EXHIBIT 3.2
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CE GENERATION, LLC
TABLE OF CONTENTS
Page
ARTICLE I......................................................................1
DEFINITIONS AND CHARACTERIZATION...............................................1
1.1. Definitions............................................................1
1.2. Tax Characterization...................................................4
ARTICLE II.....................................................................4
FORMATION......................................................................4
2.1. Organization...........................................................4
2.2. Name...................................................................4
2.3. Term...................................................................4
2.4. Registered Agent and Office............................................4
2.5. Principal Office.......................................................4
2.6. Qualified in Other Jurisdictions.......................................5
ARTICLE III....................................................................5
PURPOSE; NATURE OF BUSINESS....................................................5
3.1. Purpose................................................................5
ARTICLE IV.....................................................................5
ACCOUNTING AND RECORDS.........................................................5
4.1. Records to be Maintained...............................................5
4.2. Tax Returns and Reports; Accounting....................................6
4.3. Information............................................................6
4.4. Confidentiality........................................................6
ARTICLE V......................................................................7
MEMBERS........................................................................7
5.1. Membership Classes.....................................................7
5.2. Names and Addresses....................................................7
5.3. Admission of New Members...............................................7
ARTICLE VI.....................................................................7
MANAGEMENT; RIGHTS AND DUTIES OF MEMBERS.......................................7
6.1. Management.............................................................7
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6.2. Operations............................................................10
6.3. Other Opportunities...................................................12
6.4. Liability ............................................................12
6.5. Exculpation and Indemnification.......................................13
ARTICLE VII...................................................................13
CONTRIBUTIONS AND CAPITAL ACCOUNTS............................................13
7.1. Contributions.........................................................14
7.2. No Obligation to Restore Deficit Balance..............................14
7.3. Withdrawal; Successors................................................14
7.4. Interest ............................................................14
7.5. No Personal Liability.................................................14
ARTICLE VIII..................................................................14
DISTRIBUTIONS.................................................................14
ARTICLE IX....................................................................14
TRANSFER OF INTERESTS.........................................................14
9.1. Transfer of Interests.................................................14
9.2. Conditions to Transfer................................................15
9.3. Electric Utility......................................................15
9.4. QF True Up............................................................15
ARTICLE X.....................................................................16
DISSOLUTION AND WINDING UP....................................................16
10.1. Dissolution..........................................................16
10.2. Effect of Dissolution................................................16
10.3. Distribution of Assets on Dissolution................................16
10.4. Winding Up and Filing Articles of
Cancellation.......................................................17
ARTICLE XI....................................................................18
MISCELLANEOUS.................................................................18
11.1. Notices ............................................................18
11.2. Amendment; Waiver; Decisions.........................................18
11.3. Resolution of Disputes...............................................18
11.4. Headings ............................................................18
11.5. Binding Agreement....................................................18
11.6. Enforcement..........................................................19
11.7. Saving Clause........................................................19
11.8. Counterparts.........................................................19
11.9. Governing Law........................................................19
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11.10. No Rights of Creditors and Third
Parties under Agreement............................................19
11.11. General Interpretive Principles......................................19
11.12. Entire Agreement.....................................................20
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LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CE GENERATION, LLC
This Limited Liability Company Operating Agreement of CE Generation,
LLC, a Delaware limited liability company (the "COMPANY"), is made by and
between the Company and CalEnergy Company, Inc., a Delaware corporation
("CALENERGY"), as of February 9, 1999.
WHEREAS, CalEnergy has formed a limited liability company pursuant to
the Delaware Limited Liability Company Act, 6 Del C. ss.18-101, et seq., as
amended from time to time (the "ACT"), by filing a Certificate of Formation of
the Company with the office of the Secretary of State of the State of Delaware
and entering into this Agreement; and
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and intending to be legally bound,
the Company and CalEnergy, the sole Member, hereby adopt the following
provisions:
ARTICLE I.
DEFINITIONS AND CHARACTERIZATION
1.1. DEFINITIONS. In addition to the other terms defined elsewhere in this
Agreement (as defined below), the following terms shall have the meanings set
forth below:
ACT. Delaware Limited Liability Company Act, as amended.
AFFILIATE. Any Person, directly or indirectly, controlling, controlled
by or under common control with such Person and any director, officer, employee,
consultant or agent of such Person.
AGREEMENT. This Limited Liability Company Operating Agreement including
all amendments adopted in accordance with this Agreement and the Act.
BOARD. The Board of Directors of the Company.
BUSINESS DAY. Any day other than Saturday, Sunday or such other day on
which banking institutions in New York, New York, are authorized or obligated to
close.
CAPITAL ACCOUNT. The account maintained for a Member determined in
accordance with Article VII.
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CAPITAL CONTRIBUTION. Any contribution of Property to the Company made
by or on behalf of a Member.
CERTIFICATE. The Certificate of Formation of the Company, as amended
from time to time and filed in the Office of the Secretary of State of the State
of Delaware.
CLASS A INTERESTS. The Class A Interests representing 50% of the Common
Equity of the Company and entitling the holder to the rights described herein.
CLASS B INTERESTS. The Class B Interests representing 50% of the Common
Equity of the Company and entitling the holder to the rights described herein.
CODE. The Internal Revenue Code of 1986, as amended.
COMPANY. CE Generation, LLC, a limited liability company formed under
the laws of the State of Delaware, and any successor limited liability company.
DEVELOPMENT AGREEMENT. The certain agreement by and among the Company,
CalEnergy and El Paso Power Holding Company to be executed as of the Closing
Date as defined in the Purchase Agreement.
DIRECTOR. A person duly appointed to the Board of the Company in
accordance with Section 6.1.
