EXHIBIT B.1
AEDR FUELS LLC
OPERATING AGREEMENT
Effective December __, 1997
AEDR FUELS LLC
OPERATING AGREEMENT
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - FORMATION OF COMPANY. . . . . . . . . . . . . . . . . . . 6
2.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Principal Place of Business; Principal Executive Office. . . . 6
2.4 Registered Office and Registered Agent . . . . . . . . . . . . 6
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III - BUSINESS OF COMPANY. . . . . . . . . . . . . . . . . . . 7
ARTICLE IV - IDENTITY OF MEMBERS . . . . . . . . . . . . . . . . . . . 7
ARTICLE V - RIGHTS AND DUTIES OF THE MEMBERS . . . . . . . . . . . . . 8
5.1 Management by Members. . . . . . . . . . . . . . . . . . . . . 8
5.2 Restriction on Authority of Individual Members . . . . . . . . 9
5.3 Amendment of Articles of Organization or of Operating
Agreement; Dissolution, Merger, etc. . . . . . . . . . . . . . 10
5.4 Duties of the Members. . . . . . . . . . . . . . . . . . . . . 10
5.5 The Members Have No Exclusive Duty to Company. . . . . . . . . 10
5.6 Indemnification of the Members, Employees and Other Agents . . 12
5.7 Rights to Information. . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI - RIGHTS AND OBLIGATIONS OF MEMBERS . . . . . . . . . . . . 14
6.1 Limitation of Liability. . . . . . . . . . . . . . . . . . . . 14
6.2 List of Members. . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Priority and Return of Capital . . . . . . . . . . . . . . . . 15
6.4 Obligations of Initial Members . . . . . . . . . . . . . . . . 15
6.5 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Right to Reimbursement . . . . . . . . . . . . . . . . . . . . 15
6.7 Sale of AllEnergy Products . . . . . . . . . . . . . . . . . . 15
6.8 AllEnergy Trademarks . . . . . . . . . . . . . . . . . . . . . 15
6.9 Dead River's Manchester District . . . . . . . . . . . . . . . 16
ARTICLE VII - MEETINGS OF MEMBERS. . . . . . . . . . . . . . . . . . . 16
7.1 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Place of Meetings. . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Meeting of all Members . . . . . . . . . . . . . . . . . . . . 16
7.5 Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.7 Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . 17
7.8 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Action by Members Without a Meeting. . . . . . . . . . . . . . 17
7.10 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . 18
7.11 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII - CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS;
ANNUAL BUDGET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Members' Initial Capital Contributions . . . . . . . . . . . . 18
8.2 Additional Capital Contributions . . . . . . . . . . . . . . . 18
8.3 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 Withdrawal or Reduction of Members' Contributions to Capital . 20
ARTICLE IX - ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS
AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Allocations of Profits and Losses from Operations. . . . . . . 21
9.2 Special Allocations to Capital Accounts and Certain Other
Income Tax Allocations . . . . . . . . . . . . . . . . . . . . 21
9.3 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.4 Distributions for Taxes. . . . . . . . . . . . . . . . . . . . . 23
9.5 Limitation Upon Distributions. . . . . . . . . . . . . . . . . . 23
9.6 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . 23
9.7 Interest On and Return of Capital Contributions. . . . . . . . . 23
9.8 Returns and other Elections. . . . . . . . . . . . . . . . . . . 24
9.9 Taxation as Partnership. . . . . . . . . . . . . . . . . . . . . 24
9.10 Tax Representation; Elections . . . . . . . . . . . . . . . . . 24
ARTICLE X - TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . . 24
10.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Right of First Refusal. . . . . . . . . . . . . . . . . . . . . 25
10.3 Transfers by Operation of Law . . . . . . . . . . . . . . . . . 27
ARTICLE XI - ADDITIONAL MEMBERS. . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XII - DISSOLUTION AND TERMINATION. . . . . . . . . . . . . . . . 29
12.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.2 Effect of Filing of Dissolving Statement. . . . . . . . . . . . 30
12.3 Winding Up, Liquidation and Distribution of Assets. . . . . . . 30
12.4 Certificate of Cancellation . . . . . . . . . . . . . . . . . . 31
12.5 Return of Capital Contribution - Nonrecourse. . . . . . . . . . 31
12.6 Breach of Operating Agreement; Remedies; Survival . . . . . . . 31
ARTICLE XIII - ARBITRATION AND INJUNCTION. . . . . . . . . . . . . . . . 32
ARTICLE XIV - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . 32
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.2 Books of Account and Records. . . . . . . . . . . . . . . . . . 33
14.3 Application of Maine Law. . . . . . . . . . . . . . . . . . . . 33
14.4 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.5 Execution of Additional Instruments . . . . . . . . . . . . . . 33
14.6 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.7 Headings and Pronouns . . . . . . . . . . . . . . . . . . . . . 33
14.8 Waivers. . . . . . . . . . . . . . . .. . . . . . . . . . . . . 33
14.9 Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . 34
14.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.11 Heirs, Successors and Assigns. . . . . . . . . . . . . . . . . 34
14.12 Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.14 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.15 Execution of Additional Instruments. . . . . . . . . . . . . . 34
14.16 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.17 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 34
OPERATING AGREEMENT
OF
AEDR FUELS LLC
THIS OPERATING AGREEMENT is made and entered into as of this ____ day of
December, 1997, by and among the Company and the Persons executing this
Operating Agreement as Members and is to take effect on the later of (a) the
date of this Operating Agreement or (b) the date on which the Company's
initial Articles of Organization is filed with the Secretary of State of the
State of Maine in substantial compliance with the requirements of the Act
("the "Effective Date").
WITNESSETH:
In consideration of the mutual covenants contained in this Operating
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 In addition to the terms defined elsewhere in this Operating
Agreement, the following terms shall have the following respective meanings:
(a) "Act" means the Maine Limited Liability Company Act, 31 M.R.S.A.
Chap. 13, and all amendments thereto.
(b) "Articles of Organization" means the Articles of Organization of
the Company as filed with the Secretary of State as the same may be amended
from time to time by the Members.
(c) "Capital Account" means, as of any given date, the Capital
Contribution to the Company by a Member as adjusted up to the date in question
pursuant to Articles VIII and IX.
(d) "Capital Contributions" means, with respect to any Member, the
total amount of cash, and the Gross Asset Value, determined by Members holding
a Majority Interest, of all tangible or intangible property, which such Member
or its predecessor in interest has contributed to the Company in respect of
such Member's Membership Interest net of liabilities secured thereby or that
the Company is considered to assume or to be subject to under Section 752 of
the Code.
(e) "Capital Units" means the dollar amount of a Member's aggregate
Capital Contributions to the Company, reduced by any return of Capital
Contributions to the Member.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Company" means the limited liability company formed pursuant to
this Operating Agreement.
(h) "Deficit Capital Account" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
taxable year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amount which such Member
is obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, as well as any addition thereto pursuant to the
next to last sentence of Sections 1.704-2(g)(1) and (i)(5) of the
Treasury Regulations, after taking into account thereunder any changes
during such year in limited liability company minimum gain attributable
to any nonrecourse debt (as determined under Section 1.704-2(d) of the
Treasury Regulations) or any Member nonrecourse indebtedness minimum
gain attributable to any member nonrecourse debt (as determined under
Section 1.704-2(i)(3) of the Treasury Regulations); and
(ii) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury
Regulations.
This definition of Deficit Capital Account is intended to comply with the
provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2,
and will be interpreted consistently with those provisions.
(i) "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Members.
(j) "Distributable Cash" means all cash, revenues and funds received by
the Company, less the sum of the following to the extent paid or set aside by
the Company: (i) all principal and interest payments on indebtedness of the
Company and all other sums paid to lenders; (ii) all cash expenditures
incurred incident to the normal operation of the Company's business; and (iii)
Reserves.
(k) "Entity" means any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association or any foreign trust or foreign business
organization.
(l) "Fiscal Year" means the Company's fiscal year which shall be a
52/53 week year ending on the Friday closest to December 31.
(m) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such
asset, as determined by Members holding a Majority Interest.
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
determined by Members holding a Majority Interest as of the following
times: (a) the acquisition of an additional interest by any new or
existing Member in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Company to a Member of more
than a de minimis amount of property as consideration for a Membership
Interest; and (c) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made only if
Members holding a Majority Interest reasonably determine that such
adjustments are necessary or appropriate to reflect the relative
economic interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset distributed to
any Member shall be adjusted to equal the gross fair market value of
such asset on the date of distribution as determined by Members holding
a Majority Interest; and
(iv) The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulation Section
1.704-1(b)(2)(iv)(m) and Section 8.4 and subparagraph (vii) under the
definition of Net Profits and Net Losses; provided, however, that Gross
Asset Values shall not be adjusted pursuant to this definition to the
extent Members holding a Majority Interest determine that an adjustment
pursuant to subparagraph (ii) of this definition is necessary or
appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to subparagraph (i), (ii) or (iv) of this definition, then such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Net Profits and Net Losses.
(n) "Majority Interest" means that number of Capital Units of Members
which taken together exceed fifty percent (50%) of the aggregate of all
Capital Units.
(o) "Member" means each of the parties who executes a counterpart of
this Operating Agreement as a Member and each of the parties who may hereafter
become Members, until withdrawal.
(p) "Membership Interest" means a Member's entire interest in the
Company including such Member's economic interest and such other rights and
privileges that the Member may enjoy by being a Member.
