Exhibit 10.48
AMENDED AND RESTATED OPERATING AGREEMENT
OF
GREENBRIER PIPELINE COMPANY, LLC
Dated as of September 1, 2001
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS AGREEMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND WERE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. MEMBERSHIP INTERESTS MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED AT ANY TIME EXCEPT (I) IN ACCORDANCE WITH THE RESTRICTIONS CONTAINED
IN THIS AGREEMENT, AS AMENDED FROM TIME TO TIME AND (II) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH THE TRANSFER.
AMENDED AND RESTATED OPERATING AGREEMENT
OF
GREENBRIER PIPELINE COMPANY, LLC
TABLE OF CONTENTS
1 DEFINITIONS AND CONSTRUCTION........................................................................................1
1.1 Definitions...............................................................................................1
1.2 Construction.............................................................................................12
2 FORMATION AND PURPOSE OF THE COMPANY...............................................................................12
2.1 Formation................................................................................................12
2.2 Name.....................................................................................................12
2.3 Registered Office, Registered Agent......................................................................12
2.4 Offices..................................................................................................12
2.5 Purposes.................................................................................................13
2.6 Foreign Qualification....................................................................................13
2.7 Term.....................................................................................................13
2.8 No State Law Partnership.................................................................................13
3 MEMBERSHIP; DISPOSITION OF INTERESTS...............................................................................13
3.1 Members. Before the date hereof, Dominion Greenbrier was the sole Member of the
Company, having contributed assets to the Company with an initial Gross
Asset Value of $1,000. Effective as of the date hereof, Piedmont
Greenbrier became a Member of the Company, and in consideration of the
Capital Commitments detailed on Appendix B hereto, the Company issued 33%
of its Membership Interests to Piedmont Greenbrier, which
effectively diluted Dominion Greenbrier's Sharing Ratio to 67%...........................................13
3.2 Restrictions on the Disposition of an Interest...........................................................14
3.3 Additional Members.......................................................................................18
3.4 Limit on Encumbrances....................................................................................18
3.5 Sale of VPSC's Fractional Interest. The Company is undertaking development of the
Facilities with VPSC, a wholly-owned subsidiary of Dominion Greenbrier
that owns a fractional interest in the Facilities and the development
rights thereto. At any time, such fractional interest (the "Fractional
Interest") shall be equal to a fraction, the numerator of which is the
capital of VPSC at such time and the denominator of which is the sum of
the total Capital Commitments of the Members at such time plus the capital
of VPSC at such time.....................................................................................19
4 COVENANTS, REPRESENTATIONS AND WARRANTIES; INFORMATION.............................................................19
4.1 Commitment to Construct the Initial Facilities...........................................................19
4.2 Development of a Modification............................................................................21
4.3 Commitment to Construct a Modification...................................................................21
4.4 General Representations and Warranties...................................................................22
4.5 Regulatory Status........................................................................................24
4.6 [INTENTIONALLY OMITTED]..................................................................................24
4.7 Governmental Applications................................................................................24
4.8 Information..............................................................................................24
4.9 Liability to Third Parties...............................................................................25
4.10 Withdrawal...............................................................................................25
4.11 Lack of Authority........................................................................................25
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4.12 Reasonable and Necessary Efforts.........................................................................25
4.13 No Personal Gain to Members..............................................................................25
5. CAPITAL CONTRIBUTIONS..............................................................................................26
5.1 Pre-Execution Date Expenditures..........................................................................26
5.2 Required Capital Contributions...........................................................................26
5.3 Failure of a Member to Make Required Capital Contributions...............................................28
5.4 Loans....................................................................................................30
5.5 Voluntary Contributions..................................................................................31
5.6 Return of Contributions..................................................................................31
5.7 Capital Accounts.........................................................................................31
6 ALLOCATIONS AND DISTRIBUTIONS......................................................................................31
6.1 Allocations of Profits and Losses........................................................................31
6.2 Tax Allocations..........................................................................................34
6.3 Withholding..............................................................................................35
6.4 Distributions............................................................................................35
7. MANAGEMENT.........................................................................................................36
7.1 Voting by Members and Management Committee...............................................................36
7.2 Removal, Resignation and Replacement of Managers.........................................................40
7.3 Meetings by the Management Committee.....................................................................40
7.4 Action by Written Consent or Telephone Conference........................................................40
7.5 Compensation.............................................................................................41
7.6 Operating Budgets........................................................................................41
7.7 Financing Committee......................................................................................41
7.8 Conflicts of Interest....................................................................................42
7.9 Management of VPSC.......................................................................................42
8 [INTENTIONALLY OMITTED]............................................................................................43
9 OPERATION OF THE FACILITIES........................................................................................43
9.1 Operator.................................................................................................43
10. INDEMNIFICATION....................................................................................................43
10.1 Right to Indemnification.................................................................................43
10.2 Advance Payment..........................................................................................44
10.3 Indemnification of Agents................................................................................44
10.4 Indemnification by the Members...........................................................................44
10.5 Appearance as a Witness..................................................................................44
10.6 Nonexclusivity of Rights.................................................................................45
10.7 Insurance................................................................................................45
10.8 Member Notification......................................................................................45
10.9 Savings Clause...........................................................................................45
11. TAXES..............................................................................................................45
11.1 Tax Returns..............................................................................................45
11.2 Tax Status...............................................................................................46
11.3 Tax Matters..............................................................................................46
11.4 Tax Elections............................................................................................46
12. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS.........................................................................47
12.1 Maintenance of Books and Records.........................................................................47
12.2 Accounting Basis.........................................................................................47
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12.3 Financial Reports........................................................................................47
12.4 Fiscal Year..............................................................................................48
12.5 Accounts.................................................................................................48
12.6 Other Notices............................................................................................48
12.7 Governmental Reports.....................................................................................49
12.8 Cost of Preparing and Distributing Reports...............................................................49
12.9 Accounts.................................................................................................49
13. INSPECTION.........................................................................................................49
13.1 Inspection of Facilities and Records.....................................................................49
14. BANKRUPTCY OF A MEMBER.............................................................................................50
14.1 Bankruptcy Members.......................................................................................50
15 DISSOLUTION, LIQUIDATION, AND TERMINATION..........................................................................50
15.1 Dissolution..............................................................................................50
15.2 Liquidation and Termination..............................................................................50
15.3 Deficit Capital Accounts.................................................................................51
15.4 Certificate of Cancellation..............................................................................51
16. GENERAL PROVISIONS.................................................................................................52
16.1 Offset...................................................................................................52
16.2 Notices..................................................................................................52
16.3 Entire Agreement.........................................................................................52
16.4 Effect of Waiver or Consent..............................................................................52
16.5 Amendment or Modification................................................................................53
16.6 Binding Effect...........................................................................................53
16.7 Specific Performance and Injunctive Relief...............................................................53
16.8 Governing Law; Severability..............................................................................53
16.9 No Third Party Beneficiaries.............................................................................53
16.10 Creditors................................................................................................54
16.11 Further Assurances.......................................................................................54
16.12 Notice to Members of Provisions of this Agreement........................................................54
16.13 Press Releases...........................................................................................54
16.14 Counterparts.............................................................................................54
16.15 Supercedes...............................................................................................55
APPENDIX D.................................................................................................................1
PHASE I CAPITAL BUDGET...................................................................................................1
Pipelines...........................................................................................................1
Total....................................................................................................................1
Appendix A - Certificate of Formation
Appendix B - Sharing Ratios
Appendix C - Description of Initial Facilities
Appendix D - Pre-Execution Date Expenditures
Appendix E - Phase I Capital Budget
Appendix F - CO&M Agreement
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This Amended and Restated Operating Agreement (this "Agreement") of
Greenbrier Pipeline Company, LLC, a Delaware limited liability company (the
"Company"), is executed and agreed to by the Members (as defined below) as of
September 1, 2001.
RECITALS
A. The Company was formed as a limited liability company pursuant to a
Certificate of Formation filed with the Secretary of State of the State
of Delaware on July 12, 2001 with Dominion Greenbrier, Inc. as its sole
Member.
B. The Company and Dominion Greenbrier desire to admit Piedmont Greenbrier
Pipeline Company, L.L.C. as a Member of the Company and Piedmont
Greenbrier desires to be admitted as a Member of the Company, and the
parties desire to restate the Company's Operating Agreement as set
forth herein.
1. DEFINITIONS AND CONSTRUCTION.
The terms defined in this Section 1 shall, for all purposes of this
Agreement, have the meaning set forth below:
1.1 DEFINITIONS
1.1.1. "ACT" means the Delaware Limited Liability Company
Act, as amended, or any successor or replacement
statute.
1.1.2. "ADDITIONAL MEMBER" means any Person who becomes a
Member upon the issuance of a Membership Interest
directly from the Company after the date hereof.
1.1.3. "ADDITIONAL NECESSARY REGULATORY APPROVALS" means all
Authorizations (but excluding Authorizations of a
nature not customarily obtained prior to commencement
of construction of facilities similar to the
Modification in question) as may be required in
connection with (a) the ownership, construction and
operation of a Modification and (b) the
transportation of the natural gas in connection with
such Modification.
1.1.4. "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with
respect to any Member, the deficit balance, if any,
in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the
following adjustments:
(a) such Capital Account shall be deemed to be
increased by any amounts that such Member is
obligated to restore to the Company
(pursuant to this Agreement or otherwise) or
is deemed to be obligated to restore
pursuant to (i) the penultimate sentence of
Treasury Regulations Section 1.704-2(g)(l),
or (ii) the penultimate sentence of Treasury
Regulations Section 1.704-2(i)(5); and
(b) such Capital Account shall be deemed to be
decreased by the items described in Treasury
Regulations Sections
1.704-l(b)(2)(ii)(d)(4), (5) and (6).
1.1.5. "AFFILIATE" means with respect to a Member, any
Person which is (a) a Parent of such Member; or (b) a
corporation as to which the majority of the voting
securities are (directly or through any number of
wholly- owned subsidiaries) owned by such Member or a
Parent of such Member.
1.1.6. "AFUDC" means allowance for funds used during
construction.
1.1.7. "AGREEMENT" has the meaning set forth in the
Preamble.
1.1.8. "AUTHORIZATIONS" means all licenses, certificates,
permits, orders, approvals, determinations and
authorizations from Governmental Authorities having
jurisdiction.
1.1.9. "AVAILABLE INTEREST" has the meaning set forth in
Section 3.2.3.
1.1.10. "BANKRUPT MEMBER" means a Member who shall take or be
subject to any of the actions described in Section
18-304 of the Act.
1.1.11. "BASE RATE" means an interest rate per annum equal to
the lesser of (a) the prime rate of Chase Manhattan
Bank, N.A. (or its successor) as then in effect, or
(b) the maximum interest rate allowed pursuant to
Delaware law.
1.1.12. "BUSINESS DAY" means a day, other than Saturday or
Sunday, on which commercial banks are open for the
transaction of business in New York, New York.
1.1.13. "CAPITAL ACCOUNT" means a book account to be
established and maintained by the Company for each
Member as computed from time to time in accordance
with the capital account maintenance rules set forth
in Treasury Regulations Section 1.704-l(b)(2)(iv) and
the following provisions:
(a) to each Member's Capital Account there shall
be credited (i) such Member's Capital
Contributions, (ii) such Member's
distributive share of Profits and any items
in the nature of income or gain which are
allocated to such Member pursuant to Section
6.1 hereof, and (iii) the amount of any
Company liabilities assumed by such Member
or which are secured by any asset of the
Company distributed to such Member;
(b) to each Member's Capital Account there shall
be debited (i) the amount of money and the
Gross Asset Value of any asset of the
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Company distributed to such Member, (ii)
such Member's distributive share of Losses
and any items in the nature of expenses or
losses which are allocated to such Member
pursuant to Section 6.1 hereof, and (iii)
the amount of any liabilities of such Member
assumed by the Company or which are secured
by any asset contributed by such Member to
the Company;
(c) in the event that any Membership Interest is
Disposed of or transferred in accordance
with the terms of this Agreement, the
transferee shall succeed to the Capital
Account of the transferor to the extent it
relates to the Membership Interest involved;
and
(d) in determining the amount of any liability
for purposes of subparagraphs (a) and (b)
above, there shall be taken into account
Section 752(c) of the Code and any other
applicable provisions of the Code and
Treasury Regulations.
The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Treasury
Regulations Section 1.704-l(b), and shall be
interpreted and applied in a manner consistent with
such Treasury Regulations. In the event the
Management Committee shall determine that it is
prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are
computed in order to comply with such Treasury
Regulations, the Management Committee may make such
modification, provided that it is not likely to have
a material effect on the amounts distributed to any
Person pursuant to Section 15 hereof upon the
dissolution of the Company.
