EXHIBIT 10.16
______________________________________________
OPERATING AGREEMENT
OF
AMERICAN TRANSMISSION COMPANY LLC
______________________________________________
Dated as of January 1, 2001
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS....................................................................................................1
SECTION 1.1 Definitions......................................................................................1
ARTICLE II FORMATION OF COMPANY.........................................................................................12
SECTION 2.1 Name, Office, Registered Agent and Continuance..................................................12
SECTION 2.2 Governing Law...................................................................................13
SECTION 2.3 Purpose.........................................................................................13
SECTION 2.4 Powers..........................................................................................14
SECTION 2.5 Restrictions....................................................................................14
SECTION 2.6 Term............................................................................................15
SECTION 2.7 Adequacy........................................................................................15
SECTION 2.8 Operating Protocols.............................................................................16
ARTICLE III MEMBERS AND CAPITAL CONTRIBUTIONS...........................................................................16
SECTION 3.1 Members and Schedule A..........................................................................16
SECTION 3.2 Initial Capital Contributions...................................................................16
SECTION 3.3 Additional Members by Right.....................................................................17
SECTION 3.4 Pre-emptive Rights..............................................................................18
SECTION 3.5 Contribution of Additional Transmission Assets..................................................19
SECTION 3.6 Voluntary Additional Capital Contributions......................................................20
SECTION 3.7 Issuance to Corporate Manager...................................................................21
SECTION 3.8 Adjustment of Tax-Exempt Members' Capital.......................................................23
SECTION 3.9 Capital Accounts................................................................................24
SECTION 3.10 Initial Debt Financing..........................................................................25
SECTION 3.11 No Interest.....................................................................................25
SECTION 3.12 No Third Party Beneficiary......................................................................25
SECTION 3.13 Membership Units as Securities..................................................................26
SECTION 3.14 Month-End Convention............................................................................26
ARTICLE IV RIGHTS, OBLIGATIONS AND POWERS OF THE CORPORATE MANAGER......................................................26
SECTION 4.1 Management of the Company.......................................................................26
SECTION 4.2 Authority of Corporate Manager..................................................................27
SECTION 4.3 Indemnification and Exculpation of Indemnitees..................................................27
SECTION 4.4 Liability of the Corporate Manager..............................................................28
SECTION 4.5 Corporate Expenses and Administrative Expenses..................................................29
SECTION 4.6 Outside Activities..............................................................................30
SECTION 4.7 Title to Company Assets.........................................................................30
ARTICLE V ACCOUNTING, TAX AND FISCAL MATTERS............................................................................30
SECTION 5.1 Fiscal and Taxable Year.........................................................................30
SECTION 5.2 Books...........................................................................................30
SECTION 5.3 Records.........................................................................................30
SECTION 5.4 Company Funds...................................................................................31
SECTION 5.5 Tax Returns.....................................................................................31
SECTION 5.6 Tax Elections...................................................................................32
SECTION 5.7 Tax Matters, Tax Elections and Special Basis Adjustments........................................32
SECTION 5.8 Access to Records...............................................................................32
ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS................................................................................33
SECTION 6.1 Allocations.....................................................................................33
SECTION 6.2 Cash Available for Distribution.................................................................34
SECTION 6.3 No Right to Distributions in Kind...............................................................36
SECTION 6.4 Limitations on Distributions....................................................................36
SECTION 6.5 Distributions Upon Liquidation..................................................................36
SECTION 6.6 Substantial Economic Effect.....................................................................37
SECTION 6.7 Quarter-End Convention..........................................................................37
ARTICLE VII CHANGES IN CORPORATE MANAGER................................................................................37
SECTION 7.1 Transfer of the Corporate Manager's Member Interest.............................................37
SECTION 7.2 Admission of a Substitute or Additional Corporate Manager.......................................39
SECTION 7.3 Effect of Bankruptcy, Withdrawal or Liquidation of the Corporate Manager........................39
SECTION 7.4 Removal of a Corporate Manager..................................................................40
ARTICLE VIII RIGHTS AND OBLIGATIONS OF THE NON-MANAGING MEMBERS.........................................................41
SECTION 8.1 Management of the Company.......................................................................41
SECTION 8.2 Power of Attorney...............................................................................41
SECTION 8.3 Limitation on Liability of Non-Managing Members.................................................41
SECTION 8.4 Redemption Right................................................................................41
SECTION 8.5 Registration....................................................................................43
ARTICLE IX TRANSFER.....................................................................................................47
SECTION 9.1 Purchase Not for Distribution...................................................................47
SECTION 9.2 Restrictions on Transfer of Member Interests....................................................47
SECTION 9.3 Permitted Transfers.............................................................................49
SECTION 9.4 Admission of Substitute Member..................................................................49
SECTION 9.5 Rights of Assignees of Members Interests........................................................50
SECTION 9.6 Effect of Bankruptcy or Termination of a Non-Managing Member....................................51
SECTION 9.7 Month-End Convention............................................................................51
ARTICLE X AMENDMENTS; MERGER............................................................................................51
SECTION 10.1 Amendments......................................................................................51
SECTION 10.2 Merger..........................................................................................52
ARTICLE XI MISCELLANEOUS................................................................................................52
SECTION 11.1 Notices.........................................................................................52
SECTION 11.2 Entire Agreement................................................................................52
SECTION 11.3 Interpretation and Construction.................................................................52
SECTION 11.4 Counterparts....................................................................................53
SECTION 11.5 Binding on Successors...........................................................................53
SECTION 11.6 Severability....................................................................................53
SECTION 11.7 Rights and Remedies.............................................................................53
SECTION 11.8 Economic Benefit................................................................................53
Schedules and Exhibits
Schedule A List of Members and Member Units
Schedule B Illustrative ▇▇▇▇ Calculations
Schedule C 1999 Load Ratio Shares
Exhibit A Notice of Exercise of Redemption Right
Exhibit B Dispute Resolution Provisions
AMERICAN TRANSMISSION COMPANY LLC
OPERATING AGREEMENT
THIS OPERATING AGREEMENT of AMERICAN TRANSMISSION COMPANY
LLC, a Wisconsin limited liability company (the "Company"), is
made and entered into as of January 1, 2001, by and among the
parties listed on Schedule A, for the regulation of the affairs
and conduct of the Company and certain relationships with and
among its Members.
RECITALS
1. 1999 Wisconsin Act 9 includes provisions commonly
referred to as the Reliability 2000 Legislation, which authorized
the organization of a new company to provide electric
transmission service.
2. Pursuant to the provisions of the Reliability 2000
Legislation, electric transmission utilities were authorized to
contribute their transmission assets to such company, and certain
other electric utilities were authorized to make cash
contributions to such company.
3. The initial parties listed on Schedule A have
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determined to establish the Company for such purpose and have
entered into this Operating Agreement to govern the affairs of
the Company and certain relationships with and among its Members.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
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In addition to the definitions contained in this Agreement,
the following terms used herein shall have the following meanings
assigned to them.
"Act" means the Wisconsin Limited Liability Company Act,
Chapter 183 of the Wisconsin Statutes, as amended from time to
time.
"Additional Securities" means any additional Corporate
Shares (other than Corporate Shares issued in connection with an
exchange pursuant to Section 8.4 hereof) or rights, options,
warrants or convertible or exchangeable securities containing the
right to subscribe for or purchase Corporate Shares, as set forth
in Section 3.7(a)(ii).
"Administrative Expenses" means (i) all administrative and
operating costs and expenses incurred by the Company, (ii) those
administrative costs and expenses of the Corporate Manager,
including any salaries or other payments to directors, officers
or employees of the Corporate Manager, and any accounting and
legal expenses of the Corporate Manager, which expenses, the
Members have agreed, are expenses of the Company and not the
Corporate Manager, and (iii) to the extent not included in clause
(ii) above, Corporate Expenses.
"Affiliate" means, with respect to any Person:
(a) Any Person owning or holding directly or indirectly 5%
or more of the voting securities of such Person;
(b) Any Person in any chain of successive ownership of 5%
or more of the voting securities of such Person;
(c) Any corporation 5% or more of whose voting securities
are owned by any Person owning 5% or more of the voting
securities of such Person or by any Person in any chain of
successive ownership of 5% or more of the voting securities of
such Person;
(d) Any Person who is an officer or director of such Person
or of any corporation in any chain of successive ownership of 5%
or more of the voting securities of such Person;
(e) Any corporation operating a servicing organization for
furnishing supervisory, construction, engineering, accounting,
legal or similar services to such Person, which corporation has
one or more officers or one or more directors in common with such
Person, and any other corporation which has directors in common
with such Person if the number of directors of the corporation is
more than one-third of the total number of such Person's
directors; or
(f) Any subsidiary of such Person.
"Agreement" means this Operating Agreement, as it may be
amended from time to time in accordance with its terms.
"Article 8" means Article 8 of the Uniform Commercial Code
as codified at Chapter 408 of the Wisconsin Statutes.
"Asset Contribution Agreement" means any of the asset
contribution agreements to be entered into between the Company
and each of the Transmission Utilities, which agreements provide
for the contribution of such Transmission Utility's Transmission
Assets in exchange for Member Units.
"Capital Account" has the meaning provided in Section 3.9.
"Capital Contributions" means the aggregate contributions by
a Member to the capital of the Company as set forth on Schedule A,
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as amended from time to time.
"Capital Event" means (i) any Company transaction that does
not result in a carry-over of a Tax-Exempt Member's Capital
Account, such as a liquidation of the Company, sale of all or
substantially all of its assets or a merger of the Company into a
corporation, (ii) the sale of all or a portion of the Units held
by a Tax-Exempt Member to a Member that directly or indirectly is
a Person whose share of taxable income or loss of the Company is
subject to tax under Code Section 11, (iii) the exchange of all
or a portion of the Units held by a Tax-Exempt Member for
Corporate Shares, (iv) any change of more than 20% of the total
Tax-Exempt Members' Percentage Interests, or (v) any other event
or occurrence where the adjustment of Tax-Exempt Member's capital
pursuant to Section 3.8 is no longer necessary to prevent
diminution of the non-Tax-Exempt Members' returns on the equity
portion of the rate base in the rate-making process.
"Cash Amount" means an amount of cash per Member Unit equal
to the Value of the Corporate Shares Amount on the date of
receipt by the Corporate Manager of a Notice of Redemption.
"Cash Available for Distribution" shall mean, for any
period, the excess, if any, of (i) the cash receipts of the
Company (other than from (A) the Initial Financing, (B) financing
pursuant to Section 3.5(d), or (C) a Terminating Capital
Transaction), receipts from the sale, exchange or other
disposition of Company assets, and amounts withdrawn from
Reserves, over (ii) disbursements of cash by the Company (other
than distributions to Members and amounts paid with receipts from
(A) the Initial Financing, (B) financing pursuant to Section
3.5(d), or (C) a Terminating Capital Transaction), including the
payment of operating expenses, debt service on loans, capital
expenditures, and amounts set aside for Reserves. The foregoing
amounts are intended not to exceed "operating cash flow
distributions," as defined in Section 1.707-4(b) of the
Regulations.
"Chapter 196" means Chapter 196 of the Wisconsin Statutes,
Regulation of Public Utilities.
"Charter" means the Articles of Incorporation of the
Corporate Manager filed with the Wisconsin Department of
Financial Institutions, as such Articles may be amended or
restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding
law).
"Commission" means the United States Securities and Exchange
Commission.
"Company" means American Transmission Company LLC, and its
successors and assigns.
"Company Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(d). In accordance with Regulations
Section 1.704-2(d), the amount of Company Minimum Gain is
determined by first computing, for each Company nonrecourse
liability, any gain the Company would realize if it disposed of
the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the
separately computed gains. A Member's share of Company Minimum
Gain shall be determined in accordance with Regulations Section
1.704-2(g)(1).
"Company Record Date" has the meaning provided in Section
6.2(g).
"Contribution Value" means the value, as of the date of
contribution, of the Transmission Assets contributed by a Member
pursuant to its Asset Contribution Agreement, as reflected on the
FERC Books of Account of the Member (or with respect to a Member
without an OATT, its regulatory books of account relating to the
Transmission Assets being contributed), as adjusted on a
dollar-for-dollar basis for (i) Deferred Taxes, and (ii) Deferred
Investment Tax Credits associated with those Transmission
Assets. The Members agree that the Contribution Values of the
Transmission Assets contributed by MG&E, WEPCO, WPL and WPS as of
the Operations Date shall be further adjusted by increasing the
number of Member Units to be received by MG&E by 2/3 of the
difference between (A) the Contribution Value that MG&E would
have had if Deferred Investment Tax Credits had not been taken
into account and (B) such Contribution Value taking Deferred
Investment Tax Credits into account, subject to a maximum
aggregate reallocation of $708,727 of Contribution Value (prior
to the Initial Financing). The Member Units to be received by
WEPCO and WPL shall each be reduced by 45% of the amount
reallocated, and the number of Member Units to be received by WPS
shall be reduced by 10% of the amount reallocated. Contribution
Value shall not otherwise be adjusted for the effect of any Code
Section 704(c) allocations, unless such amount would cause a
reallocation of annual income of more than $250,000 for any
Member, in which case the Members shall endeavor to agree on
alternative arrangements.
"Conversion Factor" means 1.0, provided that in the event
that the Corporate Manager (i) declares or pays a dividend on its
outstanding Corporate Shares in Corporate Shares or makes a
distribution to all holders of its outstanding Corporate Shares
in Corporate Shares, (ii) subdivides its outstanding Corporate
Shares or (iii) combines its outstanding Corporate Shares into a
smaller number of Corporate Shares, the Conversion Factor shall
be adjusted by multiplying the Conversion Factor by a fraction,
the numerator of which shall be the number of Corporate Shares
issued and outstanding on the record date for such dividend,
distribution, subdivision or combination (assuming for such
purposes that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of
which shall be the actual number of Corporate Shares (determined
without the above assumption) issued and outstanding on such date
and, provided further, that in the event that an entity other
than an Affiliate of the Corporate Manager shall become Corporate
Manager pursuant to any merger, consolidation or combination of
the Corporate Manager with or into another entity (the "Successor
Entity"), the Conversion Factor shall be adjusted by multiplying
the Conversion Factor by the number of shares of the Successor
Entity into which one Corporate Share is converted pursuant to
such merger, consolidation or combination, determined as of the
date of such merger, consolidation or combination. Any
adjustment to the Conversion Factor shall become effective
immediately after the effective date of such event retroactive to
the record date, if any, for such event; provided, however, that
if the Corporate Manager receives a Notice of Redemption after
the record date, but prior to the effective date of such
dividend, distribution, subdivision or combination, the
Conversion Factor shall be determined as if the Corporate Manager
had received the Notice of Redemption immediately prior to the
record date for such dividend, distribution, subdivision or
combination.
"Corporate Expenses" means (i) costs and expenses relating
to the formation and continuity of existence and operation of the
Corporate Manager and any Subsidiaries thereof (which
Subsidiaries shall, for purposes hereof, be included within the
definition of Corporate Manager), including taxes, fees and
assessments associated therewith, any and all costs, expenses or
fees payable to any director, officer or employee of the
Corporate Manager, (ii) costs and expenses relating to any public
offering and registration of securities by the Corporate Manager
and all statements, reports, fees and expenses incidental
thereto, including, without limitation, underwriting discounts
and selling commissions applicable to any such offering of
securities, and any costs and expenses associated with any claims
made by any holders of such securities or any underwriters or
placement agents thereof, (iii) costs and expenses associated
with any repurchase of any securities by the Corporate Manager,
(iv) costs and expenses associated with the preparation and
filing of any periodic or other reports and communications by the
Corporate Manager under federal, state or local laws or
regulations, including filings with the Commission, (v) costs and
expenses associated with compliance by the Corporate Manager with
laws, rules and regulations promulgated by any regulatory body,
including the Commission and any securities exchange, (vi) costs
and expenses associated with any 401(k) plan, incentive plan,
bonus plan or other plan providing for compensation for the
employees of the Corporate Manager, (vii) costs and expenses
incurred by the Corporate Manager relating to any issuing or
redemption of Member Interests and (viii) all other operating or
administrative costs of the Corporate Manager incurred in the
ordinary course of its business on behalf of or in connection
with the Company.
"Corporate Manager" means ATC Management Inc., a Wisconsin
corporation, and any Person who becomes a substitute or
additional Corporate Manager as provided herein, and any of their
successors as Corporate Manager.
"Corporate Share" means one share of common stock, Class A
or Class B, of the Corporate Manager.
"Corporate Shares Amount" means a number of Corporate Shares
equal to the product of the number of Member Units offered for
redemption by a Redeeming Member pursuant to a completed Notice
of Redemption submitted by such Redeeming Member to the Corporate
Manager, multiplied by the Conversion Factor as adjusted to and
including the Specified Redemption Date; provided that in the
event the Corporate Manager issues to all holders of Corporate
Shares rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or
purchase Corporate Shares, or any other securities or property
(collectively, the "rights"), and the rights have not expired at
the Specified Redemption Date, then the Corporate Shares Amount
shall also include the rights issuable to a holder of the
Corporate Shares Amount on the record date fixed for purposes of
determining the holders of Corporate Shares entitled to rights.
"Deferred Investment Tax Credits" means those unamortized
deferred investment tax credits (as defined in the Code)
associated with the Transmission Assets that are reflected on the
FERC Books of Account (with respect to any Member with an OATT)
or regulatory books of account (with respect to all other
Members) of the Member contributing such assets, as adjusted to
the Operations Date or date of contribution of the Transmission
Assets, if other than the Operations Date.
"Deferred Taxes" means the income tax liability or benefit
associated with the contributed Transmission Assets that are
reflected on the FERC Books of Account (with respect to any
Member with an OATT) or regulatory books of account (with respect
to all other Members) of the Member contributing such
Transmission Assets, as adjusted to the Operations Date or date
of contribution of the Transmission Assets, if other than the
Operations Date, that has been deferred as a result of the
difference for regulatory accounting and tax purposes between
depreciation or other plant-related items and reflects the
historic tax rates in effect at the time that the difference
arose.
"Dispute Resolution Provisions" means those provisions for
resolving disputes among the Members and the Company and
Corporate Manager set forth as Exhibit B to this Agreement.
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"Effective Date" means June 12, 2000, the date the Company's
articles of organization were accepted for filing by the
Wisconsin Department of Financial Institutions.
"Effective Period" has the meaning provided in Section
8.5(a)(ii).
"Electric Utility" means (i) a public utility as defined in
Section 196.01 of the Wisconsin Statutes, that is involved in the
generation, transmission, distribution or sale of electric
energy, (ii) a municipal electric company organized under
Section 66.073 of the Wisconsin Statutes, (iii) a wholesale electric
cooperative as defined in Section 196.485(1)(k) of the Wisconsin
Statutes, or (iv) a Retail Electric Cooperative.
"Equity Accounting" means the accounting standard that
allows a Member, subject to certain conditions, to report its
investment in the Company on such Member's balance sheet and its
allocable share of the Company's profits on such Member's income
statement, as such standard is applied on the Effective Date.
"Equity Value" means the equity of the Company attributable
to Members other than Tax-Exempt Members, determined by reference
to a balance sheet prepared in accordance with FERC Books of
Account. For this purpose, the Tax-Exempt Investment Amount
attributable to the Tax-Exempt Members shall be excluded.
"ESE" means Edison Sault Electric Company, a Michigan
corporation.