DISSOLUTION EVENT. An event, the occurrence of which will result in the
dissolution of the Company under Article X.
ELECTRIC UTILITY. An "electric utility," "electric utility holding
company" or a combination thereof, as such terms are used in 18 C.F.R.ss.292.206
or any successor provision, any Subsidiary of any of the foregoing, or any other
Person in which any of the foregoing holds an interest which, if such Person
owned a Class A Interest, would be deemed to result in any portion of such Class
A Interest being held by any of the foregoing. Any determination of who is an
Electric Utility shall be made by the Board.
FERC. The Federal Energy Regulatory Commission, or any successor
agency.
FISCAL YEAR. The calendar year.
IMPERIAL VALLEY PROJECTS. The meaning set forth in the Purchase
Agreement.
INTERESTS. The Class A Interests and Class B Interests taken together
or individually as the context may require.
INVESTOR. The Person acquiring the Class A Interest from CalEnergy and
such Persons successors and permitted assigns.
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IPPCO DEBT. shall mean the $400 million indebtedness of the Company
issued prior to the Closing as defined in the Purchase Agreement.
MEMBER. The Persons, other than the Company, executing this Agreement
as Members and any new Members added in accordance with this Agreement.
MEMBERSHIP ADMISSION. The sale or issuance by the Company of any
Interest to any Person, whether or not such Person, immediately prior to the
time of such sale or issuance, was a Member.
OFFICER. The Persons appointed pursuant to Section 6.1(f).
PERSON. An individual, trust, estate, corporation, partnership, joint
venture, limited liability company, business trust, unincorporated association,
or a government or agency or political subdivision thereof.
POWER PURCHASE AGREEMENTS. The Power sale contracts pursuant to which
each Project sells electricity.
PROJECTS. The Company's interests in certain generating facilities,
commonly known as Salton Sea Units I, II, III, IV and V, CE Turbo, Del Ranch,
▇▇▇▇▇▇, Vulcan, Leathers, PRI, Yuma, NorCon and Saranac.
PROPERTY. Any property, real or personal, tangible or intangible,
including money and securities, and any legal or equitable interest in such
property, but excluding services and promises to perform services in the future.
PURCHASE AGREEMENT. The Equity Purchase Agreement dated February 21,
1999 between CalEnergy, as Seller, and Investor, as Buyer, for the purchase of
the Class A Interests.
PURPA. The Public Utility Regulatory Policies Act of 1978, as amended.
QF. A power plant which has qualified as a "small power production
facility" or a "cogeneration facility" as such terms are defined in PURPA.
QF PROJECT. Any Project which has obtained the status of a QF until
such time as the Board determines to terminate the QF status, or such Project is
otherwise determined not to be a QF by FERC.
SECURITIES ACT. The Securities Act of 1933, as amended.
SUBSIDIARY. Any corporation or other entity (including partnerships and
other business associations and joint ventures) in which the Company directly or
indirectly owns 10% or more of the equity securities.
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TAX REGULATIONS. The federal income tax regulations promulgated by the
United States Treasury Department under the Code as such Tax Regulations may be
amended from time to time. All references herein to a specific section of the
Tax Regulations shall be deemed also to refer to any corresponding provision of
succeeding Tax Regulations.
TRANSFER. Any sale assignment, pledge, hypothecation, abandonment or
other disposition or encumbrance whether or not for consideration.
ZINC RECOVERY PROJECT. That certain zinc extraction facility located in
Imperial Valley, California, owned by CalEnergy Minerals LLC and all future
expansions thereof and future minerals extraction facilities developed in the
vicinity of the Projects located in Imperial Valley, California.
1.2. TAX CHARACTERIZATION. It is intended that the Company be characterized
and treated for federal, state and local income tax purposes as the Directors
shall determine from time to time.
ARTICLE II.
FORMATION
2.1. ORGANIZATION. The Members hereby organize the Company as a Delaware
limited liability company pursuant to the provisions of the Act.
2.2. NAME. The name of the Company is CE Generation, LLC, and all business
of the Company shall be conducted under that name, or one or more fictitious
names as the Board may determine from time to time.
2.3. TERM. The existence of the Company shall be perpetual, unless the
Company shall be sooner dissolved and its affairs wound up in accordance with
the Act or this Agreement.
2.4. REGISTERED AGENT AND OFFICE. The registered agent for the service of
process and the registered office of the Company shall be that Person and
location set forth in the Certificate. The Members or the Board may, from time
to time, change the registered agent or office through appropriate filings with
the Office of the Secretary of State of the State of Delaware. In the event the
registered agent ceases to act as such for any reason or the registered office
shall change, the Members or Board shall promptly designate a replacement
registered agent or file a notice of change of address, as the case may be.
2.5. PRINCIPAL OFFICE. The Principal Office of the Company shall be located
at: c/o CalEnergy Company, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: General Counsel, or at such other address as the Company
may have furnished in writing.
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2.6. QUALIFIED IN OTHER JURISDICTIONS. The Members shall cause the Company
to be qualified, formed or registered under assumed or fictitious name statutes
or similar laws in any jurisdiction in which the Company transacts business. Any
member of the Board, any Officer or any person appointed by the Board as an
authorized person within the meaning of the Delaware Act, shall execute, deliver
and file any certificates (and any amendments and/or restatements thereof)
necessary for the Company to qualify to do business in a jurisdiction in which
the Company may wish to conduct business.
ARTICLE III.