1.1.14 "CAPITAL COMMITMENT" means, in the case of a Member
executing this Agreement as of the date of this
Agreement or a person acquiring that Membership
Interest, the amount calculated pursuant to the
formula specified on Appendix B for that Member as
its Capital Commitment to the Company, and in the
case of a Membership Interest issued directly by the
Company, the Capital Commitment established pursuant
thereto, in each case, subject to adjustments on
account of Dispositions of Membership Interests
permitted by this Agreement.
1.1.15. "CAPITAL CONTRIBUTION" means, with respect to any
Member, the amount of money and the initial Gross
Asset Value of any property (other than money)
contributed to the Company with respect to the
Membership Interest held by such Member pursuant to
the terms of this Agreement.
1.1.16. "CAPITAL DEFAULTING MEMBER" has the meaning set forth
in Section 5.3.
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1.1.17. "CAPITAL NON-DEFAULTING MEMBER" has the meaning set
forth in Section 5.3.
1.1.18. "CERTIFICATE" means the Certificate(s) of public
convenience and necessity issued by the FERC pursuant
to the FERC Application.
1.1.19. "CERTIFICATE OF CANCELLATION" has the meaning set
forth in Section 15.4.
1.1.20. "CERTIFICATE OF FORMATION" means the Certificate of
Formation filed with the Delaware Secretary of State
pursuant to the Act on July 12, 2001, and attached to
this Agreement as Appendix A.
1.1.21. "CERTIFIED PUBLIC ACCOUNTANTS" means the firm(s) of
nationally recognized independent certified public
accountants selected from time to time by the
Operator on behalf of the Company.
1.1.22. "CODE" means the Internal Revenue Code of 1986, as
amended, or any successor or replacement statute.
1.1.23. "COMPANY" means Greenbrier Pipeline Company, LLC, a
Delaware limited liability company.
1.1.24. "COMPANY MINIMUM GAIN" has the meaning ascribed to
the term "partnership minimum gain" in Section
1.704-2(b)(2) and (d) of the Treasury Regulations.
1.1.25. "CO&M AGREEMENT" means the Construction, Operating
and Maintenance Agreement between the Company and the
Operator.
1.1.26. "CONFIDENTIAL INFORMATION" means unique and specific
information about the Facilities, this Agreement, a
Member, the Company, rate strategies or marketing
strategies that is not generally available to the
public and, in the case of a Member or the Company,
that such Member or the Company has designated as
confidential. Upon the filing of the FERC
Application, the terms and conditions of this
Agreement and any information about the Facilities
disclosed in the FERC Application (except for any
terms and conditions or information for which
confidential treatment may have been requested and
not refused by the FERC) shall be deemed to be
generally available to the public and shall not be
considered Confidential Information.
1.1.27. "CONTROL NOTICE" has the meaning set forth in Section
3.2.5.
1.1.28. "COST OF INITIAL FACILITIES" means all costs and
expenses, including without limitation AFUDC and
Pre-Execution Date Expenditures, borne by the
Operator or the Company for (a) the acquisition,
planning, design, engineering, financing,
administration, construction and start-up of the
4
Initial Facilities, and (b) securing all
Authorizations required for the foregoing.
1.1.29. "COST OF MODIFICATION" means, with respect to any
Modification, all costs and expenses, including
without limitation AFUDC, borne by the Operator or
the Company for the (a) acquisition, planning,
design, engineering, financing, administration,
construction and start-up of such Modification, and
(b) securing all Authorizations required for the
foregoing.
1.1.30. "CUSTOMER" means a Person who has entered into a
Service Agreement with the Company (or, where
applicable, a precedent agreement relating thereto)
for the receipt, transportation, and delivery of
natural gas by means of the Facilities.
1.1.31. "DEFAULT RATE" means an interest rate equal to the
lesser of (a) two percent (2%) per annum over the
prime rate of Chase Manhattan Bank, N.A. (or its
successor) as in effect from time to time while such
default is outstanding; or (b) the maximum interest
rate allowed for this purpose pursuant to the law of
Delaware.
1.1.32. "DEPRECIATION" means, for each Fiscal Year or part
thereof, an amount equal to the depreciation,
amortization, or other cost recovery deduction
allowable for federal income tax purposes with
respect to an asset for such Fiscal Year or part
thereof, except that if the Gross Asset Value of an
asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal
Year, the depreciation, amortization, or other cost
recovery deduction for such Fiscal Year or part
thereof shall be an amount which bears the same ratio
to such Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery
deduction for such Fiscal Year or part thereof bears
to such adjusted tax basis.
1.1.33. "DISPOSE, DISPOSING OR DISPOSITION" means a sale,
assignment, transfer, exchange or other disposition
(including, without limitation, by operation of law),
or the acts thereof.
1.1.34. "DOMINION GREENBRIER" means Dominion Greenbrier,
Inc., a Delaware corporation.
1.1.35. "ESTIMATED COST OF INITIAL FACILITIES" means the
estimated total Cost of Initial Facilities as
determined by the Operator from time to time.
1.1.36. "ESTIMATED COST OF MODIFICATION" means, with respect
to any Modification, the estimated total Cost of
Modification as determined by the Operator from time
to time.
1.1.37. "EXECUTION DATE" means September 1, 2001.
5
1.1.38. "FACILITIES" means the Initial Facilities together
with any and all Modifications.
1.1.39. "FERC" means the Federal Energy Regulatory Commission
or any commission, agency or other governmental body
succeeding to the powers of such commission.
1.1.40. "FERC APPLICATION" means the documents pursuant to
which application for a certificate(s) of public
convenience and necessity is made to FERC by the
Company for authority to construct, own, lease and
operate the Initial Facilities and to receive,
transport and deliver natural gas by means of the
Initial Facilities.
1.1.41. "FERC REHEARING DATE" means the date upon which the
order issuing the Certificate is no longer subject to
rehearing before FERC.
1.1.42. "FINANCING COMMITMENT" means the agreements between
one or more financial institutions or other Persons
and the Company or the Financing Corporation pursuant
to which such financial institutions or other Persons
agree, subject to the conditions set forth therein,
to lend money to, or purchase securities of, the
Company or the Financing Corporation, the proceeds of
which shall be used to finance all or a portion of
the Facilities.
1.1.43. "FINANCING COMMITTEE" means the Committee of Member
representatives established pursuant to Section 7.7.
1.1.44. "FINANCING CORPORATION" means a corporation or trust
wholly owned by the Company that may be organized for
the purpose of issuing securities, the proceeds from
which are to be advanced directly or indirectly to
the Company to finance all or a portion of the
Facilities.
1.1.45. "FISCAL YEAR" means the fiscal year adopted by the
Company from time to time.
1.1.46. "FRACTIONAL INTEREST" has the meaning set forth in
Section 3.5.
1.1.47. "GAAP" means generally accepted accounting principles
as applied in the United States.
1.1.48. "GOVERNMENTAL AUTHORITY" means any court, agency,
authority, board, bureau, commission, department,
office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether
federal, state, parish, county, district,
municipality, city, political subdivision or
otherwise, domestic or foreign whether now or
hereafter in existence.
6
1.1.49. "GROSS ASSET VALUE" means, with respect to any asset
of the Company, the adjusted tax basis of such asset
as of the relevant date for federal income tax
purposes, except as follows:
(a) the initial Gross Asset Value of any asset
contributed by a Member to the Company shall
be the gross fair market value of such asset
as determined by the Management Committee;
(b) the Gross Asset Values of all Company assets
(including intangible assets such as
goodwill) shall be adjusted to equal their
respective gross fair market values (taking
into account Section 770l(g) of the Code) as
determined by the Management Committee as of
the following times:
(i) the acquisition after the date
hereof of an additional Membership
Interest in the Company by any new
or existing Member in exchange for
more than a de minimis Capital
Contribution;
(ii) the distribution by the Company to
a Member of more than a de minimis
amount of money or Company property
as consideration for a Membership
Interest in the Company; and
(iii) the liquidation of the Company
within the meaning of Treasury
Regulations Section
1.704-l(b)(2)(ii)(g);
provided that an adjustment pursuant to
clauses (i) and (ii) above shall be made
only if the Management Committee reasonably
determines that such adjustment is necessary
to reflect the relative economic interests
of the Members in the Company;
(c) the Gross Asset Value of any item of Company
assets distributed to any Member shall be
adjusted to equal the gross fair market
value (taking into account Section 770l(g)
of the Code) of such asset on the date of
distribution as determined by the Management
Committee;
(d) the Gross Asset Values of all Company assets
(including intangible assets such as
goodwill) shall be adjusted to reflect any
adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b)
of the Code, but only to the extent that
such adjustments are required to be taken
into account in determining Capital Accounts
pursuant to Treasury Regulations Section
1.704-l(b)(2)(iv)(m) and subparagraph (d) of
the definition of "Profits" and "Losses"
provided that Gross Asset Values shall
not be adjusted pursuant to this
subparagraph (d) to the extent that
7
the Management Committee determines that an
adjustment pursuant to subparagraph (b) is
required in connection with a transaction
that would otherwise result in an adjustment
pursuant to this subparagraph (d); and
(e) if the Gross Asset Value of an asset has
been determined or adjusted pursuant to
subparagraphs (b) or (d) above, such Gross
Asset Value shall thereafter be adjusted by
the Depreciation taken into account with
respect to such asset for purposes of
computing Profits and Losses and other items
allocated pursuant to Section 6.1 of this
Agreement.
1.1.50. "INITIAL FACILITIES" means the real, personal, mixed
and contractual property (whether tangible or
intangible) to be owned and operated by the Company
for the receipt, transportation and delivery of
natural gas, all as more fully described in Appendix
C (not including any Modification but including any
changes in size, design capacity and location as may
be approved prior to the date of filing of the FERC
Application).
1.1.51. "IN-SERVICE DATE" means the date on which the Initial
Facilities have been constructed and placed in
service.
1.1.52. "LOAN" means any loan made by a Member to the
Company.
1.1.53. "MANAGER" has the meaning set forth in Section 7.1.2.
1.1.54. "MANAGEMENT COMMITTEE" has the meaning set forth in
Section 7.1.2.
1.1.55. "MEMBER" means any Person executing this Agreement as
of the date of this Agreement or who is hereafter
admitted to the Company as a Member as provided in
this Agreement, but does not include any Person who
has ceased to be a Member of the Company.
1.1.56. "MEMBERSHIP INTEREST" means all of a Member's rights
in the Company, including, without limitation, the
Member's share of profits and losses of the Company,
the right to receive distributions of the Company's
assets, any right to vote, and any right to
participate in the management of the Company.
1.1.57. "MEMBER NONRECOURSE DEBT" has the meaning ascribed to
the term "partner nonrecourse debt" in Treasury
Regulations Section 1.704-2(b)(4).
1.1.58 "MEMBER NONRECOURSE DEBT MINIMUM GAIN" has the
meaning ascribed to the term "partner nonrecourse
debt minimum gain" in Section 1.704-2(i)(2) and (3)
of the Treasury Regulations.
8
1.1.59. "MEMBER NONRECOURSE DEDUCTIONS" has the meaning
ascribed to the term "partner nonrecourse deductions"
in Sections 1.704-2(i)(l) and 1.704-2(i)(2) of the
Treasury Regulations.
1.1.60. "MEMBER TRANSFEREE" has the meaning set forth in
Section 3.2.4.
1.1.61. "MODIFICATION" means any additions or modifications
to the Facilities approved after the filing of the
FERC Application installed (a) to modify, improve,
expand, extend or increase the design capacity or
scope of the Facilities or any portion thereof
(except in connection with customary maintenance) or
(b) to provide a new point of delivery or receipt of
natural gas for the Facilities.
1.1.62. "NECESSARY REGULATORY APPROVALS" means all
Authorizations (but excluding Authorizations of a
nature not customarily obtained prior to commencement
of construction of pipeline facilities similar to the
Initial Facilities) as may be required in connection
with (a) the construction and operation of the
Initial Facilities, (b) the formation of the Company,
and (c) the receipt, transportation and delivery of
natural gas under the Service Agreements.
1.1.63. "NON-OFFERING MEMBER" has the meaning set forth in
Section 3.2.3.
1.1.64. "NONRECOURSE LIABILITY" has the meaning set forth in
Treasury Regulations Section 1.704-2(b)(3).
1.1.65. "OFFERING MEMBER" has the meaning set forth in
Section 3.2.3.
1.1.66. "OFFER NOTICE" has the meaning set forth in Section
3.2.3.
1.1.67. "OFFER PERIOD ONE" has the meaning set forth in
Section 3.2.3.
1.1.68. "OFFER PERIOD TWO" has the meaning set forth in
Section 3.2.3.
1.1.69. "OPERATING BUDGET" has the meaning set forth in
Section 7.6.
1.1.70. "OPERATOR" means Dominion Transmission, Inc., a
Delaware corporation, and any of its successors or
assigns, pursuant to the CO&M Agreement.
1.1.71. "PARENT" means any Person who directly or indirectly
owns more than fifty percent (50%) of the outstanding
voting stock of a Member.