(q) "Net Profits" and "Net Losses" mean for each taxable year of the
Company an amount equal to the Company's net taxable income or loss for such
year as determined for federal income tax purposes (including separately
stated items) in accordance with the accounting method and rules used by the
Company and in accordance with Section 703 of the Code with the following
adjustments:
(i) any items of income, gain, loss and deduction allocated to
Members pursuant to Section 9.2 shall not be taken into account in
computing Net Profits or Net Losses for purposes of this Operating
Agreement;
(ii) any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Net Profits and
Net Losses (pursuant to this definition) shall be added to such taxable
income or loss;
(iii) any expenditure of the Company described in Section
705(a)(2)(B) of the Code and not otherwise taken into account in
computing Net Profits and Net Losses (pursuant to this definition) shall
be subtracted from such taxable income or loss; and
(iv) in the event the Gross Asset Value of any Company asset is
adjusted pursuant to clause (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be taken into account
as gain or loss from the disposition of such asset for purposes of
computing Net Profits and Net Losses;
(v) gain or loss resulting from any disposition of any Company
asset with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax
basis of such asset differs from its Gross Asset Value;
(vi) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year; and
(vii) to the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Section 734(b) of the Code or Section 743(b)
of the Code is required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of
the Treasury Regulations to be taken into account in determining Capital
Accounts, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis of the asset) from the disposition of
the asset and shall be taken into account for purposes of computing Net
Profits or Net Losses.
(r) "Operating Agreement" means this Operating Agreement as originally
executed and as amended from time to time.
(s) "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such Person where the context so permits.
(t) "Reserves" shall mean, with respect to any fiscal period, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by Members holding a Majority
Interest, for working capital and to pay taxes, insurance, debt service or
other costs or expenses incident to the ownership or operation of the
Company's business.
(u) "Secretary of State" means the Secretary of State of the State of
Maine.
(v) "Selling Member" means any Member which sells, assigns, or
otherwise transfers for consideration all or any portion of its Membership
Interest.
(w) "Statement of Authority" means a statement of limited liability
company authority with respect to the Company executed in accordance with
Section 626 of the Act.
(x) "Supermajority Interest" means that number of Capital Units of
Members which taken together equal or exceed sixty-six and two-thirds percent
(66 2/3%) of the aggregate of all Capital Units.
(y) "Termination of Membership", with respect to any Member, means the
withdrawal of the Member from the Company for any reason other than death or,
in the case of a Member which is an Entity, dissolution or other termination
of its existence as a legal entity, including without limitation: (i) the
voluntary withdrawal of the Member, which shall be effected by delivery of
written notice to other Members at least 90 days before the effective date of
such withdrawal and the consent of the other Members as required in Section
6.5 hereof, and (ii) a finding of Cause with respect to such withdrawing
Member by Members holding at least 66 2/3% of the Capital Units (excluding
Capital Units held by such withdrawing Member) with respect to such Member,
which shall immediately result in the withdrawal of such Member. For purposes
of this Section 1.1(z), "Cause" shall mean acts, actions or omissions of a
Member that are adverse to the Company's interests, including, without
limitation, the following:
(i) Bankruptcy of a Member; or
(ii) The failure of a Member to observe or perform one or more
material duties and obligations as a Member, including without
limitation the breach of any provision of this Operating Agreement, and
the continued failure of such Member to observe or perform the same or
to cure said breach for a period of seven (7) business days from the day
of his receipt of written notice from the Company specifying the
aforesaid failure or breach.
(z) "Treasury Regulations" shall include proposed, temporary and final
regulations promulgated under the Code in effect as of the date of filing the
Articles of Organization and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
ARTICLE II
FORMATION OF COMPANY
2.1 Formation. The Company shall be formed at the time of the filing of
the initial Articles of Organization with the Secretary of State in
substantial compliance with the Act, and, until such time, no Person shall be
authorized to take any action pursuant to this Operating Agreement except for
the purpose of effecting such formation.
2.2 Name. The name of the Company is AEDR Fuels LLC.
2.3 Principal Place of Business; Principal Executive Office. The
Company's principal place of business and principal executive office shall be
▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇. The Company may relocate its
principal place of business or its principal executive office from time to
time as the Members deem advisable.
2.4 Registered Office and Registered Agent. The address of the
Company's initial registered office shall be ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇. The name and address of the Company's initial registered agent
shall be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇. The registered office and registered agent may be changed from
time to time as Members holding a Majority Interest deem advisable by filing
notice of such changes with the Secretary of State in accordance with Section
607 of the Act.
2.5 Term. The term of the Company shall be 5 years from the filing of
the Articles of Organization with the Secretary of State; provided, however,
that the term of the Company shall automatically be renewed for up to ten (10)
successive additional 3 year periods, unless, at least 1 year prior to the end
of the then-current 5 or 3 year period (as applicable), any Member or Members
holding in the aggregate at least 50% of the Capital Units in the Company have
given written notice to all other Members of said Member(s) desire to dissolve
the Company.
ARTICLE III
BUSINESS OF COMPANY
The Company exists solely for the purpose of engaging in the business of
acquiring and operating businesses selling fuel oil, propane and other energy
sources (including natural gas and electricity) and other energy related
products and services on a retail basis in the states of Massachusetts,
Connecticut, Rhode Island and New Hampshire (the "Target Territory"), and
engaging in activities and owning assets related thereto, and may not conduct
any other business without the written consent of Members owning a Majority
Interest.
The provisions of this Article III shall be applied in any
interpretation of the duties of Members under Section 652 of the Act or this
Operating Agreement, and the rights and duties of the Members as provided in
Articles V and VI hereof. The authority granted to the Members under this
Operating Agreement or the Act to bind the Company shall be limited to actions
necessary or convenient to this business purpose, and shall be further limited
as provided in Articles V and VI hereof, in the Articles of Organization and
in any Statement of Authority.
ARTICLE IV
IDENTITY OF MEMBERS
The names and addresses of the Members, their respective Capital Units
and their initial Capital Contributions are to be set forth on a schedule
maintained by the Members at the Company's principal office. The initial
version of such schedule is attached hereto as Exhibit A. Such schedule shall
be modified from time to time to reflect changes thereto made in accordance
with this Operating Agreement and the Act and shall be made available to any
Member upon request.
ARTICLE V
RIGHTS AND DUTIES OF THE MEMBERS
5.1 (a) Management by Members. The Company and its business shall be
managed by its Members. Each Member may designate by written notice to the
Company and to the other Members, one or more representatives of such Member
(each, a "Representative") who shall be authorized to speak on behalf of and
take actions on behalf of such Member and, if such authorization is subject to
any limits, conditions or qualifications, shall specify the precise nature of
such limits, conditions or qualifications. A Member's designation may be
changed at any time by notice to the Company and the other Members. In the
absence of a designated Representative, the chief executive officer of such
Member shall be such Member's Representative. The Members expressly intend
that the Company will not have "managers," as that term is used in the Act or
in Rev. Proc. 95-10, 1995-3 I.R.B. 20, it being understood that the
Representatives do not constitute "managers," but that each Representative
acts solely as the agent of the Member that appointed it. The Members shall
cause the Company to hire such management personnel as they deem appropriate
and by resolutions adopted by the Members, establish, subject to any
limitations contained herein, the authority of such management personnel to
act on behalf of the Company.
(b) Officers; Authority. The Members may designate one or more persons
to be officers of the Company and may remove any such person as an officer of
the Company. Any officers so designated shall have such titles and, subject
to the other provisions of this Operating Agreement, have such authority and
perform such duties as the Members may delegate to them, including the power
to execute documents, and shall serve at the pleasure of the Members. Unless
the authority of the person designated as the officer in question is limited
or expanded in the document appointing such officer or is otherwise specified
by the Members, any officer so appointed shall have the same authority to act
for the Company as a corresponding officer of a Maine corporation would have
to act for a Maine corporation in the absence of a specific delegation of
authority; provided, however, that unless such power is specifically delegated
to the officer in question either for a specific transaction or generally, no
such officer shall have the power to act in a manner that is not consistent
with the business plan and annual budget of the Company then in effect, or
contrary to the provisions of Article V hereof. The Members, in their
discretion, may by written instrument signed by such Members ratify any act
previously taken by an officer acting on behalf of the Company.
(c) Limitations on Members' Authority. Notwithstanding anything to the
contrary contained in this Article V or in the Act, neither the Members nor
any officer of the Company shall have authority to take any of the following
actions on behalf of the Company without first obtaining the affirmative vote
of Members holding a Supermajority Interest unless a lesser voting requirement
is expressly set forth in this Operating Agreement.
(i) incur any indebtedness for borrowed money on behalf of the
Company in excess of $250,000 or refinance any such indebtedness of the
Company in excess of $250,000;
(ii) confess a judgment against the Company in an amount in excess
of $250,000, or release, settle or compromise any claim or right in
favor of the Company having a value in excess of $250,000;
(iii) cause the Company to incur any liabilities in any single
transaction or series of related transactions in excess of $250,000;
(iv) (A) make capital expenditures in any single transaction or
series of related transactions in excess of $250,000, or make any
capital expenditures which are outside of the approved operating budget
of the Company (as approved by the Members holding a Majority Interest)
or (B) acquire all or part of the assets or securities of, or other
interest in, any other Entity involving the expenditure of more than
$250,000;
(v) admit new Members to the Company;
(vi) knowingly do any act in contravention of this Operating
Agreement;
(vii) knowingly do any act which would make it impossible to carry
on the ordinary business of the Company, except as otherwise provided in
this Operating Agreement;
(viii) cause the Company to voluntarily take any action that would
cause a bankruptcy of the Company;
(ix) sell or otherwise transfer all or substantially all of the
assets of the Company, act to dissolve the Company and wind up its
affairs, or cause the Company to merge or consolidate with or into any
Entity; or
(x) cause a significant change in the nature of the Company's
business.