PURPOSE; NATURE OF BUSINESS
3.1. PURPOSE. The Company's business and purpose is to (i) to engage in the
ownership and operation of the Projects, (ii) to issue the IPPCo Debt, (iii) if
approved by the Board, to construct new projects, (iv) if approved by the Board,
to pursue new generation facilities, to engage in activities incidental to the
foregoing (including financing activities), and any and all lawful business
activities which may be approved by the Board from time to time for which
limited liability companies may be organized under the Act.
ARTICLE IV.
ACCOUNTING AND RECORDS
4.1. RECORDS TO BE MAINTAINED. The Company shall maintain the following
records at the Principal Office:
(a) a current list of the full name set forth in alphabetical order and
last known mailing address of each Member, together with information relating to
each Member's Capital Contributions and Membership Interest;
(b) a copy of the Certificate and all amendments thereto, together with
executed copies of any powers of attorney pursuant to which the Certificate or
any such amendment has been executed;
(c) a copy of the Company's federal, state and local income or
information tax returns and reports for the three most recent Fiscal Years; and
(d) the Company's books and records, including financial statements,
permits and insurance of the Company, which shall be open to inspection by the
Members or their agents at reasonable times.
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4.2. TAX RETURNS AND REPORTS; ACCOUNTING. The Company, at its own expense,
shall cause its accountants to prepare and timely file income tax returns of the
Company in all jurisdictions where such filings are required, and the Company
shall cause its accountants to prepare and deliver to each Member, within ninety
(90) days after the expiration of each Fiscal Year or as soon as practicable
thereafter, at the Company's expense, all information with respect to the
Company required by the Code and the Tax Regulations for the preparation of the
Members' federal income tax returns. The Company shall use the accrual method of
accounting in the preparation of its financial reports and for tax purposes and
shall keep its books and records accordingly.
4.3. INFORMATION.
(a) Requested Information. With reasonable promptness, the Company
shall furnish each Member or Director with such other data and information as
from time to time may be reasonably requested. The Company acknowledges that its
obligations under this Section 4.3(a) shall not limit the rights of its Members
or Directors under applicable law to obtain information and other materials from
the Company.
(b) Management Reporting. The officers of the Company shall cause to be
prepared and delivered to the Board of Directors or a designated officer of each
Member, within thirty (30) days after the end of each quarter (and monthly to
the extent such reports are available), reports which are conventional for the
power generation industry presenting timely and relevant information on the
financial and operational performance of the Company and its assets. In addition
to the foregoing, the officers of the Company shall prepare and deliver to the
Board of Directors (i) within sixty (60) days after the end of each Fiscal Year,
a balance sheet of the Company and its Subsidiaries as at the end of such year
and statements of income and cash flows of the Company and its Subsidiaries for
such year, setting forth in comparative form the figures for the previous Fiscal
Year, audited and certified by a nationally recognized accounting firm acting as
the independent public accountants of the Company; (ii) within thirty (30) days
after the end of each fiscal quarter (other than year-end), an unaudited balance
sheet of the Company and its Subsidiaries as at the end of such quarter and
statements of income and cash flows for the Company and its Subsidiaries for
such quarter, setting forth in comparative form the figures for the same fiscal
quarter for the previous year; (iii) with reasonable promptness, such other
financial information and reports as from time to time may be requested by the
Board of Directors, including, without limitation, production reports,
management reports and efficiency data.
(c) Inspection. From and after the date hereof, the Company will
permit, upon reasonable prior notice and at such members sole cost and expense,
each holder of more than 5% of the outstanding Interests, its nominee, assignee
or its representative to visit and inspect any of the properties of the Company
and its Subsidiaries, to examine all their books of account, records, reports
(including tax records and returns) and other papers and to make copies and
extracts therefrom, during normal business hours, subject to appropriate
confidentiality requirements.
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4.4. CONFIDENTIALITY. As much of the information and other material
furnished under or in connection with this Agreement (whether furnished before,
on or after the date hereof) constitutes or contains confidential business,
financial or other information of the Company, its Subsidiaries or the Projects,
each Member covenants for itself and its directors, officers, partners and
stockholders that it will not disclose such confidential information and will
cause its respective officers, directors, employees, counsel, accountants and
other representatives to abide by such confidentiality obligations; provided,
however, that such Member may disclose or deliver any information or other
material disclosed to or received by the Member should such disclosure or
delivery be required by law or regulation provided that it provides prior notice
to the Company so that the Company may seek an appropriate protective order, if
applicable.
ARTICLE V.
MEMBERS
5.1. MEMBERSHIP CLASSES. The Company shall have two classes of Member
Interests, Class A Interests and Class B Interests. The Class A Interests and
Class B Interests shall each represent 50% of the common equity of the Company
and shall each be entitled to 50% of the voting rights and 50% of any
distributions, and otherwise have the rights as set forth in this Agreement.
5.2. NAMES AND ADDRESSES. The names and addresses of the Initial Members of
each class are as stated on Schedule 1.
5.3. ADMISSION OF NEW MEMBERS. The Members may effect, at their sole
discretion, a Membership Admission by the prior written consent of both (i) the
holders of a majority of the Class A Interests and (ii) the holders of a
majority of the Class B Interests; provided, however, that at no time while any
Project remains a QF may such Membership Admission be effected if it will cause
an Electric Utility, or more than one Electric Utility in the aggregate, to own
more than 50% of the equity of the Company or cause any Project to lose its QF
status.
ARTICLE VI.
MANAGEMENT; RIGHTS AND DUTIES OF MEMBERS
6.1. MANAGEMENT. (a) Board of Directors. The Company shall be managed
exclusively by or under the direction of a Board of Directors (the "BOARD"),
consisting of four Directors, two of whom shall be appointed by the holders of
the Class A Interests and two of whom shall be appointed by the holders of the
Class B Interests; provided, that, no person appointed by the holders of the
Class A Interests shall be an Electric Utility. Each Director and Officer of the
Company is not a "manager" (within the meaning of the Act) of the Company.