1.1.72. "PERSON" means an individual, a trust, an estate, a
domestic corporation, a foreign corporation, a
professional corporation, a partnership, a limited
partnership, a limited liability company, a foreign
limited liability company, an unincorporated
association, or another entity.
9
1.1.73. "PHASE I CAPITAL BUDGET" means the capital budget for
the period from the Execution Date until the filing
of the FERC Application, as set forth in Appendix E.
1.1.74. "PHASE II CAPITAL BUDGET" means the capital budget
for the period from the filing of the FERC
Application to the issuance of the Certificate.
1.1.75. "PHASE III CAPITAL BUDGET" means the capital budget
for the period from the issuance of the Certificate
to the In-Service Date.
1.1.76. "PIEDMONT GREENBRIER" means Piedmont Greenbrier
Pipeline Company, LLC, a North Carolina limited
liability company.
1.1.77. "PRE-EXECUTION DATE EXPENDITURES" means expenditures
and costs made by any Member or any of its Affiliates
prior to the Execution Date, if approved by the
Members pursuant to Section 5 if required to be so
approved, including, but not limited to, expenditures
made in the course of activities reasonably related
to preparing this Agreement, the CO&M Agreement, the
precedent agreements, and other agreements related to
the formation of the Company, marketing, planning and
designing the Facilities, acquiring rights of way,
preparing the FERC Application and obtaining the
Necessary Regulatory Approvals. Pre-Execution Date
Expenditures include only internal and external
expenditures and costs made on behalf of the Company
and do not include any internal and external
expenditures or costs made by a Member or any of its
Affiliates for the purpose of (i) evaluating the
Member's investment in the Company or its use of any
services to be provided by the Company, (ii)
obtaining the permission of any Governmental
Authority or other Person to participate as a Member
or as a subscriber to any such services, (iii) or any
other expenditures or costs made by a Member or its
Affiliates for the benefit of a Member and not for
the direct benefit of the Company, except that legal
fees incurred by each Member in connection with the
preparation of this Agreement, the CO&M Agreement and
other agreements related to the formation of the
Company and the organization of its activities shall
be Pre-Execution Date Expenditures.
1.1.78. "PROCEEDING" means any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or
investigative.
1.1.79. "PROFITS" and "LOSSES" mean, for each Fiscal Year or
part thereof, the taxable income or loss of the
Company for such Fiscal Year determined in accordance
with Section 703(a) of the Code (for this purpose,
all items of income, gain, loss or deduction required
to be stated separately pursuant to Section 703(a)(l)
of the Code shall be included in taxable income or
loss), with the following adjustments (without
duplication):
10
(a) any income of the Company that is exempt
from federal income tax shall be added to
such taxable income or loss;
(b) any expenditures of the Company described in
Section 705(a)(2)(B) of the Code or treated
as such pursuant to Treasury Regulations
Section 1.704-l(b)(2)(iv)(i) shall be
subtracted from such taxable income or loss;
(c) in the event the Gross Asset Value of any
Company asset is adjusted pursuant to
subparagraphs (b) or (c) of the definition
of Gross Asset Value, the amount of such
adjustment shall be taken into account as
gain (if the adjustment increases the Gross
Asset Value of the asset) or loss (if the
adjustment decreases the Gross Asset Value
of the asset) from the disposition of such
asset for purposes of computing Profits and
Losses;
(d) gain or loss resulting from any disposition
of Company property with respect to which
gain or loss is recognized for federal
income tax purposes shall be computed with
reference to the Gross Asset Value of the
property disposed of, rather than the
adjusted tax basis of such property;
(e) in lieu of the depreciation, amortization or
other cost recovery deductions taken into
account in computing such taxable income or
loss, there shall be taken into account
Depreciation for such Fiscal Year or part
thereof, computed in accordance with the
definition of Depreciation; and
(f) to the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to
Sections 734(b) or 743(b) of the Code is
required to be taken into account in
determining Capital Accounts pursuant
Treasury Regulations Section 1.704-
l(b)(2)(iv)(m)(4) as a result of a
distribution other than in liquidation of a
Member's Interest, the amount of such
adjustment shall be treated as an item of
gain (if the adjustment increases the basis
of the asset) or loss (if the adjustment
decreases such basis) from the disposition
of the asset and shall be taken into account
for purposes of computing Profits or Losses.
1.1.80. "PURCHASE NOTICE" has the meaning set forth in
Section 5.3.5.
1.1.81. "REGULATORY ALLOCATIONS" has the meaning set forth in
Section 6.1.2(h).
1.1.82. "SERVICE AGREEMENTS" means the service agreement(s)
by and between the Company and the Customers for the
receipt, transportation and delivery of natural gas
by means of the Facilities.
11
1.1.83. "SHARING RATIO" means with respect to any Member, the
fraction (expressed as a percentage), the numerator
of which is that Member's Capital Commitment and the
denominator of which is the sum of all Capital
Commitments of all Members, as such fraction may be
adjusted pursuant to any other Section of this
Agreement (including, without limitation, Sections
4.1, 4.3, 5.3 and 7.7).
1.1.84. "SUPERMAJORITY VOTE" means the affirmative vote of
those Members representing not less than seventy-five
percent (75%) of the Sharing Ratios of all Members.
1.1.85. "TAX DISTRIBUTION" has the meaning set forth in
Section 6.4.1.
1.1.86. "TAX MATTERS PARTNER" has the meaning set forth in
Section 11.1.
1.1.87. "TREASURY REGULATIONS" means the Treasury Regulations
issued and in effect under the Code.
1.1.88. "VPSC" means Dominion Pipeline-Greenbrier, Inc., a
Virginia public service company.
1.2 CONSTRUCTION.
Whenever the context requires, the gender of all words used in
this Agreement includes the masculine, feminine and neuter.
All references to Sections refer to sections of this Agreement
(unless the context clearly indicates otherwise), and all
references to Appendices are to Appendices attached to this
Agreement, each of which is made a part hereof for all
purposes.
2. FORMATION AND PURPOSE OF THE COMPANY.
2.1 FORMATION.
The Company has been organized as a Delaware limited liability
company by the filing of the Certificate of Formation pursuant
to the Act with the Delaware Secretary of State.
2.2 NAME.
The name of the Company is "Greenbrier Pipeline Company, LLC."
2.3 REGISTERED OFFICE, REGISTERED AGENT.
The registered agent and office shall be as set forth in the
Certificate of Formation or as subsequently designated by the
Company, subject to the requirements of the Act.
2.4 OFFICES.
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The principal offices of the Company shall be at such place as
the Members may from time to time determine. Notice of any
change in such offices shall be given to each Member by the
Managers. The Company may have such other offices as the
Members may designate from time to time.
2.5 PURPOSES.
The purposes of the Company shall be to plan, design, develop,
construct, own, lease and provide for the operation and
maintenance of the Facilities and conduct such business
activities that are necessary or incidental in connection
therewith.
2.6 FOREIGN QUALIFICATION.
To the extent required by law, the Members shall cause the
Company to qualify to transact business in North Carolina,
Virginia and West Virginia and any other jurisdictions in
which such qualification may be required. At the request of
the Management Committee, each Member shall execute,
acknowledge, swear to, and deliver all certificates and other
instruments conforming with this Agreement that are necessary
or appropriate to qualify, continue, and terminate the Company
as a foreign limited liability company in all such
jurisdictions.
27 TERM.
The Company commenced on July 12, 2001 and shall continue in
existence until the latest date on which the Company is to
dissolve as may be provided in the Certificate of Formation or
until such earlier date as the Company may be dissolved as
provided in this Agreement.
2.8 NO STATE LAW PARTNERSHIP.
The Members intend that (a) the Company shall not be a
partnership (including, without limitation, a limited
partnership) or joint venture other than for federal or state
income tax purposes, (b) no Member or Manager shall be a
partner or joint venturer of any other Member or Manager as a
result of this Agreement for any purposes other than federal
and state tax purposes, and (c) this Agreement shall not be
construed to suggest otherwise.
3. MEMBERSHIP; DISPOSITION OF INTERESTS.
3.1 MEMBERS. Before the date hereof, Dominion Greenbrier was the
sole Member of the Company, having contributed assets to the
Company with an initial Gross Asset Value of $1,000. Effective
as of the date hereof, Piedmont Greenbrier became a Member of
the Company, and in consideration of the Capital Commitments
detailed on Appendix B hereto, the Company issued 33% of its
Membership Interests to Piedmont Greenbrier, which effectively
diluted Dominion Greenbrier's Sharing Ratio to 67%.
13
As of the date hereof, the Members of the Company are Dominion
Greenbrier and Piedmont Greenbrier.
3.2 RESTRICTIONS ON THE DISPOSITION OF AN INTEREST.
3.2.1. SUPER MAJORITY VOTE. Except as specifically provided
below in this Section 3.2, a Disposition of a
Membership Interest shall not occur without a
Supermajority Vote of the Members. Any attempted
Disposition of a Membership Interest, or a part
thereof, other than in accordance with Section 3.2 of
this Agreement shall be null and void ab initio.
3.2.2. TRANSFER TO AFFILIATE. Notwithstanding any other
provisions of Section 3.2, a Member may Dispose of a
Membership Interest without the consent of the other
Members if the Disposition is to an Affiliate of such
Member.
3.2.3. TRANSFERS GENERALLY.
(a) Subject to Section 3.2.4, if a Member wishes
to Dispose of all or any portion of its
Membership Interest (the "Available
Interest") to a Person other than an
Affiliate of such Member, the following
procedures shall apply. After receiving a
bona fide purchase offer from such Person
for the Available Interest, the Member
holding the Available Interest (the
"Offering Member") shall give a written
notice to each of the other Members (the
"Non-Offering Members") stating the terms of
the offer and the Offering Member's intent
to accept the offer unless the Available
Interest is purchased as provided below (the
"Offer Notice").
(b) Each Non-Offering Member shall have the
right, exercisable by giving joint written
notice to all Members within thirty (30)
calendar days after receipt of the Offer
Notice ("Offer Period One"), to purchase a
pro rata portion of the entire Available
Interest, based on the respective Sharing
Ratios of all Non-Offering Members.
(c) If at least one, but less than all, of the
Non-Offering Members exercises its
respective purchase right during Offer
Period One each of the Non-Offering Members
who exercised such right shall have the
further right, exercisable by giving joint
written notice to all Members within thirty
(30) calendar days after the end of Offer
Period One ("Offer Period Two"), to purchase
a pro rata portion of the entire remaining
Available Interest, based on the respective
Sharing Ratios of those Non-Offering Members
who actually exercise such purchase right.
14
(d) If a Member elects to purchase an Available
Interest or portion thereof pursuant to
Section 3.2.3(b) or (c), but does not
receive Authorization to purchase all of the
Available Interest or portion thereof, then
such Member shall be allowed to purchase the
maximum amount of the Available Interest
which it is permitted to purchase hereunder
and under such Authorization, in which case
the portion of such Available Interest which
such Member is unable to purchase shall be,
within 30 days after such Authorization is
denied, offered to the other Non-Offering
Members in accordance with Section 3.2.3(c).
(e) Any purchase under the preceding paragraphs
shall occur on the terms and conditions set
forth in the bona fide offer, except as set
forth below. At closing, each purchasing
Member shall make a cash payment for its
proportionate amount of the total purchase
price for the Available Interest, which
total price shall be the lesser of the price
set forth in the bona fide offer or the
balance in the Offering Member's Capital
Account on the date of the closing. Closing
on all purchases shall occur on a date and
at the location mutually agreed by the
purchasing Members, but shall be no later
than thirty (30) calendar days after the
expiration of the final offer period.
(f) If no purchase rights are exercised at all
during Offer Period One or if Offer Period
Two occurs and no purchase rights are
exercised during Offer Period Two or the
offers received during Offer Period Two do
not cover all of the Available Interest,
then the Offering Member shall be free to
complete the Disposition of the entire
Available Interest to the Person making the
bona fide offer on the terms and conditions
thereof. If the Disposition to the Person
making the bona fide offer is not
consummated within ninety (90) calendar days
after the expiration of the Offer Period,
such Disposition by the Offering Member
shall not be made without again complying
with the procedures of this Section 3.2.3.
3.2.4. TRANSFERS BY MEMBER TRANSFEREES.
(a) Notwithstanding the terms of Section 3.2.3,
if a Member who has received its Membership
Interest through a Disposition from another
Member (the "Member Transferee") wishes to
Dispose of an Available Interest to a Person
other than its Affiliate, the following
procedures shall apply. After receiving a
bona fide purchase offer from such Person,
the Member Transferee shall give an Offer
Notice to the Member from whom it received
its Membership Interest (the "Original
Transferring Member"). The terms of this
Section 3.2.4 shall not apply if the
Original Transferring Member is no longer a
Member of the Company.
15
(b) Upon receipt of the Offer Notice, the
Original Transferring Member shall have the
first right, exercisable by giving written
notice to all Members within thirty (30)
calendar days after receipt of the Offer
Notice, to purchase the entire Available
Interest. Any decision by the Original
Transferring Member not to exercise this
right shall not limit its rights under the
following provisions.