5.2 Restriction on Authority of Individual Members. Except to the
extent provided by the Act or by any other express terms of this Operating
Agreement, no Member shall have the power to act for or on behalf of, or to
bind, the Company without first obtaining the written consent of a Member or
Members holding a Majority Interest at the time of such consent to the
proposed action. Such written consent may be specific as to a proposed
action, or may be continuing until revoked by a Member or Members holding a
majority of the Capital Units at the time of revocation, and such specific or
continuing written consent shall be effective according to its terms.
5.3 Amendment of Articles of Organization or of Operating Agreement;
Dissolution, Merger, etc. No revision, restatement or amendment of the
Certificate of Organization of the Company or of this Operating Agreement,
dissolution of the Company or sale of substantially all of the Company's
assets, or consummation of any merger or consolidation of the Company with or
into any other entity, shall be effective unless first approved by a Member or
Members holding a Supermajority Interest at the time of the proposed action;
provided, however, that any provision of the Articles of Organization or of
this Operating Agreement containing a requirement of the vote of a greater
number of Members or percentage of Capital Units may be amended only by such
vote.
5.4 Duties of the Members.
(a) Each Member shall exercise its powers and discharge its duties in
good faith with a view to the interests of the Company and its Members with
that degree of diligence, care and skill that ordinarily prudent persons would
exercise under similar circumstances in like positions.
(b) Every Member must account to the Company and hold as trustee for it
any profit or benefit derived by that Person from any transaction connected
with the conduct of the Company's business or winding up of the Company, or
any use by such Member of the Company's property, including, but not limited
to, confidential or proprietary information of the Company entrusted to the
Person as a result of that Person's status as a Member, unless that Person has
obtained the consent of more than one half by number of the disinterested
Members.
5.5 The Members Have No Exclusive Duty to Company.
(a) Notwithstanding the provisions of Section 5.4 hereof, but subject
to the limitations contained in Section 5.5(b), any Member may have other
business interests and may engage in other activities in addition to those
relating to the Company. Subject to the provisions of Section 5.5(b), neither
the Company nor any Member shall have any right, by virtue of this Operating
Agreement, to share or participate in such other permitted investments or
activities of any Member or to the income or proceeds derived therefrom. No
Member shall incur any liability to the Company or to any of the Members as a
result of engaging in any such other permitted business or venture.
(b) Subject to the provisions of Section 8.2(c), each Member shall be
required to present to the Company for consideration, as soon as reasonably
practical upon gaining knowledge or awareness of the same by said Member (the
"Presenting Member"), any opportunity for acquisition of the assets, voting or
membership interest of any fuel oil or propane company (a "Target Company")
which has a material portion of its operations in the Target Territory. Said
notification shall include all relevant information which the Presenting
Member has regarding the Target Company and its business operations. Unless
approved by the Members holding a Majority Interest, no Member shall execute
any agreement which prohibits it from disclosing such information to the
Company or any other Member. No Member shall enter into discussions or
negotiations regarding acquisition of a Target Company on that Member's own
behalf unless and until the Members holding a Majority Interest have
determined that the Company shall not pursue acquisition of the Target
Company. If a Member proposes that the Company acquire a Target Company it
shall notify the other Members and the Members shall, within 15 days
thereafter, decide whether or not to pursue such acquisition.
(c) Pursuit of Acquisition. If the Members decide not to pursue such
acquisition or fail to reach a decision to pursue the acquisition within the
allotted time, and any Member ("Purchasing Member") thereafter determines to
pursue such Target Company for its own account, it shall give the other
Members notice of such intent, together with the anticipated price and
approximate terms, and the other Members holding a majority of the Capital
Units (excluding the Capital Units held by the Purchasing Member) shall have
an additional period of 15 days to decide that the Company should pursue the
acquisition. If the decision is made to pursue the acquisition, then only the
Company and none of the individual Members shall be entitled to pursue the
acquisition of that Target Company for its own account for a period of two
years, unless the Company decides not to acquire the Target Company pursuant
to Section 5.5(e). If the Company decides not to pursue acquisition of the
Target Company, then the Purchasing Member and other Members voting in favor
of pursuing such acquisition shall be entitled to pursue acquisition of the
Target Company at the price and on the approximate terms set forth in the
proposal to the Company, but any Member not voting in favor of pursuing the
acquisition of the Target Company shall be prohibited from pursuing the
acquisition of the Target Company for its own account for a period of two
years without first offering the opportunity to the Company.
(d) If the Members decide to pursue such acquisition, they shall,
within 30 days thereafter, or within such longer period as the Members holding
a Majority Interest may determine, decide whether to make the acquisition.
(e) Decision to Acquire. If the Members decide not to acquire or fail
to reach a decision to acquire within the allotted time, and a Purchasing
Member thereafter determines to acquire such Target Company for its own
account, it shall give the other Members notice of such intent, together with
the anticipated price and approximate terms, and the other Members holding a
majority of the Capital Units (excluding the Capital Units held by the
Purchasing Member) shall have an additional period of 15 days to decide that
the Company should acquire the Target Company. If the decision is made to
acquire, then only the Company and none of the individual Members shall be
entitled to acquire that Target Company for its own account for a period of
two years. If the Company decides not to acquire the Target Company, then the
Purchasing Member and other Members voting in favor of such acquisition shall
be entitled to acquire the Target Company at the price and on the approximate
terms set forth in the proposal to the Company, but any Member not voting in
favor of acquiring the Target Company shall be prohibited from acquiring the
Target Company for its own account for a period of two years without first
offering the opportunity to the Company.
(f) Notwithstanding any provision to the contrary contained herein,
each Member shall be free to directly serve customers both inside and outside
of the Target Territory and pursue acquisitions of fuel oil and propane
companies serving customers located primarily outside of the Target Territory.
Within the Target Territory, each Member agrees to not pursue commercial
arrangements similar to the arrangements reflected in this Agreement, with
third parties which offer products and services similar to and competitive
with those offered by other Members within the Target Territory.
5.6 Indemnification of the Members, Employees and Other Agents.
(a) General. The Company shall in all cases indemnify any person who
is or was a Member, or who as an employee or agent of a Member is or was
serving as an agent or employee of the Company, and may indemnify any other
person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a Member, employee or agent of the Company, or is or was serving at the
request of the Company as a member, principal, director, officer, trustee,
partner, fiduciary, employee or agent of another Entity, pension or other
employee benefit plan or other enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement to the extent
actually and reasonably incurred by that person in connection with such
action, suit or proceeding; provided that no indemnification may be provided
for any person with respect to any matter as to which that person shall have
been finally adjudicated:
(i) Not to have acted honestly or in the reasonable belief that
that person's action was in or not opposed to the best interests of the
Company or its Members or, in the case of a person serving as a
fiduciary of an employee benefit plan or trust, in or not opposed to the
best interests of that plan or trust, or its participants or
beneficiaries;
(ii) With respect to any criminal action or proceeding, to have
had reasonable cause to believe that that person's conduct was unlawful;
or
(iii) To have acted without authorization under or in violation
of this Operating Agreement.
The termination of any action, suit or proceeding by judgment, order or
conviction adverse to that Person, or by settlement or plea of nolo contendere
or its equivalent, shall not of itself create a presumption that (i) that
person did not act honestly or in the reasonable belief that that person's
action was in or not opposed to the best interests of the Company or its
Members or, in the case of a person serving as a fiduciary of an employee
benefit plan or trust, in or not opposed to the best interests of that plan or
trust or its participants or beneficiaries, (ii) with respect to any criminal
action or proceeding, had reasonable cause to believe that that person's
conduct was unlawful, or (iii) that person acted without authorization under
or in violation of this Operating Agreement.
(b) Derivative Actions. Notwithstanding any provision of Section
5.6(a) or (d), the Company shall not indemnify any person with respect to any
claim, issue or matter asserted by or in the right of the Company as to which
that person is finally adjudicated to be liable to the Company unless the
court in which the action, suit or proceeding was brought shall determine
that, in view of all the circumstances of the case, that person is fairly and
reasonably entitled to indemnity for such amounts as the court shall deem
reasonable.
(c) Advancement of Expenses. Expenses (including, without limitation,
reasonable attorneys fees) incurred in defending a civil, criminal,
administrative or investigative action, suit or proceeding with respect to
which indemnification exists under Section 5.6(a) of this Agreement, shall be
authorized and paid by the Company in advance of the final disposition of that
action, suit or proceeding, to the extent permitted by Section 654(5) of the
Act and upon receipt of the undertaking and affirmation described in Section
654(5)(A) and (B) of the Act from the Person or Persons on whose behalf or for
whose benefit the expenses are to be advanced.
(d) Indemnification Rights Under Operating Agreement Not Exclusive;
Enforceable by Separate Action. The indemnification and entitlement to
advances of expenses provided by this Section 5.6 shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any agreement, vote of Members or otherwise, both as to action in that
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a Member,
employee, agent, trustee, partner or fiduciary and shall inure to the benefit
of the heirs, executors and administrators of such a person. A right to
indemnification required by this Section 5.6 may be enforced by a separate
action against the Company, if an order for indemnification has not been
entered by a court in any action, suit or proceeding in respect to which
indemnification is sought.
(e) Insurance. The Company shall have power to purchase and maintain
insurance on behalf of any person who is or was a Member against any liability
asserted against that person and incurred by that person in any such capacity,
or arising out of that person's status as such, whether or not the Company
would have the power to indemnify that person against such liability under
this Section 5.6.
(f) Amendment. Any amendment, modification or repeal of this Section
5.6 shall not deny, diminish or otherwise limit the rights of any person to
indemnification or advance hereunder with respect to any action, suit or
proceeding arising out of any conduct, act or omission occurring or allegedly
occurring at any time prior to the date of such amendment, modification or
repeal.