Following their appointment, Directors shall serve until (i) removal, (ii)
resignation or (iii) election of a successor by the holders of the applicable
class of Interests, whichever occurs first. Directors may be removed at any
time, with or without cause, by the holders of the class of Interests appointing
such Director.
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(b) Authority of the Board. Except as provided in Section 6.2,
(i) The Board, acting as a group or through the officers, has sole authority
to manage the Company and is authorized to make any contracts, enter into any
transactions, make and obtain any commitments and take any and all actions on
behalf of the Company to conduct or further the Company's business. Any action
taken by the Directors or Officers on behalf of the Company in accordance with
the foregoing provisions shall constitute the act of and shall serve to bind the
Company;
(ii) Each Director has one vote in Board decisions;
(iii) Action by the Board requires either
(A) a resolution approved by the affirmative vote of at least three of
the Directors present at a meeting of the Board, (1) scheduled by a prior
act of the Directors or called upon at least two business days' written
notice signed by at least two Directors or the Chairman or President, and
(2) with a quorum present of at least three of the Directors, or
(B) a written action, signed by at least three of the Directors.
(c) Meetings of the Board of Directors. The Board of Directors shall
hold annual meetings at such time and at such place as shall be designated by
the President and stated in the notice of the meeting. Notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
Director not less than ten (10) days before the date of such annual meeting,
either personally, by telephone, by mail, by telegram or by any other means of
communication. Special meetings of the Board of Directors may be called by the
Chairman, if any, or the President on three (3) days' notice to each Director,
either personally, by telephone, by mail, by telegram or by any other means of
communication; special meetings shall be called by the Chairman, if any, or the
President or Secretary in like manner and on like notice on the written request
of one or more of the Directors.
(d) Quorum and Acts of the Board of Directors. At all meetings of the
Board of Directors a majority of the Directors shall constitute a quorum for the
transaction of business and the act of a majority of the Directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by this Agreement.
If a quorum shall not be present at any meeting of the Board of Directors, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Any action required or permitted to be taken at any meting of the Board of
Directors may be taken without a meeting, if all members of the Board of
Directors consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of the Board of Directors.
(e) Electronic Communications. Directors may participate in a meeting
of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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(f) Officers. The Board of Directors shall appoint officers of the
Company (the "Officers") and assign in writing titles (including, without
limitation, President, Vice President, Secretary, and Treasurer) to such
persons. Any number of offices may be held by the same person. The Board of
Directors at its annual meetings may appoint such other Officers as it shall
deem necessary who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors. The salaries, if any, of all Officers shall be fixed by
or in the manner prescribed by the Board of Directors.
(1) The President. The President shall be the chief executive
officer of the Company, shall preside at all meetings of the Board of Directors,
shall have general and active management of the business of the Company and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The President shall execute bonds, mortgages and other contracts,
except where required or permitted by law to be otherwise signed and executed
and except where signing and execution thereof shall be expressly delegated by
the Board of Directors or by this Agreement to some other Officer.
(2) The Vice President and Commercial Officer. In the absence of
the President or in the event of the President's inability to act, the Vice
President shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Subject to the direction of the President or the Board, the Vice
President shall be responsible for overseeing activities related to optimizing
the commercial contracts and optimization of project economic value, including
power sales and fuel management. The President shall work with the Vice
President in developing and implementing the Annual Budget. Subject to Board
ratification, the holders of the Class A Interests shall appoint the initial
Vice President and Commercial Officer.
(3) The Treasurer. The Treasurer shall have the custody of the
Company funds and securities and shall keep full and accurate accounts or
receipts and disbursements in books belonging to the Company and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Board of Directors. The
Treasurer shall disburse the funds of the Company as may be ordered by the Board
of Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its annual meetings, or when the
Board of Directors so requires, an account of all of the Treasurer's
transactions and of the financial condition of the Company.
(4) The Secretary. The Secretary shall attend all meetings of the
Board of Directors and record all proceedings of the meetings of the Board of
Directors in books to be kept for that purpose. The Secretary shall give, or
cause to be given, notice of all meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or the
President, under whose supervision the Secretary shall be.
(g) Binding. Unless otherwise determined by the Board of Directors or
as otherwise set forth in this Agreement, each Officer has the authority to bind
the Company.
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(h) Nonliability of Directors and Officers for Acts or Omissions in
Their Official Capacity. To the full extent permitted by the Act, all Directors
and Officers appointed thereby are released from liability for damages and other
monetary relief on account of any act, omission, or conduct in the Director's or
such Officer's Managerial capacity. No amendment or repeal of this section
affects any liability or alleged liability of any Director or Officer for any
acts, omission, or conduct that occurred prior to the amendment or repeal.