"Event of Bankruptcy" as to any Person means the filing of a
petition for relief as to such Person as debtor or bankrupt under
the Bankruptcy Code of 1978 or similar provision of law of any
jurisdiction (except if such petition is contested by such Person
and has been dismissed within 90 days); insolvency or bankruptcy
of such Person as finally determined by a court proceeding;
filing by such Person of a petition or application to accomplish
the same or for the appointment of a receiver or a trustee for
such Person or a substantial part of its assets; commencement of
any proceedings relating to such Person as a debtor under any
other reorganization, arrangement, insolvency, adjustment of debt
or liquidation law of any jurisdiction, whether now in existence
or hereinafter in effect, either by such Person or by another,
provided that if such proceeding is commenced by another, such
Person indicates its approval of such proceeding, consents
thereto or acquiesces therein, or such proceeding is contested by
such Person and has not been finally dismissed within 90 days.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FERC" means the Federal Energy Regulatory Commission, or
its successor in interest.
"FERC Books of Account" means those books of account
pertaining to transmission that are required by FERC to be
maintained by companies that have filed transmission tariffs with
FERC.
"GAAP" means United States generally accepted accounting
principles consistently applied.
"Indemnitee" means (i) any Person made a party to a
proceeding by reason of its status as the Corporate Manager or a
director, officer or employee of the Corporate Manager or the
Company and (ii) such other Persons (including Affiliates of the
Company or the Corporate Manager) as the Corporate Manager may
designate from time to time, in its sole and absolute discretion.
"Initial Financing" means the Company's initial debt
financing contemplated in Section 3.10.
"IPO" means the closing of an offering of Corporate Shares
that has the effect of listing the Corporate Shares on the New
York Stock Exchange, American Stock Exchange, NASDAQ, or any of
their successors in interest.
"Jurisdictional Area" means the geographic area that is
currently served by the Mid-America Inter-connected Network,
Inc., or the Mid-Continent Area Power Pool reliability council of
the North American Electric Reliability Council.
"Land Right" means any right in real property, including fee
simple ownership easement, lease or other right, that has been
acquired for a Transmission Facility that is located or intended
to be located on the real property.
"Load Ratio Share" means, with respect to any Person, such
Person's firm electric usage in Wisconsin during 1999, as
determined by dividing such Person's kWh sales shown in Schedule C
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by the total kWh sales in Wisconsin shown in Schedule C,
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converting the quotient to a percentage and carrying such
percentage to two decimal places using standard rounding
conventions.
"Losses" has the meaning provided in Section 6.1(f).
"Majority in Interest" means the affirmative vote or consent
of Members holding Percentage Interests aggregating greater than
50%.
"Member Interest" means an ownership interest in the Company
held by a Member and includes any and all benefits to which the
holder of such a Member Interest may be entitled as provided in
this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.
"Member Nonrecourse Debt Minimum Gain" means "partner
nonrecourse debt minimum gain" as set forth in Regulations
Section 1.704-2(i). A Member's share of Member Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations
Section 1.704-2(i)(5).
"Member Unit" means a Member Interest in the Company having
an initial value of $10. The number of Member Units owned by
each Member shall be as set forth on Schedule A, as it may be
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amended from time to time.
"Members" means the Persons identified on Schedule A from
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time to time and their successors and permitted assigns.
"MG&E" means Madison Gas and Electric Company, a Wisconsin
corporation.
"MISO" means the Midwest Independent Transmission System
Operator, Inc., the establishment of which FERC has conditionally
authorized in an order issued on September 16, 1998, or any
independent system operator or regional transmission organization
that has been approved under federal law to succeed the MISO.
"NASDAQ" means the Nasdaq National Market System.
"Net Book Value" means the aggregate Capital Accounts of all
the Members kept in accordance with Section 3.9, less, with
respect to the Tax-Exempt Members, an amount equal to the excess,
if any, of the Tax-Exempt Investment Amount over the Tax-Exempt
Ownership Interest.
"Net Contribution" shall have the meaning set forth in
Section 3.8.
"Non-Managing Member" means any Person named as a Member on
Schedule A other than the Corporate Manager, and any Person who
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becomes a Substitute or additional Non-Managing Member, in such
Person's capacity as a Non-Managing Member in the Company.
"Notice of Redemption" means the Notice of Exercise of
Redemption Right substantially in the form attached as Exhibit A.
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"OATT" means Open Access Transmission Tariff.
"Operations Date" means the date that the Company commences
operations, as determined by the PSCW.
"Percentage Interest" means the percentage interest of each
Member in the Company, as determined by dividing the Member Units
owned by such Member by the total number of Member Units then
outstanding.
"Person" means an individual, corporation, general or
limited partnership, joint venture, trust, unincorporated
association, limited liability company or any other legal or
commercial entity.
"Profits" has the meaning provided in Section 6.1(f).
"PSCW" means the Public Service Commission of Wisconsin, or
its successor in interest.
"PUHCA" means the Public Utility Holding Company Act of
1935, as amended.
"Redeeming Member" has the meaning provided in Section
8.4(a).
"Redemption Amount" means either the Cash Amount or the
Corporate Shares Amount, as selected by the Corporate Manager
pursuant to Section 8.4(b) hereof.
"Redemption Right" has the meaning provided in Section
8.4(a).
"Redemption Shares" has the meaning provided in Section
8.5(a).
"Registrable Securities" means (i) any issued and
outstanding Corporate Shares, and (ii) any Corporate Shares
issued or issuable directly or indirectly with respect to the
outstanding Corporate Shares by way of stock dividend or stock
split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
As to any particular shares constituting Registrable Securities,
such shares will cease to be Registrable Securities when they
have been (x) effectively registered under the Securities Act and
disposed of in accordance with a registration statement covering
them or (y) sold to the public pursuant to Rule 144 (or by other
similar provision under the Securities Act).
"Registration Statement" has the meaning provided in Section
8.5(a).
"Regulations" means the Income Tax Regulations promulgated
under the Code, as such Regulations may be amended from time to
time (including corresponding provisions of succeeding
Regulations).
"Reliability 2000 Legislation" means that portion of
Wisconsin Act 9 (the 1999-2001 Biennial Budget Act) relating to
public utility holding companies, electric power transmission,
public benefits and other aspects of electric utility regulation.
"Reserves" means the amount of cash determined from time to
time by the Corporate Manager to be required by the Company for
its operations, including the construction of additional
Transmission Facilities.
"Retail Electric Cooperative" means a cooperative organized
under Chapter 185 of the Wisconsin Statutes that provides retail
electric service to its members.
"SBWGE" means South Beloit Water, Gas and Electric Company,
an Illinois corporation.
"Securities Act" means the Securities Act of 1933, as
amended.
"Service" means the Internal Revenue Service.
"Specified Redemption Date" means the first business day of
the month that is at least 60 calendar days after the receipt by
the Corporate Manager of a Notice of Redemption.
"Subscription Agreement" means either of the subscription
agreements to be entered into between the Company and any Member
that is not a Transmission Utility, which agreements provide for
the contribution of cash in exchange for Member Units.
"Substitute Members" means those Persons admitted as Members
in accordance with Section 9.4.
"Successor Entity" has the meaning provided in the
definition of "Conversion Factor" contained herein.
"Tax-Exempt Investment Amount" means, with respect to a
Tax-Exempt Member, an amount determined as follows:
TEOI x TEIP
, where TEOI is the Tax-Exempt Ownership Interest and TEIP is the
Tax-Exempt Investment Percentage.
"Tax-Exempt Investment Percentage" means a percentage
determined as follows:
RIOUER%
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IIOUER%
, where RIOUER% is the Reduced IOU Equity Return Percentage and
IIOUER% is the Increased IOU Equity Return Percentage. The
Reduced IOU Equity Return Percentage means a percentage
determined as follows:
ER%-((ER% - ((ER% - AMORT/IOUCRB] ) x TEPI X EITR%)) x (1 -TEPI))/ IOUOI/IOUCRB
, where ER% is equal to an equity return percentage calculated
using the most recently approved FERC authorized equity return;
AMORT is equal to the amount of Deferred Investment Tax Credit
and excess deferred income taxes; EITR% is equal to the
effective income tax rate applied to the Company by FERC; TEPI is
equal to the aggregate Percentage Interests of all the Tax-Exempt
Members; IOUOI is equal to the Equity Value attributable to
Members other than Tax-Exempt Members; and IOUCRB is equal to the
equity amount of the rate base contributed by, and allocable to,
all Members other than Tax-Exempt Members.
The Increased IOU Equity Return Percentage means a percentage
determined as follows:
(ER% - (ER% x TEPI x EITR%)) x TEPI
, where ER%, EITR% and TEPI are defined above.
"Tax-Exempt Member" means a Member whose share of income or
loss of the Company is exempt from federal income taxation.
"Tax Matters Member" has the meaning provided in Section 5.7.
"Tax-Exempt Ownership Interest" means, with respect to a
Tax-Exempt Member, an amount determined as follows:
IOUOI x (?TEPI/ 1 - TEPI)
, where IOUOI and TEP are defined above and ?TEPI is equal to
the Percentage Interest of the Tax-Exempt Member in question.
"Terminating Capital Transaction" means the sale, exchange
or other disposition of all or substantially all of the assets of
the Company, after which transaction the Company is dissolved and
terminated.
"Trading Day" means a day on which the principal national
securities exchange on which a security is listed or admitted to
trading is open for the transaction of business or, if a security
is not listed or admitted to trading on any national securities
exchange, shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Transfer" has the meaning provided in Section 9.2.
"Transmission Area" means the area of Wisconsin that, on
January 1, 1997, was served by the Mid-America Interconnected
Network, Inc. reliability council of the North American Electric
Reliability Council.
"Transmission Assets" means the Transmission Facilities and
associated Land Rights.
"Transmission-Dependent Utility" means an Electric Utility
that is not a Transmission Utility and that is dependent on the
transmission system of another Person for delivering electricity
to the electric utility's customers.
"Transmission Facility" means any pipe, pipeline, duct,
wire, line, conduit, pole, tower, equipment or other structure
used for the transmission of electric power that is contributed
to or owned or leased by the Company.
"Transmission Utility" means a cooperative organized under
Chapter 185 of the Wisconsin Statutes or a public utility (as
defined in Section 196.01 of the Wisconsin Statutes) that owns a
Transmission Facility in Wisconsin and that provides transmission
service in Wisconsin.
"Value" means, with respect to any security, the average of
the daily market price of such security for the ten consecutive
Trading Days immediately preceding the date of such valuation.
The market price for each such Trading Day shall be: (i) if such
security is listed or admitted to trading on any securities
exchange or the NASDAQ, the closing sale price, regular way, on
such day, or if no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, on such day,
(ii) if such security is not listed or admitted to trading on any
securities exchange or the NASDAQ, the last reported sale price
on such day or, if no sale takes place on such day, the average
of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the Company, or (iii) if
such security is not listed or admitted to trading on any
securities exchange or the NASDAQ and no such last reported sale
price or closing bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as
reported by a reliable quotation source designated by the
Company, or if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than ten days prior to
the date in question) for which prices have been so reported;
provided that if there are no bid and asked prices reported
during the ten days prior to the date in question, the value of
the security shall be determined by the Corporate Manager acting
in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment,
appropriate; and provided that the Value of a share of Class B
Common Stock (as defined in the Charter) shall be deemed to be
equal to the Value of a share of Class A Common Stock (as defined
in the Charter). In the event the security includes any
additional rights, then the value of such rights shall be
determined by the Corporate Manager acting in good faith on the
basis of such quotations and other information as it considers,
in its reasonable judgment, appropriate.
"Voting Members" means the Corporate Manager and those
Persons who, in accordance with Wisconsin Statutes
Section 196.485(3)(c)(3), own a Class B Corporate Share of the Corporate
Manager.
"WEPCO" means Wisconsin Electric Power Company, a Wisconsin
corporation.
"WPL" means Wisconsin Power and Light Company, a Wisconsin
corporation.
"WPL LLC" means WPL Transco LLC, a Wisconsin limited
liability company wholly owned by WPL.
"WPPI" means Wisconsin Public Power Inc., a Wisconsin
municipal electric company organized under Section 66.073 of the
Wisconsin Statutes.
"WPS" means Wisconsin Public Service Corporation, a
Wisconsin corporation.
"WPS LLC" means WPS Investments, LLC, a Wisconsin limited
liability company wholly owned by WPS.
ARTICLE II
FORMATION OF COMPANY
SECTION 2.1 Name, Office, Registered Agent and Continuance.
-----------------------------------------------
(a) The name of the Company shall be AMERICAN TRANSMISSION
COMPANY LLC. The Company's initial registered office is located
at N16 ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and
its registered agent is ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, whose business office
is identical with the Company's registered office. The Company's
principal office and place of business is located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other
places as the Corporate Manager may determine.
(b) Prior to the Operations Date, the Company has been operated
in accordance with the Act and with various Consents entered into
by the Members from time to time. From and after the Operations
Date, this Agreement shall supercede such Consents with respect
to the operation of the Company, provided, however, that this
Agreement shall not negate or overrule any approvals contained in
such Consents, which shall be deemed ratified by Members'
signatures to this Agreement.
SECTION 2.2 Governing Law.
--------------
This Agreement and all questions with respect to the rights
and obligations of the Members, the construction, enforcement and
interpretation hereof, and the formation, administration and
termination of the Company shall be governed by the provisions of
the Act and other applicable laws of the State of Wisconsin and
the Federal Power Act.
SECTION 2.3 Purpose.
--------
(a) The sole purpose of the Company is the planning,
constructing, operating, maintaining and expanding of
Transmission Facilities to provide for an adequate and reliable
transmission system that meets the needs of all users that are
dependent on the transmission system, and that supports effective
competition in energy markets without favoring any market
participant, and to engage in any and all other activities
incidental or appropriate thereto.
(b) Subject to obtaining appropriate federal or state regulatory
approvals and to the extent not inconsistent with the obligations
set forth in Section 2.3(c), the Company may acquire, own, lease,
construct and expand Transmission Assets in any jurisdiction and
may conduct operations in any jurisdiction where it owns,
operates, leases or otherwise acquires Transmission Assets.
(c) The Company undertakes and acknowledges that it shall:
(i) Apply for any approvals under federal law that are necessary
for the Company to begin operations no later than January 1,
2001;
(ii) Have the exclusive duty to provide transmission service in
those areas where it owns or leases Transmission Assets,
which service shall be under the authority of MISO when it
shall begin operations, as determined by the PSCW;
(iii) (A) contract with each Member that is a Transmission Utility
to provide reasonable and cost-effective operation and
maintenance services with respect to the Transmission Assets
contributed by it for three years following the Operations
Date; and (B) agree to an extension of such three-year
period if the Company and the contracting Transmission
Utility deem appropriate;
(iv) Assume the obligations of a Transmission Utility under any
agreement of such Transmission Utility to provide
transmission service over its Transmission Facilities or
credits for the use of Transmission Facilities, provided
that the Company may modify any such agreement to the extent
allowed under the agreement and to the extent allowed under
state or federal law;
(v) Apply for membership in MISO as a single zone for pricing
purposes that includes the Transmission Area and, upon a
determination by the PSCW that MISO has begun operations,
transfer operational control of its Transmission Facilities
to MISO and use reasonable efforts to ensure that the
Transmission Facilities in the Transmission Area, the
control of which are transferred to MISO, are planned,
constructed, operated, maintained and controlled as part of
a single transmission system;
(vi) Remain a member of MISO for at least the six-year transition
period that is specified in the agreement establishing MISO
that was conditionally approved by FERC;
(vii) Elect to be included in a single zone for the purpose of any
tariff administered by MISO; provided, however, that if the
transmission charges or rates of any Transmission Utility in
the Transmission Area are 10% or more below the average
transmission charges or rates of the Transmission Utilities
in the Transmission Area on November 5, 1999, the Company
shall, after consulting with each Transmission Utility,
prepare a plan for phasing in a combined single zone rate
for the purpose of pricing network use by users of the
transmission system operated by MISO, and shall seek plan
approval by FERC and MISO. Such plan shall phase in an
average cost-price for the combined single zone in equal
increments over a five-year period, except that transmission
service shall be provided to all users of the transmission
system on a single-zone basis during the phase-in period.
SECTION 2.4 Powers.
-------
The Company shall have all the powers incident and
appropriate to the performance of its purposes as set forth in
Section 2.3, and all other powers of limited liability companies
under the Act. Without limiting the foregoing, the Company shall
have all the powers of a transmission company under Chapter 196,
and as appropriate, under analogous provisions of other states'
laws where the Company is conducting business.
SECTION 2.5 Restrictions.
-------------
(a) The Company may not:
(i) Sell or transfer its Transmission Assets located in the
Transmission Area to, or merge such Transmission Assets
with, another Person, unless (A) such Transmission Assets
are sold, transferred or merged on an integrated basis and
in a manner that ensures that the Company's Transmission
Facilities in the Transmission Area are planned,
constructed, operated, maintained and controlled as a single
transmission system and (B) the successor agrees to be bound
by the provisions of Section 2.7;
(ii) Bypass the distribution facilities of an Electric Utility or
provide service directly to a retail customer or member of a
retail cooperative;
(iii) Own electric generation facilities, or sell, market or
broker electric capacity or energy in a relevant wholesale
or retail market, or as determined by the PSCW, except that,
if authorized or required by FERC, the Company may purchase
or resell ancillary services obtained from third parties and
engage in redispatch activities that are necessary to
relieve transmission constraints or operate a control area.
(b) Notwithstanding Section 2.3, the Company may not begin
operations until it provides an opinion to PSCW from a nationally
recognized investment banking firm that the Company is able to
finance, at a reasonable cost, its start-up costs, working
capital and operating expenses, and the cost of any new
facilities that are planned.
SECTION 2.6 Term.
-----
(a) The Company shall have perpetual existence unless sooner
dissolved or terminated as provided herein. Subject to any
approvals required under state or federal law, the Company shall
be dissolved upon the first to occur of the following events:
(i) The determination by the Corporate Manager to dissolve and
terminate the Company in accordance with Section 183.0901(1)
of the Act; or
(ii) The entry of a decree of judicial dissolution under Section
183.0902 of the Act.
(b) The bankruptcy, insolvency, dissociation or dissolution of
one or more of the Non-Managing Members shall not dissolve the
Company.
(c) Upon the dissolution of the Company for any reason, the
Corporate Manager shall proceed promptly to wind up the affairs
of and liquidate the Company. The Corporate Manager shall have
reasonable discretion to determine the time, manner and terms of
any sale or sales of the Company's property pursuant to such
liquidation.
SECTION 2.7 Adequacy.
---------
(a) Subject to applicable regulatory approvals, including
adherence to least-cost planning requirements and principles, and
subject to the oversight and direction of MISO where applicable,
the Company shall have a public utility duty to operate,
maintain, plan and construct its transmission system so that the
system is adequate:
(i) (A) to support effective competition in energy markets
without favoring any market participant;
(B) to deliver on a reliable basis the reasonable, projected
needs of all of the loads on the electric distribution
systems connected to and dependent upon the Company's
facilities for delivery of reliable, low-cost and
competitively-priced electricity to such distribution
systems; and
(C) to provide needed support to the distribution systems
interconnected to the Company's system, where a
transmission addition is the least-cost electric
solution to an improvement need, including but not
limited to, the reliability needs of the distribution
systems that are owned by the initial Non-Managing
Members or their members.
(ii) to receive energy from both existing and new generating
facilities connected to and dependent upon the Company's
transmission of such energy.
(b) In meeting these obligations, the Company shall treat the
needs of each electric distribution system interconnected to the
Company's system, the electric loads on each system and
interconnected generation facilities, in a non-discriminatory
manner. The costs of additions to the Company's transmission
system to meet this adequacy obligation shall not be directly
assigned or charged to a distribution system, to end users or to
generating facilities separately, except in circumstances where
approved or required by the appropriate regulatory agency.