(g) Indemnification by Members. A Member who takes any unauthorized
action on or purportedly on behalf of the Company shall indemnify and hold the
Company and the other Members harmless from any costs (including without
limitation reasonable attorneys' fees) or damages incurred by any such
indemnified parties as a result thereof. The Company and any Member entitled
to indemnification under this Section 5.6(g) shall be entitled to set off
against, withhold, proceed against or collect or receive from the Company, as
applicable, all or any part of the indemnifying Member's Membership Interest,
any amounts distributable with respect thereto or, following the withdrawal of
such Member or the dissolution of the Company, any amounts payable to the
indemnifying Member pursuant to this Operating Agreement, under an employment
agreement or otherwise, in order to enforce its, his or her rights hereunder.
The obligations of the Members hereunder shall survive the withdrawal of any
Member as such and the dissolution or termination of the Company.
5.7 Rights to Information. Members shall have the right to receive
from the Company upon request a copy of the Articles of Organization and of
this Agreement, as amended from time to time, and such other information
regarding the Company as is required by the Act, subject to reasonable
conditions and standards established by the Members, as permitted by the Act,
which may include, without limitation, withholding or restrictions on the use
of confidential information. Within 90 days after the end of each fiscal year
the Company shall furnish to all Members such information as may be needed to
permit Members to file their federal income tax returns and any required state
and local income tax returns.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
6.1 Limitation of Liability. Except as otherwise provided in the Act,
no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member, whether arising
in contract, tort or otherwise, solely by reason of being a Member of the
Company. No Member shall be personally liable to the Company or to its
Members for breach of any fiduciary or other duty with respect to the business
and affairs of the Company that does not involve (i) a breach of the duty of
loyalty to the Company or its Members, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law; or (iii) a transaction from which the Member derived an improper personal
benefit. No Member shall have any responsibility to restore any negative
balance in its Capital Account or to contribute to or in respect of the
liabilities or obligations of the Company or return distributions made by the
Company except as required by the Act or other applicable law; provided,
however, that Members are responsible for their failure to make required
Capital Contributions under Sections 8.1 and 8.2. The failure of the Company
to observe any formalities or requirements relating to the exercise of its
powers or the management of its business or affairs under this Operating
Agreement or the Act shall not be grounds for making its Members responsible
for the liabilities of the Company.
6.2 List of Members. Upon written request of any Member, the Company
shall provide a list showing the names, addresses and Membership Interests of
all Members.
6.3 Priority and Return of Capital. Except as may be expressly
provided in Article IX hereof, no Member shall have priority over any other
Member, either as to the return of Capital Contributions or as to Net Profits,
Net Losses or distributions; provided that this Section shall not apply to
loans (as distinguished from Capital Contributions) which a Member has made to
the Company.
6.4 Obligations of Initial Members. In addition to its remaining
obligations as a Member hereunder, AllEnergy Marketing Company, LLC
("AllEnergy") is expected to provide to the Company, through AllEnergy
personnel, expertise in marketing, sales and energy management. In addition
to its remaining obligations as a Member hereunder, Dead River Company ("Dead
River") is expected to provide to the Company, through Dead River personnel,
expertise in operations and customer service, sales and installation of energy
consuming products, and acquisition and operation of retail operating
companies. Each of Dead River and AllEnergy shall assist the Company in the
procurement of fuel oil and other products to be sold by the Company. The
Members are expected to limit the provision of the required services to those
approved in the annual operating budget. Notwithstanding the foregoing, the
costs incurred by Members so providing these services shall be reimbursed by
the Company pursuant to Section 6.6.
6.5 Withdrawal. Except as provided in Article X, no Member may
withdraw or resign from the Company without the consent of the other Members
holding a majority of the Capital Units, not including the Capital Units of
the withdrawing or resigning Member.
6.6 Right to Reimbursement. Each of the Members shall be entitled to
be reimbursed for the cost of services provided to the Company within 30 days
of submission of proof of such costs to the Company for the actual cost
(including an overhead allocation) in accordance with the Public Utility
Holding Company Act of 1935 ("PUHCA"), to the extent applicable for services
provided to the Company by the employees of the Member. All costs for
services rendered to the Company by any Member must have been approved in the
annual operating budget of the Company.
6.7 Sale of AllEnergy Products. AllEnergy shall make available to the
Company and its subsidiaries, through commission sales arrangements or
otherwise, on terms to be agreed, AllEnergy products for sale by the Company
and its subsidiaries to their customers. Unless otherwise agreed, the Company
and its subsidiaries will be paid commissions on the sale of AllEnergy
products on a basis not less favorable than that afforded to independent
commissioned sales agents under similar circumstances, but subject to any
applicable limitations imposed by PUHCA. The Company shall actively promote
AllEnergy products and services and will not sell or offer for sale any
products or services competing with the AllEnergy products and services
available for sale by it.
6.8 AllEnergy Trademarks. Upon execution of this Agreement, AllEnergy
shall enter into the form of Trademark Licensing Agreement ("TLA") with the
Company, attached hereto as Exhibit B. Pursuant to the terms of the TLA, the
Company shall be permitted to market all of its goods and services for retail
sale using the trademarks and trade names used by AllEnergy to market products
of a similar nature. AllEnergy will cooperate with the Company to coordinate
branding and marketing of the Company's products and services with the
products and services offered by AllEnergy.
6.9 Dead River's Manchester District. Dead River shall, within 60 days
of the Effective Date, propose to the Company that the Company acquire the
assets of Dead River's Manchester, New Hampshire District as its initial
acquisition of a fuel oil and propane business, with the intention that the
Company will be presented the opportunity to purchase that business at its
fair market value. The parties will in good faith attempt to agree on the
fair market value of such business. All costs of due diligence in connection
with the proposed acquisition shall be paid by the Company.
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Meetings. Meetings of the Members for any purpose may be called by
any Member or Members holding at least thirty percent (30%) of the Capital
Units.
7.2 Place of Meetings. The Person or Persons calling a meeting
pursuant to Section 7.1 hereof may designate any place within the New England
states as the place of meeting for any meeting of the Members. If no
designation is made, the place of meeting shall be the principal executive
office of the Company.
7.3 Notice of Meetings. Written notice stating the place, day and hour
of the meeting and the purpose or purposes for which the meeting is called
shall be delivered not less than twenty (20) nor more than sixty (60) days
before the date of the meeting, either personally or by mail, by or at the
direction of the Members or Person(s) calling the meeting, to each Member
entitled to vote at such meeting. If mailed, such notice shall be deemed to
be delivered three (3) business days after being deposited in the United
States mail, addressed to the Member at its address as it appears on the books
of the Company, with postage thereon prepaid.
7.4 Meeting of all Members. If all of the Members shall meet at any
time and place and consent to the holding of a meeting at such time and place,
such meeting shall be valid without call or notice, and at such meeting lawful
action may be taken.
7.5 Record Date. For the purpose of determining Members entitled to
notice of or to vote at any meeting of members or any adjournment thereof, or
Members entitled to receive payment of any distribution, the date on which
notice of the meeting is mailed or the date on which the resolution declaring
such distribution is adopted, as the case may be, shall be the record date for
such determination of Members. When a determination of Members entitled to
vote at any meeting of Members has been made as provided in this Section, such
determination shall apply to any adjournment thereof.
7.6 Quorum. Members holding at least a majority of the Capital Units
of all Members, represented in person or by proxy, shall constitute a quorum
at any meeting of Members. In the absence of a quorum at any such meeting, a
majority of the Capital Units so represented may adjourn the meeting from time
to time for a period not to exceed 60 days without further notice. However,
if the adjournment is for more than 60 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Member of record entitled to vote at the
meeting. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal during such meeting of that number of Capital Units whose
absence would cause there to be present less than a quorum.
7.7 Manner of Acting. If a quorum is present, the affirmative vote of
Members holding a majority of the Capital Units represented in person or by
proxy shall be the act of the Members, unless the vote of a greater or lesser
proportion or number is otherwise required by the Act, by the Articles of
Organization, or by this Operating Agreement. Unless otherwise expressly
provided herein or required under applicable law, Members who have an interest
(economic or otherwise) in the outcome of any particular matter upon which the
Members vote or consent may vote or consent upon any such matter and their
Capital Unit, vote or consent, as the case may be, shall be counted in the
determination of whether the requisite matter was approved by the Members.
7.8 Proxies. At all meetings of Members a Member may vote in person or
by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Members before or at the
time of the meeting. No proxy shall be valid after eleven months from the date
of its execution, unless otherwise provided in the proxy.
7.9 Action by Members Without a Meeting. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if the
action is evidenced by one or more written consents describing the action
taken, signed by a sufficient number of Members or Members holding the
requisite Capital Units, as applicable, whose vote is necessary for the taking
of the action described therein and delivered to the Members for inclusion in
the minutes or for filing with the Company records. Action taken under this
Section is effective when Members in the requisite number or holding the
requisite Capital Units, as applicable, have signed the consent, unless the
consent specifies a different effective date. The record date for determining
Members entitled to take action without a meeting shall be the date the first
Member signs a written consent. Notice of all actions so taken will be given
as soon as practicable to all Members.
7.10 Waiver of Notice. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
7.11 Telephonic Meetings. Any Member may participate in a meeting of
the Members by means of conference telephone or similar communications
equipment which permits all persons participating in the meeting to hear each
other, and participation in the meeting by means of such equipment shall
constitute presence in person at such meeting.
