disposition;
(ii) Upon the unanimous consent of the Members;
(iii) The termination, dissolution, death, permanent disability
or bankruptcy of any of the Members. Upon the occurrence of any event described
in this paragraph (iii) of this Section 8.1(a), the Voting Members (excluding,
for this purpose, the Units held by the Member with respect to which the event
has occurred) may, within ninety (90) days after such event, elect to continue
the business of the Company. If the business of the Company is continued
pursuant to this Section 8.1(a)(iii), the Member with respect to whom the event
occurred shall retain and be entitled to its share of the profits, losses and
distributions of the Company to the same extent as though held by the Member,
except that the successor to or representative of said Member shall be a
Non-voting Member from and after the occurrence of the event; or
(iv) at the option of a Member, upon a Change of Control of the
other Member.
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8.2 Liquidation.
(a) Except as otherwise provided herein, upon the dissolution of the
Company, no further business shall be conducted except for the taking of such
action as shall be necessary for the winding up of the affairs of the Company
and the distribution of its assets to the Members pursuant to the provisions of
this section. The Members shall appoint a Person (who may be a Member) to act as
liquidating trustee who shall have full authority to wind up the affairs of the
Company and to make final distribution as provided herein. The liquidating
trustee may sell all of the assets of the Company, at the best price available
or distribute all or part of the Company's assets in kind; provided that, any
such sale shall be made only with ten (10) days advance written notice to the
Members.
(b) Upon the liquidation of the Company, all of the assets of the
Company shall be applied and distributed, by the liquidating trustee in the
following order:
(i) To the creditors of the Company, other than Members;
(ii) To setting up reserves which the liquidating trustee may
deem necessary for contingent or unforeseen liabilities or obligations of the
Company arising out of or in connection with the operations of the Company or
its liquidation;
(iii) To the Members with respect to any Member Loans or advances
(including accrued interest) made by them to the Company; and
(iv) To the Members in accordance with Article IV.
(c) Any distributions in kind to the Members shall be valued at the
fair market value thereof, as reasonably determined by the liquidating trustee,
and the Capital Accounts of the Members shall be adjusted to reflect the income
or loss that would be realized if the item(s) of property were sold for an
amount equal to the fair market value as so determined.
(d) The liquidating trustee shall comply with any requirements of the
Act or other applicable law, except as modified by this Agreement, pertaining to
the winding up of a limited liability company, at which time the Company shall
stand liquidated.
8.3 Compliance with the Act. Upon the dissolution of the Company, the
liquidating trustee shall cause to be prepared and filed, and the Members shall
consent to and execute, where appropriate, such documents as my be necessary or
appropriate to comply with the relevant provisions of the Act including, without
limitation, filing a statement of commencement of winding up and a certificate
of termination.
ARTICLE IX
PERMITTED TRANSFERS; OPTION TO PURCHASE
---------------------------------------
9.1 Permitted Transfers. A Member may Transfer all or a part of its Units
only in accordance with this Section 9.1 or upon compliance with the
requirements of Section 9.3. Any attempted Transfer of Units, any part of a
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Unit, or any rights appurtenant thereto, other than in compliance with this
Section 9.1 or Section 9.3 shall be void and of no effect. The permitted
transfer ("Permitted Transfer") by a Member shall mean only the following and,
only a Person to whom a permitted Transfer is made pursuant hereto shall be a
"Permitted Transferee": (a) a direct or indirect Transfer of Units by a Member
to a Subsidiary or Affiliate, provided that control of the Units so Transferred
remains in a current Member or the Company, as appropriate, and the other
Members shall be entitled to rely on the transferring Member (or another Member)
for all purposes under and pursuant to this Agreement; (b) a Transfer of Units
by a Member to another Member (including a transfer back to ADA from NexGen
under the Purchase Agreement); or (c) any other direct or indirect Transfer
approved by the affirmative vote of a majority of the Members holding Voting
Units; provided, that, the Members will not unreasonably withhold, delay or
condition their approval for such a Transfer in the event the Transfer (i) does
not change the control of the Units proposed to be Transferred from the Person
designated as a Member on the Effective Date (if the Transfer is to an entity
owned or controlled by said Member), (ii) the transferee of the transferring
Member executes a counterpart of this Agreement agreeing to all of the relevant
terms hereof in addition to any additional restrictions on further Transfers of
the Units said new Member has received, and/or (iii) the proposed Transfer would
not constitute a Change of Control. In the event of a Transfer other than in
accordance with this Section 9.1 or Section 9.3 (including, without limitation,
a transfer upon bankruptcy or dissolution of a Member), the Units subject to the
Transfer shall immediately become Non-voting Units unless and until the Members
not transferring Units have unanimously approved the Transfer, in the sole and
absolute discretion of such Members, and the Units so Transferred shall be
subject to the purchase option set forth in Section 9.2, below.