6.2. OPERATIONS. (a) Restrictions. Without the approval of a majority of the
Board (including at least one Director appointed by the holders of the Class A
Interests and at least one Director appointed by the holders of the Class B
Interests) or the approval of the holders of a majority of the Interests, the
Company shall not take (and, subject to paragraph (b) below, shall cause its
Subsidiaries and controlled Affiliates not to take) the following actions:
(i) provide guarantees, indemnities, loans or other forms of financial
or credit support in favor of any Member or any of their Affiliates, other
than pursuant to arrangements existing as of the date hereof;
(ii) enter into any other transaction, agreement or arrangement with
any Member or any of their Affiliates other than the Administrative Services
Agreement, the Fuel Management Services Agreement and the Power Marketing
Services Agreement;
(iii) adopt the annual operating, capital and maintenance budget (the
"ANNUAL BUDGET") for any Project other than changes reasonably necessary in
the case of emergencies including the Company's 1999 operating budget which
shall be presented to the Board of Directors on or before May 1, 1999 and
approved by May 31, 1999. This budget shall include all existing project
capital expenditure requirements, all direct project revenues, costs and
expenses as well as the direct costs of Services as addressed in agreements
with Affiliates of a Member which are included in the existing 1999 Project
Annual Budgets. Any other costs shall only be included in the Annual Budget
with the approval of the Board of Directors;
(iv) make any capital expenditures, acquire any assets or expand or
modify any Project at a cost of more than $100,000 for any single capital
expenditure, acquisition, expansion or modification, or $500,000 in the
aggregate per Project for any series of capital expenditures, acquisitions,
expansions or modifications (or such other amounts as may be fixed from time
to time by the Board), in each case, other than pursuant to the Annual
Budget for such Project or relating to the replacement or repair of such
Project in the ordinary course of business or such as are reasonably
necessary in the case of emergencies;
(v) liquidate, file for bankruptcy, reorganize, dissolve or wind up;
(vi) merge or consolidate with or into any other Person;
(vii) transfer, sell, lease or otherwise dispose of its assets other
than in the ordinary course of business) having a value in excess of
$250,000 to or in favor of a third party unless included in an approved
budget;
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(viii) issue, repurchase or redeem any Interest in the Company or any
securities convertible or exchangeable for any such Interest;
(ix) incur indebtedness for borrowed money (or enter into any related
guarantee, pledge or security arrangement) in excess of $1 million, except
for refinancings of existing debt outstanding principle and accrued interest
plus transaction and closing costs on commercially reasonable terms;
(x) enter into any contractual or other agreement or commitment that
would exceed $100,000 in any year (or $500,000 over the life of the
contract) (or such other amount as may be fixed from time to time by the
Board), other than in the ordinary course of business or pursuant to the
Annual Budget;
(xi) adopt, or modify in any material respect, the Company's
distribution policy, as described in Article VIII hereof, other than
pursuant to the Company's financing documents, its organizational documents
or rating agency requirements;
(xii) enter into any material amendment to the Company's organizational
documents;
(xiii) make any material modification to or enter into any material
amendment of any Power Purchase Agreement or any other material Project
agreement;
(xiv) initiate or settle any litigation or other adversary or
regulatory proceeding involving claims in excess of $100,000 and will
provide at least three Business Days prior notice to the Directors before
initiating any litigation, adversarial or regulatory proceeding, and will
provide as much notice as reasonably practicable prior to settling any such
proceeding.
(xv) take any action with respect to a change in the QF status of any
Project;
(xvi) make any material tax election settle any material tax litigation
or controversy, select any agents or employees to manage any material tax
litigation or controversy, file any material tax returns (including any
amendments thereto), or make any material tax payments;
(xvii) establish or modify material accounting practices and
procedures;
(xviii) select independent accountants;
(xix) make any determination as to the amount and timing of any
additional Capital Contributions to the Company;
(xx) enter into any joint venture or any new project other than
pursuant to the Purchase Agreement and Development Agreement (as defined in
the Purchase Agreement); and
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(xxi) waive any material rights the Company or any of its Subsidiaries
may have in respect of any Member
(xxi) make any other material decision not in the ordinary course of
business.
(b) Subsidiaries. The above clauses (other than clauses (viii),
(xi), (xii) and (xix)) shall apply to all Subsidiaries and controlled Affiliates
of the Company as well as to the Company itself.
(c) Annual Budget. The officers of the Company shall prepare and
deliver to the Board of Directors, no later than September 30 of each year a
proposed budget for the next Fiscal Year of the Company and a meeting of the
Board of Directors shall be held prior to October 31 or such early date as may
be required by project documents to take action to approve the budget for the
forthcoming year (each, an "Annual Budget"). In the event the Board cannot reach
agreement as to the Annual Budget with respect to any Project prior to the end
of any Fiscal Year, such Project shall continue to be run in accordance with the
Annual Budget for the previous year until a new Budget is agreed upon or reached
pursuant to the dispute resolution mechanisms set forth in Section 11.3 below;
provided that all the items in the last Annual Budget shall be increased for
inflation based on the change in the Consumer Price Index - All Urban Consumer,
as reported by the U.S. Department of Labor for the most recent 12-month period
for which figures are available.
(d) Additional Actions. Each Member agrees to take all steps
reasonably necessary to cause the Company to comply with the provisions of this
Section 6.2.
6.3. OTHER OPPORTUNITIES. Except as expressly provided under the Development
Agreement, the Company shall have the right to pursue all ventures, activities
and opportunities relating to the expansion of its existing Projects at existing
sites and all new projects developed on leasehold or fee interests owned by the
Company or any of the Subsidiaries, other than with respect to the Zinc Recovery
Project and the other mineral recovery and processing rights or projects at the
Imperial Valley Projects or at other locations. Except for the rights provided
to the Company in the preceding sentence, no Member shall be restricted from
independently pursuing any competing or other ventures, activities or
opportunities in the independent power production business or any other
business. The Board shall evaluate from time to time the feasibility of the
Project Subsidiaries that own various Projects becoming "exempt wholesale
generators" ("EWG") as defined in PUHCA. In the event that the Board determines
that such an event is beneficial and in the best interest of the Company with
respect to any or all of the Projects, without violating the terms of any
material contracts of the Company or any of the Project Subsidiaries, the
Company shall apply to FERC for EWG status for the applicable Project
Subsidiaries.