(c) If the Original Transferring Member does not
give written notice to exercise its purchase
right as provided in Section 3.2.4(b), each
Member (including the Original Transferring
Member) shall have the right, exercisable by
giving joint written notice to all Members
within thirty (30) calendar days after the
end of the Original Transferring Member's
first right of offer period, to purchase a
pro rata portion of the entire Available
Interest, based on the respective Sharing
Ratios of all the Members.
(d) If at least one, but less than all, of the
Members exercises its purchase right
according to Section 3.2.4(c) above, such
Member(s) shall have the further right,
exercisable by giving joint written notice
to all Members within thirty (30) calendar
days after the end of the offer period
provided in Section 3.2.4(c) above, to
purchase a pro rata portion of the entire
remaining Available Interest, based on the
respective Sharing Ratios of those Members
who actually exercise such purchase right.
(e) If a Member elects to purchase the Available
Interest or portion thereof pursuant to
Sections 3.2.4(b), (c) or (d), but does not
receive Authorization to purchase the entire
Available Interest, then such Member shall
be allowed to purchase the maximum amount of
the Available Interest which it is permitted
to purchase hereunder and under such
Authorization, in which case the portion of
such Available Interest which such Member is
unable to purchase shall be, within 30 days
after such Authorization is denied, offered
to the other Members in accordance with
Section 3.2.4(d).
(f) Any purchase under the preceding paragraphs
shall occur on the terms and conditions set
forth in the bona fide offer, except as set
forth below. At closing, each purchasing
Member shall make a cash payment for its
proportionate amount of the total purchase
price for the Available Interest, which
total price shall be the lesser of the price
set forth in the bona fide offer or the
balance in the Member Transferee's Capital
Account on the date of the closing. Closing
on all purchases shall occur on a date and
at the location mutually agreed by the
purchasing Members, but shall be no later
than thirty (30) calendar days after the
expiration of the final offer period.
16
(g) If no purchase rights are exercised at all
under Section 3.2.4(b)-(d), or the offers do
not cover all of the Available Interest,
then the Member Transferee shall be free to
complete the Disposition of the entire
Available Interest to the Person making the
bona fide offer on the terms and conditions
thereof. If the Disposition to the Person
making the bona fide offer is not
consummated within ninety (90) calendar days
after the expiration of the final offer
period, such Disposition by the Member
Transferee shall not be made without again
complying with the procedures of this
Section 3.2.4.
(h) The provisions of this Section 3.2.4 shall
only apply to a transfer by a Member
Transferee. Any subsequent transfer by the
transferee of a Member Transferee shall be
governed by Section 3.2.3.
3.2.5. CHANGE IN CONTROL. If a Member shall cease to be
controlled directly or indirectly by the same Persons
who control it as of the date of that Member's
admission to the Company, the Member shall provide
written notice thereof to each of the other Members
(the "Control Notice"). On or before the expiration
of the thirty (30) day period after the Control
Notice is received by the other Members, such other
Members shall have the option to buy the Membership
Interest of the Member affected by the change of
control at a purchase price equal to the balance in
that Member's Capital Account on the date the option
is exercised, according to the procedures set forth
in Section 3.2.3 above. If more than one of such
other Members wishes to exercise such option, they
shall exercise such option on the same date and share
in such purchase on a pro rata basis based on their
respective Sharing Ratios. This paragraph shall not
apply to a change in control that results from the
merger or consolidation of a Parent of a Member with
another corporation or the sale of all or
substantially all of the assets of such Parent if, in
each such case, (a) such Parent shall not have been
formed for the principal purpose of directly or
indirectly controlling the Member, (b) the Membership
Interest does not represent substantially all of the
assets of such Parent, and (c) either (i) such Parent
shall be the continuing corporation and shall
continue to directly or indirectly control the
Member, or (ii) the successor corporation (if other
than such Parent) shall be a corporation organized
and existing under the laws of the United States of
America or a state thereof or the District of
Columbia and such successor corporation shall
continue to be in substantially the same business as
such Parent.
3.2.6. GENERAL ADMISSION REQUIREMENTS. No Person (who is not
already a Member) shall be admitted to the Company as
a Member, whether through issuance of a Membership
Interest by the Company or Disposition of a
Membership Interest by a Member, unless all of the
following occur: (a) such Person executes this
Agreement, makes any
17
required Capital Contributions in full, and provides
all information reasonably requested by the Company
in connection with its identity and the terms of any
Disposition of a Membership Interest to such Person;
(b) if required by law, such issuance or Disposition
of a Membership Interest is registered under the
Securities Act of 1933, as amended, and any
applicable state securities laws; and (c) the Company
receives an opinion of its legal counsel,
satisfactory to the Company in form and substance,
confirming that such issuance or Disposition is
exempt from registration under those laws and would
not result in the termination of the Company for tax
or other purposes. The Company may waive the
requirements of an opinion from legal counsel, or may
limit the scope and subject matter of such opinion,
based upon the determination of the Management
Committee.
3.2.7. REIMBURSEMENT UPON ADMISSION. The Member effecting a
Disposition and any Person admitted to the Company in
connection therewith shall pay, or reimburse the
Company for, all costs incurred by the Company in
connection with the Disposition or admission
(including, without limitation, the legal fees
incurred in connection with the legal opinions
referred to in Section 3.2.6) on or before the 30th
day after the receipt by such Member or transferee of
the Company's invoice for the amount due. If payment
is not made by the date due, the Person owing that
amount shall pay interest on the unpaid amount from
the date due at the Default Rate.
3.3 ADDITIONAL MEMBERS.
Any Person who receives a Membership Interest pursuant to
Sections 3.2.2, 3.2.3 or 3.2.4 shall be admitted to the
Company as a Member upon consummation of such transfer. Except
as set forth in the previous sentence, no Person shall be
admitted to the Company as a Member or Additional Member, and
Membership Interests shall not be created or issued for such
purpose, unless such admission is approved by the
Supermajority Vote of all then existing Members and is
followed by compliance with Section 3.2.6 above. Any admission
shall become effective only after the new Member has executed
and delivered to the other Members a document including the
new Member's notice address, its agreement to be bound by this
Agreement and its representation and warranty that the
representations and warranties in Section 4.4 are true and
correct with respect to the new Member.
3.4 LIMIT ON ENCUMBRANCES.
Except as provided in this Section 3 and except as may be
required by the lenders in connection with the Financing
Commitment, each Member shall be prohibited from pledging,
granting a security interest in, or otherwise encumbering its
Membership Interest or granting any option or contingent right
of purchase with respect thereto, whether in whole or in part,
without the prior written approval of the Members by
Supermajority Vote.
18
3.5 SALE OF VPSC'S FRACTIONAL INTEREST. The Company is undertaking
development of the Facilities with VPSC, a wholly-owned
subsidiary of Dominion Greenbrier that owns a fractional
interest in the Facilities and the development rights thereto.
At any time, such fractional interest (the "Fractional
Interest") shall be equal to a fraction, the numerator of
which is the capital of VPSC at such time and the denominator
of which is the sum of the total Capital Commitments of the
Members at such time plus the capital of VPSC at such time.
Dominion Greenbrier shall cause VPSC to sell the Fractional
Interest to the Company, and the Members shall cause the
Company to purchase the Fractional Interest from VPSC, as soon
after the issuance of the Certificate as approval can be
obtained from the Virginia State Corporation Commission (if
such approval is necessary) unless some other time is mutually
agreed upon by the Members. The purchase price for the
Fractional Interest shall be equal to the amount necessary to
fully reimburse VPSC for all reasonable expenditures VPSC made
or is reasonably obligated to make as of the date of the sale
in connection with activities related to the Company or the
development of the Facilities. Upon payment of such purchase
price by the Company, the Members shall make such additional
Capital Commitments and related Capital Contributions in
accordance with their Sharing Ratios as are necessary to
enable the Company to pay the purchase price for the
Fractional Interest.
If the Fractional Interest is not sold to the Company for any
reason (including, without limitation, lack of Virginia State
Corporation Commission approval of such sale or any alternate
structure that may be agreed upon by the Members), then,
promptly after written request by VPSC, the Company shall
reimburse VPSC for all reasonable expenditures made by VPSC in
connection with activities related to the Company or the
development of the Facilities, and the Company shall assume
any unpaid obligations of VPSC incurred in connection with
VPSC's activities with respect to the Company or the
development of the Facilities. Upon such reimbursement by the
Company, the Members shall make such additional Capital
Commitments and related Capital Contributions in accordance
with their Sharing Ratios as are necessary to enable the
Company to reimburse VPSC for all expenditures made by VPSC in
connection with activities related to the Company or the
development of the Facilities and to assume any unpaid
obligations of VPSC incurred in connection with VPSC's
activities with respect to the Company or the development of
the Facilities.
4 COVENANTS, REPRESENTATIONS AND WARRANTIES; INFORMATION.
4.1 COMMITMENT TO CONSTRUCT THE INITIAL FACILITIES.
4.1.1. Not less than thirty (30) days prior to the filing of
the FERC Application, the Management Committee or any
Member shall submit to the Members a Phase II Capital
Budget and a Phase III Capital Budget. Within thirty
(30) days after delivery of the Phase II and Phase
III Capital Budgets, the Members shall vote on
whether to accept and fund
19
the Phase II Capital Budget (which acceptance shall
also be deemed authorization to file the FERC
Application) and on whether to accept the Phase III
Capital Budget. If the Members do not agree by a
Supermajority Vote to accept and fund the Phase II
Capital Budget and to accept the Phase III Capital
Budget, the Member(s) that voted for acceptance may
purchase, in proportion to their respective Sharing
Ratios, the entire Membership Interest(s) of the
Member(s) who voted against acceptance. The Members
desiring to exercise such purchase right shall so
notify all of the other Members within ten (10)
calendar days after such vote. The aggregate price
for the Membership Interests to be purchased shall be
paid in cash at closing and, unless the selling and
purchasing Members otherwise agree, shall be the sum
of the Capital Account balances, on the date of such
vote, of the Member(s) who voted against acceptance,
and such price shall be allocated to the purchasing
Member(s) in proportion to their respective Sharing
Ratios. Closing on such purchase shall occur on the
date and at the location mutually agreed by the
purchasing Member(s), but in no event more than
twenty-one (21) calendar days after such vote. The
Sharing Ratios of the Members shall be adjusted
accordingly, and a revised Appendix B shall be sent
to the Members. If the Members who voted for
acceptance do not purchase the entire Membership
Interest(s) of the Member(s) who voted against
acceptance, the Company shall be dissolved as soon as
reasonably practicable in accordance with Section 15,
subject to any necessary approvals from any
Governmental Authority.
4.1.2. Within the time requirements specified in the FERC's
regulations for acceptance of the Certificate, the
Members shall vote on whether the Company shall (a)
accept the Certificate and commit to construct the
Initial Facilities, (b) reject the Certificate and/or
(c) seek rehearing of the order issuing the
Certificate. Within thirty (30) calendar days after
the FERC Rehearing Date, if applicable, the Members
shall vote on whether the Company shall either accept
the Certificate and commit to construct the Initial
Facilities, reject the Certificate, appeal the order
issuing the Certificate or to take other legal
action. A Member may vote to reject the Certificate
only if a condition of the Certificate is
unacceptable in the Member's reasonable opinion. A
vote to accept the Certificate shall also be a vote
to fund the Phase III Capital Budget. In the event
the Certificate is not ultimately accepted by a
Supermajority Vote of the Members, the Member(s) that
voted to accept the Certificate may accept the
Certificate and commit to construct the Initial
Facilities and purchase, in proportion to their
respective Sharing Ratios, the entire Membership
Interest(s) of the Member(s) who voted against
acceptance of the Certificate. The Members desiring
to exercise such purchase right shall so notify all
of the other Members within ten (10) calendar days
after such vote. The aggregate price for the
Membership Interests to be purchased shall be paid in
cash at closing and, unless the selling and
purchasing Members otherwise agree, shall be the sum
of the Capital
20
Account balances, on the date of such vote, of the
Member(s) who voted against acceptance of the
Certificate, and such price shall be allocated to the
purchasing Member(s) in proportion to their
respective Sharing Ratios. Closing on such purchase
shall occur on the date and at the location mutually
agreed by the purchasing Member(s), but in no event
more than twenty-one (21) calendar days after such
vote. The Sharing Ratios of the Members shall be
adjusted accordingly, and a revised Appendix B shall
be sent to the Members. If the Members who voted to
accept the Certificate do not purchase the entire
Membership Interest(s) of the Member(s) who voted
against acceptance as provided above, the Company
shall be dissolved as soon as reasonably practicable
in accordance with Section 15, subject to any
necessary approvals from any Governmental Authority.