9.2 Purchase Right Upon Non-Approved Transfer. In the event any Units of
the Company are Transferred other than by a Permitted Transfer (including,
without limitation, a Transfer to the separate property of a Person not named as
the Member upon a transfer to a trustee in bankruptcy or a transfer upon the
dissolution of a Member to a Person who is not a Member), the Units shall, at
the election of the holders of a majority of the Voting Units outstanding (not
counting the Units then Transferred), become Non-voting Units, effective
retroactively to the date of such non-approved Transfer, and the Company and the
other Members shall have the right (but not the obligation), to purchase the
Units so Transferred (the "Option Units") in accordance with the terms of this
Section 9.2.
(a) Company Option to Purchase. The Company shall first have the right
to elect to redeem the Option Units (subject to applicable law or restrictions
regarding such redemption) during the period (the "Company Option Period")
beginning on the later of (i) the day on which the Company received actual
notice, in writing, of the Transfer or (ii) the day on which the Company obtains
written confirmation from the transferee of the Option Units that a Transfer has
occurred (the "Transfer Notice") and ending on the later of (x) one (1) year
after the Transfer Notice or (y) thirty (30) days after receipt of the
"Appraised Value" (as defined herein) from the "Appraiser" (as defined herein).
(b) Member Option to Purchase. In the event the Company elects not to
purchase all of the Option Units as provided in Section 9.2(a), the Members
other than the owner of the Option Units (the "Non-transferring Members") shall
36
have the right to elect to purchase the Option Units during the period (the
"Member Option Period") beginning on the earlier to occur of (i) the date on
which the Company gives the Non-transferring Member written notice that it does
not intend to exercise its option to redeem the Option Units or (ii) the end of
the Company Option Period, and ending sixty (60) days thereafter. The option to
purchase or redeem shall be exercised by the Company or the Non-transferring
Members, as the case may be, by written notice to the Person who owns or
controls the Option Units (the "Option Notice") delivered on or before the end
of the applicable period. In the event more than one (1) Non-transferring Member
desires to purchase the Option Units (the "Purchasing Members"), if the
Purchasing Members cannot agree on the number of Option Units each will
purchase, they shall have the right to purchase the percentage of Option Units
pro rata based upon their respective Sharing Ratios
(c) Appraised Value; Appraisers. The value per Option Unit shall be
determined either by (i) agreement of the Person who owns or controls the Option
Units (the "Option Seller") and either the Company, in the case of Section
9.2(a), or the Purchasing Members, in the case of Section 9.2(b), or (ii) if no
agreement can be reached under the applicable portion of Section 9.2(c)(i), in
the case of either Section 9.2(a) or Section 9.2(b), by an Appraiser determining
the Appraised Value. The "Appraised Value" shall mean the fair market value of
the Option Units, taking into account any lack of liquidity of the Units, the
financial and business condition of the Company and such other factors an
Appraiser may take into account in determining fair market value of the Option
Units, including any lack-of-control or minority status in determining the value
of the Option Units. Any "Appraiser" shall be appointed upon Approval of the
Members and compensated by the Company and shall be qualified to appraise the
Units. The Appraiser shall give written notice of the Appraised Value to the
Option Seller and, as applicable, the Purchasing Members or the Company. The
purchase price shall be as agreed by the appropriate parties in the case of
Section 9.2(c)(i), or the Appraised Value per Option Unit multiplied by the
number of Units constituting the Option Units, in the case of Section 9.2(c)(ii)
(the "Purchase Price").
(d) Closing The Closing of the purchase and sale of the Option Units,
whether pursuant to Section 9.2(a) or Section 9.2(b), shall occur within thirty
(30) days following the determination of the Purchase Price. At closing the
Option Seller shall deliver the Option Units to the Company or the Purchasing
Members, as the case may be, free and clear of any and all Liens (except this
Agreement) pursuant to such instrument or instruments as may be necessary or
appropriate for such purpose.
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9.3 Bona Fide Offer.
(a) Any Member (a "Transferor") who receives and desires to accept a
Bona Fide Offer from a Person to buy the Member's Units (the "Offered Units")
must promptly send a written "Notice to Sell" to the Voting Members and shall
offer to sell the Offered Units to said Voting Members at the same price and on
the same terms as contained in the Bona Fide Offer. Such Notice to Sell shall be
in writing and contain a true and correct copy of the Bona Fide Offer, including
its price, terms, and conditions, and the name, address, business or occupation,
and financial statements dated within 12 months from the date of the Bona Fide
Offer of the person or persons making such Bona Fide Offer, or if the Bona Fide
Offer is for cash, written demonstration of the ability to pay. The Voting
Members shall have thirty (30) days after the receipt of the Notice to Sell to
notify the Transferor in writing that said Members elect to purchase all, but
not less than all, of the Offered Units. The Notice to Sell may be accepted by
all or less than all of the Voting Members who receive the Notice to Sell (the
"Electing Members").