SECTION 2.8 Operating Protocols.
--------------------
(a) The Company has established certain operating protocols that
have been incorporated into its OATT.
(b) If the Company provides terms in any of its agreements with
a Member that are more favorable to a Member than those granted
to any other Member, all Members similarly situated (including
any member of a Member) shall be entitled to such terms. A term
is not more favorable if each Member is offered cost-based terms.
(c) The Company has established certain other operating
protocols that will become part of the Forming Party Agreement or
other agreements as appropriate: Transmission Loss Calculations
and Allocation, Transmission Reservation Queue, Transition of
Operational Control (and sample agreements related thereto),
Control Area Operations, Planning Memo on Project Prioritization,
and Calculations of Available Transmission Capacity.
ARTICLE III
MEMBERS AND CAPITAL CONTRIBUTIONS
SECTION 3.1 Members and Schedule A.
-----------------------
(a) The name and address of each of the initial Members are
listed on Schedule A.
-----------
(b) The Company may, upon approval of the Board of Directors of
the Corporate Manager, admit such additional Persons as Members
after the Operations Date upon such terms and conditions as the
Corporate Manager deems appropriate, provided, however, that with
respect to the issuance of Member Units for cash, it shall first
have complied with the provisions of Section 3.6, except to the
extent contemplated in Section 3.2.
(c) The Corporate Manager shall amend Schedule A upon the
-----------
admission of additional Members and upon any adjustment in the
Members' Capital Contributions, number of Member Units and
Percentage Interests.
SECTION 3.2 Initial Capital Contributions.
------------------------------
(a) Each of MG&E, WEPCO, WPL, ESE, SBWGE and WPS agrees to
transfer to the Company, on or before the Operations Date, all
Transmission Assets owned by it, all pursuant to separate Asset
Contribution Agreements with the Company, which Agreements may
provide for the issuance of Units directly to an Affiliate of the
transferor.
(b) The Corporate Manager agrees to purchase for $10 each the
number of Units set forth in its Subscription Agreement.
(c) WPPI and other Tax-Exempt Members shall each purchase that
number of Member Units that would enable it to receive a
Percentage Interest, upon completion of the Initial Financing and
the distribution of proceeds therefrom, equal to its Load Ratio
Share. The purchase price for each Unit shall equal the product
of $10 and the Tax-Exempt Investment Percentage.
(d) If a member of WPPI contributes Transmission Assets to the
Company in accordance with Section 3.3, the Company shall notify
WPS, and WPS will have the option, within 30 days of the date
that such Transmission Assets are contributed, to purchase
additional Member Units in the Company at a price equal to $10
per Member Unit so as to enable it to obtain a Percentage
Interest in the Company equal to what it would have had had such
WPPI members not been allowed to contribute such Transmission
Assets. WPS's failure to purchase additional Member Units within
the time specified shall terminate its rights pursuant to this
Section 3.2(d).
(e) The number of Units initially issued to each Member, the
amount of each Member's Capital Contribution or Contribution
Value, and the Percentage Interest of each Member is set forth by
each Member's name on Schedule A.
-----------
(f) The Members acknowledge that WPL and WEPCO have previously
paid $1,000 to the capital of the Company, and the Company shall
return such funds, without interest thereon, on the Operations
Date. The Members further acknowledge that WPPI and the
Corporate Manager have previously paid $1,000 to the capital of
the Company, and the Company shall credit such amounts against
the amounts otherwise payable by such Members.
(g) The Members agree that the exact number of Member Units
issued to each Member may not be determinable as of the
Operations Date. Within 150 days after the Operations Date, the
Company shall make such investigations and examine and audit such
records as it deems necessary or appropriate in order to
determine the definitive Contribution Value of the Transmission
Assets, the corresponding Percentage Interests and the Tax-Exempt
Investment Amount. Upon completion of such investigation and
audit, the Company shall (i) provide Members with work papers and
the results of such investigation and audit, and (ii) notify
Members of the correct number of Member Units held by each
Member, and the records of the Company shall be retroactively
adjusted. Any disputes with respect to the correct allocation of
Percentage Interests shall be resolved pursuant to the Dispute
Resolution Provisions.
SECTION 3.3 Additional Members by Right.
----------------------------
(a) A Transmission-Dependent Utility or transmission-dependent
rural electric cooperative that has (i) made all required filings
with federal and state regulatory authorities, and (ii) provided
the Company with evidence of such Person's corporate (or
comparable) authorization to acquire Member Units, in form and
substance reasonably satisfactory to the Company, may purchase
prior to January 1, 2001, a Percentage Interest in the Company
that is no greater than such Person's Load Ratio Share. If such
Person owns incidental Transmission Assets, it may contribute
them in accordance with the last sentence of this Section 3.3(a),
and pay cash prior to January 1, 2001, to acquire additional
Member Units up to its Load Ratio Share. Notwithstanding the
foregoing, if the members of a Transmission-Dependent Utility
that is a municipal electric company have authorized it to invest
cash based upon the Load Ratio Shares of its members, the members
may not individually purchase interests based upon their Load
Ratio Shares. However, any such member may contribute its
incidental Transmission Assets in exchange for Member Units (on
substantially similar terms to those set out in the Asset
Contribution Agreement) prior to July 1, 2001, if it has, prior
to January 1, 2001, (i) made all required filings with federal
and state regulatory authorities, (ii) provided the Company with
evidence of such Person's corporate (or comparable) authorization
to convey Transmission Assets in exchange for Member Units, in
form and substance reasonably satisfactory to the Company, and
(iii) identified the Transmission Facilities and their
Contribution Value.
(b) If prior to January 1, 2001, any Electric Utility that owns
more than incidental Transmission Facilities and provides
transmission service (other than a public utility Affiliate or
owner or operator of a wholesale merchant plant (as defined in
Wisconsin Statutes Section 196.491(1)(w))) and that has (i) made all
required filings with federal and state regulatory authorities,
(ii) provided the Company with evidence of such Person's
corporate (or comparable) authorization to convey Transmission
Assets in exchange for Member Units, in form and substance
reasonably satisfactory to the Company, and (iii) identified the
Transmission Facilities and their Contribution Value, shall have
the right to transfer, prior to July 1, 2001, all of its
Transmission Assets located in the Jurisdictional Area and become
a Member on the same terms and conditions as a contribution of
Transmission Assets by a public utility Affiliate under the Asset
Contribution Agreements and pursuant to Chapter 196.485(5)(b) and
(c) of the Wisconsin Statutes. The retail distribution
cooperative members of any such Electric Utility may likewise
contribute their incidental Transmission Assets, but neither such
Electric Utilities, nor their members will be permitted to
purchase interests individually based upon their Load Ratio
Shares. However, any such member may contribute its incidental
Transmission Assets in exchange for Member Units in accordance
with the last sentence of Section 3.3(a).
(c) The value ascribed to any Transmission Assets contributed
pursuant to this Section 3.3 shall be their Contribution Value.
The purchase price for each Member Unit issued in exchange
pursuant to this Section 3.3 shall equal $10; provided, however,
that if the Transmission-Dependent Utility is a Tax-Exempt
Member, the purchase price for each Member Unit shall equal the
product of $10 and the Tax-Exempt Investment Percentage. The
portion of the purchase price in excess of $10 per Unit may be
payable by the contribution of Transmission Assets (if
appropriate) or cash.
SECTION 3.4 Pre-emptive Rights.
-------------------
(a) Purchase of Right.
(i) Any Member that has elected to receive distributions
approximating 100% of its allocable share of Company Profits
pursuant to Section 6.2(c) may, in such Member's sole
discretion, contribute cash to the Company in an amount
equal to the amount determined in 6.2(d) for additional
Member Units.
(ii) Until the IPO, any Transmission-Dependent Utility shall have
the right to maintain its initial Percentage Interest by
paying cash for additional Member Units upon the
contribution of additional Transmission Assets located in
the State of Wisconsin after the Operations Date.
(b) Member Unit Price.
(i) The price for Member Units issued pursuant to Section
3.4(a)(i) shall equal the price at which such Member's
Member Units were redeemed.
(ii) The price for Member Units issued pursuant to Section
3.4(a)(ii) shall equal the price at which the Company is
then issuing Member Units to others that is causing the
dilution; provided, however, that if the
Transmission-Dependent Utility is a Tax-Exempt Member, it
shall pay a price equal to the product of the price at which
the Company is then issuing Member Units that is causing the
dilution and the Tax-Exempt Investment Percentage, unless
the price at which the Company is then issuing Member Units
already includes the Tax-Exempt Investment Percentage, in
which case the price to the Tax-Exempt Member shall equal
the price at which the Company is then issuing Member Units.
(c) Notice. Until the IPO, the Corporate Manager shall give
prompt notice to each Tax-Exempt Member of any proposed
contribution of Transmission Assets that would dilute a
Tax-Exempt Member's interest and permit it to maintain its
Percentage Interest in accordance with Section 3.4(a)(ii). If it
desires to maintain its Percentage Interest, such Tax-Exempt
Member shall, within 30 days thereafter, advise the Corporate
Manager of its intention to purchase additional Member Units.
(d) Payment of Purchase Price. Any additional Member Units
purchased shall be paid for within 30 days following the
contribution giving rise to such right to purchase additional
Units, but not earlier than 60 days after notice to the
Tax-Exempt Members as provided for in Section 3.4(c) hereof.
Failure to purchase additional Member Units within the time
specified shall terminate a Member's rights pursuant to this
Section 3.4. Payment shall be made by wire transfer of clearing
house funds, if so specified by the Company, and otherwise by
check payable to the order of the Company.
SECTION 3.5 Contribution of Additional Transmission Assets.
-----------------------------------------------
(a) Under Construction. Certain Transmission Utilities have
conveyed Transmission Assets under construction to the Company
pursuant to the Asset Contribution Agreement.
(i) The Company hereby undertakes to use its best commercial
efforts to complete such projects in a timely manner
following the Operations Date.
(ii) If the contributing Member desires to complete any such
project on behalf of the Company, the Company and the
contributing Member agree to negotiate in good faith the
terms and conditions upon which the project would be
completed by the contributing Member.
(b) Subsequent Contributions. Each Transmission Utility Member
shall contribute or cause to be contributed to the Company any
Transmission Assets under construction as of the Operations Date,
but not contributed as of such date. The Transmission Assets
shall be valued at their Contribution Value, and Member Units
issued in exchange therefor at a price equal to the Company's Net
Book Value per Member Unit as of the end of the calendar month
preceding such conveyance.
(c) Outside Wisconsin. Each Transmission Utility Member or
Affiliate shall have the right, within one year after the
Operations Date, to contribute to the Company Transmission Assets
located in jurisdictions outside Wisconsin, provided that such
Transmission Utility Member or Affiliate contributes all of its
Transmission Assets in such other jurisdiction. The Transmission
Assets shall be valued at their Contribution Value, and Member
Units issued in exchange therefor at a price of $10 per Member
Unit. As a condition to exercising such right, the contributing
Member shall cause to be issued an opinion of counsel recognized
as experts with respect to PUHCA (which may be counsel to the
Company) that the contribution of such assets would not cause any
of the Members to lose its exemption under PUHCA; provided,
however, that this condition shall not be required following the
effective date of any repeal of PUHCA.
(d) Nature of Contribution. The parties intend that any
contribution of Transmission Assets after the Operations Date
with an unleveraged Contribution Value in excess of $3 million in
any running 12-month period shall be credited as if it were
subject to indebtedness in an amount equal to approximately 50%
of the unleveraged Contribution Value of the Transmission Assets
being contributed. To that end, the Company and the contributing
Member shall endeavor to agree on an arrangement whereby either
(i) the contributing Member incurs indebtedness and assigns such
indebtedness to the Company, which shall assume such
indebtedness, or (ii) the Company issues indebtedness and
distributes, within 90 days thereafter, the proceeds to the
contributing Member. The contributing Member shall be permitted
to guarantee such indebtedness, but shall not receive any
compensation therefor.
(e) Dispute. Any dispute regarding Contribution Value shall be
resolved pursuant to the Dispute Resolution Provisions.
SECTION 3.6 Voluntary Additional Capital Contributions.
-------------------------------------------
(a) No Member may be required at any time to contribute any
additional amounts or assets to the Company in excess of that set
forth in Section 3.2, 3.5(b) or 3.8.
(b) If the Corporate Manager determines that additional equity
capital is required for Company operations and activities, and
shall determine not to effect an IPO at that time or otherwise
obtain funding in accordance with the provisions of Section 3.7,
the Corporate Manager shall issue a call notice to the Members
advising them of the total funding that the Company seeks, each
Member's pro rata share thereof (based upon its Percentage
Interest), the price per Member Unit and the date upon which such
voluntary contributions are to be payable, which shall be a date
not less than 45 days subsequent to the date of such notice.
(c) Each Member shall have the right, but not the obligation, to
contribute its pro rata share for additional Member Units thereof
by giving notice to the Company within 30 days following receipt
of such call notice from the Corporate Manager. If fewer than
all the Members agree to contribute their pro rata amounts, then
the other Members that do contribute their pro rata amounts shall
have the right to contribute such additional amounts for
additional Member Units in accordance with their Percentage
Interests (excluding the Percentage Interests of the
non-participating Members).
(d) Each Member shall make payment of its portion of the capital
call on or before 11:00 a.m., central time, on the due date.
Payment shall be made by wire transfer of clearing house funds,
if so designated in the call notice, and otherwise by check
payable to the order of the Company.
(e) Except as provided in Section 3.4, 3.6(c) or Section 3.7, no
Member shall have the right to make additional cash contributions
to the Company after the Operations Date.
SECTION 3.7 Issuance to Corporate Manager.
------------------------------
The Corporate Manager may contribute additional capital to
the Company, from time to time, and receive additional Member
Interests in respect thereof, in the manner contemplated in this
Section 3.7.
(a) Issuances of Additional Company Interests.
(i) General. The Corporate Manager is hereby authorized to
--------
cause the Company to issue such additional Member Interests
in the form of Member Units for any Company purpose at any
time or from time to time to the Members (including the
Corporate Manager) for such consideration and on such terms
and conditions as shall be established by the Corporate
Manager in its sole and absolute discretion, all without the
approval of any Members. Any additional Member Interests
issued thereby may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, participating,
optional or other special rights, powers and duties,
including rights, powers and duties senior to Member
Interests, all as shall be determined by the Corporate
Manager in its sole and absolute discretion and without the
approval of any Member, including without limitation, (i)
the allocations of items of Company income, gain, loss,
deduction and credit to each such class or series of Member
Interests; (ii) the right of each such class or series of
Member Interests to share in Company distributions; and
(iii) the rights of each such class or series of Member
Interests upon dissolution and liquidation of the Company;
provided, however, that no additional Member Interests shall
--------- --------
be issued to the Corporate Manager unless:
A. the additional Member Interests are issued in connection
with an issuance of Corporate Shares of or other
interests in the Corporate Manager, which shares or
interests have designations, preferences and other
rights, all such that the economic interests are
substantially similar to the designations, preferences
and other rights of the additional Member Interests
issued to the Corporate Manager by the Company in
accordance with this Section 3.7 and (B) the Corporate
Manager shall make a Capital Contribution to the
Company in an amount equal to the proceeds raised in
connection with the issuance of such shares of stock of
or other interests in the Corporate Manager;
B. the additional Member Interests are issued in exchange for
property owned by the Corporate Manager with a fair
market value, as determined by the Corporate Manager,
in good faith, equal to the value of the Member
Interests; or
C. additional Member Interests are issued to all Members in
proportion to their respective Percentage Interests.
Without limiting the foregoing, the Corporate Manager is
expressly authorized to cause the Company to issue Member Units
for less than fair market value, so long as the Corporate Manager
concludes in good faith that such issuance is in the best
interests of the Corporate Manager and the Company.
(ii) Upon Issuance of Additional Securities. The Corporate
--------------------------------------------
Manager shall not issue any additional Corporate Shares
(other than Corporate Shares issued in connection with an
exchange pursuant to Section 8.4 hereof) or rights, options,
warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase Corporate
Shares (collectively, "Additional Securities") other than to
all holders of Corporate Shares, unless (A) the Corporate
Manager shall cause the Company to issue to the Corporate
Manager Member Interests or rights, options, warrants or
convertible or exchangeable securities of the Company having
designations, preferences and other rights, all such that
the economic interests are substantially similar to those of
the Additional Securities, and (B) the Corporate Manager
contributes the proceeds from the issuance of such
Additional Securities and from any exercise of rights
contained in such Additional Securities to the Company.
Without limiting the foregoing, the Corporate Manager is
expressly authorized to issue Additional Securities for less
than fair market value, and to cause the Company to issue to
the Corporate Manager corresponding Member Interests, so
long as (x) the Corporate Manager concludes in good faith
that such issuance is in the best interests of the Corporate
Manager and the Company, including without limitation, the
issuance of Corporate Shares and corresponding Member Units
pursuant to an employee share purchase plan providing for
employee purchases of Corporate Shares at a discount from
fair market value or employee stock options that have an
exercise price that is less than the fair market value of
the Corporate Shares, either at the time of issuance or at
the time of exercise, and (y) the Corporate Manager
contributes all proceeds from such issuance to the Company.
For example, in the event the Corporate Manager issues
Corporate Shares for a cash purchase price and contributes
all of the proceeds of such issuance to the Company as
required hereunder, the Corporate Manager shall be issued a
number of additional Member Units equal to the product of
(A) the number of such Corporate Shares issued by the
Corporate Manager, the proceeds of which were so
contributed, multiplied by (B) a fraction, the numerator of
which is 100%, and the denominator of which is the
Conversion Factor in effect on the date of such
contribution.
(b) Certain Contributions of Proceeds of Issuance of Corporate
Shares. In connection with any and all issuances of Corporate
Shares, the Corporate Manager shall make Capital Contributions to
the Company of the proceeds therefrom, provided that if the
proceeds actually received and contributed by the Corporate
Manager are less than the gross proceeds of such issuance as a
result of any underwriter's discount or other expenses paid or
incurred in connection with such issuance, then the Corporate
Manager shall make a Capital Contribution of such net proceeds to
the Company but shall receive additional Member Units with a
value equal to the aggregate amount of the gross proceeds of such
issuance pursuant to Section 3.7(a) hereof. Upon any such
Capital Contribution by the Corporate Member, the Corporate
Manager's Capital Account shall be increased by the actual amount
of its Capital Contribution pursuant to Section 3.9 hereof.
(c) Redemption of Corporate Shares. In the event the Corporate
Manager redeems any Corporate Shares, then the Corporate Manager
shall cause the Company to purchase from the Corporate Manager a
number of Member Units as determined based on the application of
the Conversion Factor on the same terms that the Corporate
Manager redeemed such Corporate Shares. Moreover, if the
Corporate Manager makes a cash tender offer or other offer to
acquire Corporate Shares, then the Corporate Manager shall cause
the Company to make a corresponding offer to the Corporate
Manager to acquire an equal number of Member Units held by the
Corporate Manager. In the event any Corporate Shares are
redeemed by the Corporate Manager pursuant to such offer, the
Company shall redeem an equivalent number of the Corporate
Manager's Member Units for an equivalent purchase price based on
the application of the Conversion Factor.
SECTION 3.8 Adjustment of Tax-Exempt Members' Capital.