4.2 DEVELOPMENT OF A MODIFICATION.
4.2.1. Any Member who desires the Company to construct a
Modification shall notify the other Members and the
Operator of the nature of the proposed Modification,
including such details as are then available, and
shall provide a detailed explanation of the reasons
why such Modification is being requested. Promptly,
but in no event later than one hundred fifty (150)
calendar days from the date requested to do so by
such Member, the Operator shall prepare and provide
to each Member a detailed description of the proposed
Modification and an estimate of the cost thereof,
appropriate rate information and the proposed
financing therefor.
4.2.2. Within sixty (60) calendar days after the information
described in Section 4.2.1 has been received by each
Member, the Members shall vote on whether to proceed
with the development of such proposed Modification.
Upon the Supermajority Vote to proceed with the
development of such proposed Modification, the
Company shall proceed with such development,
including, but not limited to, the acquisition of
Additional Necessary Regulatory Approvals and the
Financing Commitment. A vote to proceed with the
development of a Modification shall be without
prejudice to the vote on whether the Company shall be
committed to construct such Modification under
section 4.3.2.
4.3 COMMITMENT TO CONSTRUCT A MODIFICATION.
4.3.1. Except upon approval by a Supermajority Vote, the
Company shall not incur material costs or obligations
with respect to a Modification or be obligated under
any Financing Commitment relating to a Modification
until (a) the Additional Necessary Regulatory
Approvals have been obtained and accepted, (b) such
Financing Commitment, if any, as may be required in
the opinion of the Members for such Modification has
been negotiated and is ready for acceptance by the
Company (with the Management Committee to decide
whether such Financing Commitment
21
utilizes a Financing Corporation), (c) if applicable,
the Service Agreements for the use of substantially
all of the capacity created by the Modification have
been executed by the Company and by one or more
Customers pursuant to the Company's FERC gas tariff,
(d) the Estimated Cost of Modification has been
determined and (e) the Management Committee has
approved a commitment to construct such Modification
as provided in Section 4.3.2.
4.3.2. Immediately following the last to occur of the events
referred to in Section 4.3.1 (a), (b) and (d)
(provided that the condition that the event referred
to in Section 4.3.1 (a) shall have occurred may be
waived by the Supermajority Vote of the Members), and
if the Modification will create additional capacity,
the satisfaction or waiver by the applicable
Customers of all conditions set forth in the
precedent agreements for execution of the Service
Agreements by substantially all of the Customers that
will utilize the capacity to be created by the
Modification (other than the vote of the Members to
commit to construct the Modification), or at such
later time as agreed by the Members, the Members
shall vote on whether the Company shall be committed
to construct the Modification (which commitment to
construct shall constitute an acceptance of the
Financing Commitment, if any).
4.3.3. If the proposal to construct the Modification
receives Supermajority approval by the Members, the
costs of such Modification and related Capital
Contribution requirements shall be divided among all
Members in proportion to their respective Sharing
Ratios.
4.3.4. After the Members vote to commit the Company to
construct a Modification, except with the approval by
a Supermajority Vote, the Company shall not incur any
material costs or obligations with respect to such
Modification until all conditions precedent to the
obtaining by the Company of funds pursuant to a
Financing Commitment (if any) relating to such
Modification have been satisfied or waived.
4.4 GENERAL REPRESENTATIONS AND WARRANTIES.
Each Member hereby represents and warrants to the Company and
to each other Member that as of the date of its admission as a
Member:
(a) if such Member is an organization, it is
duly organized, validly existing, and in
good standing under the law of its state of
incorporation or organization and that it
has full organizational power to execute and
agree to this Agreement and to perform its
obligations under this Agreement;
22
(b) such Member is acquiring its Membership
Interest for such Member's own account as an
investment and without an intent to
distribute the interest,
(c) such Member acknowledges that such
Membership Interests have not been
registered under the Securities Act of 1933
or any state securities laws and may not be
resold or transferred by the Member without
appropriate registration or the availability
of an exemption from such requirements;
(d) such Member, by itself or together with its
advisors, is experienced in making
investments comparable to its investment in
the Company and is capable of judging for
itself the risks inherent in such
investment;
(e) such Member has the financial capacity to
hold its investment in the Company for an
indefinite period of time and to meet its
obligations to make Capital Contributions
under this Agreement, and acknowledges that
the disposition of such investment is
restricted both pursuant to federal and
state securities laws and pursuant to the
terms of this Agreement;
(f) such Member acknowledges that it has
received access to all information that it
deems necessary in order to make its
decision to invest in the Company;
(g) this Agreement has been duly executed and
delivered by it and constitutes its valid
and binding obligation, enforceable in
accordance with its terms;
(h) neither the execution and delivery of this
Agreement nor the consummation of the
transactions contemplated hereby nor
compliance by it with any provisions hereof
(1) conflicts with, or results in a breach
or contravention of, or in a default or the
creation of any lien under, any of the
terms, conditions or provisions of any note,
bond, mortgage, indenture, license,
agreement, or other instrument or obligation
to which it is a party or by which it or its
properties are bound, or (2) violates any
law, order, writ, injunction or decree
applicable to it or any of its properties;
(i) except for the Necessary Regulatory
Approvals, no consent, approval or other
action by any court, governmental authority
or third party is required in connection
with its execution, delivery and performance
of this Agreement;
(j) as to Piedmont Greenbrier, there are no
lawsuits or contested administrative
proceedings against Piedmont Greenbrier that
23
would have a material adverse affect on
Piedmont Greenbrier' s ability to perform
its obligations as a member under this
Agreement;
(k) as to Dominion Greenbrier, there are no
lawsuits or contested administrative
proceedings against Dominion Greenbrier that
would have a material adverse affect on
Dominion Greenbrier's ability to perform its
obligations as a member under this
Agreement.
4.5 REGULATORY STATUS.
Each Member acknowledges that the Company will be a "natural
gas company" under the Natural Gas Act and that the Company
will be subject to all applicable laws, rules, regulations and
orders of any regulatory authority having jurisdiction.
4.6 [INTENTIONALLY OMITTED]
4.7 GOVERNMENTAL APPLICATIONS.
Each Member agrees to support the Company in securing the
Necessary Regulatory Approvals, including, without limitation,
preparing, filing and prosecuting the FERC Application.
4.8 INFORMATION.
4.8.1. In addition to the other rights specifically set
forth in this Agreement, each Member is entitled to
all information to which that Member is entitled to
have access pursuant to Section 18-305 of the Act
under the circumstances and subject to the conditions
therein stated. The Members agree, however, that the
Management Committee from time to time may determine,
due to contractual obligations, business concerns, or
other considerations, that certain information
regarding the business, affairs, properties, and
financial condition of the Company should be kept
confidential and disclosed to a Member only with the
understanding that such information constitutes
Confidential Information under Section 4.8.2.
4.8.2. Each Member acknowledges that, from time to time, it
may receive Confidential Information for or regarding
the Company or a Member the release of which may be
damaging to the Company, Persons with whom the
Company does business or to the Member. Each Member
will hold in strict confidence any Confidential
Information it receives and may not disclose such
Confidential Information to any Person other than
another Member, except for disclosures (a) compelled
by law (but the Member must notify the other Members
promptly of any request for that information, before
disclosing it, if practicable), (b) to advisers or
Managers of the Member or Persons to which that
Member's
24
Membership Interest may be Disposed as permitted by
this Agreement, but only if the recipients have
agreed to be bound by the provisions of this Section
4.8.2, or (c) of information that Member also has
received from a source independent of the Company or
a Member that the Member reasonably believes obtained
that information without breach of any obligation of
confidentiality. Each Member acknowledges that breach
of the provisions of this Section 4.8.2 may cause
irreparable injury to the Company for which monetary
damages are inadequate, difficult to compute, or
both. Accordingly, each Member agrees that provisions
of this Section 4.8.2 may be enforced by specific
performance.
4.8.3. A Member that subsequently ceases to be a Member
shall promptly destroy (and provide a certificate of
destruction to the Company with respect to), or
return to the Company, all Confidential Information
in its possession.
4.9 LIABILITY TO THIRD PARTIES.
No Member or Manager shall be liable for the debts,
obligations or liabilities of the Company by reason of being a
Member or Manager or both, and does not become so liable by
participating, in whatever capacity, in the management or
control of the business of the Company.
4.10 WITHDRAWAL.
A Member does not have the right or power to unilaterally
withdraw from the Company.
4.11 LACK OF AUTHORITY.
Except as otherwise specifically provided herein, no Member or
Manager has the authority or power to act for or on behalf of
the Company, to do any act that would be binding on the
Company, or to incur any expenditures on behalf of the
Company.
4.12 REASONABLE AND NECESSARY EFFORTS.
Each Member shall devote such efforts as shall be reasonable
and necessary to develop and promote the business of the
Company, taking into account its respective Sharing Ratio,
resources and expertise.
4.13 No PERSONAL GAIN TO MEMBERS.
The credit and the assets of the Company shall be used solely
for the benefit of the Company and shall not be used to
further the personal gain of any Member. No asset of the
Company shall be transferred or encumbered for, or in payment
of, any individual obligation of a Member.
25
5 CAPITAL CONTRIBUTIONS.
5.1 PRE-EXECUTION DATE EXPENDITURES.
5.1.1. Set forth on Appendix D are the amounts of
Pre-Execution Date Expenditures that have been
incurred with respect to each Member, all of which
are hereby approved.
5.1.2. If any Member, or Affiliate thereof, has made
Pre-Execution Date Expenditures during the period
preceding the Execution Date that are not set forth
in Appendix D. such Member shall have the right to
request approval thereof by Supermajority Vote as
soon as practicable after the Execution Date (but not
later than ninety (90) calendar days after the
Execution Date).
5.1.3. After all Pre-Execution Date Expenditures to be
considered under Section 5.1.2 have been approved or
disapproved by the Members, the applicable Members
shall, within fifteen (15) days after such approval
or disapproval, make cash Capital Contributions to
the Company pro rata in proportion to their Sharing
Ratios, in an amount equal to the Pre-Execution Date
Expenditures approved under Sections 5.1.1 or 5.1.2,
provided that to the extent one or more Member's
Pre-Execution Date Expenditures are treated as
Capital Contributions, no such Member shall be
required to make any such cash Capital Contributions
to the Company until such time as all other Members
have made cash Capital Contributions (or
Pre-Execution Date Expenditures that are treated as
Capital Contributions) to the Company that are
initially pro rata to their Sharing Ratios.
5.1.4. The assets, if any, acquired by means of the
Pre-Execution Date Expenditures of the Members shall
be and are hereby contributed to the Company. All
applicable Members agree to execute and deliver any
and all assignments and conveyances as may be
necessary or appropriate to evidence such
contribution.
5.2 REQUIRED CAPITAL CONTRIBUTIONS.
5.2.1. (a) The Members hereby agree and obligate themselves
to the Phase I Capital Budget set forth on Appendix
E. On the first day of each month during each Fiscal
Year covered by the Phase I Capital Budget, each
Member shall make a Capital Contribution equal to the
sum of (x) its Sharing Ratio of the amount due under
the Phase I Capital Budget on such date, plus (y)
amounts as are incurred by the Company or the
Operator in implementing the actions identified in
the Phase I Capital Budget provided the sum of all
such additional amounts do not exceed by more than
ten percent (10%) the sum of the amounts budgeted
through such date in the Capital Budget. All amounts
received by the
26
Company pursuant to this Section 5.2.1 (a), whether
received prior to, on or after the first day of each
quarter, shall be credited to the respective Member's
Capital Account as of the first day of each quarter.
(b) If the Members approve the Phase II Capital
Budget pursuant to Section 4.1.1, then, on the first
day of each month during each Fiscal Year covered by
the Phase II Capital Budget, each Member shall make a
Capital Contribution equal to the sum of (x) its
Sharing Ratio of the amount due under the Phase II
Capital Budget on such date plus (y) amounts as are
incurred by the Company or the Operator in
implementing the actions identified in the Phase II
Capital Budget provided the sum of all such
additional amounts do not exceed by more than ten
percent (10%) the sum of the amounts budgeted through
such date in the Phase II Capital Budget. All amounts
received by the Company pursuant to this Section 5.2.
l(b), whether received prior to, on or after the
first day of each quarter, shall be credited to the
respective Member's Capital Account as of the first
day of each quarter.
(c) If the Members approve the Phase III Capital
Budget pursuant to Section 4.1.1, then, on the first
day of each month during each Fiscal Year covered by
the Phase III Capital Budget, each Member shall make
a Capital Contribution equal to the sum of (x) its
Sharing Ratio of the amount due under the Phase III
Capital Budget on such date plus (y) amounts as are
incurred by the Company or the Operator in
implementing the actions identified in the Phase III
Capital Budget provided the sum of all such
additional amounts do not exceed by more than ten
percent (10%) the sum of the amounts budgeted through
such date in the Phase III Capital Budget. All
amounts received by the Company pursuant to this
Section 5.2. l(c), whether received prior to, on or
after the first day of each quarter, shall be
credited to the respective Member's Capital Account
as of the first day of each quarter.