(b) If there is more than one Electing Member, each Electing Member
may purchase the number of Offered Units on which such Electing Members may
agree or, if no agreement can be reached, each Electing Member may purchase a
pro rata number of the Offered Units based upon the respective Sharing Ratios of
the Electing Members.
(c) Unless otherwise agreed, the closing shall take place within sixty
(60) days after the date the Transferor receives notice that his offer has been
accepted by the Electing Members. Unless otherwise agreed, the closing shall
take place at the principal office of the Company and shall be at the price and
terms of the Bona Fide Offer.
(d) If no Voting Members elect to timely purchase the Offered Units in
accordance with this Section 9.3, the Transferor may make a bona fide sale to
the prospective purchaser named in the Notice to Sell, but only on terms in
strict compliance with those set forth by the Transferor in the Notice to Sell
and in accordance with this Agreement. Any prospective purchaser shall, prior to
such Transfer, become a signatory hereto by executing a conformed counterpart of
this Agreement whereby such Person or Persons shall be deemed to have adopted
and agreed to be bound by all of the provisions of this Agreement, and shall
provide the Company and the other Members with reasonable proof and assurances
that such prospective purchaser will be able to timely and adequately perform
the duties of the Transferor pursuant to Section 6.9 hereof. Upon a failure to
provide such reasonable assurances and proof, the Company and any
non-transferring Member shall be entitled to object to the proposed transfer,
and such transfer shall be prohibited until such prospective purchaser is able
to provide such reasonable assurances and proof. If the Transferor shall fail to
make such sale within sixty (60) days following the expiration of the time
provided in this Section 9.3 for the election by the other Members, the Offered
Units shall then again become subject to all restrictions of this Agreement. Any
modification of the terms of the Bona Fide Offer between the prospective
purchase and the Transferor shall be deemed a new offer which shall again be
subject to this Section 9.3.
(e) In connection with a Bona Fide Offer, a Transferor may disclose to
a prospective purchaser information regarding the Company, including
Confidential Information, provided the Transferor and prospective purchaser have
entered into a written agreement for the benefit of the Company and its Members
and providing that such information shall remain confidential and prohibiting
the use and further dissemination of such Confidential Information, containing
essentially the terms contained in Section 11.8.
38
ARTICLE X
INDEMNIFICATION
---------------
10.1 Indemnification by Company.
(a) In General. To the maximum extent permitted by law, and
notwithstanding any other provision relating to the rights of indemnity
hereunder or under the other Transaction Agreements, the Company shall indemnify
and hold harmless each Manager, Officer and Member and its members, managers,
partners, shareholders, officers, employees, agents, attorneys and Affiliates
(individually, an "Indemnitee") from and against any and all Damages arising
from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, in which the Indemnitee may be
involved, as a party or otherwise, arising out of or incidental to the business
or affairs of the Company or the Indemnitee's acting as a Member, a Manager or
an officer, Manager, employee or agent thereof, regardless of whether the
Indemnitee continues to be a Member, a Manager, an Affiliate, or an officer,
Manager, employee, partner or agent of such Member or of an Affiliate at the
time that such liability or expense is paid or incurred.
(b) Advance Payment of Expenses. At the sole discretion of the
Managers (and subject to the Approval of the Managers) the Company may pay or
reimburse, in advance of the final disposition of a proceeding, reasonable
expenses incurred by an Indemnitee who is, was or is threatened to be a named
defendant or respondent in a proceeding, if the Company receives a written
undertaking constituting an unlimited general obligation of the Indemnitee
(without reference, however, to the Indemnitee's ability to repay) by or on
behalf of the Indemnitee to repay the amount paid or reimbursed if it is
ultimately determined that the Indemnitee has not met the applicable
requirements.
(c) Report to Managers and Members. The Company shall promptly (but in
any case within twenty (20) days) notify the Managers and Members of any
indemnity payments made hereunder.
(d) Future Amendments to the Act. Notwithstanding anything to the
contrary in this Section 10.1 or elsewhere in this Agreement, no amendment to
the Act after the date of this Agreement may reduce or limit in any manner the
indemnification provided for or permitted by this Section 10.1 unless the
reduction or limitation is mandated by the amendment for limited liability
companies formed prior to the enactment of the amendment.
10.2 Indemnification by the Parties. To the maximum extent permitted by
law, and notwithstanding any other provision relating to the rights of indemnity
hereunder or under the other Transaction Agreements, each party shall indemnify
and hold harmless each other party and their respective members, managers,
partners, shareholders, officers, employees, agents, attorneys and Affiliates
from and against any and all Damages related to, arising out of or otherwise in
39
connection with any (i) breach or violation of any representation or warranty of
the indemnifying party contained in this Agreement or the other Transaction
Agreements, (ii) any default by such indemnifying party under any agreement or
covenant contained herein or in the other Transaction Agreements, or (iii) any
violation by such indemnifying party of any Law, in all cases except to the
extent any breach, violation or default directly results from the gross
negligence or willful misconduct of the party otherwise entitled to be
indemnified hereunder.