------------------------------------------
(a) Whenever the Company changes the rate that it charges its
customers or upon the occurrence of a Capital Event with respect
to a Tax-Exempt Member, but at least annually by June 1 of each
year, the Company shall calculate the Tax-Exempt Investment
Amount for each Tax-Exempt Member, as well as such Tax-Exempt
Member's aggregate Capital Contributions (including the
Contribution Value of any Transmission Assets contributed by it
and any amounts previously paid pursuant to this Section 3.8),
reduced by any distributions pursuant to this Section 3.8 and the
Tax-Exempt Ownership Interest corresponding to any reduction in
the number of Member Units held by such Tax-Exempt Member ("Net
Contribution"), and
(i) If a Member's Net Contribution is less than its Tax-Exempt
Investment Amount, the Member shall pay the difference to
the Company within 30 days of such Notice.
(ii) If a Member's Net Contribution exceeds its Tax-Exempt
Investment Amount, the Company shall pay the difference to
the Member within 30 days of such notice and prior to any
other distributions pursuant to Section 6.2.
(iii) The Company may set off any amounts owed to it by a
Tax-Exempt Member against amounts otherwise distributable to
it pursuant to Section 6.2.
(b) The Company shall provide each Tax-Exempt Member with all
necessary work papers used to compute the Tax-Exempt Investment
Amount and Net Contribution of each Member. Such amounts shall
be determined consistent with the terms of this Agreement, as
illustrated in Schedule B. The Tax-Exempt Investment Amount for
-----------
each Tax-Exempt Member shall be determined by multiplying each
Member's Tax-Exempt Ownership Interest by the Tax-Exempt
Investment Percentage.
(c) If a Tax-Exempt Member does not make a payment required of
it in accordance with this Section, and arrangements are not made
with respect to the set-off of such amounts due, the Company
shall reduce the Percentage Interest of the Tax-Exempt Member to
reflect its Net Contribution.
SECTION 3.9 Capital Accounts.
-----------------
(a) A separate capital account (a "Capital Account") shall be
established and maintained for each Member in accordance with
Regulations Section 1.704-1(b)(2)(iv). Without limiting the
foregoing, Capital Accounts shall be maintained in accordance
with the following provisions: (i) to each Member's Capital
Account there shall be credited such Member's cash Capital
Contributions, the Contribution Value of any Transmission Assets
contributed by it, such Member's distributive share of Profits
and any items in the nature of income or gain which are specially
allocated pursuant to Section 6.1(b), (c) or (d) hereof, and the
amount of any Company liabilities assumed by such Member or which
are secured by any Company asset distributed to such Member, (ii)
to each Member's Capital Account there shall be debited the
amount of cash and the fair market value as determined by the
Corporate Manager, of any Company asset distributed to such
Member pursuant to any provision of this Agreement, such Member's
distributive share of Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to
Section 6.1(b), (c) or (d) hereof, and the amount of any
liabilities of such Member assumed by the Company or that are
secured by any asset contributed by such Member to the Company.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall
be interpreted and applied in a manner consistent with such
Regulations, and any dispute among the Company and the Members
shall be resolved pursuant to the Dispute Resolution Provisions.
(b) When a new or existing Member acquires an additional
Membership Interest, the Corporate Manager shall determine the
potential "Adjustment in Value" by multiplying the Company's
unrealized gain or loss (calculated by multiplying (x) the
difference between (A) the Net Book Value and (B) the implied
value of the Company, based upon the price per Member Unit of
Member Units issued in exchange for such additional Membership
Interest times the total number of Member Units outstanding, by
(y) the difference between the contributing Member's new
Percentage Interest and its previous Percentage Interest, if any).
(i) If a new or existing Member acquires an additional
Membership Interest, and (A) the resulting potential
Adjustment in Value exceeds 3% of the Net Book Value, or
(B) if the aggregate Adjustment in Value measured from the
time of the most recent adjustment exceeds 3% of the Net
Book Value, the Corporate Manager shall revalue the property
of the Company to its fair market value (as determined by
the Corporate Manager, and taking into account Code Section
7701(g)) in accordance with Regulations Section
1.704-1(b)(2)(iv)(f).
(ii) If (A) a new or existing Member acquires an additional
Membership Interest in exchange for more than a de minimis
----------
Capital Contribution that is not covered by 3.9(b)(i),
(B) the Company distributes to a Member more than a de
--
minimis amount of Company property as consideration for a
-------
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), the
Corporate Manager may, in its sole and absolute discretion,
revalue the property of the Company to its fair market value
(as determined by the Corporate Manager, in its sole and
absolute discretion, and taking into account Code Section
7701(g)) in accordance with Regulations Section
1.704-1(b)(2)(iv)(f).
(iii) When the Company's property is revalued by the Corporate
Manager, the Capital Accounts of the Members shall be
adjusted in accordance with Regulations Sections
1.704-1(b)(2)(iv)(f) and (g), which generally require such
Capital Accounts to be adjusted to reflect the manner in
which the unrealized gain or loss inherent in such property
(that has not been reflected in the Capital Accounts
previously) would be allocated among the Members pursuant to
Section 6.1 if there were a taxable disposition of such
property for its fair market value (as determined by the
Corporate Manager, in its sole and absolute discretion, and
taking into account Code Section 7701(g)) on the date of the
revaluation.
SECTION 3.10 Initial Debt Financing.
------------------------
(a) The Company shall use its best efforts to issue, within 90
days following the Operations Date, long-term debt in an amount
equal to approximately 50% of its total initial capitalization.
(b) Within 90 days of the closing of such financing, the net
proceeds of such financing shall be distributed to the Members
that contributed Transmission Assets in accordance with their
respective Percentage Interests, exclusive of the Percentage
Interests held by Members that did not contribute Transmission
Assets, and the Corporate Manager shall redeem Member Units with
such proceeds and shall revise Schedule A to reflect such
-----------
distribution. Member Units redeemed shall be valued at the
initial value, as set forth in the definition of Member Unit.
SECTION 3.11 No Interest.
------------
No interest shall be paid on Capital Contributions or on the
balance in each Member's Capital Account.
SECTION 3.12 No Third Party Beneficiary.
----------------------------
No creditor or other third party having dealings with the
Company shall have the right to enforce the right or obligation
of any Member to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement
shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and
assigns. None of the rights or obligations of the Members herein
set forth to make Capital Contributions shall be deemed an asset
of the Company for any purpose by any creditor or other third
party, nor may such rights or obligations be sold, transferred or
assigned by the Company or pledged or encumbered by the Company
to secure any debt or other obligation of the Company or of any
of the Members. In addition, it is the intent of the parties
hereto that no distribution to any Member shall be deemed a
return of money or other property in violation of the Act.
However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Member is
obligated to return such money or property, such obligation shall
be the obligation of such Member and not of the Corporate
Manager. Without limiting the generality of the foregoing, a
deficit Capital Account of a Member shall not be deemed to be a
liability of such Member or an asset or property of the Company.
SECTION 3.13 Membership Units as Securities.
-------------------------------
Membership Units will not be evidenced by certificates,
writings, instruments or other documents. Membership Units shall
be deemed to be "securities" as that term is defined in Article
8. The creation and perfection of a security interest in
Membership Units will be governed by Article 8.
SECTION 3.14 Month-End Convention.
----------------------
For purposes of this Agreement, all Capital Contributions,
other than the initial Capital Contributions, shall be deemed to
be received at the end of the month in which they actually are
received by the Company.
ARTICLE IV
RIGHTS, OBLIGATIONS AND
POWERS OF THE CORPORATE MANAGER
SECTION 4.1 Management of the Company.
--------------------------
(a) Except as otherwise expressly provided in this Agreement,
the Corporate Manager shall have full, complete and exclusive
discretion to manage and control the business of the Company for
the purposes herein stated, and shall make all decisions
affecting the business and assets of the Company. Subject to the
restrictions specifically contained in this Agreement, the powers
of the Corporate Manager shall include, without limitation, the
authority to take all actions on behalf of the Company as
provided in Section 2.4 and to take such other action, execute,
acknowledge, swear to or deliver such other documents and
instruments, and perform any and all other acts that the
Corporate Manager deems necessary or appropriate for the
formation, continuation and conduct of the business and affairs
of the Company. The Corporate Manager shall have all powers as a
manager under the Act to do all things necessary and convenient
to carry out the Company's business to the fullest extent
provided by the Act.
(b) Except as otherwise provided herein, to the extent the
duties of the Corporate Manager require expenditures of funds to
be paid to third parties, the Corporate Manager shall not have
any obligations hereunder except to the extent that Company funds
are reasonably available to it for the performance of such
duties, and nothing herein contained shall be deemed to authorize
or require the Corporate Manager, in its capacity as such, to
expend its individual funds for payment to third parties or to
undertake any individual liability or obligation on behalf of the
Company.
SECTION 4.2 Authority of Corporate Manager.
-------------------------------
Subject to applicable regulatory approvals, the Corporate
Manager may appoint, employ, contract or otherwise deal with any
Person for the transaction of the business of the Company, which
Person may, under supervision of the Corporate Manager, perform
any acts or services for the Company as the Corporate Manager may
approve. Without limiting the foregoing, the Corporate Manager
is specifically authorized to execute on behalf of the Company
various agreements with the Members, including Closing Escrow
Agreements, Asset Contribution Agreements, Subscription
Agreements, Attachment Agreements, Service Agreements for Network
Integration Transmission Service, Operation and Maintenance
Agreements, Transitional Services Agreements, Network Operating
Agreements, Bills of Sale, ▇▇▇▇ of Sale and Right of Repurchase,
Generation-Transmission Interconnection Agreements,
Transmission-Distribution Interconnection Agreements, and any
other agreements relating to the acquisition, ownership,
operation and maintenance of the Transmission Assets, and any
amendments thereto as the Corporate Manager deems appropriate.
SECTION 4.3 Indemnification and Exculpation of Indemnitees.
-----------------------------------------------
(a) The Company shall indemnify an Indemnitee from and against
any and all expenses (including fees, costs charges,
disbursements, attorneys fees and any other expenses incurred in
connection with a proceeding) and liabilities (including any
obligation to pay a judgment, settlement, penalty, assessment,
forfeiture or fine, including an excise tax assessed with respect
to an employee benefit plan, and reasonable expenses) arising
from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to
the operations of the Company in which any Indemnitee may be
involved, or is threatened to be involved, as a party or
otherwise, unless it is established that: (i) the Indemnitee
failed to deal fairly with the Company or its Members in
connection with a matter in which the Indemnitee has a material
conflict of interest; (ii) the Indemnitee violated criminal law,
unless the Indemnitee had reasonable cause to believe that its
conduct was lawful or had no reasonable cause to believe that the
conduct was unlawful; (iii) the matter relates to a transaction
from which the Indemnitee derived an improper personal profit; or
(iv) the Indemnitee engaged in willful misconduct. The
termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet
the requisite standard of conduct set forth in this Section
4.3(a). The termination of any proceeding by conviction or upon
a plea of nolo contendere or its equivalent, or an entry of an
order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee acted in a manner contrary to
that specified in this Section 4.3(a). Any indemnification
pursuant to this Section 4.3(a) shall be made only out of the
assets of the Company.
(b) The Company may reimburse an Indemnitee for reasonable
expenses incurred by an Indemnitee who is a party to a proceeding
in advance of the final disposition of the proceeding upon
receipt by the Company of (i) a written affirmation by the
Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Company
as authorized in this Section 4.3 has been met, and (ii) a
written undertaking by or on behalf of the Indemnitee to repay
the amount if it shall ultimately be determined that the standard
of conduct has not been met.
(c) The indemnification provided by this Section 4.3 shall be in
addition to any other rights to which an Indemnitee or any other
Person may be entitled under any agreement, pursuant to any vote
of the Members, as a matter of law or otherwise, and shall
continue as to an Indemnitee who has ceased to serve in such
capacity.
(d) The Company may purchase and maintain insurance, on behalf
of the Indemnitees and such other Persons as the Corporate
Manager shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person
in connection with the Company's activities, regardless of
whether the Company would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
(e) For purposes of this Section 4.3, the Company shall be
deemed to have requested an Indemnitee to serve as fiduciary of
an employee benefit plan whenever the performance by it of its
duties to the Company or the Corporate Manager also imposes
duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed
on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the
meaning of this Section 4.3; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it
to be in the interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose that is not opposed
to the best interests of the Company.
(f) In no event may an Indemnitee subject the Non-Managing
Members to personal liability by reason of the indemnification
provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 4.3 because the Indemnitee had an
interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
(h) The provisions of this Section 4.3 are for the benefit of
the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for
the benefit of any other Persons.
(i) Any amendment, modification or repeal of this Section 4.3 or
any provision hereof shall be prospective only and shall not in
any way affect the indemnification of an Indemnitee by the
Company under this Section 4.3 as in effect immediately prior to
such amendment, modification or repeal with respect to matters
occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when claims relating to
such matters may arise or be asserted.
SECTION 4.4 Liability of the Corporate Manager.
-----------------------------------
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the Corporate Manager shall not be liable for monetary
damages to the Company or any Members for losses sustained or
liabilities incurred as a result of actions or omissions
consistent with the standard to which directors of a Wisconsin
corporation are held. The Corporate Manager shall not be in
breach of any duty that the Corporate Manager may owe to the
Non-Managing Members or the Company or any other Persons under
this Agreement or of any duty stated or implied by law or equity
provided the Corporate Manager, acting in good faith, abides by
the terms of this Agreement.
(b) The Non-Managing Members expressly acknowledge that the
Corporate Manager is acting on behalf of the Company and the
Corporate Manager's shareholders collectively, that the Corporate
Manager is under no obligation to consider the separate interests
of the Non-Managing Members (including, without limitation, the
tax consequences to Non-Managing Members or the tax consequences
of some, but not all, of the Non-Managing Members) in deciding
whether to cause the Company to take (or decline to take) any
actions. In the event of a conflict between the interests of the
shareholders of the Corporate Manager on one hand and the
Non-Managing Members on the other, the Corporate Manager shall
endeavor in good faith to resolve the conflict. The Corporate
Manager shall not be liable for monetary damages for losses
sustained, liabilities incurred or benefits not derived by
Non-Managing Members in connection with such decisions, provided
that the Corporate Manager has acted in good faith.
(c) Subject to its obligations and duties as Corporate Manager
set forth in Section 4.1 hereof, the Corporate Manager may
exercise any of the powers granted to it under this Agreement and
perform any of the duties imposed upon it hereunder either
directly or by or through its agents. The Corporate Manager
shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by it in good faith.
(d) Notwithstanding any other provisions of this Agreement or
the Act, any action of the Corporate Manager on behalf of the
Company or any decision of the Corporate Manager to refrain from
acting on behalf of the Company, undertaken in the good faith
belief that such action or omission is necessary or advisable in
order to protect the ability of the Company to continue to be
classified as a partnership for federal, state and local income
tax purposes, is expressly authorized under this Agreement and is
deemed approved by all of the Non-Managing Members.
(e) Any amendment, modification or repeal of this Section 4.4 or
any provision hereof shall be prospective only and shall not in
any way affect the limitations on the Corporate Manager's
liability to the Company and the Non-Managing Members under this
Section 4.4 as in effect immediately prior to such amendment,
modification or repeal with respect to matters occurring, in
whole or in part, prior to such amendment, modification or
repeal, regardless of when claims relating to such matters may
arise or be asserted.
SECTION 4.5 Corporate Expenses and Administrative Expenses.
-----------------------------------------------
(a) Except as provided in this Section 4.5 and elsewhere in this
Agreement (including the provisions of Article VI regarding
distributions, payments and allocations to which it may be
entitled), the Corporate Manager shall not be compensated for its
services as Corporate Manager of the Company.
(b) Subject to Section 4.6, all Corporate Expenses and
Administrative Expenses shall be obligations of the Company, and
the Corporate Manager shall be entitled to reimbursement by the
Company for any expenditure (including Corporate Expenses and
Administrative Expenses) incurred by it on behalf of the Company
that shall be made other than out of the funds of the Company.
SECTION 4.6 Outside Activities.
--------------------
The Corporate Manager's activities shall be limited to
serving as Corporate Manager of the Company and its Subsidiaries.
SECTION 4.7 Title to Company Assets.
------------------------
Except to the extent that the Corporate Manager may possess
a nominal fractional undivided interest in the Transmission
Assets, title to Company assets, whether real, personal or mixed
and whether tangible or intangible, shall be deemed to be owned
by the Company as an entity, and no Member, individually or
collectively, shall have any ownership interest in such Company
assets or any portion thereof. Title to any or all of the
Company assets may be acquired and held in the name of the
Company or for the account of the Company, by the Corporate
Manager or one or more nominees, as the Corporate Manager may
determine. The Corporate Manager hereby declares and warrants
that any Company assets for which legal title is held in the name
of the Corporate Manager or any nominee or Affiliate of the
Corporate Manager shall be property of the Company under Section
183.0701 of the Act and shall be held by the Corporate Manager
for the exclusive use and benefit of the Company in accordance
with the provisions of this Agreement. All Company assets shall
be recorded as the property of the Company in its books and
records, irrespective of the names in which legal title to such
Company assets are held.
ARTICLE V
ACCOUNTING, TAX AND FISCAL MATTERS
SECTION 5.1 Fiscal and Taxable Year.
------------------------
The Company hereby adopts the calendar year, January 1
through and including December 31, as its fiscal and tax year,
except as otherwise may be required by Code Section 706.
SECTION 5.2 Books.
------
The books and records of the Company shall be kept in
accordance with usual and customary accounting practices on the
accrual method and in accordance with GAAP, FERC's Uniform System
of Accounts, and applicable tax requirements.
SECTION 5.3 Records.
--------
(a) The Company shall keep at its principal place of business
all of the following:
(i) A list, kept in alphabetical order, of each past and present
Member and manager. The list shall include the full name
and last-known mailing address of each Member or manager,
the date on which the person became a Member or manager and
the date, if applicable, on which the Person ceased to be a
Member or manager.
(ii) A copy of the Company's articles of organization and all
amendments to the articles.
(iii) Copies of the Company's federal, state and local income or
franchise tax returns and financial statements, if any, for
the four most recent years or, if such returns and
statements are not prepared for any reason, copies of the
information and statements provided to, or which should have
been provided to, the Members to enable them to prepare
their federal, state and local income tax returns for the
four most recent years.
(iv) Copies of this Agreement, all amendments hereto and any
operating agreements no longer in effect.
(b) Upon reasonable request, a Member may, at the Member's own
expense, inspect and copy during ordinary business hours (i) any
Company record required to be kept under Section 5.3(a); and (ii)
Company work papers pertaining to the determination of the (A)
number of Member Units to be issued to each Member as of the
Operations Date, and (B) Tax-Exempt Investment Amount.
(c) The Corporate Manager shall provide, to the extent that the
circumstances render it just and reasonable, true and full
information of all things affecting the Members, including any
records relating to the Transmission Assets contributed by such
Member, to any Member or to the legal representative of any
Member upon reasonable request of the Member or the legal
representative.
(d) The failure of the Company to keep or maintain any of the
records or information required under this Section shall not be
grounds for imposing liability on any Person for the debts and
obligations of the Company.
SECTION 5.4 Company Funds.
--------------
The funds of the Company shall be kept in the name of the
Company in one or more separate bank accounts with banks or trust
companies as selected by the Corporate Manager. Withdrawals from
such bank accounts shall be made only by Persons approved by the
Corporate Manager.
SECTION 5.5 Tax Returns.
-------------
(a) The Corporate Manager shall cause the Company to timely file
all Company income tax returns required to be filed by the
jurisdictions in which the Company conducts business or derives
income. By June 30 of each year, the Corporate Manager shall
cause to be furnished to each Person who was a Member during the
prior fiscal year all available information necessary for
inclusion in such person's income tax returns for such year.