ARTICLE VIII
CONTRIBUTIONS TO THE COMPANY AND CAPITAL
ACCOUNTS; ANNUAL BUDGETS
8.1 Members' Initial Capital Contributions. Each Member shall
contribute, on or prior to December 31, 1997 the amount of cash and, if
applicable, other property set forth and identified as the Initial Capital
Contribution on Exhibit A hereto as its initial Capital Contribution.
8.2 Additional Capital Contributions.
(a) Except as provided in Section 8.2(b):
No Member shall be required to make any Capital Contribution in
addition to those contemplated by Section 8.1;
(i) No Member shall be permitted to make any Capital
Contributions in addition to those contemplated by Section 8.1
hereof unless Members holding a Supermajority Interest vote to
permit such additional Capital Contributions; and
(ii)In the event that Members holding a Supermajority
Interest vote to permit additional Capital Contributions as
provided herein (other than those required by Section 8.2(b)
hereof), the Members shall have the opportunity (but not the
obligation) to participate in such additional Capital
Contributions on a pro rata basis in accordance with their Capital
Units. No additional Capital Contributions (including those made
pursuant to Section 8.2(b)) may be made other than in cash without
the approval of Members holding a Supermajority Interest.
(b) Each Member shall contribute from time to time, as an additional
Capital Contribution, (i) such Member's pro-rata portion of the amount
necessary to fund the annual operating budget of the Company after accounting
for revenues of the Company (as said budget is approved by the Members holding
a Majority Interest, and in the event that no annual operating budget is
approved the annual operating budget shall be equal to the Base Annual
Operating Budget plus 5%) up to a maximum amount of $500,000.00 per Member for
each annual operating budget; and (ii) such Member's pro-rata portion of
amounts as are necessary to fund any acquisition of fuel oil or propane
businesses located within the Target Territory which are approved by the
Members, in either case subject to an aggregate limit equal to that Member's
Aggregate Required Additional Capital Contribution as shown on Exhibit A.
Each such additional Capital Contribution shall be made in a timely fashion so
that the Company will have funds when needed for the purpose for which the
contribution is to be made. Notwithstanding the foregoing, in the case of
additional Capital Contributions to fund business acquisitions, each Member's
additional Capital Contribution shall be limited to the pro-rata portion
(based upon that Member's Capital Units) of the equity contribution necessary
to consummate the acquisition of said business, absent contrary approval by
Members holding a Supermajority Interest. For purposes of this subsection,
the term "Base Annual Operating Budget" shall mean the most recent annual
operating budget of the Company.
(c) Once the Members have made their Aggregate Required Additional
Capital Contribution and the Members holding a majority interest agree that
further Capital Contributions are needed in excess of the Aggregate Required
Additional Capital Contribution to make any additional acquisition, the
obligation under Section 5.5 hereof to present acquisition opportunities to
the Company shall be suspended unless and until the Members agree to increase
their capital contributions in an amount sufficient to enable the Company,
together with any other available resources, to make such acquisitions.
(d) For as long as AllEnergy is a Member of the Company, all Capital
Contributions required to be made pursuant to this Operating Agreement will be
made in compliance with the requirements of PUHCA, to the extent applicable.
8.3 Annual Budget. The budget for the first Fiscal Year of the
Company, shall be agreed upon by the Members no later than 15 days after the
Effective Date. The Members shall, at least 60 days before the beginning of
each subsequent Fiscal Year, determine a budget for the Company for the next
Fiscal Year (the budget for the Company's first Fiscal Year and each
subsequent budget, each an "Annual Budget"). Each Annual Budget shall include
a projected profit and loss statement, cash flow statement and balance sheet
for the next Fiscal Year, and shall specify and quantify capital expenditures.
8.4 Capital Accounts.
(a) A separate Capital Account shall be maintained for each Member in
accordance with the capital accounting rules of Section 704(b) of the Code.
The beginning balance in each Member's Capital Account shall be the amount of
such Member's initial Capital Contribution made pursuant to Section 8.1 above
(as set forth on Exhibit A hereto). Thereafter, a Member's Capital Account
shall be credited with (i) the amount of any subsequent Capital Contribution
to the Company by such Member; (ii) such Member's distributive share of
Company Net Profits; (iii) all items of income and gain allocated to such
Member pursuant to Section 9.2 (other than paragraph (f) thereof); and (iv)
such other amounts as may be required for the Capital Account to be determined
and maintained in accordance with the rules of Section 1.704-1(b)(2)(iv) of
the Treasury Regulations (including Section 1.704-1(b)(2)(iv)(g) thereof). A
Member's Capital Account shall be debited with (i) such Member's distributive
share of items of Company Net Losses; (ii) all items of loss and deduction
allocated to such Member pursuant to Section 9.2 (other than paragraph (f)
thereof); (iii) the amount of cash or the fair market value of any property
distributed from the Company to such Member (reduced by the amount of debt, if
any, assumed by such Member in connection with the distribution); and (iv)
such other amounts as may be required for the Capital Account to be determined
and maintained in accordance with the rules of Section 1.704-1(b)(2)(iv) of
the Treasury Regulations (including Section 1.704-1(b)(2)(iv)(g) thereof). It
is the parties' specific intent that Capital Accounts shall be maintained in
accordance with the capital account maintenance rules contained in section
704(b) of the Code, including the regulations thereunder, and this Section
8.4(a) shall be construed and applied to achieve such result.
(b) Upon liquidation of the Company (or any Member's Membership
Interest), liquidating distributions will be made in accordance with the
positive Capital Account balances of the Members, as determined after taking
into account all Capital Account adjustments for the Company's taxable year
during which the liquidation occurs. Liquidation proceeds will be paid in
accordance with Section 12.3. The Company may offset damages for breach of
this Operating Agreement by a Member whose interest is liquidated (either upon
the withdrawal of the Member or the liquidation of the Company) against the
amount otherwise distributable to such Member.
(c) Except as otherwise required in the Act (and subject to Sections
8.1, 8.2 and 9.2), no Member shall have any liability to restore all or any
portion of a deficit balance in such Member's Capital Account.
8.5 Withdrawal or Reduction of Members' Contributions to Capital.
(a) A Member shall not receive out of the Company's property any part of
its Capital Contribution until all liabilities of the Company, except
liabilities to Members on account of their Capital Contributions, have been
paid or there remains property of the Company sufficient to pay them.
(b) A Member, irrespective of the nature of its Capital Contribution,
has only the right to demand and receive cash in return for its Capital
Contribution.
ARTICLE IX
ALLOCATIONS, INCOME TAX, DISTRIBUTIONS,
ELECTIONS AND REPORTS
9.1 Allocations of Profits and Losses from Operations. The Net Profits
and Net Losses of the Company for each Fiscal Year will be allocated among the
Members in proportion to the Capital Units of the Members.
9.2 Special Allocations to Capital Accounts and Certain Other Income
Tax Allocations. Notwithstanding Section 9.1 hereof:
(a) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4),
(5), or (6) of the Treasury Regulations, which create or increase a Deficit
Capital Account of such Member, then items of Company income and gain
(consisting of a pro rata portion of each item of Company income, including
gross income, and gain for such year and, if necessary, for subsequent years)
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the Deficit
Capital Account so created as quickly as possible. It is the parties' intent
that this Section 9.2(a) be interpreted to comply with the alternate test for
economic effect set forth in Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations.
(b) In the event any Member would have a Deficit Capital Account at the
end of any Company taxable year, the Capital Account of such Member shall be
specially credited with items of Membership income (including gross income)
and gain in the amount of such excess as quickly as possible.
(c) With respect to any Member, notwithstanding the provisions of
Section 9.1, the amount of Net Losses for any taxable year that would
otherwise be allocated to such Member pursuant to Section 9.1 shall not cause
such Member to have a, or increase such Member's, Deficit Capital Account
balance. Any Net Losses in excess of the limitation set forth in this Section
9.2(c) shall be allocated among the other Members pro rata, to the extent that
each, respectively, is liable or exposed with respect to any debts or other
obligations of the Company.
(d) Notwithstanding any other provision of this Section 9.2, if there
is a net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company, then the
Capital Accounts of each Member shall be allocated items of income (including
gross income) and gain for such year (and if necessary for subsequent years)
equal to that member's share of the net decrease in Company minimum gain. This
Section 9.2(c) is intended to comply with the minimum gain charge-back
requirement of Section 1.704-2 of the Treasury Regulations and shall be
interpreted consistently therewith. If in any taxable year that the Company
has a net decrease in the Company's minimum gain, if the minimum gain
charge-back requirement would cause a distortion in the economic arrangement
among the Members and it is not expected that the Company will have sufficient
other income to correct that distortion, the Members may in their discretion
(and shall, if requested to do so by a Member) seek to have the Internal
Revenue Service waive the minimum gain charge-back requirement in accordance
with Treasury Regulation Section 1.704-2(f)(4).
(e) Notwithstanding any other provision of this Section 9.2, if there
is a net decrease in partner (Member) nonrecourse debt minimum gain, as
defined in Treasury Regulation Section 1.704-2(i), during a taxable year of
the Company, then the Capital Account of each Member shall be allocated items
of income (including gross income) and gain for such year (and if necessary
for subsequent years) in proportion to and to the extent of each such Member's
share if any, of such net decrease in partner (Member) nonrecourse debt
minimum gain, except to the extent that such allocation would not be required
by Treasury Regulation Section 1.704-2(i)(4). This Section 9.2(e) is intended
to comply with the partner (Member) nonrecourse debt minimum gain charge-back
requirement of Section 1.704-2(i) of the Treasury Regulations and shall be
interpreted consistently therewith.