10.3 Limits of Indemnification. Notwithstanding anything to the contrary in
this Agreement, any Transaction Agreement, or elsewhere or under applicable law,
under no circumstances will any Member be liable to any other Member for
consequential, incidental, special, or punitive damages for any breach of this
Agreement or any Transaction Agreement or howsoever else arising, and each
Member hereby waives all rights to such damages.
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
11.1 Notices. All notices and other required communications hereunder shall
be in writing, addressed as follows:
If to NexGen:
-------------
NexGen Refined Coal, LLC
0000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. XxXxxx, President
Fax: (000) 000-0000
Email address: xxxxxxx@xxxxxx-xxxxx.xxx
With a copy to:
Republic Financial Corporation
0000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Senior Vice President
Fax: (000) 000-0000
Email address: xxxxxxxx@xxxxxxxx-xxxxxxxxx.xxx
If to ADA:
ADA-ES, Inc.
0000 XxxxxXxxx Xxxxx, Xxxx X
Xxxxxxxxx, XX _80120
Attn: Dr. Xxxxxxx Xxxxxx
Fax: (000) 000-0000
Email address: xxxxx@xxxxx.xxx
40
Notices shall be given (a) by personal delivery to the other party, (b) by
facsimile or email, with confirmation sent by registered or certified mail,
return receipt requested, or (c) by registered or certified mail, return receipt
requested. All notices shall be effective and deemed delivered (i) if by
personal delivery, on the date of delivery if during business hours, otherwise
the next business day, (ii) if by facsimile, on the date the facsimile is
received if received during business hours, otherwise the next business day and
(iii) if solely by mail, upon receipt by the addressee, which receipt shall be
deemed to have occurred at such time as the party is provided with notice from
the postal authorities that a registered or certified letter is awaiting
delivery to the party. A party may change its address by notice to the other
party.
11.2 Application of Colorado Law. This Agreement and the application of
interpretation hereof, shall be governed exclusively by the laws of the State of
Colorado, and specifically the Act. In a proceeding brought to enforce or
interpret this Agreement or any matter related hereto, the parties agree that
exclusive jurisdiction and venue shall exist in the Colorado District Courts
located in Arapahoe County, Colorado, and neither party shall be entitled to
move for a change of venue based on the grounds of inconvenience or for any
other reason.
11.3 No Action for Partition. No Member shall have any right to maintain
any action for partition with respect to the property of the Company.
11.4 Amendment of Articles or this Agreement. Except as otherwise expressly
set forth in this Agreement, the Articles or this Agreement may be amended,
supplemented or restated only upon the unanimous written consent or approval, as
the case may be, of the Members then entitled to vote thereon. Upon obtaining
the approval of any amendment to the Articles, the Members shall cause a
Certificate of Amendment in accordance with the Act to be prepared, and such
Certificate of Amendment shall be executed by a Manager or Member or Members (if
so required) and shall be filed in accordance with the Act.
11.5 Binding Effect. Except as herein otherwise provided to the contrary,
this Agreement shall be binding upon and inure to the benefit of the Company and
the Members, their distributees, legal representatives, executors,
administrators, successors and assigns.
11.6 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original and shall be binding upon the
Company and the Member who executed the same, but all of such counterparts shall
constitute the same Agreement.
11.7 Dates. The term "day" as used in this Agreement means a calendar day.
If the date of any required action or notice under this Agreement falls on a
Saturday, Sunday or legal holiday, the date of such required action or notice
shall be extended to the next business day.
11.8 Confidentiality.
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(a) As used herein, the term "Confidential Information" means
information which is of a non-public, proprietary or confidential nature of the
disclosing Party or another Person providing information to the Company under an
agreement pursuant to which such information is required to be kept confidential
(whether such Confidential Information is marked or identified as confidential
or has been or is disclosed in circumstances that would lead a reasonable person
to believe such information is confidential) disclosed to the receiving Party by
the disclosing Party or Person or its officers, directors, agents or
representatives, including information disclosed in any conversations and
discussions between or among the Parties, or any of their officers, directors,
agents or representatives (including information disclosed prior to the
Effective Date), including, without limitation, all materials, documentation,
know-how, potential strategic relationships, reports and analyses, technical and
economic data, studies, forecasts, trade secrets, research or business
strategies or methods, business structures, monetization strategies, marketing
information and strategies, procedures, business, financial or contractual
information or other written or oral information regarding ADA, NexGen, the
Technology, the Company or the Business. Confidential Information may be in any
form whatsoever, including oral communications, writings, computer programs,
logic diagrams, component specifications, drawings, diagrams or other media. All
such information, howsoever disclosed, including by inspection or otherwise,
shall be deemed Confidential Information unless otherwise expressly agreed in
writing by the Party or Person disclosing such information.