6.4. LIABILITY. No Member, Director or Officer shall be liable as such for
any debts, obligations or liabilities of the Company.
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6.5. EXCULPATION AND INDEMNIFICATION. (a) No Member, Director or Officer
appointed thereby shall be liable, directly or indirectly, to the Company or to
any other Member for any loss, claim, damage or liability arising from any act
or omission performed or omitted by it in connection with this Agreement or in
its capacity as a Member, Director or Officer of the Company, except to the
extent any such losses, claims, damages or liabilities are primarily
attributable to such Member's, Director's or Officer's gross negligence, fraud
or willful misconduct.
(b) The Company shall, to the fullest extent permitted by applicable
law, indemnify and hold harmless each Member, Director and Officer against all
losses, claims, damages or liabilities to which such Member, Director or
Officer, as such, may become subject in connection with any matter arising out
of or related to the Company's business or affairs, except (i) to the extent any
such loss, claim, damage or liability is finally judicially determined to be
primarily attributable to such Member's, Director's or Officer's gross
negligence, fraud or willful misconduct or (ii) for economic loss to such
Member's membership interest. If a Member, Director or Officer becomes involved
in any capacity in any action, proceeding or investigation in connection with
any matter arising out of or related to the Company's business or affairs, the
Company will periodically reimburse such Member, Director or Officer for its
legal and other expenses incurred in connection therewith, provided that such
Member, Director or Officer shall promptly repay to the Company the amount of
any such reimbursed expenses paid to it if it shall be finally judicially
determined that such Member, Director or Officer is not entitled to be
indemnified by the Company in connection with such action proceeding or
investigation. If for any reason (other than the gross negligence, fraud or
willful misconduct of such Member, Director or Officer) the foregoing
indemnification is unavailable to such Member, Director or Officer, or
insufficient to hold it harmless, then the Company shall contribute to the
amount paid or payable by such Member, Director or Officer as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and such Member,
Director or Officer on the other hand or, if such allocation is not permitted by
applicable law, to reflect not only the relative benefits (if permitted by
applicable law to be taken into account in respect of such contribution)
referred to above but also any other relevant equitable consideration.
(c) The reimbursement, indemnity and contribution provisions of this
Section 6.5 shall (i) extend upon the same terms and conditions (but only to the
extent any loss, claim, damage or liability relates to the business or affairs
of the Company) to the directors, officers, employees and Affiliates and agents
of the applicable Member and (ii) be reduced (and, if applicable, refunded) by
the amount of any insurance or other payments from third parties in respect of
an indemnifiable claim hereunder.
ARTICLE VII.
CONTRIBUTIONS AND CAPITAL ACCOUNTS
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7.1. CONTRIBUTIONS. Each Member has made a Capital Contribution to the
Company as described on Schedule A hereto as of the date hereof in exchange for
the issuance of its Class A Interests or Class B Interests, as applicable.
7.2. NO OBLIGATION TO RESTORE DEFICIT BALANCE. Except as required by law, no
Member shall be required to restore any deficit balance in its Capital Account.
7.3. WITHDRAWAL; SUCCESSORS. A Member shall not be entitled to withdraw any
part of its Capital Account or to receive any distribution from the Company,
except as specifically provided in this Agreement. No Member holding Class A
Interests may withdraw from membership without the consent of the Board.
7.4. INTEREST. No Member shall be entitled to earn interest on such Member's
Capital Contribution or on any profits retained by the Company.
7.5. NO PERSONAL LIABILITY. No Member shall have any personal liability for
the repayment of any Capital Contributions of any other Member.
ARTICLE VIII.
DISTRIBUTIONS
Except as modified in accordance with Section 6.2(a)(xi) above, the
Company's distribution policy shall be to pay quarterly distributions (except as
otherwise required by financing documents) on the Interests equal to the
Company's net after-tax cash flow after operating expenses and all payments of
principal, interest and premiums on the Company's indebtedness and related debt
service obligations, in each case, less such amounts the Board determines is
required for working capital or applicable reserves. Distributions shall be made
equally as between the Class A Interests and the Class B Interests.
ARTICLE IX.
TRANSFER OF INTERESTS
9.1. TRANSFER OF INTERESTS. No holder of Interests shall Transfer any
Interests, or any beneficial interest therein, without the consent of the holder
or holders of a majority of the Interests of the class other than those proposed
to be so Transferred; provided, that (i) such consent may not be unreasonably
withheld in connection with the Transfer of all or substantially all of the
Interests owned by such holder, (ii) the foregoing shall not prohibit (a) any
Transfer to an Affiliate of such transferor unless, with respect to a Transfer
of Class A Interests, such Affiliate is an Electric Utility, or such Transfer of
Class A Interests would violate a Project's QF status, (b) any Transfer
resulting from any merger or consolidation of CalEnergy (or any successor) with
or into any other Person, the sale of all or substantially all of its
independent
14
power production assets or other change in beneficial ownership of CalEnergy (or
any successor) and (c) any pledge of Interests by CalEnergy (or any successor)
in connection with a financing; and (iii) the withholding of such consent shall
be deemed reasonable with respect to the proposed Transfer of any Class A
Interests to an Electric Utility or an Affiliate of an Electric Utility or any
other Transfer of Class A Interests that would violate a Project's QF status.
Any Transfer or purported Transfer made in violation of this Article IX shall be
null and void and of no effect.