(b) Within 45 days following the end of each fiscal quarter, the
Corporate Manager shall cause to be forwarded to each Person who
was a Member during such quarter, a statement setting forth such
Member's share of taxable income for such quarter, it being
understood that all such numbers shall be estimates and subject
to year-end adjustment, and the Corporate Manager shall have no
liability with respect to such numbers as long as they were
provided in good faith.
SECTION 5.6 Tax Elections.
--------------
(a) The Members intend that the Company be treated as a
partnership for U.S. federal income tax purposes. Absent the
unanimous vote of the Non-Managing Members, no election shall be
made by the Company or any Member for the Company to be treated
as a corporation, or an association taxable as a corporation,
under the Code or any provisions of any state or local laws.
(b) Subject to Section 5.6(a), the Corporate Manager shall have
the right, in its sole discretion but after consultation with the
Members affected thereby, at any time to make or not to make
elections for income tax purposes that are authorized or
permitted by any law or regulation (including Code Section 754).
SECTION 5.7 Tax Matters, Tax Elections and Special Basis
---------------------------------------------------
Adjustments.
------------
ATC Management Inc. shall be the initial tax matters member
(the "Tax Matters Member") of the Company within the meaning of
Code Section 6231. The Tax Matters Member shall have the right
and obligation to take all actions authorized and required,
respectively, by the Code for the Tax Matters Member, and shall
manage any administrative tax proceedings conducted at the
Company level by the Internal Revenue Service with respect to
Company matters. All expenses and fees incurred by the Tax
Matters Member on behalf of the Company not otherwise reimbursed
shall constitute Corporate Expenses.
Subject to the provisions of Section 5.6, all other
elections required or permitted to be made by the Company under
the Code may be made by the Tax Matters Member in accordance with
any tax agreement among the Members or in the absence of such
agreement, in such manner as determined by the Tax Matters
Member, in the exercise of its reasonable discretion, and
permitted by the provisions of the Code.
SECTION 5.8 Access to Records.
-------------------
Each Member agrees to provide the Company with reasonable
access to such Member's books and records as they pertain to the
Transmission Assets contributed by such Member.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations.
------------
(a) Profit and Loss. Profit and Loss of the Company of each
------------------
fiscal year of the Company shall be allocated to the Members in
accordance with their respective Percentage Interests.
(b) Minimum Gain Chargeback. Notwithstanding any provision to
-------------------------
the contrary, (i) any expense of the Company that is a
"nonrecourse deduction" within the meaning of Regulations Section
1.704-2(b)(1) shall be allocated in accordance with the Members'
respective Percentage Interests, (ii) any expense of the Company
that is a "partner nonrecourse deduction" within the meaning of
Regulations Section 1.704-2(i)(2) shall be allocated to the
Member that bears the "economic risk of loss" of such deduction
in accordance with Regulations Section 1.704-2(i)(1), (iii) if
there is a net decrease in Company Minimum Gain within the
meaning of Regulations Section 1.704-2(f)(1) for any Company
taxable year, then, subject to the exceptions set forth in
Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain
and income shall be allocated among the Members in accordance
with Regulations Section 1.704-2(f) and the ordering rules
contained in Regulations Section 1.704-2(j), and (iv) if there is
a net decrease in Member Nonrecourse Debt Minimum Gain within the
meaning of Regulations Section 1.704-2(i)(4) for any Company
taxable year, then, subject to the exceptions set forth in
Regulations Section 1.704(2)(g), items of gain and income shall
be allocated among the Members in accordance with Regulations
Section 1.704-2(i)(4) and the ordering rules contained in
Regulations Section 1.704-2(j). A Member's "interest in
partnership profits" for purposes of determining its share of the
nonrecourse liabilities of the Company within the meaning of
Regulations Section 1.752-3(a)(3) shall be such Member's
Percentage Interest.
(c) Qualified Income Offset. If a Member receives in any
--------------------------
taxable year an adjustment, allocation or distribution described
in subparagraphs (4), (5) or (6) of Regulations Section
1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance
in such Member's Capital Account that exceeds the sum of such
Member's shares of Company Minimum Gain and Member Nonrecourse
Debt Minimum Gain, as determined in accordance with Regulations
Sections 1.704-2(g) and 1.704-2(i), such Member shall be
allocated specially for such taxable year (and, if necessary,
later taxable years) items of income and gain in an amount and
manner sufficient to eliminate such deficit Capital Account
balance as quickly as possible as provided in Regulations Section
1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of
income or gain to a Member in accordance with this Section
6.1(c), to the extent permitted by Regulations Section
1.704-1(b), items of expense or loss shall be allocated to such
Member in an amount necessary to offset the income or gain
previously allocated to such Member under this Section 6.1(c).
(d) Capital Account Deficits. Loss shall not be allocated to a
---------------------------
Member to the extent that such allocation would cause a deficit
in such Member's Capital Account (after reduction to reflect the
items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4),
(5) and (6)) to exceed the sum of such Member's shares of Company
Minimum Gain and Member Nonrecourse Debt Minimum Gain. Any Loss
in excess of that limitation shall be allocated to the other
Members in accordance with their respective Percentage
Interests. After the occurrence of an allocation of Loss to a
Member in accordance with this Section 6.1(d), to the extent
permitted by Regulations Section 1.704-1(b), Profit shall be
allocated to such Member in an amount necessary to offset the
Loss previously allocated to each Member under this Section
6.1(d).
(e) Varying Interests. If a Member transfers any part or all of
-------------------
its Membership Interest during a fiscal year of the Company, the
distributive shares of the various items of Profit and Loss
allocable among the Members during such fiscal year shall be
allocated between the transferor and the transferee Member either
(i) as if the Company's fiscal year had ended on the date of the
transfer or (ii) based on the number of days of such fiscal year
that each was a Member. If the Members' Percentage Interests are
adjusted during a fiscal year of the Company, the Profits and
Losses for such fiscal year shall be allocated between the part
of the year ending on the day when the adjustment occurs and the
part of the year beginning on the following day either (i) as if
the taxable year had ended on the date of the adjustment or
(ii) based on the number of days in each part. The allocation of
Profits and Losses for the earlier part of the year shall be
based on the Percentage Interests before adjustment, and the
allocation of Profits and Losses for the later part shall be
based on the adjusted Percentage Interests. The Corporate
Manager, in its sole and absolute discretion, shall determine
which method shall be used to allocate the distributive shares of
the various items of Profit and Loss.
(f) Definition of Profit and Loss. "Profit" and "Loss" and any
-------------------------------
items of income, gain, expense or loss referred to in this
Agreement shall mean the Company's book income or loss, as
determined in accordance with FERC Books of Accounts and
consistent with the principles of maintaining Capital Accounts in
accordance with Regulations Section 1.704-1(b)(2)(iv), except
that Profit and Loss shall not include items of income, gain and
expense that are specially allocated pursuant to Sections 6.1(b),
6.1(c) or 6.1(d). All allocations of income, profit, gain, loss
and expense (and all items contained therein) for federal income
tax purposes shall be identical to all allocations of such items
set forth in this Section 6.1, except as otherwise required by
Code Section 704(c) and Regulations Section 1.704-1(b)(4). The
Corporate Manager, in consultation with the Members, shall elect
the initial methods for allocating items of income, gain and
expense as required by Code Section 704(c) with respect to the
properties acquired by the Company pursuant to the Asset
Contribution Agreements. With respect to (i) other properties
acquired by the Company and (ii) any amounts required to be taken
into account using Code Section 704(c) principles due to a
revaluation of Company assets pursuant to Section 3.9(b), the
Corporate Manager shall have the authority, as provided in
Section 5.6, to elect the method to be used by the Company for
allocating items of income, gain and expense as required by Code
Section 704(c) with respect to such properties, and such election
shall be binding on all Members.
SECTION 6.2 Cash Available for Distribution.
--------------------------------
(a) Distributions of Cash Available for Distribution to the
Members shall be made in accordance with their respective
Percentage Interests and at such times and in such amounts as the
Corporate Manager shall determine.
(i) The Corporate Manager hereby declares its intention, subject
to the requirements of the Act, to distribute Cash Available
for Distribution to the Members on a quarterly basis in an
amount approximating 80% of the Company's Profits for such
quarter.
(ii) Until the IPO, the record date for a distribution shall be
at the end of a quarter of a fiscal year of the Company, and
the payment date within 15 days thereafter. Upon an IPO,
the Corporate Manager shall set such record dates and
payment dates as may be required or appropriate, consistent
with the distribution of cash on a quarterly basis.
(b) Any Member that loses the right to use Equity Accounting
may, prior to October 1 of any year, notify the Corporate Manager
that such Member has elected to receive a distribution of Cash
Available for Distribution equal to 100% of its allocable share
of the Company's Profits for that year. Any Member may provide
the Corporate Manager with standing instructions to that effect
that shall prevail unless and until revoked by such Member.
(c) For any year during which a Member's election pursuant to
Section 6.2(b) is in effect, the Corporate Manager will, subject
to the requirements of the Act and Section 6.2(f), distribute
Cash Available for Distribution to such Member during that year
in an amount approximating 100% of such Member's allocable share
of Profits for the year.
(d) Any amounts received by a Member pursuant to Section 6.2(c)
that are in excess of amounts distributed pursuant to Section
6.2(a) shall be applied in redemption of all or a portion of the
Member Units held by such Member, effective as of the end of the
preceding calendar quarter. For purposes of this Section 6.2(d),
each Member Unit shall be valued based upon the aggregate Net
Book Value as of the end of the preceding calendar quarter,
divided by the number of Member Units outstanding as of the end
of the preceding calendar quarter.
(e) The Members acknowledge that the Corporate Manager's
estimate of quarterly Profits of the Company may not be precise,
and consequently, recognize the right and obligation of the
Corporate Manager to make an adjusting distribution annually once
the Company's audited financial statements have been prepared.
(f) If the Company has insufficient Cash Available for
Distribution to pay all amounts pursuant to Section 6.2(a) and
Section 6.2(c), it shall pay amounts pursuant to Section 6.2(a)
before paying any amounts pursuant to Section 6.2(c). The
Company shall use its best efforts to pay amounts pursuant to
Section 6.2(c), but shall not be obligated to borrow funds to
enable it to do so. The Company shall pay such amounts as soon
as it is able to do so, subject to the prior obligation to make
distributions pursuant to Section 6.2(a).
(g) If a new or existing Member acquires an additional
Membership Interest in exchange for a Capital Contribution on any
date other than the record date for a Company distribution (the
"Company Record Date"), the cash distribution attributable to such
additional Membership Interest relating to the Company Record
Date next following the issuance of such additional Membership
Interest shall be reduced in the proportion to (i) the number of
days that such additional Membership Interest is not held by such
Member bears to (ii) the number of days between such Company
Record Date and the immediately preceding Company Record Date.
(h) In no event may a Member receive a distribution of cash with
respect to a Member Unit if such Member is entitled to receive a
cash dividend as the holder of record of a Company Share for
which all or part of such Member Unit has been or will be
redeemed.
SECTION 6.3 No Right to Distributions in Kind.
-----------------------------------
No Member shall be entitled to demand property other than
cash in connection with any distributions by the Company. No
Member shall be entitled to withdraw from the Company in
accordance with Section 183.0802(3)(a) of the Act, and except as
provided in Section 6.2(c), no Member shall be entitled to obtain
the return of any part of its Capital Contribution in the Company.
SECTION 6.4 Limitations on Distributions.
-----------------------------
Notwithstanding any of the provisions of this Article VI, no
Member shall have the right to receive from the Company, and the
Company shall not have the right to make, a distribution to any
Member, if after giving effect to the distribution, any of the
following would occur:
(a) The Company would be unable to pay its debts as they become
due in the usual course of business; or
(b) The fair value of the Company's total assets would be less
than the sum of its total liabilities plus the amount that would
be needed, if the Company were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution
of Members, if any, whose preferential rights are superior to
those of the Members receiving the distribution.
SECTION 6.5 Distributions Upon Liquidation.
-------------------------------
Upon liquidation of the Company in connection with a
Terminating Capital Transaction or otherwise, after payment of,
or adequate provision for, debts and obligations of the Company,
any remaining assets of the Company shall be distributed to the
Members in the following order of priority:
(a) First, toward satisfaction of all outstanding debts and
other obligations of the Company;
(b) Second, to return to each Tax-Exempt Member the difference,
if any, between its Tax-Exempt Investment Amount and its
Tax-Exempt Ownership Interest; and
(c) Third, the balance, if any, to the Members with positive
Capital Accounts in accordance with, and proportional to, their
respective positive Capital Account balances.
For purposes of this Section 6.5, the Capital Account of each
Member shall be determined after the following adjustments: (i)
all adjustments made in accordance with Sections 6.1 and 6.2
resulting from Company operations and from all sales and
dispositions of all or any part of the Company's assets, (ii) the
distribution to Tax-Exempt Members as provided in Section 6.5(b),
and (iii) allocating to the Corporate Manager an amount equal to
the excess of (A) the value of the Member Units it received in
exchange for Capital Contributions of the proceeds of an issuance
of Company Shares over (B) the actual amount of its Capital
Contributions (i.e., as a result of any underwriters' discount or
other expenses paid or incurred in connection with such
issuance). Any distributions pursuant to this Section 6.5 shall
be made by the end of the Company's taxable year in which the
liquidation occurs (or, if later, within 90 days after the date
of the liquidation). To the extent deemed advisable by the
Corporate Manager, appropriate arrangements (including the use of
a liquidating trust) may be made to assure that adequate funds
are available to pay any contingent debts or obligations.
The distributions set forth in this Section 6.5 are intended to
comply with the requirement of Regulations Section
1.704-1(b)(2)(ii)(b)(2) that liquidating distributions be made in
accordance with positive Capital Accounts. It is intended that
such distributions will result in the Members receiving aggregate
distributions equal to the amount of distributions that would
have been received if the liquidating distributions were made
pursuant to Section 6.2. However, if the balances in the Capital
Accounts do not result in such intention being satisfied, items
of income, gain, loss, deduction and credit will be reallocated
among the Members for the fiscal year of the liquidation so as to
cause the balances in the Capital Accounts to be, to the extent
possible, in the amounts necessary so that such result is
achieved.
SECTION 6.6 Substantial Economic Effect.
----------------------------
It is the intent of the Members that the allocations of
Profit and Loss under the Agreement have substantial economic
effect within the meaning of Code Section 704(b) as interpreted
by the Regulations promulgated pursuant thereto. Article VI and
other relevant provisions of this Agreement shall be interpreted
in a manner consistent with such intent.
SECTION 6.7 Quarter-End Convention.
-----------------------
For purposes of this Agreement, all distributions (other
than a distribution in complete redemption of a Member's Member
Interest) shall be deemed to be made at the end of the quarter to
which they relate; provided, however, that the proceeds from any
debt financing shall be deemed to be made at the end of the month
to which they relate.
ARTICLE VII
CHANGES IN CORPORATE MANAGER
SECTION 7.1 Transfer of the Corporate Manager's Member
-------------------------------------------------
Interest.
---------
(a) The Corporate Manager shall not transfer all or any portion
of its Member Interest or withdraw as Corporate Manager except as
provided in or in connection with a transaction contemplated by
Section 7.1(b).
(b) Except as otherwise provided in Section 7.1(c) hereof, the
Corporate Manager shall not engage in any merger, consolidation
or other combination with or into another Person or sale of all
or substantially all of its assets, in each case which results in
a change of control of the Corporate Manager (a "Transaction"),
unless:
(i) With respect to a Transaction during the first three years
following the Operations Date, the consent of all the
Non-Managing Members that are Voting Members is obtained,
and with respect to a Transaction occurring subsequent to
the third anniversary of the Operations Date, the consent of
Non-Managing Members that are Voting Members holding more
than 50% of the Percentage Interests of the Non-Managing
Members that are Voting Members is obtained;
(ii) as a result of such Transaction all Non-Managing Members
will receive for each Member Unit an amount of cash,
securities or other property equal to the product of the
Conversion Factor and the greatest amount of cash,
securities or other property paid in the Transaction to a
holder of one Corporate Share in consideration of one
Corporate Share, provided that if, in connection with the
Transaction, a purchase, tender or exchange offer ("Offer")
shall have been made to and accepted by the holders of more
than 50% of the outstanding Corporate Shares, each holder of
Member Units shall be given the option to exchange its
Member Units for the greatest amount of cash, securities or
other property that a Non-Managing Member would have
received had it (A) exercised its Redemption Right and (B)
sold, tendered or exchanged pursuant to the Offer the
Corporate Shares received upon exercise of the Redemption
Right immediately prior to the expiration of the Offer; or
(iii) the Corporate Manager is the surviving entity in the
Transaction and either (A) the holders of Corporate Shares
do not receive cash, securities or other property in the
Transaction or (B) all Non-Managing Members (other than the
Corporate Manager or any subsidiary) receive an amount of
cash, securities or other property (expressed as an amount
per Corporate Share) that is no less than the product of the
Conversion Factor and the greatest amount of cash,
securities or other property (expressed as an amount per
Corporate Share) received in the Transaction by any holder
of Corporate Shares.
(c) Notwithstanding Section 7.1(b), the Corporate Manager may
merge with or into or consolidate with another entity if
immediately after such merger or consolidation (i) substantially
all of the assets of the successor or surviving entity (the
"Survivor"), other than Member Units held by the Corporate
Manager, are contributed, directly or indirectly, to the Company
as a Capital Contribution in exchange for Member Units with a
fair market value equal to the value of the assets so contributed
as determined by the Survivor in good faith and (ii) the Survivor
expressly agrees to assume all obligations of the Corporate
Manager hereunder. Upon such contribution and assumption, the
Survivor shall have the right and duty to amend this Agreement as
set forth in this Section 7.1(c). The Survivor shall in good
faith arrive at a new method for the calculation of the Cash
Amount, the Corporate Shares Amount and Conversion Factor for a
Member Unit after any such merger or consolidation so as to
approximate the existing method for such calculation as closely
as reasonably possible. Such calculation shall take into
account, among other things, the kind and amount of securities,
cash and other property that was receivable upon such merger or
consolidation by a holder of Corporate Shares or options,
warrants or other rights relating thereto, and to which a holder
of Member Units could have acquired had such Member Units been
exchanged immediately prior to such merger or consolidation.
Such amendment to this Agreement shall provide for adjustment to
such method of calculation, which shall be as nearly equivalent
as may be practicable to the adjustments provided for with
respect to the Conversion Factor. The Survivor also shall in
good faith modify the definition of Corporate Shares and make
such amendments to Section 8.4 hereof so as to approximate the
existing rights and obligations set forth in Section 8.4 as
closely as reasonably possible. The above provisions of this
Section 7.1 shall similarly apply to successive mergers or
consolidations permitted hereunder.
In respect of any transaction described in the preceding
paragraph, the Corporate Manager is required to use its
commercially reasonable efforts to structure such transaction to
avoid causing the Non-Managing Members to recognize income or
gain for federal income tax purposes by virtue of the occurrence
of or their participation in such transaction, provided such
efforts are consistent with the exercise of the board of the
Corporate Manager's fiduciary duties to the shareholders of the
Corporate Manager under applicable law.
(d) Notwithstanding Section 7.1(b),
(i) a Corporate Manager may transfer all or any portion of its
Member Interest to (A) a wholly-owned subsidiary of such
Corporate Manager or (B) the owners of all of the ownership
interests of such Corporate Manager and following a transfer
of all of its Member Interest, may withdraw as Corporate
Manager; and
(ii) the Corporate Manager may engage in a transaction required
by law or by the rules of any national securities exchange
on which the Corporate Shares are listed to be submitted to
the vote of the holders of the Corporate Shares.
SECTION 7.2 Admission of a Substitute or Additional Corporate
---------------------------------------------------
Manager.