(b) Notwithstanding the provisions of paragraph (a) of this Section
11.8, the term "Confidential Information" shall not include, and neither Party
shall be under any obligation to maintain in confidence or not use, any
information (or any portion thereof) disclosed to it by the other Party to the
extent that such information:
(i) is in the public domain at the time of disclosure; or
(ii) following disclosure, becomes generally known or publicly
available through no act or omission on the part of the receiving Party: or
(iii) is known, or becomes known, to the receiving Party from a
source other than the disclosing Party or its Representatives (as defined
herein), provided that disclosure by such source is not in breach of a
confidentiality agreement with the disclosing Party; or
(iv) is independently developed by the receiving Party without
violating any of its obligations under this Agreement and without the use of or
reference to any Confidential Information of the other Party.
(c) If a receiving Party is served with any legal process or in any
civil action or criminal action is subject to any motion or order requiring the
receiving Party to disclose to a third-party any Confidential Information of the
disclosing Party, the receiving Party will promptly notify the disclosing Party,
and unless the disclosing Party timely obtains, at its own instigation and cost,
an appropriate court order nullifying such process, motion, or order or
restraining the receiving Party from such disclosure, the receiving Party may
disclose such Confidential Information as and to the extent required by such
legal process, motion, or order. The receiving Party will promptly and fully
cooperate with all efforts of the disclosing Party to obtain such order.
42
(d) The Parties hereby further agree that the Confidential Information
(i) may only be used by the receiving Party in connection with or in furtherance
of the Business, and (ii) will be kept confidential at all times hereunder and
not disclosed by the receiving Party to any other person, except that
Confidential Information may be disclosed to any of the receiving Party's
affiliates, directors, officers, employees, attorneys, accountants, consultants,
advisors and agents (collectively, its "Representatives") and to financing
sources and customers who require access to such information in connection with
the Business. Each of the Parties agrees that any of its Representatives to whom
Confidential Information is disclosed will be informed of the confidential or
proprietary nature thereof and of the receiving Party's obligations under this
Agreement, and that each Party shall be responsible for any use or[GRAPHIC
OMITTED][GRAPHIC OMITTED] disclosure of Confidential Information by any of its
Representatives. Confidential Information shall not be reproduced in any form
except as required to accomplish the intent of this Agreement or in furtherance
of the Business. Any reproduction of any Confidential Information shall remain
the property of the disclosing Party and shall contain all confidential or
proprietary notices or legends that appear on the original, unless otherwise
authorized in writing by the disclosing Party. Notwithstanding the foregoing,
Confidential Information incorporated in the ordinary course into any Party's
written board materials or minutes shall not be subject to the obligations set
forth in this paragraph as long as such materials or minutes are held consistent
with the procedures normally used by such Party to safeguard proprietary
information. Such Confidential Information shall continue to be subject to the
other terms and conditions of this Agreement.
(e) The Parties agree that: (i) all rights to Confidential Information
disclosed pursuant to this Agreement are reserved to the disclosing Party; (ii)
except as otherwise prohibited by this Agreement, nothing in this Section 11.8
shall diminish or restrict in any way the rights that each Party has to conduct
its business or to disclose its own Confidential Information to third parties,
and (iii) except as specifically set forth in another Transaction Agreement, no
license or conveyance or any rights including intellectual property rights
relating to the Confidential Information is granted or implied by either Party
to the other.
(f) The provisions of this Section 11.8 shall become effective as of
the Effective Date, shall survive termination of this Agreement, and shall
continue until such Confidential Information ceases to be Confidential
Information in accordance with the provisions of paragraph (b) of this Section
11.8, provided, however, that in the event of a dissolution of the Company
resulting in the parties no longer ceasing to engage in the Business as members
of the Company, the party who owns any such Confidential Information may use
such information for any purpose whatsoever.
(g) Upon a disclosing Party's request, the receiving Party shall at
its option either destroy or return to the disclosing Party as promptly as
practicable, but in any event within thirty (30) days, all Confidential
Information received from the disclosing Party in the possession of the
receiving Party or its Representatives, including all copies of such
Confidential Information, all notes or other documents with respect to or
reflecting such Confidential Information, and of materials derived from such
Confidential Information. Upon completing the foregoing, the receiving Party
shall give the disclosing Party a certificate confirming its compliance with
this Section.
43
(h) Each Party further agrees that all files, records, documents,
drawings, specifications, equipment, and similar items relating to the Business
and which are prepared by the Company in the course of conducting the Business,
whether prepared by a Member or others, are and shall remain exclusively the
property of the Company and that they shall be removed from the premises of the
Company only with the express prior written consent of the Company.