9.2. CONDITIONS TO TRANSFER. No Member shall Transfer any portion of its
Interest unless (i) the transferee (if other than another Member) agrees to be
bound by this Agreement and executes a counterpart hereof and such further
documents as may be necessary, in the opinion of the Company and its counsel, to
make it a party hereto (and any such transferee shall then be deemed a Member
for all purposes of this Agreement but no such agreement shall relieve the
transferor from liability herein); (ii) the permitted transferee (including an
Affiliate of the transferor) has executed a Joinder Agreement in the form
attached hereto as Exhibit A; and (iii) such transfer is made pursuant to either
an effective registration statement under the Securities Act and any applicable
state securities laws or an available exemption from the registration
requirements of the Securities Act and such laws.
9.3. ELECTRIC UTILITY. Any holder of the Class A Interests shall not become
an Electric Utility or take any other action that would violate any Project's QF
status for as long as the Company owns any direct or indirect interest in any
QF. Any such holder of Class A Interests who breaches the foregoing restriction
shall indemnify and hold harmless the Company and the other holders of Interests
from any losses, costs, damages (including consequential damages), expenses and
liabilities resulting from such breach, including, without limitation, any
liability to holders of Class B Interests resulting from the application of the
provisions of Section 9.4 hereof as a result of such breach.
9.4. QF TRUE UP.
(a) If, during the period during which any of the QF Projects remains a
QF, there is a sale of the Class B Interests, a QF Project is sold or a QF
Project owner or the Company is dissolved, the Board shall have an analysis
performed in accordance with the procedures and practices mandated by FERC to
determine if such event will result in the loss of QF status for any QF Project.
In addition, the Board will have such an analysis performed if at any time facts
come to its attention that indicate that entitlement to QF Project benefits
through the Company has caused or will cause the aggregate interest of Electric
Utilities in any QF Project to exceed fifty percent (50%) of the equity
interests in such Project (calculated in accordance with FERC regulations),
thereby jeopardizing such Project's QF status.
(b) If, based on such analysis, the Company is advised by counsel that
the QF status of a QF Project is likely to be lost, and the Board concludes that
loss of QF status will cause an economic loss to the Company, the parties hereto
and the Company shall take the following steps:
15
(i) The holders of the Class B Interests will pay any distributions
received from each affected QF Project to the holders of the Class A Interests
to the extent required to maintain the QF status for the affected QF Projects.
If excess distributions have already been paid by the Company, the holders of
the Class B Interests will pay an amount sufficient to eliminate such excess to
the holders of the Class A Interests (together with interest thereon at an
annual rate of 7%). In the event distributions derived from a QF Project which
would otherwise be paid to and retained by the holders of the Class B Interests
are payable to the holders of the Class A Interests in accordance with the
foregoing, distributions payable from other business activities of the Company
which, upon advice of counsel or an order from FERC, are determined not to
constitute benefits of any affected QF Project, shall be payable by the holders
of the Class A Interests to the holders of the Class B Interests to offset,
insofar as possible, the loss of distributions otherwise payable on the Class B
Interests from the QF Projects.
(ii) If the foregoing procedure is inadequate to protect the QF status
of an affected QF Project, the Board may direct the holder of the Class B
Interest to sell Class B Interests to an entity which is not an Electric
Utility.
ARTICLE X.
DISSOLUTION AND WINDING UP
10.1. DISSOLUTION. The Company shall be dissolved and its affairs wound up,
upon the first to occur of any of the following events (each of which shall
constitute a Dissolution Event):
(a) the disposition for cash and/or liquid Securities of all the
securities and substantially all of the other Property held by the Company,
unless the Company is continued with the consent of the Members;
(b) the written consent of the Members; and
(c) the dissolution, expulsion, or withdrawal, if permitted, of any
Member unless, within 90 days after such event, the Company is continued by the
written consent of the remaining Members.
10.2. EFFECT OF DISSOLUTION. Upon dissolution, the Company shall not be
terminated and shall continue until the winding up of the affairs of the Company
is completed and a certificate of cancellation has been issued by the Secretary
of State of Delaware.
10.3. DISTRIBUTION OF ASSETS ON DISSOLUTION. Upon the winding up of the
Company, the remaining Members shall take full account of the assets and
liabilities of the Company and shall liquidate the assets of the Company as
promptly as is consistent with obtaining the fair value thereof. The proceeds of
any liquidation shall be applied and distributed in the following order:
16
(a) first, to the payment of the debts and liabilities of the Company
to creditors, including Members who are creditors, to the extent permitted by
law, in satisfaction of such debts and liabilities and to the payment of
necessary expenses of liquidation;
(b) second, to the setting up of any reserves which such Members may
deem necessary or appropriate for any anticipated obligations or contingencies
of the Company arising out of or in connection with the operation or business of
the Company. Such reserves may be paid over by such Members to an escrow agent
or trustee selected by such Members to be disbursed by such escrow agent or
trustee in payment of any of the aforementioned obligations or contingencies
and, if any balance remains at the expiration of such period as such Members
shall deem advisable, shall be distributed by such escrow agent or trustee in
the manner hereinafter provided;
(c) then, to the Members equally as between the Class A Interests and
the Class B Interests.
10.4. WINDING UP AND FILING ARTICLES OF CANCELLATION. Upon the commencement
of the winding up of the Company, articles of cancellation shall be delivered by
the Company to the Secretary of State of Delaware for filing. The articles of
cancellation shall set forth the information required by the Act. The winding up
of the Company shall be completed when all debts, liabilities, and obligations
of the Company have been paid and discharged or reasonably adequate provision
therefor has been made and all the remaining Property of the Company has been
distributed to the Members.
17
ARTICLE XI.
MISCELLANEOUS
11.1. NOTICES. Notices to the Company shall be sent to the Principal Office
of the Company. Notices to the Members shall be sent to their addresses as set
forth on the signature page hereof. Any Member may require notices to be sent to
a different address by giving notice to the Company and the other Members in
accordance with this Section 11.1. Any notice or other communication required or
permitted hereunder shall be in writing, and shall be deemed to have been given
with receipt confirmed if and when delivered personally, given by prepaid
telegram or mailed first class, postage prepaid, delivered by courier, or sent
by facsimile, to such Members at such addresses.