--------
A Person shall be admitted as a substitute or additional
Corporate Manager of the Company only if the following terms and
conditions are satisfied:
(a) the Person to be admitted as a substitute or additional
Corporate Manager shall have accepted and agreed to be bound by
all the terms and provisions of this Agreement by executing a
counterpart thereof and such other documents or instruments as
may be required or appropriate in order to effect the admission
of such Person as a Corporate Manager and all other actions
required by herein in connection with such admission shall have
been performed; and
(b) if the Person to be admitted as a substitute or additional
Corporate Manager is an entity, it shall have provided the
Company with evidence satisfactory to counsel for the Company of
such Person's authority to become a Corporate Manager and to be
bound by the terms and provisions of this Agreement.
SECTION 7.3 Effect of Bankruptcy, Withdrawal or Liquidation of
--------------------------------------------------
the Corporate Manager.
----------------------
(a) Upon the occurrence of an Event of Bankruptcy as to the
Corporate Manager (and its removal pursuant to Section 7.4(a)
hereof) or the withdrawal, removal or liquidation of the
Corporate Manager, the Company shall be dissolved and terminated
unless the Company is continued pursuant to Section 7.3(b)
hereof. The merger of the Corporate Manager with or into any
entity that is admitted as a substitute or successor Corporate
Manager pursuant to Section 7.2 hereof shall not be deemed to be
the withdrawal, liquidation or removal of the Corporate Manager.
(b) Following the occurrence of an Event of Bankruptcy as to the
Corporate Manager (and its removal pursuant to Section 7.4(a)
hereof) or the withdrawal, removal or liquidation of the
Corporate Manager, the Non-Managing Members that are Voting
Members, within 90 days after such occurrence, may elect to
continue the business of the Company by selecting, subject to
Section 7.2 hereof and any other provisions of this Agreement, a
substitute Corporate Manager by consent of a majority in interest
of the Non-Managing Members that are Voting Members. If the
Non-Managing Members elect to continue the business of the
Company and admit a substitute Corporate Manager, the
relationship with the Members and of any Person who has acquired
an interest of a Member in the Company shall be governed by this
Agreement.
SECTION 7.4 Removal of a Corporate Manager.
-------------------------------
(a) Except upon unanimous agreement of the Members, the
Non-Managing Members may not remove the Corporate Manager, with
or without cause. Upon the occurrence of an Event of Bankruptcy
as to the Corporate Manager, the Corporate Manager shall be
deemed to be removed automatically.
(b) If a Corporate Manager has been removed pursuant to this
Section 7.4 and the Company is continued pursuant to Section 7.3
hereof, such Corporate Manager shall promptly transfer and assign
its Member Interest in the Company to the substitute Corporate
Manager approved by a majority in interest of the Non-Managing
Members that are Voting Members in accordance with Section 7.3(b)
hereof and otherwise admitted to the Company in accordance with
Section 7.2 hereof. At the time of assignment, the removed
Corporate Manager shall be entitled to receive from the
substitute Corporate Manager the fair market value of the Member
Interest of such removed Corporate Manager as reduced by any
damages caused to the Company by such Corporate Manager. Such
fair market value shall be determined by an appraiser mutually
agreed upon by the Corporate Manager and a majority in interest
of the Non-Managing Members that are Voting Members within 10
days following the removal of the Corporate Manager. In the
event that the parties are unable to agree upon an appraiser, the
removed Corporate Manager and a majority in interest of the
Non-Managing Members that are Voting Members each shall select an
appraiser. Each such appraiser shall complete an appraisal of
the fair market value of the removed Corporate Manager's Member
Interest within 30 days of the Corporate Manager's removal, and
the fair market value of the removed Corporate Manager's Member
Interest shall be the average of the two appraisals; provided,
however, that if the higher appraisal exceeds the lower appraisal
by more than 20% of the amount of the lower appraisal, the two
appraisers, no later than 40 days after the removal of the
Corporate Manager, shall select a third appraiser who shall
complete an appraisal of the fair market value of the removed
Corporate Manager's Member Interest no later than 60 days after
the removal of the Corporate Manager. In such case, the fair
market value of the removed Corporate Manager's Member Interest
shall be the average of the two appraisals closest in value.
(c) The Member Interest of a removed Corporate Manager, during
the time after bankruptcy until transfer under Section 7.4(b),
shall be converted to that of a special Non-Managing Member;
provided, however, such removed Corporate Manager shall not have
any rights to participate in the management and affairs of the
Company, and shall not be entitled to any portion of the income,
expense, profit, gain or loss allocations or cash distributions
allocable or payable, as the case may be, to the Non-Managing
Member. Instead, such removed Corporate Manager shall receive
and be entitled only to retain distributions or allocations of
such items that it would have been entitled to receive in its
capacity as Corporate Manager, until the transfer is effective
pursuant to Section 7.4(b).
(d) All Members shall have given and hereby do give such
consents, shall take such actions and shall execute such
documents as shall be legally necessary and sufficient to effect
all the foregoing provisions of this Section.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF THE NON-MANAGING MEMBERS
SECTION 8.1 Management of the Company.
--------------------------
Except to the extent provided in Section 10.1, the
Non-Managing Members shall not participate in the management or
control of Company business nor shall they transact any business
for the Company, nor shall they have the power to sign for or
bind the Company, such powers being vested solely and exclusively
in the Corporate Manager.
SECTION 8.2 Power of Attorney.
------------------
Each Non-Managing Member hereby irrevocably appoints the
Corporate Manager its true and lawful attorney-in-fact, who may
act for each Member and in its name, place and stead, and for its
use and benefit, to sign, acknowledge, swear to, deliver, file or
record, at the appropriate public offices, any and all documents,
certificates and instruments as may be deemed necessary or
desirable by the Corporate Manager to carry out fully the
provisions of this Agreement and the Act in accordance with their
terms, which power of attorney is coupled with an interest and
shall survive the death, dissolution or legal incapacity of the
Non-Managing Member, or the transfer by the Member of any part or
all of its Member Interest.
SECTION 8.3 Limitation on Liability of Non-Managing Members.
------------------------------------------------
No Non-Managing Member shall be liable for any debts,
liabilities, contracts or obligations of the Company. A
Non-Managing Member shall be liable to the Company only to make
payments of its Capital Contribution, if any, as and when due
hereunder. After its Capital Contribution is fully paid, no
Non-Managing Member shall, except as otherwise required by the
Act, be required to make any further Capital Contributions or
other payments or lend any funds to the Company.
SECTION 8.4 Redemption Right.
-----------------
(a) Subject to Sections 8.4(b), 8.4(c), and 8.4(d), each
Non-Managing Member shall have the right, commencing on the third
anniversary of the Operations Date (the "Redemption Right"), to
require the Company to redeem on a Specified Redemption Date all
or a portion of the Member Units held by such Non-Managing Member
at a redemption price equal to and in the form of the Cash Amount
to be paid by the Company, provided that such Member Units shall
have been outstanding for at least twelve months immediately
prior to such third anniversary. The Redemption Right shall be
exercised pursuant to a Notice of Redemption delivered to the
Company (with a copy to the Corporate Manager) by the
Non-Managing Member who is exercising the Redemption Right (the
"Redeeming Member"); provided, however, that the Company shall not
be obligated to satisfy such Redemption Right if the Corporate
Manager elects to purchase the Member Units subject to the Notice
of Redemption; and provided, further, that no Non-Managing Member
may deliver more than two Notices of Redemption during each
calendar year. A Non-Managing Member may not exercise the
Redemption Right for less than 5,000 Member Units or, if such
Non-Managing Members holds less than 5,000 Member Units, all of
the Member Units held by such Member. The Redeeming Member shall
have no right, with respect to any Member Units so redeemed, to
receive any distribution paid with respect to Member Units if the
record date for such distribution is on or after the Specified
Redemption Date.
(b) Notwithstanding the provisions of Section 8.4(a), a
Non-Managing Member that exercises the Redemption Right shall be
deemed to have offered to sell the Member Units described in the
Notice of Redemption to the Corporate Manager, and the Corporate
Manager may, in its sole and absolute discretion, elect to
purchase directly and acquire such Member Units by paying to the
Redeeming Member either the Cash Amount or the Corporate Shares
Amount, as elected by the Corporate Manager (in its sole and
absolute discretion), on the Specified Redemption Date, whereupon
the Corporate Manager shall acquire the Member Units offered for
redemption by the Redeeming Member and shall be treated for all
purposes of this Agreement as the owner of such Member Units. If
the Corporate Manager shall elect to exercise its right to
purchase Member Units under this Section 8.4(b) with respect to a
Notice of Redemption, it shall so notify the Redeeming Member
within five Business Days after the receipt by the Corporate
Manager of such Notice of Redemption.
In the event the Corporate Manager shall exercise its right
to purchase Member Units with respect to the exercise of a
Redemption Right in the manner described in the first sentence of
this Section 8.4(b), the Company shall have no obligation to pay
any amount to the Redeeming Member with respect to such Redeeming
Member's exercise of such Redemption Right, and each of the
Redeeming Member, the Company and the Corporate Manager shall
treat the transaction between the Corporate Manager and the
Redeeming Member for federal income tax purposes as a sale of the
Redeeming Member's Units to the Corporate Manager. Each
Redeeming Member agrees to execute such documents as the
Corporate Manager may reasonably require in connection with the
issuance of Corporate Shares upon exercise of the Redemption
Right.
(c) Any Cash Amount to be paid to a Redeeming Member pursuant to
this Section 8.4 shall be paid on the Specified Redemption Date;
provided, however, that the Corporate Manager may elect to cause
the Specified Redemption Date to be delayed for up to an
additional 180 days to the extent required for the Corporate
Manager to cause additional Corporate Shares to be issued to
provide financing to be used to make such payment of the Cash
Amount. Notwithstanding the foregoing, the Corporate Manager
agrees to use its best efforts to cause the closing of the
acquisition of redeemed Member Units hereunder to occur as
quickly as reasonably possible.
(d) The exercise by Members of their Redemption Rights shall be
subject to the provisions of Section 9.2(c). The rights provided
by this Section 8.4 shall be in lieu of any rights provided to
the Members under Wisconsin Statutes Section 196.485(3m)(c)4.
SECTION 8.5 Registration.
-------------
(a) Registration of the Corporate Shares. Upon the earlier of
the fourth anniversary of the Operations Date or the one-year
anniversary of the IPO, the Corporate Manager agrees to file with
the Commission a registration statement under the Securities Act
(a "Registration Statement") covering the resale of all of the
Corporate Shares that may be issued upon redemption of such
Member Units pursuant to Section 8.4 ("Redemption Shares") in the
event that the Non-Managing Members, as a group, request
registration covering the resale of at least 1,000,000 Corporate
Shares; provided however, that only two such registrations may
occur each year. Notwithstanding the foregoing, the Corporate
Manager shall not be obligated to effect a registration pursuant
to this Section 8.5(a) during the period starting with the date
45 days prior to the Corporate Manager's estimated date of filing
of, and ending on a date 180 days following the effective date
of, a registration statement pertaining to an underwritten public
offering of Corporate Shares for the account of the Corporate
Manager. If, while a registration request is pending pursuant to
this Section 8.5(a), the Corporate Manager has determined in good
faith that (i) the filing of a registration statement could
jeopardize or delay any contemplated material transaction other
than a financing plan involving the Corporate Manager or would
require the disclosure of material information that the Corporate
Manager had a bona fide business purpose for preserving as
confidential; (ii) the Corporate Manager then is unable to comply
with requirements of the Commission applicable to the requested
registration (notwithstanding its best efforts to so comply) or
(iii) or the Corporate Manager has not received any state
approval, the Corporate Manager shall not be required to effect a
registration pursuant to this Section 8.5(a) until the earlier of
(x) the date upon which such contemplated transaction is
completed or abandoned or such material information is otherwise
disclosed to the public or ceases to be material or the Corporate
Manager is able to so comply with applicable Commission
requirements or received state approvals, as the case may be, or
(y) 45 days after the Corporate Manager makes such good-faith
determination. The Non-Managing Members also may request
"piggyback" registration of their Redemption Shares. Upon any of
such requests, the Corporate Manager will:
(A) provide written notice of such request within 10 days of the
receipt of such request to the Non-Managing Members not
a party to the request;
(B) use its best efforts to have such Registration Statement
declared effective by the Commission and to keep it
effective for a period of 180 days (the "Effective
Period");
(C) give each holder of Redemption Shares, their underwriters,
if any, and their counsel and accountants a reasonable
opportunity to participate in the preparation of the
Registration Statement and give such persons reasonable
access to its books, records, officers and independent
public accountants;
(D) furnish to each holder of Redemption Shares such numbers of
copies of prospectuses, and supplements or amendments
thereto, and such other documents as such holder
reasonably requests;
(E) register or qualify the securities covered by the
Registration Statement under the securities or blue sky
laws of such jurisdictions within the United States as
any holder of Redemption Shares shall reasonably
request, and do such other reasonable acts and things
as may be required of it to enable such holders to
consummate the sale or other disposition in such
jurisdictions of the Redemption Shares; provided,
however, that the Corporate Manager shall not be
required to (i) qualify as a foreign corporation or
consent to a general or unlimited service or process in
any jurisdictions in which it would not otherwise be
required to be qualified or so consent or (ii) qualify
as a dealer in securities;
(F) furnish, at the request of the holders of Redemption Shares,
on the date Redemption Shares are delivered to the
underwriters for sale pursuant to such registration,
or, if such Redemption Shares are not being sold
through underwriters, on the date the Registration
Statement with respect to such Redemption Shares
becomes effective, (A) a securities opinion of counsel
representing the Corporate Manager for the purposes of
such registration covering such legal matters as are
customarily included in such opinions and (B) letters
of the firm of independent public accountants that
certified the financial statements included in the
Registration Statement, addressed to the underwriters,
covering substantially the same matters as are
customarily covered in accountants' letters delivered
to underwriters in underwritten public offerings of
securities and such other financial matters as such
holders (or the underwriters, if any) may reasonably
request;
(G) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission;
(H) enter into and perform an underwriting agreement with the
managing underwriter, if any, selected as provided
herein, containing customary (A) terms of offer and
sale of the securities, payment provisions,
underwriting discounts and commissions and (B)
representations, warranties, covenants, indemnities,
terms and conditions; and
(I) keep the holders of the Redemption Shares advised as to the
initiation and progress of the Registration Statement.
The Corporate Manager further agrees to supplement or make
amendments to each Registration Statement, if required by the
Commission's rules, regulations or instructions applicable to the
registration form utilized by the Corporate Manager or by the
Securities Act or rules and regulations thereunder for such
Registration Statement. Notwithstanding the foregoing, if for any
reason the effectiveness of a Registration Statement is delayed
or suspended or it ceases to be available for sales of Redemption
Shares thereunder, the Effective Period shall be extended by the
aggregate number of days of such delay, suspension or
unavailability.
(b) Listing on Securities Exchange. If the Corporate Manager
shall list or maintain the listing of any Corporate Shares on any
securities exchange or national market system, it will at its
expense and as necessary to permit the registration and sale of
the Redemption Shares hereunder, list thereon, maintain and, when
necessary, increase such listing to include such Redemption
Shares.
(c) Registration Not Required. Notwithstanding the foregoing,
the Corporate Manager shall not be required to file or maintain
the effectiveness of a registration statement relating to
Redemption Shares after the first date upon which, in the opinion
of counsel to the Corporate Manager, all of the Redemption Shares
covered thereby could be sold by the holders thereof in any
period of three months pursuant to Rule 144 under the Securities
Act, or any successor rule thereto.
(d) Allocation of Expenses. The Company shall pay all expenses
in connection with the Registration Statement, including without
limitation (i) all expenses incident to filing with the National
Association of Securities Dealers, Inc., (ii) registration fees,
(iii) printing expenses, (iv) accounting and legal fees and
expenses, except to the extent holders of Redemption Shares elect
to engage accountants or attorneys in addition to the accountants
and attorneys engaged by the Corporate Manager or the Company,
(v) accounting expenses incident to or required by any such
registration or qualification and (vi) expenses of complying with
the securities or blue sky laws of any jurisdictions in
connection with such registration or qualification; provided,
however, the Company shall not be liable for (A) any discounts or
commissions to any underwriter or broker attributable to the sale
of Redemption Shares, (B) the fees and expenses of counsel to the
Non-Managing Members or (C) any fees or expenses incurred by
holders of Redemption Shares in connection with such registration
that, according to the written instructions of any regulatory
authority, the Company is not permitted to pay.
(e) It shall be a condition precedent to the obligations of the
Corporate Manager to take any action pursuant to this Section 8.5
that the Non-Managing Members proposing to sell Corporate Shares
shall furnish to the Corporate Manager such information regarding
them, the Corporate Shares held by them, and the intended method
of disposition of such securities and such other matters as may
be required by the 1933 Act and other applicable laws and
regulations as the Corporate Manager shall request and as shall
be required in connection with the action to be taken by the
Corporate Manager.
(f) Indemnification.
(i) In connection with the Registration Statement, the Corporate
Manager and the Company agree to indemnify holders of
Redemption Shares within the meaning of Section 15 of the
Securities Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of
investigation) caused by any untrue, or alleged untrue,
statement of a material fact contained in the Registration
Statement, preliminary prospectus or prospectus (as amended
or supplemented if the Corporate Manager shall have
furnished any amendments or supplements thereto) or caused
by any omission or alleged omission, to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar
as such losses, claims, damages, liabilities or expenses are
caused by any untrue statement, alleged untrue statement,
omission, or alleged omission based upon information
furnished to the Corporate Manager expressly for use
therein. The Corporate Manager and each officer, director
and controlling person of the Corporate Manager shall be
indemnified by each holder of Redemption Shares covered by
the Registration Statement for all such losses, claims,
damages, liabilities and expenses (including reasonable
costs of investigation) caused by any such untrue, or
alleged untrue, statement or any such omission, or alleged
omission, based upon information furnished to the Corporate
Manager expressly for use therein in a writing signed by the
holder.
(ii) Promptly upon receipt by a party indemnified under this
Section 8.6(f) of notice of the commencement of any action
against such indemnified party in respect of which indemnity
or reimbursement may be sought against any indemnifying
party under this Section 8.5(f), such indemnified party
shall notify the Corporate Manager in writing of the
commencement of such action, but the failure to so notify
the Corporate Manager shall not relieve it of any liability
that it may have to any indemnified party otherwise than
under this Section 8.5(f) unless such failure shall
materially adversely affect the defense of such action. In
case notice of commencement of any such action shall be
given to the Corporate Manager as above provided, the
Corporate Manager shall be entitled to participate in and,
to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
of such action at its own expense, with counsel chosen by it
and reasonably satisfactory to such indemnified party. The
indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel (other
than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the Corporate Manager or the
Company agrees to pay the same, (ii) the Corporate Manager
fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party or (iii)
the named parties to any such action (including any
impleaded parties) have been advised by such counsel that
representation of such indemnified party and the Corporate
Manager by the same counsel would be inappropriate under
applicable standards of professional conduct (in which case
the Corporate Manager shall not have the right to assume the
defense of such action on behalf of such indemnified
party). No indemnifying party shall be liable for any
settlement entered into without its consent.
(g) Contribution.