(i) Prior to appointment of any Person as a Manager who is not also a
Member, such Person will be required to execute and deliver to the Company a
Confidentiality Agreement covering essentially the same items as covered hereby.
(j) The receiving Party of any Confidential information acknowledges
and agrees that due to the unique nature of the Confidential Information, there
may be no adequate remedy at law for any breach of a receiving Party's
obligations hereunder, that any such breach or any unauthorized use or release
of any Confidential Information by a receiving Party may allow such receiving
Party or third parties to unfairly compete with the disclosing Party, resulting
in irreparable harm to the disclosing Party and therefore, that upon any such
breach or any, threat thereof, the disclosing Party shall be entitled to
appropriate equitable relief in addition to whatever remedies that the
disclosing Party might have at law, and the disclosing Party shall be entitled
to be indemnified by the receiving Party from any loss or harm, including,
without limitation, attorney's fees, in connection with any breach or
enforcement of the receiving Party's obligations hereunder or the unauthorized
use or release of any such Confidential Information. Notwithstanding the
forgoing or any law, under no circumstances shall either Party be liable for
special, incidental, consequential, or punitive damages with respect to any
breach of this Agreement other than the payment of attorney fees as is
specifically provided for in this Agreement.
11.9 Covenant Not to Compete: Business Opportunities. Each Member agrees
that it will not compete with the Business of the Company during the term of
this Agreement. For this purpose, the term "compete" shall mean engaging in any
business or activity that is in competition with the Business or activity of the
Company in the same market the Company is engaged in or is marketing to (through
direct marketing efforts) at any time during the term of this Agreement and with
any customers of the Company at the time of termination for a period of three
years. In addition, during the term of this Agreement, each Member shall present
to the Company any business opportunity which relates to or in the furtherance
of, the ongoing Business of the Company, except that nothing in this Section
11.9 shall in any way limit the applicability of Section 1.6 hereof. In this
regard, the Members agree that they will use their best efforts to further the
purposes and business of the Company and shall not engage in any activities
which are or may be considered competitive with the Business or operations of
the Company. The Members agree that prior to the appointment of any Person as a
Manager who is not also a Member, such Person will be required to execute and
deliver to the Company a non-competition agreement containing terms and
conditions substantially the same as the foregoing Section 11.8 and 11.9.
Notwithstanding this Section 11.9, or any other provision of this Agreement,
such provisions shall not be construed in such a manner as to prevent ADA from
selling a product or service where such sales are not competitive with the
Company's Business.
44
11.10 Invalidity of Provisions. Should any provision or part of any
provision of this Agreement be held to be invalid or unenforceable by a Court of
competent jurisdiction, such provision shall be deemed modified and amended to
the extent (but only to the extent) necessary to make such provision valid and
enforceable, and so amended, such provision shall be enforced. In the event a
Court finds that it cannot so modify or amend any such provision, such provision
shall be stricken from this Agreement and the remaining provisions of this
Agreement shall remain valid and enforceable to the fullest extent possible,
excluding such invalid provision.
11.11 Representations and Warranties.
(a) Each Member represents and warrants to the other Members and the
Company as follows:
(i) It is the type of legal entity specified in the first
paragraph of this Agreement, duly organized and in good standing under the laws
of the jurisdiction of its organization and is qualified to do business and is
in good standing in those jurisdictions where necessary to carry out the
purposes of this Agreement;
(ii) the execution, delivery and performance by it of this
Agreement and all transactions contemplated herein are within its entity powers
and have been duly authorized by all necessary entity actions;
(iii) this Agreement constitutes its valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium and similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity; and
(iv) the execution, delivery and performance by it of this
Agreement will not conflict with, result in a breach of or constitute a default
under any of the terms, conditions or provisions of (i) any applicable law, (ii)
its governing documents, or (iii) any agreement or arrangement to which it or
any of its Affiliates is a party or which is binding upon it or any of its
Affiliates or any of its or their assets.
(b) Each Member recognizes that (i) the Units have not been registered
under the Securities Act or qualified under any state securities laws, and
covenants not to sell, offer for sale, or otherwise Transfer all or any part of
its Units in the absence of an effective registration statement covering such
interest under the Securities Act and qualification under applicable state
securities laws unless such sale, offer of sale, or other Transfer is exempt
therefrom, (ii) the Company has no obligation to register or qualify any
Member's Units for sale, or to assist in establishing an exemption from
registration or qualification for any proposed sale and may, in conjunction with
any proposed sale or Transfer, require the Transferring owner to provide the
45
Company with an opinion of counsel as to the legality of such transfer under
applicable Laws, and (iii) the restrictions on Transfer contained in this
Agreement, under the Securities Act and under applicable state securities laws
may severely affect the liquidity of a Member's investment. This Agreement and
any certificates representing Units may include a legend reflecting the
restrictions on Transfer set forth in this Section 11.11(b) or elsewhere in this
Agreement.