(f) Items of Company loss, deduction and expenditures described in
Section 705(a)(2)(B) which are attributable to any nonrecourse debt of the
Company and are characterized as partner (Member) nonrecourse deductions under
Section 1.704-2(i) of the Treasury Regulations shall be allocated to the
Members' Capital Accounts in accordance with said Section 1.704-2(i) of the
Treasury Regulations.
(g) Beginning in the first taxable year in which there are allocations
of "nonrecourse deductions" (as described in Section 1.704-2(b) of the
Treasury Regulations) such deductions shall be allocated to the Members in the
same manner as Net Profit or Net Loss is allocated for such period.
(h) In accordance with Section 704(c)(1)(A) of the Code and Section
1.704(b)(2)(iv)(g) of the Treasury Regulations, if a Member contributes
property or is deemed to contribute property pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(g) with a Gross Asset Value that differs from its
adjusted basis at the time of contribution (or deemed contribution), income,
gain, loss and deductions with respect to the property shall, solely for
federal income tax purposes (and not for Capital Account purposes), be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company and its Gross Asset Value as of
the beginning of the relevant taxable year (or portion thereof).
(i) Any credit or charge to the Capital Accounts of the Members
pursuant to Sections 9.2 (a), (b), (c), (d), (e), (f) and/or (g) hereof shall
be taken into account in computing subsequent allocations of Net Profits and
Net Losses pursuant to Section 9.1, so that the net amount of any items
charged or credited to Capital Accounts pursuant to Sections 9.1 and 9.2 (a),
(b), (c), (d), (e), (f) and/or (g) and shall to the extent possible, be equal
to the net amount that would have been allocated to the Capital Account of
each Member pursuant to the provisions of this Article IX if the special
allocations required by Sections 9.2 (a), (b), (c), (d), (e), (f) and/or (g)
hereof had not occurred.
9.3 Distributions. All distributions of Distributable Cash shall be
made to the Members pro rata in proportion to the respective interests of the
Members in Net Profits and Net Losses as set forth in Section 9.1 on the
record date of such distribution. Except as provided in Section 9.5, all
distributions of Distributable Cash and property shall be made at such time as
determined by a majority of the Members. All amounts withheld pursuant to the
Code or any provisions of state or local tax law with respect to any payment
or distribution to the Members from the Company shall be treated as amounts
distributed to the relevant Member or Members pursuant to this Section 9.3.
9.4 Distributions for Taxes. Subject to the provisions of Section 9.5,
the Company shall annually distribute to each Member an amount of cash
sufficient in amount to pay any state and federal income taxes on income
earned by the Company and allocated to such Member, based upon the assumption
that each Member pays federal and state income taxes at the marginal rate then
applicable to the Member whose marginal combined federal and state income tax
rate (taking into account the deductibility of state income taxes for federal
income tax purposes) is the highest of any Member.
9.5 Limitation Upon Distributions. No distribution shall be declared
and paid if, in the determination of a majority of the Members, after giving
effect to the distribution:
(a) the Company would not able to pay its debts as they become due in
the usual course of business; or
(b) all liabilities of the Company, other than liabilities to Members on
account of their Membership Interests and liabilities for which the recourse
of creditors is limited to specified property of the Company, would exceed the
fair value of the Company's assets, except that the fair value of property
that is subject to a liability for which the recourse of creditors is limited
shall be included in the Company's assets only to the extent the fair value of
that property exceeds that liability.
9.6 Accounting Principles. For financial accounting purposes (but not
for federal income tax or Capital Account maintenance purposes) the profits
and losses of the Company shall be determined in accordance with generally
accepted accounting principles applied on a consistent basis.
9.7 Interest On and Return of Capital Contributions. No Member shall be
entitled to interest on its Capital Contribution or to return of its Capital
Contribution, except as otherwise specifically provided for herein, and any
return of the Capital Contributions of any Member shall be made solely from
the assets of the Company and only in accordance with the terms of this
Agreement.
9.8 Returns and other Elections. The Company shall prepare and timely
file all tax returns required to be filed by the Company pursuant to the Code
and all other tax returns and other reports deemed necessary and required in
each jurisdiction in which the Company does business, including without
limitation, all sales and use tax filings and annual reports with the
Secretary of State. Copies of such returns and other reports, or pertinent
information therefrom, shall be furnished to the Members within 90 days after
the end of the Company's Fiscal Year, and in any event, as soon as they are
available.
9.9 Taxation as Partnership. Notwithstanding section 9.8 of this
Operating Agreement, Members shall make any elections and take any and all
other actions necessary to cause the Company to be taxed as a partnership
under the Code. In the event that the Company's counsel or accountants advise
that, as a result of any change in applicable laws or regulations, or
administrative or judicial interpretations thereof, or otherwise, it is
necessary or desirable to amend the terms of this Operating Agreement or of
the Articles of Organization in order to preserve or protect the Company's
treatment as a partnership for tax purposes, then
(i) the Members shall make such amendments to this Operating
Agreement or the Articles of Organization, as the case may be, that
preserve and protect such partnership status, and which secondarily
preserve the economic arrangement among the parties to the greatest
extent possible, and which tertiarily preserve the management structure
of the Company to the greatest extent possible; and
(ii) all Members agree to vote for and approve any such
amendments.
9.10 Tax Representation, Elections. The Members may designate one of
the Members to prepare and file (or have prepared and filed) all required
returns for federal, state and local tax purposes, and to serve as the "Tax
Matters Partner" of the Company for purposes of Section 6231(a)(7) of the
Code, with power to manage and represent the Company in any administrative
proceeding of the Internal Revenue Service. Any elections which may or are
required to be made by the Company for tax purposes, whether on a federal,
state or local return, or otherwise, shall be determined by Members holding a
Majority Interest.
ARTICLE X
TRANSFERABILITY
10.1 General. Except as otherwise specifically provided herein,
without the affirmative vote of Members holding a majority of the Capital
Units of all Members (excluding the Capital Units of the Transferring Member)
a Member (the "Transferring Member") shall not have the right to:
(a) sell, assign, transfer, exchange, mortgage, pledge or hypothecate,
or otherwise transfer for consideration (collectively, "sell" or "sale"); or
(b) gift, bequeath or otherwise transfer for no consideration whether or
not by operation of law, except in connection with bankruptcy, insolvency and
similar proceedings (collectively "gift"), all or any part of its Membership
Interest.
Notwithstanding the foregoing, a Member may transfer all of its
Membership Interest to any person or entity directly or indirectly
controlling, controlled by, or under common control with such Member, provided
that such transferee consents to becoming a Member of the Company and to be
bound by the terms of this Operating Agreement and provided further, that in
the reasonable judgment of the other Members, such transfer will not have a
material adverse effect on the Company, its financial condition, or its
operations.
Each Member hereby acknowledges the reasonableness of the restrictions
on sale and gift of Membership Interests imposed by this Operating Agreement
in view of the Company's purposes and the relationship of the Members.
Accordingly, the restrictions on sale and gift contained herein shall be
specifically enforceable. Any transfer or attempted transfer of Membership
Interests other than in strict accordance with the terms hereof shall be void
and of no effect. In the event that any Member pledges or otherwise encumbers
any of its Membership Interest as security for repayment of a liability, any
such pledge or hypothecation shall be made pursuant to a pledge or
hypothecation agreement that requires the pledgee or secured party to be bound
by all the terms and conditions of this Article X.
10.2 Right of First Refusal.
(a) A Member (the "Selling Member") which desires to sell all or any
portion of its Membership Interest in the Company shall so notify the other
Members (the "Offeree Members") and if requested by one or more of the Offeree
Members, engage in good faith negotiations with the Offeree Members to sell
its interest to the Offeree Members. If after 30 days following the giving of
such notice, the Selling Member and the Offeree Members are unable to agree
upon the sale of the interest of the Selling Member to one or more Offeree
Members, then the Selling Member shall be free to seek other purchasers for
its Membership Interest. Prior to selling such Membership Interest, however,
the Selling Member shall give written notice to the Offeree Members by
certified mail or personal delivery of the terms and conditions under which
the Selling Member is offering to sell such interest, and a list of
prospective purchasers of such interest (the "Prospective Purchasers"). The
Offeree Members shall have the right to purchase all (but not less than all)
of the interest proposed to be sold by the Selling Member upon the same terms
and conditions as stated in the aforesaid written notice by giving written
notification to the Selling Member, by certified mail or personal delivery, of
its or their intention to do so within thirty (30) days after receipt of
written notice from the Selling Member. The interest proposed to be sold
shall be subject to purchase by the Offeree Members, in whole but not in part,
pro rata in accordance with the then relative percentage interests of the
Members electing to purchase such Membership Interest. If the Offeree Members
fail to so notify the Selling Member of its or their desire to exercise this
right of first refusal within said period, the right of first refusal shall
terminate and the Selling Member shall, for a period of 180 days following
expiration of the 30 day notice period be entitled to sell its Membership
Interest to any one or more of the Prospective Purchasers on terms
substantially the same as those set forth in the notice given to the Offeree
Members, unless a majority of interest of the Offeree Members, within said 30
day period, notify the Selling Member of its or their election to dissolve the
Company, in which event the Company shall be dissolved in accordance with
Article 12 hereof.
(b) In the event one or more Offeree Members give written notice to the
Selling Member of its or their desire to exercise this right of first refusal
and to purchase all of the Selling Member's interest in the Company which the
Selling Member desires to sell upon the same terms and conditions as are
stated in the Selling Member's written notice, such Offeree Members shall have
the right to designate the time, date and place of closing, provided that the
date of closing shall be within ninety (90) days after receipt by the Offeree
Members of written notification from the Selling Member its desire to sell.