(i) If for any reason the indemnification provisions
contemplated by Section 8.5(f) are either unavailable or
insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities
referred to therein, then the party that would otherwise be
required to provide indemnification or the indemnifying
party (in either case, for purposes of this Section 8.5(g),
the "Indemnifying Party") in respect of such losses, claims,
damages or liabilities, shall contribute to the amount paid
or payable by the party that would otherwise be entitled to
indemnification or the indemnified party (in either case,
for purposes of this Section 8.5(g), the "Indemnified
Party") as a result of such losses, claims, damages,
liabilities or expense, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and
the Indemnified Party, as well as any other relevant
equitable considerations. The relative fault of the
Indemnifying Party and Indemnified Party shall be determined
by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact related to
information supplied by the Indemnifying Party or
Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct
or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses
reasonably incurred by such party. In no event shall any
holder of Redemption Shares covered by the Registration
Statement be required to contribute an amount greater than
the dollar amount of the proceeds received by such holder
from the sale of Redemption Shares pursuant to the
registration giving rise to the liability.
(ii) The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 8.5(g)
were determined by pro rata allocation (even if the holders
or any underwriters or all of them were treated as one
entity for such purpose) or by any other method of
allocation that does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. No person or entity determined to have committed
a fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution
from any person or entity who was not guilty of such
fraudulent misrepresentation.
(iii) The contribution provided for in this Section 8.5(g) shall
survive the termination of this Agreement and shall remain
in full force and effect regardless of any investigation
made by or on behalf of any Indemnified Party.
ARTICLE IX
TRANSFER
SECTION 9.1 Purchase Not for Distribution.
------------------------------
(a) Each Member hereby represents and warrants to the Company
that the acquisition of its Member Interest is made as a
principal for its account and not with a view to the resale or
distribution of such Member Interest.
(b) Each Member agrees that it will not sell, assign or
otherwise transfer its Member Interest or any fraction thereof,
whether voluntarily or by operation of law or at judicial sale or
otherwise, to any Person who does not make the representations
and warranties to the Company set forth in Section 9.1(a) above
and similarly agree not to sell, assign or transfer such Member
Interest or fraction thereof to any Person who does not similarly
represent, warrant and agree.
SECTION 9.2 Restrictions on Transfer of Member Interests.
---------------------------------------------
(a) Except as permitted pursuant to Section 9.3, no Member may
offer, sell, assign, or otherwise transfer all or any portion of
its Member Interest, whether voluntarily or by operation of law
or at judicial sale or otherwise (collectively, a "Transfer"),
until the third anniversary of the Operations Date; provided,
however, that the foregoing shall not prohibit the pledge or
hypothecation of any Member's interest for financing purposes.
Any such purported Transfer shall be considered to be null and
void ab initio and shall not be given effect.
(b) Prior to the consummation of any Transfer under this Article
IX, the transferor and/or the transferee shall deliver to the
Corporate Manager such opinions, certificates and other documents
as the Corporate Manager shall reasonably request in connection
with such Transfer.
(c) Notwithstanding any other provision of this Agreement,
including the provisions of Section 8.4 and Section 9.3, no
Member may effect a Transfer of its Member Interest, in whole or
in part:
(i) If, in the opinion of legal counsel for the Company, such
proposed Transfer would require the registration of the
Member Interest under the Securities Act or would otherwise
violate any applicable federal or state securities or blue
sky law (including investment suitability standards);
(ii) If in the opinion of legal counsel for the Company, such
Transfer would cause the Company to be regarded as a
publicly-traded partnership under Code Section 7704; or
(iii) If such proposed Transfer would cause a termination of the
partnership for tax purposes under Code Section 708(b)(1)(B)
(because of the Transfer in any 12-month period of 50% or
more of the capital and profits of the Company).
(d) Any Member that desires to Transfer all or any portion of
its Member Interest other than a pledge or hypothecation of
Member Interests for financing purposes (including exchanging
Member Units for Corporate Shares) shall notify the Corporate
Manager of its intention to Transfer, the number of Member Units
proposed to be sold, and the date on which the Transfer is
proposed to occur, which shall be at least 45 days after the date
of such notice. The Corporate Manager shall thereupon promptly
provide such information to the other Members. Any Member that
proposes to sell its Members Interests within the ensuing 12
months after the proposed date of sale shall notify the Corporate
Manager of the number of Member Units proposed to be sold by such
Member.
(i) If the total number of Member Units proposed to be
transferred by all the Members is less than 50% of the total
number of outstanding Member Units, then all such Members
shall be entitled to Transfer the Member Units proposed to
be transferred by them.
(ii) If the total number of Member Units proposed to be
transferred by all the Members equals or exceeds 50% of the
total number of outstanding Member Units, then each such
Member shall be entitled to Transfer that number of Units
proposed to be transferred by it multiplied by a fraction
the numerator of which is such Member's Percentage Interest
and the denominator of which is all such Members' Percentage
Interests.
(iii) If any Member does not Transfer at least one-half the number
of Units proposed to be transferred by it within 90 days of
the date specified in such Member's notice to the Corporate
Manager, such Member will not be permitted to sell any
Member Units owned by it for the 12-month period commencing
on the date specified in such Member's notice to the
Corporate Manager.
SECTION 9.3 Permitted Transfers.
--------------------
(a) During the first three years following the Operations Date,
any Member may offer all or any portion of its Member Interest to
other Members at a price per Member Unit equal to the quotient of
the Net Book Value as of the end of the most recent calendar
quarter divided by the number of Member Units outstanding as of
such date.
(i) Upon the request of any Member specifying the number of
Member Units proposed to be sold (which shall be
irrevocable), the Company shall advise the other Members of
the proposed sale and the number of Member Units allocated
for purchase by each Member based upon their Percentage
Interests, exclusive of the selling Member. Each Member
shall have 30 days to indicate its interest in purchasing
all or a portion of the number of Member Units allocated to
it. If any Member Units remain unsold, the Company shall
advise the remaining Members, which shall have the right to
purchase the remaining Member Units in accordance with their
respective Percentage Interests exclusive of the selling
Member and non-purchasing Members.
(ii) The closing for any such sale shall occur within 45 days
following the initial notice to the Members of the sale.
(b) Subject to any required regulatory approvals,
(i) any Member may transfer its Member Interest, at any time, to
a Person, so long as such Person is and remains 100%
directly or indirectly owned by the Member, the related
Electric Utility (if different than the Member) or the
related holding company. In the event that prior to the
third anniversary of the Operations Date, such Person, or
any other direct or indirect parent of such Person, is
proposed to be sold, the interest of such Person in the
Company shall first be transferred to a Person 100% directly
or indirectly owned by the related Electric Utility or
holding company; and
(ii) with respect to a Member that has members, such Member may
transfer its Membership Interest to its members or to
another entity owned by such Members.
(c) A Member may Transfer its Member Interest in connection with
such Member's merger, consolidation, or sale of all or
substantially all of its assets, so long as the surviving or
purchasing entity shall execute a counterpart of this Agreement
to evidence its assent hereto.
SECTION 9.4 Admission of Substitute Member.
--------------------------------
(a) Subject to the other provisions of this Article IX, an
assignee of the Member Interest of a Non-Managing Member (which
shall be understood to include any purchaser, transferee, donee
or other recipient of any disposition of such Member Interest)
shall be deemed admitted as a Member of the Company only with the
consent of the Corporate Manager (which shall not be unreasonably
withheld) and upon the satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound by
the terms and provisions of this Agreement by executing a
counterpart or an amendment thereof, including a revised
Schedule A, and such other documents or instruments as the
------------
Corporate Manager may require in order to effect the
admission of such Person as a Member.
(ii) To the extent required, an amended certificate evidencing
the admission of such Person as a Member shall have been
signed, acknowledged and filed for record to the extent
required by the Act.
(iii) The assignee shall have delivered a letter containing the
representation set forth in Section 9.1(a) hereof and the
agreement set forth in Section 9.1(b) hereof.
(iv) If the assignee is an entity, the assignee shall have
provided the Corporate Manager with evidence satisfactory to
counsel for the Company of the assignee's authority to
become a Member under the terms and provisions of this
Agreement.
(v) The assignee shall have executed a power of attorney
containing the terms and provisions set forth in Section 8.2
hereof.
(vi) The assignee shall have paid all legal fees and other
expenses of the Company and the Corporate Manager and filing
and publication costs in connection with its substitution as
a Member.
(b) For the purpose of allocating Profits and Losses and
distributing cash received by the Company, a Substitute Member
shall be treated as having become, and appearing in the records
of the Company as, a Member at the end of the month in which the
filing of the certificate described in Section 9.4(a)(ii) hereof
occur or if no such filing is required, the later of the date
specified in the transfer documents or the date on which the
Corporate Manager has received all necessary instruments of
transfer and substitution.
(c) The Corporate Manager shall cooperate with the Person
seeking to become a Substitute Member by preparing the
documentation required by this Section and making all official
filings and publications. The Company shall take all such action
as promptly as practicable after the satisfaction of the
conditions in this Article IX to the admission of such Person as
a Member of the Company.
SECTION 9.5 Rights of Assignees of Members Interests.
-----------------------------------------
(a) Subject to the provisions of Sections 9.2 and 9.3 hereof,
except as required by operation of law, the Company shall not be
obligated for any purposes whatsoever to recognize the assignment
by any Member of its Member Interest until the Company has
received notice thereof.
(b) Any Person who is the assignee of all or any portion of a
Member Interest, but does not become a Substitute Member and
desires to make a further assignment of such Member Interest,
shall be subject to all the provisions of this Article IX to the
same extent and in the same manner as any Member desiring to make
an assignment of its Member Interest.
SECTION 9.6 Effect of Bankruptcy or Termination of a
-------------------------------------------------
Non-Managing Member.
--------------------
The occurrence of an Event of Bankruptcy as to a
Non-Managing Member or the dissolution or termination of a
Non-Managing Member shall not cause the termination or
dissolution of the Company, and the business of the Company shall
continue. The trustee or receiver of a bankrupt Non-Managing
Member, or its representative shall have the rights of such
Member for the purpose of settling or managing its property and
such power as the bankrupt, dissolved or terminated Member
possessed to assign all or any part of its Member Interest and to
join with the assignee in satisfying conditions precedent to the
admission of the assignee as a Substitute Member.
SECTION 9.7 Month-End Convention.
---------------------
For purposes of this Agreement, all transfers of Member
Interests shall be deemed to take place at the end of the month
in which the transfer actually occurs.
ARTICLE X
AMENDMENTS; MERGER
SECTION 10.1 Amendments.
------------
This Agreement may be amended with the consent of a majority
of the Voting Members per capita; provided, however, that the
Wisconsin public utility Affiliates of WPSLLC and WPLLLC shall
exercise all voting rights with respect to the interests held by
such Persons and their Affiliates; and provided further that the
following amendments shall require the consent of all of the
Voting Members and, if any proposed amendment pursuant to
Sections 10.1(b), (c) or (g) would accord different treatment to
the Members who are not Voting Members than those who are Voting
Members, the consent of a majority of Members (by Percentage
Interest) who are not Voting Members:
(a) any amendment to modify the provisions of Section 3.2(g),
3.3, 3.4, 3.5, 3.6, or 9.3(a) with respect to the ability of a
Member to increase its Percentage Interest in the Company;
(b) any amendment to modify the provisions of Article VI
relating to the allocation of Profits and Losses and the
distribution of cash to Members, except in accordance with
Section 3.7; provided, however, the dividend rate shall be
subject to adjustment by a majority vote of the board of
directors of the Corporate Manager;
(c) any amendment of Section 3.8 or the method of determining
the Tax-Exempt Investment Amount (including the methodology used
in Schedule B);
(d) any amendment that would impose on the Members any
obligation to make additional Capital Contributions to the
Company;
(e) any amendment that would remove the Corporate Manager;
(f) any amendment to Section 2.7; or
(g) any amendment to this Article X.
(h) any amendment of a provision hereto that incorporates or
embodies a provision of the Reliability 2000 Legislation.
SECTION 10.2 Merger.
--------
Subject to any applicable regulatory approvals, the
Corporate Manager, without the consent of the Members, may (i)
merge or consolidate the Company with or into any other domestic
or foreign partnership, limited partnership, limited liability
company or corporation in a transaction pursuant to Section
7.1(b), (c) or (d) hereof, or (ii) sell the assets of the
Company; provided, however, that, until the third anniversary of
the Operations Date, any merger, consolidation, or sale of all or
substantially all of the assets of the Company shall require the
consent of all the Voting Members.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Notices.
---------
All notices, consents, requests, demands, offers, reports or
other communications required or permitted to be given pursuant
to this Agreement shall be in writing and considered properly
given or made when personally delivered to the person entitled
thereto, when sent by certified or registered United States mail
in a sealed envelope, with postage prepaid, or when sent by
overnight courier, addressed, if to the Company, at its address
set forth in Section 2.1, and if to a Member, to the address set
forth opposite such member's name on Schedule A. Any Member may
----------
change his address by giving notice to the Corporate Manager.
The Company may change its address by giving notice to each of
its Members.
SECTION 11.2 Entire Agreement.
-----------------
This Agreement embodies the entire understanding and
agreement among the Members concerning the Company, and
supersedes any and all prior negotiations, understandings or
agreements with respect thereto.
SECTION 11.3 Interpretation and Construction.
--------------------------------
The headings and captions in this Agreement are inserted for
convenience and identification only and are in no way intended to
define, limit or expand the scope and intent of this Agreement or
any provision hereof. The references to Sections and Articles in
this Agreement are to the Sections and Articles of this
Agreement, except where otherwise indicated. Where the context
so requires, the masculine shall include the feminine and the
neuter, and singular shall include the plural.
SECTION 11.4 Counterparts.
-------------
This Agreement may be executed in multiple counterpart
copies, each of which shall be considered an original and all of
which shall constitute one and the same instrument.
SECTION 11.5 Binding on Successors.
----------------------
This Agreement and all of the terms and provisions hereof
shall be binding upon, and inure to the benefit of, the Members
and their respective successors and assigns.
SECTION 11.6 Severability.
-------------
If any provision of this Agreement or the application
thereof to any Person or circumstance shall, to any extent, be
held invalid or unenforceable in any jurisdiction, the validity
and enforceability of the remainder of this Agreement or the
application of such provision to any other Persons or
circumstances shall not be affected thereby, and each provision
of this Agreement shall be valid and enforceable to the extent
permitted by law in every jurisdiction.
SECTION 11.7 Rights and Remedies.
--------------------
The rights and remedies provided this Agreement are
cumulative, and the use of any one right or remedy by any party
shall not preclude or waive its right to the use of any or all
other rights and remedies. Such rights and remedies are given to
such party in addition to any other rights and remedies such
party may have by law, rule, regulation or otherwise.
SECTION 11.8 Economic Benefit.
-----------------
(a) This Agreement evidences the intent of the Members with
respect to the matters covered hereby, and reflects the agreed
allocation of benefits and burdens among the Members. If, as a
consequence of regulatory reviews or approvals, certain changes
are required, the Members agree to negotiate in good faith so as
to restore, as much as practically feasible, the original
allocation of benefits and burdens among the Members.
(b) Each Member agrees that the agreements set forth herein and
in the other documents pertaining to the formation of the Company
and the Corporate Manager reflect extensive negotiations and
compromises among the Members. To that end, each Member agrees
that any filings or communications by it with any regulatory
authority will not contradict the positions set forth herein, in
the Asset Contribution Agreement and Subscription Agreement, the
Amended and Restated Articles of Incorporation and By-laws of the
Corporate Manager and the Shareholders Agreement, and further,
that any filings or communications by it with any regulatory
authority will support, to the extent applicable, the positions
set forth herein and in such other documents, excluding issues
concerning the Company's tariff and rates. Each Member shall
retain its right to take independent legal or regulatory
positions regarding any other aspect of the Company, including
its tariff and rates.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
ATC Management, Inc.
By:
____________________________________
Name:
Title:
Wisconsin Electric Power Company
By:
____________________________________
Name:
Title:
Wisconsin Power and Light Company,
for itself and as manager of WPL
TRANSCO LLC
By:
____________________________________
Name:
Title:
Wisconsin Public Service
Corporation, for itself and as the
sole member of WPS INVESTMENTS, LLC
By:
____________________________________
Name:
Title:
Madison Gas and Electric Company
By:
____________________________________
Name:
Title:
Wisconsin Public Power Inc.
By:
____________________________________
Name:
Title:
Edison Sault Electric Company
By:
____________________________________
Name:
Title:
South Beloit Water, Gas and
Electric Company
By:
____________________________________
Name:
Title:
Schedule A
Member Initial Capital Contribution Number of Units Percentage Interest
------- or Contribution Value --------------- -------------------
--------------------------
ATC Management Inc. $______ _____ _____%
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Edison Sault Electric Company $______ _____ _____%
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
South Beloit Water, Gas and Electric Company $______ _____ _____%
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Wisconsin Electric Power Company $______ _____ _____%
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WPLLLC $______ _____ _____%
c/o Wisconsin Power and Light Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WPS Investments, LLC $______ _____ _____%
c/o Wisconsin Public Service Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
[P.O. Box 19001, 54307]
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Madison Gas and Electric Company $______ _____ _____%
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Wisconsin Public Power Inc. $______ _____ _____%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
EXHIBIT A
---------
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section 8.4 of the Operating Agreement
(the "Agreement") of American Transmission Company LLC (the
"Company"), the undersigned hereby irrevocably (i) presents for
redemption ________ Member Units in the Company in accordance
with the terms of the Agreement and the Redemption Right referred
to in Section 8.4 thereof, (ii) surrenders such Member Units and
all right, title and interest therein and (iii) directs that the
Cash Amount or Corporate Shares Amount (as defined in the
Agreement), as determined by the Corporate Manager (as defined in
the Agreement), deliverable upon exercise of the Redemption
Right, be delivered to the address specified below, and if
Corporate Shares (as defined in the Agreement) are to be
delivered, such Corporate Shares be registered or placed in the
name(s) and at the address(es) specified below.
Dated:________ __, _____
Name of Member:
______________________________
(Signature of Member)
______________________________
(Mailing Address)
______________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
______________________________
If Corporate Shares are to be issued, issue to:
______________________________
Please insert social security or identifying number:
__________________________
Name:______________________________________________________________
EXHIBIT B
---------
DISPUTE RESOLUTION
PROVISIONS
ARTICLE I
APPLICABILITY AND DEFINITIONS
SECTION 1.1 Applicability.
---------------
The dispute resolution procedures set forth herein shall be
applicable, under the conditions hereinafter provided, to all
disputes relating to the interpretation and application of the
terms and conditions of the Transco Agreements arising between or
among the Members (whether as Members or as a party to a Transco
Agreement), between the Members and the Company; provided,
however, that these dispute resolution procedures do not apply to
any matters covered by the dispute resolution procedures of the
OATT. Nothing in this Exhibit is intended to restrict or expand
existing state or federal laws or regulatory authorities.
SECTION 1.2 Definitions.
-------------
Capitalized terms used herein and not defined herein shall
have the respective meanings assigned to such terms in the
Operating Agreement to which these Dispute Resolution Provisions
are attached. The following terms shall have the meanings set
forth below:
"Committee" means the Alternative Dispute Resolution
Committee established by the Board of Directors of the Corporate
Manager in accordance with Article V to this Exhibit.
"Corporate Manager Governing Documents" means the Amended
and Restated Articles of Incorporation and Amended and Restated
By-laws of the Corporate Manager, and the Shareholders Agreement
between the Corporate Manager and the Class B Shareholders named
therein, as the same may be amended from time to time.
"FPA" means the Federal Power Act, as amended.
"Members" means the Members of the Company, including the
Corporate Manager acting in its capacity as manager.
"OATT" means open access transmission tariff of the Company
currently approved by FERC.