11.2. AMENDMENT; WAIVER; DECISIONS. Amendments to this Agreement may be made
from time to time, provided, however, that, except as otherwise provided in the
last sentence of this Section 11.2 or elsewhere in this Agreement, no amendment,
modification or waiver of this Agreement or any provision hereof shall be valid
or effective unless in writing and signed by (i) the holder or holders of a
majority of the Class A Interests and (ii) the holder or holders of a majority
of the Class B Interests. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other subsequent breach or condition,
whether of like or different nature. The Members may amend this Agreement in any
way necessary, in their reasonable judgment, to effectuate a Membership
Admission. Notwithstanding anything in this Agreement to the contrary, any
decision to be made or action to be taken by the Members hereunder shall be made
or taken by (i) the holder or holders of a majority of the Class A Interests and
(ii) the holder or holders of a majority of the Class B Interests.
11.3. RESOLUTION OF DISPUTES. In the event of any failure of the Board or
the Members to reach agreement on any material decision (including, without
limitation, those described in Section 9.2 hereof), the chief executive officers
and/or chief operating officers of each of the Members shall meet to attempt to
resolve any such dispute in good faith. If agreement cannot be reached between
the parties within 45 days, the parties shall submit the dispute to non-binding
arbitration under the rules of the American Arbitration Association. If, 60 days
after such 45-day period, such dispute is still not resolved, the parties shall
be free to pursue any other remedy they may have.
11.4. HEADINGS. All Article and Section headings in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of any
Article or Section.
11.5. BINDING AGREEMENT. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto, their successors, and permitted assigns,
except as otherwise provided herein.
18
11.6. ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. The
Company and the Members shall have the right to specific performance of such
obligations, and if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, each of the Company and the Members hereby waives
the claim or defense that the party instituting such action or proceeding has an
adequate remedy at law. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
State of New York or any New York state court in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal or state court
sitting in the State of New York.
11.7. SAVING CLAUSE. If any provision of this Agreement shall be held
invalid, illegal or unenforceable in any jurisdiction in any respect, then the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties shall use
their best efforts to amend or substitute such invalid, illegal or unenforceable
provision with enforceable and valid provisions which would produce as nearly as
possible the rights and obligations previously intended by the parties without
renegotiation of any material terms and conditions stated herein.
11.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
11.9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of laws or provisions thereof.
11.10. NO RIGHTS OF CREDITORS AND THIRD PARTIES UNDER AGREEMENT. This
Agreement is entered into among the Company and the Members for the exclusive
benefit of the Company, its Members, and their successors and permitted
assignees. This Agreement is expressly not intended for the benefit of any
creditor of the Company or any other Person. Except and only to the extent
provided by applicable statute, no such creditor or any third party shall have
any rights under this Agreement or any agreement between the Company and any
Member with respect to any Capital Contribution or otherwise.
11.11. GENERAL INTERPRETIVE PRINCIPLES. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
19
(a) the terms defined in this Agreement include the plural as well as
the singular, and the use of any gender herein shall be deemed to include the
other gender;
(b) accounting terms not otherwise defined herein have the meanings
given to them in the United States in accordance with generally accepted
accounting principles;
(c) references herein to "Articles", "Sections" and other subdivisions
without reference to a document are to designated Articles, Sections and other
subdivisions of this Agreement;
(d) a reference to a paragraph without further reference to a Section
is a reference to such paragraph as contained in the same Section in which the
reference appears, and this rule shall also apply to other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision;
(f) where any provision in this Agreement refers to action to be taken
by any Person, or which such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by such
Person; and
(g) the term "include" or "including" shall mean without limitation by
reason of enumeration.
11.12. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior agreements, written or oral, with respect thereto.
20
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the date hereof.
CE GENERATION, LLC CALENERGY COMPANY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------- --------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Assistant Secretary Title: Assistant Secretary
21
SCHEDULE 1
CalEnergy Company, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT A
JOINDER AGREEMENT
Joinder Agreement, dated as of this 3rd day of March 1999, by and among
CE Generation, LLC., a Delaware limited liability company (the "Company"), and
the undersigned (the "New Investor").
Reference is made to that certain Limited Liability Company Operating
Agreement (the "Operating Agreement"), dated as of February 9, 1999, by and
between the Company and, CalEnergy Company, Inc. and the other holders of
interests in the Company from time to time party thereto, as the same may from
time to time be amended.
By executing this Joinder Agreement, the New Investor hereby agrees to
be bound by the terms of the Operating Agreement as if it were an original
signatory to such Agreement and shall be entitled to all of the rights and
benefits afforded to, and shall be subject to all the restrictions and
obligations of the Members thereunder.
The New Investor hereby represents and warrants that (i) it is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has the power and authority to execute and deliver this
Agreement and perform its obligations hereunder, (ii) the execution, delivery
and performance of this Agreement has been authorized by the board of directors
of the New Investor and no other approval or authorization is necessary and
(iii) the execution, delivery and performance of this Agreement does not
conflict with or violate the terms of its Certificate of Incorporation or
By-laws or any agreement to which it is a party or may be bound.
IN WITNESS WHEREOF, the parties hereto have executed this Joinder
Agreement as of the date first above written.
El Paso Power Holding Company
By:
---------------------------------
Name:
Title:
Agreed to and Accepted by:
CE Generation, LLC
---------------------------------
Name:
Title:
1