(d) With respect to any Capital Contributions not
provided for in Sections 5.2.1(a), (b) or (c), the
Members by Supermajority Vote shall issue or cause to
be issued a written request to each Member for the
making of Capital Contributions at such times and in
such amounts as the Members shall so approve. All
amounts received by the Company pursuant to this
Section 5.2, whether received prior to, on or after
the date specified in Section 5.2.2(d), shall be
credited to the respective Member's Capital Account
as of such specified date (and the Pre-Execution
Date Expenditures approved pursuant to Sections 5.1.1
and 5.1.2 shall be so credited as of the date
specified in Section 5.2.2(d)). All amounts received
from a Member after the date specified in Section
5.2.2(d) by the Company pursuant to this Section 5.2
shall be accompanied by interest on such overdue
amounts (and the default shall not be cured unless
such interest is also received by the Company), which
interest shall be payable to the Company and shall
accrue from
27
and after such specified date at the Default Rate.
Any such interest paid with respect to a Capital
Contribution shall be credited to the respective
Capital Accounts of the Members, on a pro rata basis
in proportion to their respective Sharing Ratios as
of the date such payment is made to the Company after
giving effect to the payment of that Capital
Contribution with respect to which such interest
accrued.
5.2.2. Each written request issued pursuant to Section
5.2.l(d) shall include the following information:
(a) The total amount of Capital Contributions
requested from all Members;
(b) The amount of Capital Contribution requested
from the Member to whom the request is
addressed, such amount to be in accordance
with the Sharing Ratio of such Member;
(c) The purpose for which the funds are to be
applied in such reasonable detail as the
Management Committee shall direct;
(d) The date on which payments of the Capital
Contribution shall be made (which date shall
not be less than thirty (30) calendar days
following the date the request is given,
unless an earlier date is approved by the
Members) and the method of payment, provided
that such date and method shall be the same
for each of the Members; and
(e) Evidence that the Members have approved the
request in accordance with Section 5.2.1(d).
5.3 FAILURE OF A MEMBER TO MAKE REQUIRED CAPITAL CONTRIBUTIONS.
If there are any Members (collectively, the "Capital
Defaulting Members") who fail to make any required Capital
Contribution to the Company when due (including without
limitation any Loan in lieu of a Capital Contribution as
determined by the Management Committee), the Company, the
Operator or any Member who has made all of its respective
Capital Contributions when due (a "Capital Non-Defaulting
Member") shall be entitled to give written notice of default
to the Capital Defaulting Members, with a copy to all Capital
Non-Defaulting Members. If there are any Capital Defaulting
Members who do not pay all amounts due within ten (10)
calendar days after such notice is given, the Operator (who
shall be deemed to have authority from the Management
Committee), if the Operator's Affiliate is not the Capital
Defaulting Member, or any Capital Non-Defaulting Member, if
the Operator's Affiliate is the Capital Defaulting Member,
shall be entitled to take any of the following actions
(separately or in combination, to the extent that combination
of actions is not inconsistent):
28
5.3.1. Cause the Company to apply any distributions
otherwise payable to the Capital Defaulting Members
hereunder to the payment of unpaid Capital
Contributions, plus interest thereon at the Default
Rate;
5.3.2. Transfer any and all voting and approval rights of
the Capital Defaulting Members to the Capital
Non-Defaulting Members in proportion to the
respective Sharing Ratios of the Capital
Non-Defaulting Members.
5.3.3. With the approval of Members representing a majority
of the Sharing Ratios of the Capital Non-Defaulting
Members, cause the Capital Non-Defaulting Members to
make aggregate Loans to the Company in the amount of
such required and unpaid Capital Contributions in
proportion to the respective Sharing Ratios of the
Capital Non-Defaulting Members. In such event, (a)
such Loans shall accrue interest at the Default Rate
from the date of the Loans; (b) repayment of the
Loans to the Capital Non-Defaulting Members shall
have priority over any other distributions to be made
hereunder; and (c) the amount of interest paid by the
Company for any such Loans shall be deducted from any
distribution otherwise owed to the Capital Defaulting
Members. Upon the making of any such Loans to the
Company, the Company shall be deemed to have
simultaneously made loans in the same aggregate
amount and at the same interest rate to the Capital
Defaulting Members, and such loans by the Company
shall be due and payable upon demand by the Operator;
5.3.4. With the approval of Members representing a majority
of the Sharing Ratios of the Capital Non-Defaulting
Members, cause the Capital Non-Defaulting Members to
Contribute to the Company the required and unpaid
portion of the Capital Contributions due from the
Capital Defaulting Members. In such case the Sharing
Ratios of the Capital Defaulting Members shall be
reduced, as to each Capital Defaulting Member, by the
percentage equivalent of a fraction, the numerator of
which is twice the amount of the required and unpaid
Capital Contribution due from such Capital Defaulting
Member, and the denominator of which is the sum of
all previous Capital Contributions made by such
Capital Defaulting Member. The Sharing Ratios of the
Capital Non-Defaulting Members shall be
proportionately increased, provided such reduction
and increase do not violate any law or regulatory
requirement. The Members shall be sent a revised
Appendix B reflecting the adjusted Sharing Ratios;
5.3.5. With the approval of a majority of the Capital
Non-Defaulting Members, upon written notice (a
"Purchase Notice") to any Capital Defaulting Member,
which notice may be given at any time before the
default is fully cured by such Capital Defaulting
Member or any Loans are made in accordance with
Section 5.3.3, purchase the entire Membership
Interest of such Capital Defaulting Member in
proportion to the respective Sharing Ratios of the
Capital Non-Defaulting Members. The purchase
29
price shall be equal to seventy five percent (75%) of
the Capital Account of such Capital Defaulting Member
as of the date of such default. If such purchase
right is exercised, the closing shall take place on
the date specified by the Capital Non-Defaulting
Members, which date shall be not sooner than fifteen
(15) calendar days and not later than thirty (30)
calendar days after the date the Purchase Notice is
given. At such closing, the purchase price shall be
payable in cash. The Members shall be sent a revised
Appendix B reflecting the adjusted Sharing Ratios; or
5.3.6. ▇▇▇ to enforce the obligations of the Capital
Defaulting Members to pay the required and unpaid
portion of their Capital Contributions, together with
interest thereon at the Default Rate.
5.4 LOANS.
5.4.1. At any time after the Capital Contributions referred
to in Section 5.1.3 have been made that the Members
determine that the Company needs funds, rather than
calling for Capital Contributions, the Members may
issue or cause to be issued a written request to each
Member for the making of Loans or advances to the
Company at such times and in such amounts as the
Members shall approve by a Supermajority Vote,
provided that the Members shall not call for Loans or
advances rather than Capital Contributions if doing
so would breach any Financing Commitment or other
agreement of the Company. All amounts received from a
Member after the date specified in Section 5.4.2(d)
by the Company pursuant to this Section 5.4 shall be
accompanied by interest on such overdue amounts (and
the default shall not be cured unless such interest
is also received by the Company), which interest
shall be payable to the Company and shall accrue from
and after such specified date at the Default Rate.
Any such interest paid shall be credited to the
respective Capital Accounts of all the Members, on a
pro rata basis in proportion to their respective
Sharing Ratios as of the date such payment is made to
the Company, but shall not be considered part of the
principal of the loan.
5.4.2. Each written request issued pursuant to Section 5.4.1
shall include the following information:
(a) The total amount of Loans or advances
requested from all Members;
(b) The amount of the Loans or advances
requested from the Member to whom the
request is addressed, such amount to be in
accordance with the Sharing Ratio of such
Member;
(c) The purpose for which the funds are to be
applied in such reasonable detail as the
Members shall direct;
30
(d) The date on which the Loans or advances to
the Company shall be made (which date shall
not be less than thirty (30) calendar days
following the date the request is given,
unless a sooner date is approved by the
Members) and the method of payment, provided
that such date and method shall be the same
for each of the Members;
(e) All terms relating to such Loans, including
the terms of repayment, provided that such
terms shall be the same for each of the
Members; and
(f) Evidence that the Members have approved the
request in accordance with Section 5.4.1.
5.5 VOLUNTARY CONTRIBUTIONS.
No Member shall be required or permitted to make any Capital
Contributions or Loans to the Company except pursuant to this
Section 5.
5.6 RETURN OF CONTRIBUTIONS.
A Member is not entitled to the return of any part of its
Capital Contributions or to be paid interest in respect of
either its Capital Account or its Capital Contributions. An
unreturned Capital Contribution is not a liability of the
Company or of any Member. A Member is not required to
contribute or to lend any cash or property to the Company to
enable the Company to return a Member's Capital Contributions.
5.7 CAPITAL ACCOUNTS.
A Capital Account shall be established and maintained for each
Member in accordance with the Code and the Treasury
Regulations. A Member that has more than one Membership
Interest shall have a single Capital Account that reflects all
of its Membership Interests, regardless of any class of
Membership Interests owned by that Member and regardless of
the time or manner in which those Membership Interests were
acquired.
6 ALLOCATIONS AND DISTRIBUTIONS.
6.1 ALLOCATIONS OF PROFITS AND LOSSES.
6.1.1. IN GENERAL. Profits and Losses shall be allocated
among the Members ratably in proportion to their
respective Sharing Ratios.
6.1.2. SPECIAL RULES. Notwithstanding the general allocation
rules set forth in Sections 6.1.1, the following
special allocation rules shall apply under the
circumstances described:
31
(a) LIMITATION ON LOSS ALLOCATIONS. The Losses
allocated to any Member pursuant to Section
6.1.1 with respect to any Fiscal Year shall
not exceed the maximum amount of Losses that
can be so allocated without causing such
Member to have an Adjusted Capital Account
Deficit at the end of such Fiscal Year. All
Losses in excess of the limitation set forth
immediately above shall be allocated (i)
first, to those Members who will not be
subject to this limitation, in the ratio
that their Sharing Ratio bear to each other,
and (ii) second, any remaining amount to the
Members in the manner required by the Code
and Treasury Regulations.
(b) QUALIFIED INCOME OFFSET If in any Fiscal
Year a Member unexpectedly receives an
adjustment, allocation or distribution
described in Treasury Regulations Section
1.704-l(b)(2)(ii)(d)(4), (5), or (6), and
such adjustment, allocation or distribution
causes or increases an Adjusted Capital
Account Deficit for such Member, then,
before any other allocations are made under
this Agreement or otherwise, such Member
shall be allocated items of income and gain
(consisting of a pro rata portion of each
item of Company income, including gross
income and gain) in an amount and manner
sufficient to eliminate such Adjusted
Capital Account Deficit as quickly as
possible, provided that an allocation
pursuant to this Section 6.1.2(b) shall be
made if and only to the extent that the
Member has an Adjusted Capital Account
Deficit after all other allocations provided
in this Section 6.1 have been tentatively
made as if this Section 6.1.2(b) were not in
this Agreement.
(c) COMPANY MINIMUM GAIN CHARGEBACK. If there is
a net decrease in Company Minimum Gain
during any Fiscal Year, then, except as
provided in Treasury Regulations Section
1.704-2(f), each Member shall be allocated
items of income and gain for such Fiscal
Year (and, if necessary, for subsequent
Fiscal Years) in proportion to, and to the
extent of, such Member's share of the net
decrease in Company Minimum Gain during such
Fiscal Year as determined in accordance with
Section 1.704-2(g). This Section 6.1.2(c) is
intended to comply with the minimum gain
chargeback requirement in Treasury
Regulations Section 1.704-2(f) and shall be
applied and interpreted in accordance with
such Treasury Regulations.
(d) MEMBER NONRECOURSE DEBT MINIMUM GAIN
CHARGEBACK. If there is a net decrease in
Member Nonrecourse Debt Minimum Gain during
any Fiscal Year, then, except as provided in
Treasury Regulations Section 1.704-2(i)(4),
each Member shall be allocated items of
income and gain for such Fiscal Year (and,
if necessary, for subsequent Fiscal Years)
in proportion to, and to the extent of, such
Member's share of the net decrease in Member
Nonrecourse
32
Debt Minimum Gain during such Fiscal Year.
This Section 6.1.2(d) is intended to comply
with the minimum gain chargeback requirement
in Treasury Regulations Section
1.704-2(i)(4) and shall be applied and
interpreted in accordance with such Treasury
Regulations.
(e) MEMBER NONRECOURSE DEDUCTIONS. Member
Nonrecourse Deductions shall be allocated
among the Members in accordance with the
ratios in which the Members share the
economic risk of loss for the Member
Nonrecourse Debt that gave rise to those
deductions. This allocation is intended to
comply with the requirements of Treasury
Regulations Section 1.704-2(i) and shall be
interpreted and applied consistent
therewith.
(f) COMPANY NONRECOURSE DEDUCTIONS. Nonrecourse
deductions that are not related to Member
Nonrecourse Debt shall be allocated to the
Members in proportion to their Sharing
Ratios.