"Transco Agreements" means the Operating Agreement, the
Asset Contribution Agreements, the Subscription Agreements, the
Corporate Manager Governing Documents, the Service Agreements for
Network Integration Transmission Service, Operations &
Maintenance Agreements, Attachment Agreements, Transitional
Services Agreement, Network Operating Agreements,
Generation-Transmission Interconnection Agreements,
Transmission-Distribution Interconnection Agreements, Alliant
Operating Agreement, Forming Party Agreement, and all Schedules,
Exhibits and Appendices to such Agreements.
ARTICLE II
INFORMAL DISPUTE RESOLUTION PROCEDURES
SECTION 2.1 When Required.
--------------
Any dispute subject to the procedures specified in this
Exhibit shall be subject first to the informal dispute resolution
procedures specified herein.
SECTION 2.2 Procedures.
-----------
(a) The Company and each Member shall designate an employee or
representative who shall be its initial contact for resolving
disputes involving them as to matters governed by the Transco
Agreements. Each party to such a dispute shall first raise all
issues regarding the dispute with the designated representative
of the other party or parties to such dispute. The designated
representatives shall work together to resolve the relevant
issues in a manner that meets the interests of such parties, or
until the issues are referred to the designated officers of the
parties as set forth in Section 2.2(b).
(b) The Company and each Member shall designate a representative
who shall review disputes subject to this Exhibit that its
designated representatives are unable to resolve. In the case of
the Company, this officer shall be designated by the Board of
Directors of the Corporate Manager. The applicable officers of
the parties involved in such dispute shall work together to
resolve the disputes so referred in a manner that meets the
interests of such parties, either until such resolution is
reached, or until an impasse is declared by any party to such
dispute.
ARTICLE III
MEDIATION
SECTION 3.1 When Available.
---------------
If the parties agree, any dispute subject to this Exhibit
may be subject to non-binding mediation subsequent to informal
dispute resolution, but prior to the initiation of arbitration,
regulatory, judicial, or other dispute resolution proceedings.
The parties that elect mediation shall notify the Committee in
writing of the election to mediate.
SECTION 3.2 Procedures.
------------
(a) A neutral mediator shall be selected by the Chair of the
Committee after consultation with the parties involved in the
dispute. The Chair of the Committee also may consult with the
other representatives on the Committee concerning the selection
of a mediator. The mediator selected shall (i) be knowledgeable
in the subject matter of the dispute, and (ii) have no official,
financial, or personal conflict of interest with respect to the
parties or the issues involved in the dispute, unless such
interest is fully disclosed in writing to all parties involved in
the dispute and all such parties waive in writing any objection
to the interest.
(b) The parties involved in the dispute shall attempt in good
faith to resolve their dispute in accordance with the procedures
and timetable established by the mediator. In furtherance of the
mediation efforts, the mediator may, among other actions:
(i) Require representatives of such parties who have the
authority to settle such dispute to meet for face-to-face
discussions, with or without the mediator;
(ii) Act as an intermediary between such parties;
(iii) Require such parties to submit written statements of issues
and positions;
(iv) Require such parties to exchange relevant information with
respect to the dispute; and
(v) If requested by such parties at any time in the mediation
process, provide a written recommendation on resolution of
the dispute including, if requested, the mediator's
assessment of the merits of the principal positions being
advanced by each such party.
(c) If the parties are unable to resolve the dispute at or in
connection with this meeting, then, (i) any party involved in the
dispute may commence such arbitration proceedings, or such
judicial, regulatory, or other proceedings as may be appropriate
as permitted by the provisions of Section 4.1 of this Exhibit;
(ii) the statements made by any party in connection with such
mediation shall not be admissible for any purpose in any
subsequent arbitration, administrative, judicial or other
proceeding; (iii) the recommendation of the mediator shall have
no further force or effect and shall not be admissible for any
purpose in any subsequent arbitration, administrative, judicial,
or other proceeding; and (iv) the mediator may not be compelled
to testify concerning the mediation in any subsequent
arbitration, judicial, or other proceeding.
SECTION 3.3 Costs.
-------
The costs of the time, expenses, and other charges of the
mediator and common costs of the mediation process shall be borne
by the parties involved in the dispute, with each side (treating
all parties as aligned with either the plaintiff side or the
defendant side of the dispute) in the mediated matter bearing
one-half of such costs. Each party involved in the dispute shall
bear its own costs and attorney's fees incurred in connection
with any mediation under this Article III.
ARTICLE IV
ARBITRATION
SECTION 4.1 When Required.
--------------
Any dispute subject to this Exhibit that has not been
resolved through the informal or mediation procedures specified
herein shall be resolved by arbitration in accordance with the
procedures specified herein; provided, however, that unless all
parties agree to arbitrate, (a) any dispute subject to the
jurisdiction of any regulatory authority shall only be heard by
such regulatory authority, and (b) any dispute wherein one party
seeks an injunction or other equitable relief shall be heard only
by a court having jurisdiction over the matter.
SECTION 4.2 Initiation.
------------
(a) A party to a dispute that wishes to commence arbitration
proceedings shall send a written demand for arbitration to an
officer or managing or general agent (or other agent authorized
by appointment or law to receive service of process) of each
party to the dispute, and to the secretary of the Committee. The
demand for arbitration shall state each claim for which
arbitration is being demanded, the relief being sought, a brief
summary of the grounds for such relief, and the basis for the
claim, and shall identify all other parties to the dispute.
(b) Any party receiving such notice may, if the proviso in
Section 4.1 is applicable, notify the parties to the dispute
within 14 days of receiving the demand for arbitration, that it
intends to have the matter heard by a regulatory or judicial
authority and shall thereafter have a further 60 days in which to
make the necessary filing to commence proceedings at such
regulatory or judicial authority. If the filing necessary to
commence proceedings before such regulatory or judicial authority
is not made within the foregoing 60-day period, then the party
seeking to invoke jurisdiction of a regulatory authority shall be
deemed to have consented to arbitration, and the dispute shall
revert to arbitration.
SECTION 4.3 Selection of Arbitrator.
-------------------------
The Committee shall maintain a list of arbitrators that
contains an odd number of names, and contains at least five names
of Persons whom the Committee believes are generally qualified,
by reason of their temperament and experience, to resolve
disputes among the parties. Upon an arbitration demand being
made by one or more parties, the Committee shall provide the list
to the parties to the dispute. The party or parties demanding
arbitration on the one hand, and the party or parties responding
to the demand for arbitration on the other, shall each (treating
all parties as aligned with either the plaintiff side or the
defendant side of the dispute) take turns (with the plaintiff
proceeding first) crossing names off the list until one
arbitrator remains, who shall thereupon be engaged as arbitrator
with respect to the dispute.
SECTION 4.4 Procedures.
-----------
The Committee shall compile and make available to the
arbitrator and the parties standard procedures for the
arbitration of disputes, which may be modified or adopted for use
in a particular proceeding as the parties mutually agree or as
the arbitrator deem appropriate. Upon selection of the
arbitrator, arbitration shall go forward in accordance with
applicable procedures.
SECTION 4.5 Intervention.
-------------
The arbitrator may permit any Member to intervene in the
proceeding upon the filing of a timely application which
demonstrates that the Member has a direct interest that will be
materially affected by the decision of the arbitrator and that it
will not be represented adequately by an existing party to the
proceeding. Any Member seeking to intervene in a dispute shall
indicate in its intervention papers whether it believes that it
should be aligned with either the plaintiff side or the defendant
side of the dispute. Any party to the dispute may challenge such
proposed alignment. The arbitrator shall determine the actual
alignment of the parties to a dispute based upon the
comparability of the specific positions advanced by each party
concerning the issues involved in the dispute.
SECTION 4.6 Summary Disposition and Interim Measures.
-----------------------------------------
(a) The procedures for arbitration of a dispute shall provide a
means for summary disposition of a demand for arbitration, or
response to a demand for arbitration, that in the reasoned
opinion of the arbitrator does not have a good faith basis either
in law or fact. If the arbitrator determines that a demand for
arbitration, or response to a demand for arbitration, does not
have a good faith basis either in law or fact, the arbitrator
shall have discretion to award the costs of the time, expenses,
and other charges of the arbitrator to the prevailing party.
(b) The procedures for the arbitration of a dispute shall
provide a means for summary disposition without discovery if
there is no dispute as to any material fact, or with such limited
discovery as the arbitrator shall determine is reasonably likely
to lead to the prompt resolution of any disputed issues of
material fact.
(c) The procedures for arbitration of a dispute shall permit any
party to a dispute to request the arbitrator to render a written
interim decision requiring that any action or decision that is
the subject of a dispute not be put into effect, or imposing such
other interim measures as the arbitrator deem necessary or
appropriate, to preserve the rights and obligations secured by
the Transco Agreements during the pendency of the arbitration
proceeding. The arbitrator may grant or deny, in whole or in
part, a request for such a written interim decision. Members and
the Company shall be bound by any such written decision pending
the outcome of the arbitration proceeding.
SECTION 4.7 Discovery of Facts.
--------------------
(a) The arbitration procedures for the resolution of a dispute
shall include adequate provision for the discovery of relevant
facts, including the taking of testimony under oath, production
of documents and things, and inspection of land and tangible
items. The nature and extent of such discovery shall be
determined as provided herein and shall take into account (i) the
complexity of the dispute, (ii) the extent to which facts are
disputed, and (iii) the amount of money in controversy.
(b) The arbitrator shall be responsible for establishing the
timing, amount, and means of discovery, and for resolving
discovery and other pre-hearing disputes. If a dispute involves
contested issues of fact, promptly after the selection of the
arbitrator, the arbitrator shall convene a meeting of the parties
for the purpose of establishing a schedule and plan of discovery
and other pre-hearing actions.
SECTION 4.8 Evidentiary Hearing.
--------------------
The procedures established by the arbitrator shall provide
for an evidentiary hearing, with provision for the
cross-examination of witnesses, unless all parties consent to the
resolution of the matter on the basis of a written record. The
forms and methods for taking evidence shall be as agreed by the
parties, or if the parties cannot agree, as established by the
arbitrator. The arbitrator may require such written or other
submissions from the parties as shall be deemed appropriate,
including submission of the direct testimony of witnesses in
written form. The arbitrator may exclude any evidence that is
irrelevant, immaterial, or unduly repetitious, and, except to the
extent hereinafter otherwise provided, shall exclude any material
which is covered by the attorney-client privilege, the
accountant-client privilege, other evidentiary privileges, or the
attorney-work product doctrine. Any party or parties may arrange
for the preparation of a record of the hearing and, except to the
extent otherwise provided, shall pay the costs thereof. Such
party or parties shall have no obligation to provide, or to agree
to the provision of, a copy of the record of the hearing to any
party that does not pay a proportionate share of the cost of the
record. At the request of any party, the arbitrator shall
determine a fair and equitable allocation of the cost of the
preparation of a record between or among the parties to the
proceeding who are willing to share such costs.
SECTION 4.9 Confidentiality.
-----------------
(a) Any information requested from another party in the course
of an arbitration proceeding, and not otherwise available to the
receiving party, including any such information contained in
documents or other means of recording information created during
the course of the proceeding, may be designated "Confidential" by
the producing party to the extent that such information is of a
proprietary nature. The party designating documents or other
information as "Confidential" shall have 20 days from the request
for such material to submit a request to the arbitrator to
establish such requirements for the protection of such documents
or other information designated as "Confidential" as may be
reasonable and necessary to protect the confidentiality and
commercial value of such information and the rights of the
parties. Prior to the decision of the arbitrator on a request
for confidential treatment, documents or other information
designated as "Confidential" need not be produced.
"Confidential" information shall not be used by the arbitrator,
or anyone working for or on behalf of any of the foregoing, for
any purpose other than the arbitration proceeding, and shall not
be disclosed in any form to any Person not involved in the
arbitration proceeding without the prior written consent of the
party producing the information, or as permitted by the
arbitrator or as required by law.
(b) Any Person receiving a request or demand for disclosure,
whether by compulsory process, discovery request, or otherwise,
of documents or information obtained in the course of an
arbitration proceeding that have been designated "Confidential"
and that are subject to a non-disclosure requirement under this
Exhibit, or that are subject to a decision of the arbitrator,
shall immediately inform the Person from which the information
was obtained, and shall take all reasonable steps to afford the
Person from which the information was obtained an opportunity to
protect the information from disclosure. Any person disclosing
information in violation of this Exhibit or requirements
established by the arbitrator shall be deemed to waive any right
to introduce or otherwise use such information in any judicial,
regulatory, or other legal or dispute resolution proceeding,
including the proceeding in which the information was obtained.
(c) Nothing in this Exhibit shall preclude any Person from using
documents or information properly and previously obtained outside
of an arbitration proceeding, or otherwise public, for any
legitimate purpose, notwithstanding that the information was also
obtained in the course of the arbitration proceeding.
SECTION 4.10 Timetable.
----------
Promptly after the selection of the arbitrator, the
arbitrator shall set a date for resolution of the dispute, which
shall be not later than eight months (or such earlier date as may
be agreed to by the parties) from the date of the selection of
the arbitrator, with other dates, including the dates for an
evidentiary hearing, or other final submissions of evidence, set
in light of this date. The date for the evidentiary hearing, or
other final submission of evidence, shall not be changed absent
extraordinary circumstances. The arbitrator shall have the power
to impose sanctions for dilatory tactics or undue delay in
completing the arbitration proceedings.
SECTION 4.11 Decisions.
The arbitrator shall issue either an oral decision that is
transcribed or a written decision, which may, at the arbitrator's
discretion, include findings of fact. The arbitration decision
shall be based on (i) the evidence in the record; (ii) the terms
of the relevant Transco Agreements, including any principle,
standard, requirement, procedure, plan, or other right or
obligation established by or pursuant to those Transco
Agreements; (iii) applicable federal and state legal standards,
including the FPA and any applicable state and FERC regulations
and decisions; and, (iv) relevant decisions in previous
arbitration proceedings under the Transco Agreements which shall
be available subject to applicable confidentiality provisions.
All decisions of the arbitrator shall be maintained by the
Committee and shall, subject to any applicable confidentiality
provisions, be made available on request to all Members, to the
Company and to federal and state regulatory authorities. The
arbitrator shall have no authority to revise or alter any
provision of any Transco Agreement. Any arbitration decision
that affects matters subject to the jurisdiction of the FERC
under section 205 or section 206 of the FPA shall be filed with
the FERC and any arbitration decision that affect matters subject
to the jurisdiction of a state authority shall be filed with that
authority.
SECTION 4.12 Costs.
------
Unless the arbitrator shall decide otherwise, the costs of
the time, expenses, and other charges of the arbitrator shall be
borne by the parties to the dispute, with each side on an
arbitrated issue bearing one-half of such costs, and each party
to an arbitration proceeding shall bear its own costs and fees.
The arbitrator may require all of the costs of the time,
expenses, and other charges of the arbitrator, plus all or a
portion of the costs of arbitration, attorneys' fees, and the
costs of mediation, if any, to be paid by any party that
substantially loses on an issue determined by the arbitrator to
have been raised without a substantial basis.
SECTION 4.13 Enforcement.
------------
The decision of the arbitrator shall be final, binding and
not appealable, except to the extent reviewable by FERC (as
permitted or required by law) or as provided in Chapter 788 of
the Wisconsin Statutes. Any party may petition any state or
federal court having jurisdiction to enter judgment upon the
arbitration award.
SECTION 4.14 Regulatory Jurisdiction.
------------------------
If a party fails to invoke regulatory jurisdiction of a
dispute involving matters subject to FERC or state regulatory
jurisdiction within 60 days in accordance with Section 4.1 of
this Exhibit, the party shall be deemed to have waived its right
to invoke such jurisdiction; provided, however, that this waiver
only applies to the party and does not affect any right that the
FERC or state regulatory authority may have to act on its own.
If such party nonetheless invokes FERC or applicable state
regulatory jurisdiction following the arbitration proceedings
provided for herein, that party shall be responsible for all
attorneys' fees incurred by other parties to the dispute and the
Company, whether or not the FERC or state regulatory authority
concludes that such party has waived its right to invoke FERC or
state regulatory jurisdiction.
ARTICLE V
ALTERNATE DISPUTE RESOLUTION COMMITTEE
SECTION 5.1 Membership.
-----------
(a) The Committee shall be composed of six representatives
selected by the Board of Directors of the Corporate Manager,
which shall use its best efforts to select a Committee that
reflects the diversity, in terms of size, type of entity, and
geographic location, of the Members. No more than one
representative on the Committee may be a representative of the
same Member.
(b) Representatives on the Committee shall serve for terms of
three years, beginning on the first day of the month following
the annual meeting of the Board of Directors, and may serve
additional terms, except that, of the representatives first
elected to the Committee, two representatives shall serve terms
of one year, and two representatives shall serve terms of two
years.
SECTION 5.2 Voting Requirements.
---------------------
Approval of adoption of measures by the Committee shall
require two-thirds of the votes of the representatives present
and voting, but in no event less than three votes. Two-thirds of
the representatives on the Committee shall constitute a quorum
for the conduct of the business of the Committee.
SECTION 5.3 Officers.
---------
At the first meeting of the Committee following the annual
meeting of the Board of Directors, the representatives on the
Committee shall choose a Chair and Vice Chair from among the
representatives on the Committee. The Chair and the Vice Chair
shall each serve a term of three years, unless earlier terminated
by a two-thirds vote of the representatives of the Committee.
The Chair of the Committee shall preside at meetings of the
Committee, and shall have the power to call meetings of the
Committee and to exercise such other powers as are specified in
this Exhibit or authorized by the Committee.
SECTION 5.4 Meetings.
----------
The Committee shall meet at such times and places as
determined by the Committee, or at the call of the Chair. The
Chair shall call a meeting of the Committee upon the request of
two or more members of the Committee.
SECTION 5.5 Responsibilities.
-----------------
The duties of the Committee include, but are not limited to,
the following:
(a) Maintain a pool of persons qualified by temperament and
experience, and with technical or legal expertise in matters
likely to be the subject of disputes, to serve a mediators and
arbitrators under this Exhibit;
(b) Determine the rates and other costs and charges that shall
be paid to mediators and arbitrators for, or in connection with,
their services;
(c) Select mediators for disputes;
(d) Determine if mediation is not warranted in a particular
dispute;
(e) Provide to the parties involved in a dispute lists of
arbitrators qualified by temperament and experience, and with
appropriate technical or legal expertise, to resolve particular
disputes, such lists to include only neutral persons who have no
official, financial, or personal interest or conflict of interest
with respect to the parties or the issues involved in the dispute;
(f) Compile and make available to Members, arbitrators, and
other interested parties suggested procedures for the arbitration
of disputes in accordance with Section 4.4 of this Exhibit;
(g) Maintain and make available to Members, mediators,
arbitrators, and other interested parties, subject to any
applicable confidentiality provisions, the written decisions
required by Section 4.11 of this Exhibit;
(h) Establish such procedures and schedules, in addition to
those specified herein, as it shall deem appropriate to further
the prompt, efficient, fair, and equitable resolution of
disputes; and
(i) Provide such oversight and supervision of the dispute
resolution processes and procedures instituted pursuant to this
Exhibit as may be appropriate to facilitate the prompt,
efficient, fair, and equitable resolution of disputes.
SECTION 5.6 American Arbitration Association.
----------------------------------
Whenever the Company is a party to any dispute, any party
whose interests are not aligned with the Company may demand that
the Committee instruct the American Arbitration Association to
provide the parties with a list of arbitrators pursuant to
Section 4.3 in lieu of the Company supplying such list. In
addition, in connection with such dispute, the Committee shall
not perform any of those responsibilities charged to it pursuant
to Section 5.5 and the dispute shall instead be resolved in
accordance with the arbitration rules of the American Arbitration
Association for the resolution of commercial disputes.