(c) Each Member further represents and warrants to the other Members
and the Company as follows:
(i) such Member has been advised (i) that a conflict of interest
exists among the Members' individual interests, (ii) that this Agreement has tax
consequences and (iii) that it should seek independent counsel in connection
with the execution of this Agreement;
(ii) such Member has had the opportunity to seek independent
counsel and independent tax advice prior to the execution of this Agreement and
no Person has made any representation of any kind to it regarding the tax
consequences of this Agreement; and
(iii) this Agreement and the language used in this Agreement are
the product of all parties' efforts and each party hereby irrevocably waives the
benefit of any rule of contract construction that disfavors the drafter of an
agreement.
(d) The representations and warranties set forth in Section11.10(a),
(b) and (c) above shall survive the execution and delivery of this Agreement and
any documents of Transfer provided under this Agreement.
11.12 Expenses. Except as otherwise specifically provided in this Agreement
and the Purchase Agreement, NexGen and ADA will each pay all costs and expenses
incurred by each of them on their own behalf, in connection with this Agreement
and the transactions contemplated hereby, including fees and expenses of their
own financial consultants, accountants and counsel.
11.13 Public Announcements. No public announcement may be made by any
Person with regard to the transactions contemplated by this Agreement without
the prior consent of NexGen and ADA, provided that either party may make such
disclosure if advised by counsel that it is required to do so by applicable law
or regulation of any governmental agency or stock exchange upon which securities
of such party are registered. NexGen and ADA will discuss any public
announcements or disclosures concerning the transactions contemplated by this
Agreement with the other party prior to making such announcements or
disclosures.
11.14 Entire Agreement. This Agreement and the other Transaction
Agreements, together with all respective exhibits and schedules hereto and
thereto, collectively constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all representations,
warranties, understandings, terms or conditions on such subjects that are not
set forth specifically herein or therein, including, without limitation, the
terms and conditions contained in the LOI.
[Remainder of Page Intentionally Left Blank]
46
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of November 3, 2006.
COMPANY:
--------
ADA-NexCoal, LLC, a Colorado limited
liability company
By: /s/ Xxxx X. XxXxxxxxx
-------------------------
Name: Xxxx X. XxXxxxxxx
Title: Manager
MEMBERS:
--------
ADA-ES, Inc., a Colorado corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
NexGen Refined Coal, LLC, a Wyoming
limited liability company
By: /s/ Xxxxxxx X. XxXxxx
-------------------------
Name: Xxxxxxx X. XxXxxx
Title: President
47
INDEX OF EXHIBITS AND SCHEDULES
TO
OPERATING AGREEMENT OF
ADA-NEXCOAL, LLC
----------------
EXHIBIT DESCRIPTION
------- -----------
A [Reserved]
B Unit Ownership and Sharing Ratios
C Addresses of Members
D License Agreement (to which the Supply
Agreement shall be attached as Exhibit 1)
SCHEDULE DESCRIPTION
-------- -----------
5.1(c) Managers
6.9(a)(i) Non-reimbursable Duties of
NexGen under Section
6.9(a)(i)
6.9(a)(ii) Non-reimbursable Duties of
NexGen under Section
6.9(a)(ii)
6.9(b) Non-reimbursable Duties of ADA under
Section 6.9(b)
6.9(d) Reimbursable Duties of NexGen under
Section 6.9(d)
EXHIBIT A
TO
OPERATING AGREEMENT
OF
ADA-NexCoal , LLC
[Reserved]
----------
EXHIBIT B
TO
OPERATING AGREEMENT
OF
ADA-NexCoal, LLC
Unit Ownership and Sharing Ratios
Member Units* Sharing Ratios
------ ----- --------------
ADA-ES Inc. 50 50%
NexGen Refined Coal, LLC 50 50%
* All Voting Units
EXHIBIT C
TO
OPERATING AGREEMENT
OF
ADA-NexCoal, LLC
Addresses
---------
Member Address
------ -------
ADA-ES, Inc. 0000 XxxxxXxxx Xxx, Xxxx X
Xxxxxxxxx, XX 00000
NexGen Refined Coal, LLC 0000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
EXHIBIT D
TO
OPERATING AGREEMENT
OF
ADA-NexCoal , LLC
[License Agreement dated November 3, 2006 between ADA-ES, Inc. and ADA-NexCoal,
LLC]
SCHEDULE 5.1(C)
Managers
--------
ADA Managers: Dr. Xxxxxxx Xxxxxx, Xx. Xxxx Xxxxxx French
NexGen Managers: Xxxxxxx XxXxxx, Xxxxx Xxxxxxxx
Schedule 6.9(a)(i)
------------------
NexGen's Non-reimbursable Duties under Section 6.9(a)(i):
---------------------------------------------------------
o Provide expanded market access to assist the Company in marketing the
Technology.