(c) In the event of the purchase of the Selling Member's interest in
the Company by a third party purchaser, and as a condition to recognizing the
effectiveness and binding nature of any such sale and substitution of a new
Member as against the Company or otherwise, the Company may require the
Selling Member and the proposed purchaser to execute, acknowledge and deliver
to the Company such instruments of transfer, assignment and assumption and
such other certificates, representations and documents, and to perform all
such other acts, which the Company may deem necessary or desirable to:
(i) constitute such purchaser as a Member or successor-in-
interest;
(ii) confirm that the person desiring to be admitted as a Member,
has accepted, assumed and agreed to be subject and bound by all of the
terms, obligations and conditions of the Operating Agreement, as the
same may have been further amended, including any payment obligations
the Selling Member may have to the Company at the time of transfer;
(iii) preserve the status of the Company as a foreign or domestic
limited liability company after the completion of such sale, transfer,
assignment, or substitution under the laws of each jurisdiction in which
the Company is qualified, organized or does business;
(iv) maintain the status of the Company as a partnership for
federal tax purposes; and
(v) assure compliance with any applicable state and federal laws
including without limitation securities laws and regulations.
(d) Any sale or gift of a Membership Interest or admission of a Member
in compliance with this Article X shall be deemed effective as of the last day
of the calendar month in which the remaining Members' consent thereto was
given, or, if no such consent was required, then on such date that the donee
or successor in interest complies with Section 10.2(c). The Transferring
Member agrees, upon request of the Company, to execute such certificates or
other documents and perform such other acts as may be reasonably requested by
the Company from time to time in connection with such sale, transfer,
assignment, or substitution. The Transferring Member hereby indemnifies the
Company and the remaining Members against any and all loss, damage, or expense
(including, without limitation, tax liabilities or loss of tax benefits)
arising directly or indirectly as a result of any transfer or purported
transfer in violation of this Article X.
(e) The foregoing right of first refusal may be waived, and consent to
transfer of a Membership Interest may be given by vote of Members holding a
Majority Interest (computed by excluding the Membership Interest of the
Transferring Member).
(f) A Member which is subject to a transfer of its Membership Interest
by operation of law or pursuant to a judicial decree or settlement of judicial
proceedings, other than a judicial decree or proceeding described in Section
10.3, shall be deemed to be a selling Member and be subject to the provisions
of Section 10.2.
10.3 Transfers by Operation of Law. (a) In the event that a Member (i)
files a voluntary petition under any bankruptcy or insolvency law, or a
petition for the appointment of a receiver, or makes an assignment for the
benefit of creditors, or (ii) is subjected involuntarily to such a petition or
assignment, or to an attachment or other legal or equitable interest with
respect to its Membership in the Company, and such involuntary petition, or
assignment, attachment or other interest is not discharged within thirty (30)
days after its date, said Member shall be deemed to have offered all of his or
her Membership Interest to the Company as provided in this Section 10.3. Such
offer shall be irrevocable for a period of ninety (90) days and within said
time period the Company may, by delivering a written notice of acceptance to
such Member, accept the offer in respect of all, but not less than all, of
said Membership Interest. If the Company does not elect to purchase all of
the Membership Interest of such Member, such Membership Interest shall be
deemed to have been offered to the remaining Members, individually, for an
additional ninety (90) days following the ninety (90) day period during which
the Company could purchase the Membership Interest. The Membership Interest
shall be subject to purchase by the remaining Members pro rata in accordance
with their then relative Percentage Interests. If the Company or the
remaining Members do not notify said selling Member of its or their decision
in respect of the Membership Interest within the applicable ninety (90) day
offering period, said offer to sell shall be deemed not to have been accepted
by the Company or the remaining Members, as the case may be.
(b) Purchase Price. The purchase price at which the Company or a
remaining Member, as the case may be, may elect to purchase all or a portion
of a Membership Interest hereunder shall be a ratable portion of the lesser of
(i) the selling Member's Capital Account balance adjusted through the date of
purchase and further adjusted by adjusting the Gross Asset Values of all
Company assets to equal their fair market value as of such date, or (ii) the
selling Member's Capital Contributions, in either case reduced by any unpaid
Capital Contributions the Selling Member is required to pay pursuant to this
Operating Agreement.
(c) Payment of Purchase Price. If the Company or any remaining Members
elect to purchase a Membership Interest in accordance with the provisions of
this Section 10.3, transfer of said Membership Interest shall be made at the
office of the Company on a mutually satisfactory business day within thirty
(30) days of acceptance of the offer to sell by the Company, or the remaining
Members, as the case may be. Delivery of instruments evidencing such transfer
to the Company or the remaining Members, as the case may be, shall be made
upon receipt by the selling Member of cash representing the aggregate purchase
price for the Membership Interest.
(d) Withdrawal of Members if No Purchase. In the event that all or any
portion of the Membership Interest subject to purchase pursuant to this
Section 10.3 is not so repurchased, the Member owning such Membership Interest
shall be deemed to have withdrawn as a Member in compliance with Section 6.5
hereof and shall receive a distribution from the Company equal to the amount
specified in Section 10.3(b), unless the Company is dissolved within 60 days
of such withdrawal, in which case such Member will receive the amount
determined under Article XII.
ARTICLE XI
ADDITIONAL MEMBERS
From the date of the formation of the Company, any Person or Entity may
become a Member in the Company upon execution of all necessary documentation
to bind such person or entity to the terms of this Operating Agreement either
(i) upon approval by Members holding a Supermajority Interest by the issuance
by the Company of Membership Interests for such consideration as Members
holding a Supermajority Interest shall determine, or (ii) as a transferee of a
Member's Membership Interest or any portion thereof, upon approval of holder
of a majority of the Capital Units other than those held by the Transferring
Member, subject to the terms and conditions of this Operating Agreement. No
new Members shall be entitled to any retroactive allocation of losses, income
or expense deductions incurred by the Company. The Members may, at their
option, at the time a Member is admitted, close the Company books (as though
the Company's tax year had ended) or make pro rata allocations of loss, income
and expense deductions to a new Member for that portion of the Company's tax
year in which a Member was admitted in accordance with the provisions of
Section 706(d) of the Code and the Treasury Regulations promulgated
thereunder.
ARTICLE XII
DISSOLUTION AND TERMINATION
12.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of the
following events:
(i) the expiration of the Term as set forth in Section 2.5.
(ii) the election of a majority of interest of Offeree Members
under Section 10.2(a).
(iii) the written agreement of Members holding a Supermajority
Interest;
(iv) the sale or other disposition of all or substantially all of
the assets of the Company or the permanent cessation of the Company's
business operations; or
(v) any other cause resulting in dissolution under the Act
provided however, that except as provided above, the Company shall have
perpetual existence so long as it has the minimum number of Members
required by the Act, and it shall not be dissolved and its affairs shall
not be wound up as a result of the death, insanity, retirement,
resignation, expulsion bankruptcy or dissolution of a Member, or the
occurrence of any other event which terminates the membership of a
Member in the Company, and in any such event the existence of the
Company shall continue without further consent of the Members, unless
the Members otherwise determine. If any action or occurrence leaves the
Company with less than the minimum number of Members required by the
Act, the existence of the Company shall nevertheless be continued if the
last remaining Member shall agree in writing to continue the existence
of the Company and to the admission of any other person as a Member of
the Company.
(b) As soon as possible following the occurrence of any of the events
specified in this Section 12.1 effecting the dissolution of the Company, the
appropriate representative of the Company shall execute a statement of intent
to dissolve in such form as shall be prescribed by the Act and file same with
the office of the Secretary of State.
(c) If a Member who is an individual dies or a court of competent
jurisdiction adjudges him to be incompetent to manage his person or his
property, the Member's executor, administrator, guardian, conservator, or
other legal representative ("Successor") may exercise all of the Member's
rights for the purpose of settling his estate or administering his property,
provided, however, that for purposes of Section 10.2, 10.3, Article XI and
Section 12.1(a)(iii), the Successor shall not be considered a Member and shall
have no right to vote, approve or consent to any matter pursuant to such
provisions and for purposes of determining voting requirements any Capital
Units held by the successor shall be deemed to be not outstanding.
12.2 Effect of Filing of Dissolving Statement. Upon the filing of a
statement of intent to dissolve with the Secretary of State, the Company shall
cease to carry on its business, except insofar as may be necessary for the
winding up of its business, but its separate existence shall continue until a
certificate of cancellation has been issued by the Secretary of State or until
a decree dissolving the Company has been entered by a court of competent
jurisdiction.
12.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, the Members shall immediately proceed to wind up
the affairs of the Company in accordance with the requirements of the Act and
other applicable law. In furtherance of the winding up of the Company, the
Members shall:
(i) sell or otherwise liquidate all of the Company's assets as
promptly as practicable (except to the extent the Members may determine
to distribute any assets to the Members in kind);
(ii) discharge or make reasonable provision for all liabilities of
the Company, including liabilities to Members who are also creditors
(other than liabilities to Members for distributions and the return of
capital) and establish such Reserves as may be reasonably necessary to
provide for contingent liabilities of the Company (for purposes of
determining the Capital Accounts of the Members, the amounts of such
Reserves shall be deemed to be an expense of the Company);
(iii) distribute the remaining assets of the Company in the
following order of priority:
(1) To each Member, with respect to the cumulative amount of
all accrued but unpaid pre-dissolution distributions for which the
Company is liable to such Member, the amount of such liability;
(2) To each Member, with respect to his unreturned capital
contribution, an amount equal to the positive balance (if any) in
his Capital Account (as determined after taking into account all
Capital Account adjustments for the Company's taxable year during
which the liquidation occurs), or, if the assets available to be
distributed hereunder are insufficient to cover the aggregate of
the Members' positive balances, a proportionate amount based upon
the relative positive balances of the Members; and
(3) To each Member with respect to his Membership Interest,
a proportionate share of the remaining assets equal to its
proportionate share of Capital Units.