(g) CURATIVE ALLOCATIONS. Any allocations of
items of income, gain, or loss pursuant to
Sections 6.1.2(a)-(f) hereof shall be taken
into account in computing subsequent
allocations pursuant to this Section 6, so
that the net amount of any items so
allocated and the income, losses, and other
items allocated to each Member pursuant to
this Section 6 shall, to the extent
possible, be equal to the net amount that
would have been allocated to each Member had
no allocations ever been made pursuant to
Sections 6.1.2(a)-(f).
(h) CHANGE IN TREASURY REGULATIONS. If the
Treasury Regulations incorporating the
allocations set forth in Sections
6.1.2(a)-(g) (the "Regulatory Allocations")
are hereafter changed or if new Treasury
Regulations are hereafter adopted, and such
changed or new Treasury Regulations, in the
opinion of tax counsel for the Company, make
it necessary to revise the Regulatory
Allocations or provide further special
allocation rules in order to avoid a
significant risk that a material portion of
any allocation set forth in this Section 6
would not be respected for federal income
tax purposes, the Members shall make such
reasonable amendments to this Agreement as,
in the opinion of such counsel, are
necessary or desirable, taking into account
the interests of the Members as a whole and
all other relevant factors, to avoid or
reduce significantly such risk to the extent
possible without materially changing the
amounts allocable and distributable to any
Member pursuant to this Agreement.
(i) CHANGE IN MEMBERS' INTERESTS. In the event
of a Disposition of a Membership Interest or
a change in a Member's Sharing Ratio during
any Fiscal Year, allocations among the
Members shall be
33
made in accordance with their Sharing Ratios
from time to time during such Fiscal Year in
accordance with Code Section 706, provided
that in the event of a sale or other
Disposition of a Member's entire Membership
Interest, allocations of income, gain, loss,
deductions and credits with respect to such
Member shall be computed precisely by an
interim closing of the Company's books as of
the date of such sale or other Disposition
in accordance with Treasury Regulations
Section 1.706-l(c)(2)(ii).
(j) EXCESS NONRECOURSE LIABILITIES. For purposes
of calculating Members' shares of "excess
nonrecourse liabilities" of the Company
(within the meaning of Treasury Regulations
Section 1.752-3), the Members intend that
they be considered as sharing profits of the
Company in proportion to their respective
Sharing Ratios.
6.2 TAX ALLOCATIONS.
6.2.1. IN GENERAL. Except as set forth in Section 6.2.2,
allocations for tax purposes of items of income,
gain, loss, deduction, and credits, shall be made in
the same manner as the applicable allocation of
Profit or Loss set forth in Section 6.1. Allocations
pursuant to this Section 6.2 are solely for purposes
of federal, state and local income taxes and shall
not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of
Profits, Losses, other items or other distributions
pursuant to any provision of this Agreement.
6.2.2 SPECIAL RULES
(a) ELIMINATION OF BOOK/TAX DISPARITIES. In
determining a Member's allocable share of
Company taxable income or tax loss, the
Member's allocable share of each item of
income, gain, loss and deduction shall be
properly adjusted to reflect the difference
between such Member's share of the adjusted
tax basis and the Gross Asset Value of each
of the Company assets used in determining
such item. With respect to depreciation, for
example, in determining the taxable income
or tax loss allocable to a Member, Profits
and Losses allocable to that Member shall be
adjusted by eliminating Depreciation
allocable to that Member and substituting
therefor tax depreciation, amortization or
other cost recovery deduction allocable to
that Member determined by reference to that
Member's share of the tax basis of Company
assets. This provision is intended to comply
with the requirements of Code Section 704(c)
and Treasury Regulations Section
1.704-l(b)(2)(iv)(f)(4) and shall be
interpreted in conformity therewith. Any
elections or other decisions relating to
such tax allocations shall be made by the
Management Committee.
34
(b) TAX CREDITS. Any tax credits shall be
allocated among the Members in accordance
with Treasury Regulations Section
1.704-l(b)(4)(ii), unless the applicable
Code provision shall otherwise require.
6.2.3. CONFORMITY OF REPORTING. The Members are aware of the
income tax consequences of the allocations made by
this Section 6.2 and hereby agree to be bound by the
provisions of this Section 6.2 in reporting their
shares of Company profits, gains, income, losses,
deductions, credits and other items for income tax
purposes.
6.3 WITHHOLDING.
The Company is authorized to withhold from distributions to a
Member, or with respect to allocations to a Member, and to pay
over to a federal, state or local government, any amounts
required to be withheld pursuant to the Code, or any
provisions of any other federal, state or local law. Any
amounts so withheld shall be treated as having been
distributed to such Member pursuant to this Section 6 for all
purposes of this Agreement, and shall be offset against the
current or next amounts otherwise distributable to such
Member.
6.4 DISTRIBUTIONS.
From time to time (but at least once each calendar quarter)
the Managers shall determine in their reasonable judgment to
what extent (if any) the Company's cash on hand exceeds its
current and anticipated needs, including, without limitation,
for operating expenses, debt service, acquisitions, and a
reasonable contingency reserve. If such an excess exists, the
Managers, by majority vote, shall cause the Company to
distribute to the Members, in accordance with their Sharing
Ratios, an amount in cash equal to that excess, excluding,
however, any cash from revenues derived from the Company's
collection, through its rates and charges, of federal and
state income taxes, which shall be distributed (subject to the
terms of this Section 6.4) to all Members in accordance with
their Sharing Ratios.
6.4.1. The Company shall also distribute, to the extent
funds are available, to each Member, with respect to
each Fiscal Year within seventy-five (75) days after
the end of such Fiscal Year, an amount of cash or
cash equivalents equal to (i) the amount of the
Company's federal taxable income allocated to such
Member for such Fiscal Year, multiplied by (ii) 35%
(the "Tax Distribution"); provided; however, that the
Tax Distribution for any Fiscal Year may be reduced
or eliminated on a pro rata basis among the Members
if and to the extent determined by all of the
Members.
6.4.2. From time to time the Members also may cause property
of the Company other than cash to be distributed to
the Members, which distribution must
35
be made in accordance with their Sharing Ratios and
may be made subject to existing liabilities and
obligations.
7. MANAGEMENT.
7.1 VOTING BY MEMBERS AND MANAGEMENT COMMITTEE.
7.1.1. Except as otherwise provided in this Agreement, the
vote of the Members necessary for a matter to be
approved by Members shall be a majority of the total
Sharing Ratios of the Members. If the requisite
majority of Sharing Ratios is not voted in favor of a
matter being voted on, then the matter shall be
deemed to be denied. Furthermore, unless otherwise
provided herein, if the matter being voted on
provides for more than two alternatives and no
alternative receives the requisite majority approval
then no alternative shall be selected.
7.1.2. The Members shall manage the Company's business
through a management committee (the "Management
Committee") in accordance with this Agreement. The
acts of the Management Committee in accordance with
its authority shall be binding upon all of the
Members and the Company. The Management Committee
shall consist of one individual manager appointed by
each Member (collectively, the "Managers"). Each
Member shall also designate an alternate for its
Manager. Each alternate shall have all of the powers
of the regular Manager in the regular Manager's
absence, declination or inability to serve from time
to time. On all matters decided by the Management
Committee, each Manager or its alternate shall have
voting power equal to the Sharing Ratio of the Member
represented by such Manager. Whenever in this
Agreement action by the Members as a group is
contemplated, action by the Management Committee
shall constitute the action of the Members as a
group.
7.1.3. Subject to the other terms of this Agreement, the
Management Committee, by majority vote of the
Managers, may make all decisions and take all actions
for the Company not otherwise provided for in this
Agreement or in the CO&M Agreement, including,
without limitation, the following:
(a) Delegating management authority to the
Operator under the CO&M Agreement; provided,
however, that the Management Committee may
not delegate to the Operator the right to
take any action that would require a
Supermajority Vote under Section 7.1.4
unless such action has been approved by a
Supermajority Vote or is provided for in the
CO&M Agreement;
(b) Entering into, making and performing
contracts, agreements, and other
undertakings binding the Company that may be
necessary,
36
appropriate, or advisable in furtherance of
the purposes of the Company and making all
decisions and waivers thereunder;
(c) Opening and maintaining bank and investment
accounts and arrangements, drawing checks
and other orders for the payment of money,
and designating individuals with authority
to sign or give instructions with respect to
those accounts and arrangements;
(d) Maintaining the assets of the Company in
good order;
(e) Collecting sums due the Company;
(f) To the extent that funds of the Company are
available therefor, paying debts and
obligations of the Company;
(g) Subject to the provisions of Section
7.1.4(t), acquiring, utilizing for Company
purposes, and disposing of any asset of the
Company;
(h) Selecting, removing and changing the
authority and responsibility of accountants,
contractors and other advisers and
consultants;
(i) Obtaining insurance for the Company;
(j) Determining distributions of Company cash
and other property as provided in Section
6.4;
(k) Establishing a seal for the Company;
(1) Appointing and removing any officers of the
Company and establishing the authority and
duties thereof;
(m) Investing funds of the Company;
(n) Determining the accounting methods and
conventions to be used in preparation of the
Company's financial statements (consistent
with GAAP) and tax returns and making any
and all elections under any applicable tax
laws (consistent with the requirements of
this Agreement);
(o) Obtaining all necessary permits and
governmental approvals regarding the
business or operations of the Company; and
(p) Engaging in any other activity and
performing and carrying out contracts of any
kind which may be necessary or appropriate
to conduct the Company's business and
accomplish its purposes, as may be lawfully
carried on or performed by a limited
liability company under the laws of the
State of Delaware and the laws of
37
the states and municipalities in which the
Company conducts business.
7.1.4. Notwithstanding anything in Section 7.1.3 above, the
Management Committee may not cause the Company to do
any of the following without the Supermajority Vote
of the Members:
(a) Filing the FERC Application or filing an
application with FERC in connection with any
Modification;
(b) Approving a sale or abandonment of the
Facilities;
(c) Amending, modifying, changing or otherwise
altering this Agreement or taking any action
in contravention of this Agreement;
(d) Electing to dissolve the Company;
(e) Borrowing money or otherwise committing the
credit of the Company for Company activities
and voluntary prepayments or extensions of
debt;
(f) Approving any matter pursuant to Section
3.3;
(g) Approving any matter pursuant to Sections
4.1;
(h) Approving any matter pursuant to Section
5.1.2;
(i) Selecting, removing and changing lawyers
under Section 7.1.3.(h);
(j) Entering into, amending, modifying, or
terminating any contract or commitment to
acquire or transfer any asset not provided
for in an approved Phase I or Phase II or
Phase III Capital Budgets, the cost of which
exceeds by more than ten percent (10%) the
amount budgeted therefor;
(k) Requesting that Loans (rather than Capital
Contributions) be made to the Company
pursuant to Section 5.4.1;
(1) Delegating any authority to any committee,
Manager or agent of the Company to take any
action that requires more than a majority
vote of Members under this Section 7.1.4;
(m) Approving any Financing Commitment or
causing any financing (whether or not
pursuant to a Financing Commitment) to be
issued on which there is recourse to a
Person other than the Company;
38
(n) Approving the Phase II or Phase III Capital
Budgets or making any capital expenditures
in excess of $200,000 in the aggregate in
any calendar year that are not included in
an approved Capital Budget;
(o) Indemnifying any officer, employee, agent
or any other Person except as specifically
provided herein or in the CO&M Agreement;
(p) Executing or otherwise entering into, or
amending, modifying, or terminating, any
employment agreement with an officer of the
Company or similarly compensated person,
the election or removal of any officer or
the hiring or firing of other similarly
compensated person with or without cause;
(q) Setting or amending the compensation level
of any officer of the Company or other
similarly compensated person employed by
the Company;
(r) Revaluing any property or asset outside of
the normal course of business;
(s) Executing or otherwise entering into, or
amending, modifying, or terminating (other
than in accordance with, or pursuant to,
the terms of such agreement), any agreement
with a Member, an officer or employee of
the Company, an Affiliate of a Member, or a
person related by blood or marriage to an
Officer or employee of the Company,
involving aggregate consideration
(including assumed actual and contingent
liabilities) or fair market value or actual
or contingent liability in excess of
$100,000;
(t) Transferring all or substantially all of
the assets of the Company;
(u) The filing of a petition as debtor in a
United States Bankruptcy Court or taking
any material affirmative act that would
result in the Company's Bankruptcy;
(v) Merging or consolidating the Company with
or into any other Person;
(w) Changing the name of the Company;
(x) Changing the designation or the terms of
Membership Interests which the Company has
authorized or is authorized to issue;
(y) Increasing the size of the Management
Committee and changing the provisions of
Section 7.1.2 regarding the composition of
the Management Committee;
39
(z) Authorizing any non-cash distribution,
dividend or transfer of Company assets;
(aa) Any agreement by the Tax Matters Partner to
an extension of the statute of limitations
for making assessments on behalf of the
Company or changing any tax election
provided for in Section 11.4;
(bb) Voting at a meeting of the Management
Committee on a matter not on the agenda for
the meeting referred to in Section 7.3 or
shortening the ten (10) day notice
requirement of Section 7.3;
(cc) Amending, modifying, changing or otherwise
altering the CO&M Agreement; or
(dd) Taking any other action as to which a
Supermajority Vote is required under this
Agreement.