o NexGen shall engage legal counsel (Xxxxx Xxxxxx of Xxxxxxxxxx & Xxxxx
LLP) to pursue appropriate and available legal, legislative or
regulatory approaches to best enable the Company to qualify for
Section 45 Tax Credits, which may include the preparation of a private
letter ruling application to the IRS; provided, however, that, NexGen
shall only be obligated to pay exclusively for the fees and expenses
of such legal counsel up to $100,000, and, thereafter, any fees and
expenses of legal counsel shall be an expense of the Company and paid
pursuant to the terms of the Operating Agreement.
o NexGen shall initiate contact with its current section 29 tax credit
monetizers and related parties and other prospective tax credit
monetizers to attempt to structure and negotiate a sale of any Section
45 Tax Credits for which the Company may qualify.
o Structure and assist in obtaining project finance funding for plant
development and testing and additional funding necessary to support
the Business' projected working capital and development capital needs.
o Provide the contributions and expertise of Xxxxxxx XxXxxx, Xxx Xxxxxxx
(finance and accounting), Xxxxx Xxxxxxx (tax), Xxxx Xxxxxxx (project
finance) and, except as provided in Exhibit D below, Xxxxx Xxxxxxxx
and Xxxxxx Xxxxxx (legal) or substantially equivalent Persons if
NexGen is forced to sever their relationships with these persons.
o Serve as Tax Matters Partner for the Company.
o Provide marketing and consulting expertise of Xxx Xxxxx.
Schedule 6.9(a)(ii)
-------------------
NexGen's Non-reimbursable Duties under Section 6.9(a)(ii):
----------------------------------------------------------
o Structure and assist in obtaining project finance funding for plant
development and testing and additional funding necessary to support
the Business' projected growth.
o Provide expanded market access to assist the Company in marketing the
Technology.
o Structure and assist in obtaining project finance funding for the
Business' projected working capital and development capital needs.
o Provide the contributions and expertise of Xxxxxxx XxXxxx, Xxx Xxxxxxx
(finance and accounting), Xxxxx Xxxxxxx (tax), Xxxx Xxxxxxx (project
finance) and, except as provided in Exhibit D below, Xxxxx Xxxxxxxx
and Xxxxxx Xxxxxx (legal) or substantially equivalent Persons if
NexGen is forced to sever their relationships with these persons.
o Serve as Tax Matters Partners for the Company.
o Provide marketing and consulting expertise of Xxx Xxxxx.
Schedule 6.9(b)
---------------
ADA's Non-reimbursable Duties under Schedule 6.9(b):
----------------------------------------------------
o Provide technical, engineering and marketing resources to the Company.
o Continue to research and develop improvements to the Chemicals and
Additives, as defined in the Supply Agreement.
o ADA shall be responsible for ensuring that all Chemicals and Additives
comply with all applicable Laws, including, without limitation,
obtaining and maintaining all governmental registrations, registration
applications, temporary registrations, experimental use permits,
applications and emergency use exemptions.
o ADA shall take such steps as may be reasonable or desirable under the
circumstances to secure any necessary intellectual property or
intellectual property rights to allow the Company to carry on the
Business without undue burden, interference or objection (or
unreasonable risk of burden, interference or objection) from any third
party, and bear all costs associated therewith or related thereto.
o ADA shall develop, test, troubleshoot, and market the Technology as
agreed upon from time to time by the parties in the Annual Business
Plan, as well as provide usual and customary support for installations
of the Technology in the field.
o ADA shall oversee all supply, design and fabrication work related to
the Technology and all components thereof.
o ADA shall obtain and maintain, at ADA's sole cost and expense, all
permits, licenses, and registrations required by Law for the sale of
the Chemicals and Additives, unless such expense is properly
determined to be an expense of the Company, as set forth in the Annual
Business Plan.
o Provide order taking, order processing and invoicing for all contracts
or agreements with customers of the Business who purchase Chemicals
and Additives, Equipment, and/or Technical Engineering Services from
the Company.
o Provide the contributions and expertise of Xxxx Xxxxxx, Xxxx Xxxxxx,
Xxxx XxXxxxxxx, Xxx Xxxx and Xxxxxxx Xxxxxxxx or substantially
equivalent Persons if ADA is forced to sever their relationships with
these Persons.
Arrange for the Equipment to be sold to the Company in furtherance of the
Business from third party suppliers or equipment manufacturers.
Schedule 6.9(d)
---------------
NexGen's Reimbursable Duties:
-----------------------------
o Arrange for the providing of legal work (corporate and tax) associated
with all elements of structuring the accreditation of qualifying
installations and contractual relationships with third parties so they
are eligible for Section 45 Tax Credits.