(b) The Members shall cause an accounting to be made by the Company's
independent accountants of the accounts of the Company and of the Company's
assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution.
(c) If any assets of the Company are distributed in kind, the net fair
market value of such assets as of the date of dissolution shall be determined
by independent appraisal or by agreement of the Members. Such assets shall be
deemed to have been sold to the Members in proportion to their Capital Units
as of the date of dissolution for their fair market value, and the Capital
Accounts of the Members shall be adjusted to reflect such deemed sale.
(d) Notwithstanding anything to the contrary in this Agreement, upon a
liquidation, if any Member has a Deficit Capital Account (after giving effect
to all contributions, distributions, allocations and other Capital Account
adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member's Capital Account shall
not be considered a debt owed by such Member to the Company or to any other
person for any purpose whatsoever.
12.4 Certificate of Cancellation. Upon completion of the winding up,
liquidation and distribution of the assets, the Company shall be deemed
terminated and the Members shall forthwith file with the Secretary of State a
certificate of cancellation. Thereafter, the Members, as liquidating trustees,
shall have authority to distribute any Company property discovered after
termination, convey real estate and take such other action as may be necessary
on behalf of and in the name of the Company.
12.5 Return of Capital Contribution - Nonrecourse. Except as provided
by law or as expressly provided in this Agreement, upon dissolution, each
Member shall look solely to the assets of the Company for the return of his
Capital Contribution. If the Company property remaining after the payment or
discharge of the debts and liabilities of the Company is insufficient to
return the Capital Contribution of a Member, such Member shall have no
recourse against any other Member.
12.6 Breach of Operating Agreement; Remedies; Survival. The parties
agree and acknowledge that, in addition to any other remedies specifically set
forth herein, in the event of a breach of any provision of this Operating
Agreement by a Member, the Company and the non-breaching Members shall be
entitled to receive from the breaching Member any and all damages suffered by
them as a result of such breach, together with all expenses incurred in
connection with the enforcement of this Operating Agreement and the collection
of such damages, including reasonable attorneys' fees. Without limitation of
any other means of recourse, in order to collect any amounts owing hereunder,
the Company and such non-breaching Members shall be entitled to set off
against, withhold, proceed against or collect or receive directly from the
Company, as applicable, all or any part of the breaching Member's Membership
Interest, any distributions with respect thereto and, following the withdrawal
of such Member or the dissolution of the Company, any amounts payable to the
breaching Member pursuant to this Operating Agreement. The obligations of the
Members hereunder shall survive the withdrawal of any Member and the
dissolution or termination of the Company.
ARTICLE XIII
ARBITRATION AND INJUNCTION
Any and all disputes arising out of, under, in connection with, or
relating to this Operating Agreement, the breach or any alleged breach
thereof, including disputes regarding the Capital Accounts or any Termination
of Membership for Cause, which cannot be settled through good faith
negotiations or other agreed upon procedures, shall be settled by arbitration
conducted in accordance with the rules and regulations of the American
Arbitration Association. Because of the unique relationship of the Members in
the Company and the unique value of their interests therein, this provision
for arbitration shall not prevent any party from applying for and obtaining
injunctive relief (i) as provided in Section 10.1, or (ii) in instances where,
in the absence thereof, the rights of such party cannot be adequately
protected by an arbitrator's award. Unless the parties otherwise agree, the
arbitration proceedings shall be conducted before a three-person arbitration
panel. Each party shall select an arbitrator within 20 business days of the
first written demand for arbitration. If a party fails to designate an
arbitrator within such time, the other party may designate two arbitrators.
The arbitrators shall then promptly designate a third arbitrator, who shall be
a neutral arbitrator and chairman of the panel. All arbitrators appointed
shall be individuals knowledgeable about public accountancy. No member of the
arbitration panel may be an attorney representing any party to such
proceeding. The arbitration shall be held in Boston, Massachusetts, unless
otherwise agreed. Each party shall share equally the costs and fees of such
arbitration, including compensation to the arbitrators for their time spent in
arriving at their determination. The award rendered by the arbitrators shall
be final and binding, and judgment may be entered upon the award in accordance
with applicable law in any court of competent jurisdiction.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Notices. Any notice, demand, or communication required or
permitted to be given by any provision of this Operating Agreement shall be
deemed to have been sufficiently given or served for all purposes if delivered
personally to the party or to an executive officer of the party to whom the
same is directed or, if sent by registered or certified mail, postage and
charges prepaid, addressed to the Member's and/or Company's address, as
appropriate, which is set forth in this Operating Agreement. Except as
otherwise provided herein, any such notice shall be deemed to be given three
business days after the date on which the same was deposited in a regularly
maintained receptacle for the deposit of United States mail, addressed and
sent as aforesaid.
14.2 Books of Account and Records. The Company shall maintain all
records and documents required by and in accordance with the Act. Proper and
complete records and books of account shall be kept or shall be caused to be
kept by the Members or officers of the Company in which shall be entered fully
and accurately all transactions and other matters relating to the Company's
business in such detail and completeness as is customary and usual for
businesses of the type engaged in by the Company, and in accordance with
generally accepted accounting principles. The books and records shall be at
all times be maintained at the principal executive office of the Company and
shall be open to the reasonable inspection and examination of the Members, or
their duly authorized representatives, during reasonable business hours. The
Company shall be audited annually by independent auditors chosen by Members
and the audited financial statements of the Company shall be made available to
the Members within 90 days of the end of each fiscal year or as soon
thereafter as such statements are available to the Company.
14.3 Application of Maine Law. This Operating Agreement, and the
application and interpretation hereof, shall be governed exclusively by its
terms and by the laws of the State of Maine.
14.4 Amendments. Other than as expressly provided herein, this
Operating Agreement may not be amended except by the written consent of
Members holding at least a Supermajority Interest; provided, however, that no
such amendment may be effected that would require any additional Capital
Contributions without the written consent of each Member, and further provided
that Section 14.15 shall not be amended without the consent of AllEnergy, so
long as it is a Member.
14.5 Execution of Additional Instruments. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply
with any laws, rules or regulations.
14.6 Construction. Whenever the singular number is used in this
Operating Agreement and when required by the context the same shall include
the plural and vice versa, and the masculine gender shall include the feminine
and neuter genders and vice versa.
14.7 Headings and Pronouns. The headings in this Operating Agreement
are inserted for convenience and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Operating
Agreement or any provision hereof. All pronouns and only variations thereof
shall be deemed to refer to masculine, feminine, or neuter, singular or plural
as the identity of the Person or Persons may require.
14.8 Waivers. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
14.9 Rights and Remedies Cumulative. The rights and remedies provided
by this Operating Agreement are cumulative and the use of any one right or
remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
14.10 Severability. If any provision of this Operating Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and the
application there of shall not be affected and shall be enforceable to the
fullest extent permitted by law.
14.11 Heirs, Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by
this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
14.12 Creditors. None of the provisions of this Operating Agreement
shall be for the benefit of or enforceable by any creditors of the Company
except as required by the Act.
14.13 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
14.14 Integration. This Operating Agreement constitutes the parties'
entire agreement with respect to the subject matter hereof and thereof, and
supersedes any and all prior oral or written agreements or understandings with
respect thereto.
14.15 The Members acknowledge that AllEnergy and the Company are
subject to regulation by the U.S. Securities and Exchange Commission (the
"SEC") under PUHCA and that AllEnergy is acquiring an interest in the Company
as an "energy related company" pursuant to the exemption of Rule 58
promulgated under PUHCA. The Members agree that the Company shall not
undertake or pursue any business activity (including, without limitation, the
acquisition of Target Companies) unless such business activity is one that may
be undertaken by an "energy related company" as such term is defined under
such Rule 58; provided, however, that, notwithstanding the foregoing, the
Company may undertake a business activity if (i) such business activity is
specifically authorized by an order of the SEC issued under PUHCA, or (ii) in
the opinion of counsel to AllEnergy, PUHCA is no longer applicable to the
Membership Interest of AllEnergy.
14.16 Publicity. No Member shall make any press release or other
public statements concerning the Company or its business without the consent
of the other Members.
14.17 Confidentiality. Each Member recognizes that the confidential
and proprietary information of each other Member constitutes a valuable asset
and agrees that a Member's confidential and proprietary information shall
remain the exclusive property of such Member. No Member shall use or disclose
to any third party any confidential information of another Member without that
Member's express written consent. For purposes hereof, confidential
information shall mean all financial and business information, marketing
plans, trade secrets, customer lists and other information concerning a Member
which is not known to the public generally. This Section 14.17 shall survive
termination of this Operating Agreement and may not be amended or modified
without the consent of all Members.
IN WITNESS WHEREOF, the Members have signed and sealed this Operating
Agreement as of the date first written above.
MEMBERS
WITNESS DEAD RIVER COMPANY
By:
Its
ALLENERGY MARKETING COMPANY, LLC
By:
Its
EXHIBIT A
TO
AEDR FUELS LLC
OPERATING AGREEMENT
List of Members
Name Address Initial Cash Aggregate Percentage
Capital Required Interest
Contribution Additional (%)
Capital
AllEnergy ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ $0 $10,000,000 50%
Marketing ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Company, LLC
Dead River One ▇▇▇▇ Street $0 $10,000,000 50%
Company ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
As in effect from and after December __, 1997
EXHIBIT B
TO
AEDR FUELS LLC
OPERATING AGREEMENT
[FORM OF TRADEMARK LICENSING AGREEMENT]