7.2 REMOVAL, RESIGNATION AND REPLACEMENT OF MANAGERS.
Each Member, in its sole discretion, may remove or replace
any Manager (including an alternate) appointed by it at any
time and for any reason. Each Manager shall hold office for
the term for which he is appointed and thereafter until his
successor shall have been appointed and qualified, or until
his earlier death, resignation or removal. A Manager may
resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the
remaining Manager. The acceptance of a resignation shall not
be necessary to make it effective, unless expressly so
provided in the resignation. Upon the resignation of a
Manager, the Member appointing that Manager shall have the
right to appoint and designate another Manager. Managers need
not be residents of Delaware.
7.3 MEETINGS BY THE MANAGEMENT COMMITTEE.
The Management Committee shall meet at least quarterly.
Special meetings of the Management Committee may be called
from time to time by any Manager or Member acting through its
Manager, and the Manager who does so shall be responsible for
the agenda and minutes of such meeting. Except as otherwise
provided in this Agreement, or as waived in writing by the
Managers, each Manager shall be given at least ten (10)
calendar days prior written notice of any meeting of the
Management Committee. Such notice shall contain the time and
place of such meeting, along with an agenda of items to be
discussed and/or voted on at such meeting. A quorum shall
consist of Managers or their alternates representing at least
two (2) Members and a majority of the Sharing Ratios of the
Members.
7.4 ACTION BY WRITTEN CONSENT OR TELEPHONE CONFERENCE.
40
Any action permitted or required by the Act, the Certificate
of Formation or this Agreement to be taken at a meeting of
the Members or the Management Committee may be taken without
a meeting if a consent in writing, setting forth the action
to be taken is signed by all the Members or the Managers, as
the case may be. Such consent shall have the same force and
effect as a unanimous consent at a meeting and may be stated
as such in any document or instrument filed with the
Secretary of State of Delaware, and the execution of such
consent shall constitute attendance or presence in person at
a meeting of the Members or Management Committee, as the case
may be. Subject to the requirements of the Act, the
Certificate of Formation or this Agreement for notice of
meetings, unless otherwise restricted by the Certificate of
Formation, Members or the Management Committee, may
participate in and hold a meeting of the Members or
Management Committee, as the case may be, by means of a
conference telephone or similar communications equipment by
means of which all Persons participating in the meeting can
hear each other, and participation in such meeting shall
constitute attendance and presence at such meeting, except
where a Person participates in the meeting for the express
purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or
convened.
7.5 COMPENSATION.
A Manager shall receive no compensation for services rendered
to the Company in that capacity. Officers and agents of the
Company shall receive such compensation as approved by the
Management Committee.
7.6 OPERATING BUDGETS.
The Management Committee shall cause the Operator, under the
CO&M Agreement, to direct the preparation of an annual
operating budget and related operating plan, which shall
include, for each Fiscal Year, one and three year projections
showing (a) projected capital expenditures of the Company,
(b) projected working capital and reserves that will be
maintained or funded, (c) projected revenues, (d) projected
operating expenses broken down in reasonable detail
satisfactory to the Management Committee and the Members, (e)
projected general and administrative expenses of the Company,
and (f) projected capitalization and indebtedness of the
Company and the debt service payable thereon (the "Operating
Budget"). In the event that a subsequent Operating Budget is
not approved in its entirety, any approved expense line items
of such Operating Budget shall go in effect, all other
expense line items shall be deemed to be increased by the
lesser of the percentage that is agreed upon by the
Management Committee or three percent (3%) from the level
specified in the prior Operating Budget with the exception of
Capital Contributions which shall not automatically increase
and such prior Operating Budget, as so adjusted pursuant to
the terms of this sentence, shall be effective until the end
of the Fiscal Year to which it applies.
7.7 FINANCING COMMITTEE.
41
Within 30 days after the execution of this Agreement, each
Member shall designate a representative to serve on the
Financing Committee. The Financing Committee shall arrange
for the Financing Commitment and present it to the Management
Committee for consideration. Within 30 days after the
presentation of the proposed Financing Commitment, the
Management Committee shall vote on whether to accept or
reject it. In the event the Members do not agree by a
Supermajority Vote to accept the Financing Commitment, the
Member(s) that voted for acceptance may purchase, in
proportion to their respective Sharing Ratios, the entire
Membership Interest(s) of the Member(s) who voted against
acceptance. The Members desiring to exercise such purchase
right shall so notify all of the other Members within ten
(10) calendar days after such vote. The aggregate price for
the Membership Interests to be purchased shall be paid in
cash at closing and, unless the selling and purchasing
Members otherwise agree, shall be the sum of the Capital
Account balances, on the date of such vote, of the Member(s)
who voted against acceptance, and such price shall be
allocated to the purchasing Member(s) in proportion to their
respective Sharing Ratios. Closing on such purchase shall
occur on the date and at the location mutually agreed by the
purchasing Member(s), but in no event more than twenty-one
(21) calendar days after such vote. The Sharing Ratios of the
Members shall be adjusted accordingly, and a revised Appendix
B shall be sent to the Members. If the Member(s) who voted
for acceptance do not purchase the entire Membership
Interest(s) of the Member(s) who voted against acceptance,
the Company shall be dissolved as soon as reasonably
practicable in accordance with Section 15, subject to any
necessary approvals from any Governmental Authority.
7.8 CONFLICTS OF INTEREST.
Except as otherwise provided in this Agreement, each Member
at any time and from time to time may engage in and possess
interests in other business ventures of any and every type
and description, independently or with others, including
business ventures in competition with the Company, with no
obligation to offer to the Company or any other Member the
right to participate therein. The Company may transact
business with any Member or Affiliate thereof, provided the
terms of those transactions are no less favorable than those
the Company could obtain from unrelated third parties.
7.9 MANAGEMENT OF VPSC.
Notwithstanding that Dominion Greenbrier is the sole
shareholder of VPSC, Dominion Greenbrier agrees that it shall
not cause or permit VPSC to take any actions except with the
approval of the Management Committee, and that the percentage
approval of the Management Committee required with respect to
any such actions shall be the percentage approval that would
be required under Section 7.1 hereof if the Company was
taking the action in question.
42
8. [INTENTIONALLY OMITTED]
9. OPERATION OF THE FACILITIES.
9.1 OPERATOR.
The Company intends to enter into a CO&M Agreement with the
Operator in the form attached hereto as Appendix F. The
Members may, at any time, upon a Supermajority Vote, agree to
an amendment to the CO&M Agreement, provided that the
Operator concurs therewith. In the event that such CO&M
Agreement is terminated pursuant to the terms thereof or the
Operator ceases to serve as Operator in accordance with the
terms of the CO&M Agreement, Piedmont Greenbrier, if it is
still a Member, may designate its Affiliate the successor
Operator. If neither Dominion Greenbrier or its Affiliate,
nor Piedmont Greenbrier or its Affiliate is still a Member,
the Members may, upon a Supermajority Vote, appoint a
successor Operator. Any successor Operator selected pursuant
to this Agreement shall execute and be bound by an agreement
substantially in the form of the CO&M Agreement existing
immediately prior to such execution.
10. INDEMNIFICATION.
10.1 RIGHT TO INDEMNIFICATION.
Subject to the limitations and conditions as provided in
Section 10 of this Agreement, each person who was or is made
a party or is threatened to be made a party to or is involved
in any Proceeding, or any appeal in such a Proceeding or any
inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a Person
of whom he or she is legal Manager, is or was a Manager of
the Company or while Manager of the Company is or was serving
at the request of the Company as a Manager, director,
officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or
other enterprise shall be indemnified by the Company to the
fullest extent permitted by the Act, as the same exists or
may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said
law permitted the Company to provide prior to such amendment)
against judgments, penalties (including excise and similar
taxes and punitive damages), fines, settlements and
reasonable expenses (including, without limitation,
attorneys' fees) actually incurred by such Person in
connection with such Proceeding, and indemnification under
Section 10 of this Agreement shall continue as to a Person
who has ceased to serve to the capacity which initially
entitled such Person to indemnity hereunder. The rights
granted pursuant to Section 10 of this Agreement shall be
deemed contract rights and no amendment, modification or
repeal of Section 10 of this Agreement shall have the effect
of limiting or denying any such rights with respect to
actions taken
43
or Proceedings arising prior to any such amendment,
modification or repeal. It is expressly acknowledged that the
indemnification provided in Section 10 of this Agreement
could involve indemnification for negligence or under
theories of strict liability.
10.2 ADVANCE PAYMENT.
The right to indemnification conferred in Section 10 of this
Agreement shall include the right to be paid or reimbursed by
the Company the reasonable expenses incurred by a Person of
the type entitled to be indemnified under Section 10.1 who
was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final
disposition of the Proceeding and without any determination
as to the Person's ultimate entitlement to indemnification,
provided that the payment of such expenses incurred by any
such Person in advance of the final disposition of a
Proceeding, shall be made only upon delivery to the Company
of a written affirmation by such Manager of his or her good
faith belief that he or she has met the standard of conduct
necessary for indemnification under Section 10 of this
agreement and a written undertaking, by or on behalf of such
Person, to repay all amounts so advanced if it shall
ultimately be determined that such indemnified Person is not
entitled to be indemnified under Section 10 of this Agreement
or otherwise.
10.3 INDEMNIFICATION OF AGENTS.
The Company, by adoption of a resolution of the Management
Committee, may indemnify and advance expenses to an agent of
the Company to the same extent and subject to the same
conditions under which it may indemnify and advance expenses
to Managers under Section 10 of this Agreement; and, the
Company may indemnify and advance expenses to Persons who are
not or were not Managers or agents of the Company but who are
or were serving at the request of the Company as a Manager,
director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or
domestic limited liability company, corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise against any liability asserted
against him or her and incurred by him or her in such a
capacity or arising out of his status as such a Person to the
same extent that it may indemnify and advance expenses to
Managers under Section 10 of this Agreement.
10.4 INDEMNIFICATION BY THE MEMBERS.
To the fullest extent permitted by law, each Member shall
indemnify the Company, each Manager and each other Member and
hold them harmless from and against all losses, costs,
liabilities, damages, and expenses (including, without
limitation, costs of suit and attorney's fees) they may incur
on account of any breach by that Member of this Agreement.
10.5 APPEARANCE AS A WITNESS.
44
Notwithstanding any other provisions of Section 10 of this
Agreement, upon approval by the Members, the Company shall
pay or reimburse expenses incurred by a Member in connection
with that Member or Member's Manager or other employee's
appearance as a witness or other participation in a
Proceeding at a time when that Member or Member's Manager is
not a named defendant or respondent in the Proceeding.
10.6 NONEXCLUSIVITY OF RIGHTS.
The right to indemnification and the advancement and payment
of expenses conferred in Section 10 of this Agreement shall
not be exclusive of any other right which a Manager or other
Person indemnified pursuant to Section 10.3 may have or
hereafter acquired under any law (common or statutory),
provision of the Certificate of Formation or this agreement,
agreements, vote of Members or otherwise.
10.7 INSURANCE.
Unless the Members otherwise determine by Supermajority Vote,
each Member shall maintain its own insurance for the benefit
of any Member or any Manager acting in their capacity as a
Member or Manager, and the Company shall not be required to
obtain any such insurance for the benefit of any Member or
any Manager acting in their capacity as a Member or Manager.
10.8 MEMBER NOTIFICATION.
To the extent required by law, any indemnification of or
advance of expenses to a Manager in accordance with Section
10 of this Agreement shall be reported in writing to the
Members with or before the notice or waiver of notice of the
next Members' meeting or with or before the next submission
to Members of a consent to action without a meeting and, in
any case, within the 12 month period immediately following
the date of the indemnification or advance.
10.9 SAVINGS CLAUSE.
If Section 10 of this Agreement or any portion hereof shall
be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify
and hold harmless each Manager or any other Person
indemnified pursuant to Section 10 of this Agreement as to
costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect
to any action, suit or proceedings, whether civil, criminal,
administrative or investigative to the full extent permitted
by any applicable portion of Section 10 of this Agreement
that shall not have been invalidated and to the full extent
permitted by applicable law.
11. TAXES.
1l.l TAX RETURNS.
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ is hereby designated as the Company's
"Tax Matters Partner" under Section 6231(a)(7) of the Code,
and such Member shall supervise the preparation and filing of
all tax and information returns which the Company may be
required to file and shall, on behalf of the Company, make
such tax elections and determinations as are reasonably
necessary, appropriate or desirable and consistent with
Section 11.4. Each Member shall furnish to the Company all
pertinent information that is in the possession of such
Member and is necessary to enable such returns to be prepared
and filed. Copies of the tax returns, together with any
schedules or other information that each Member may require
in connection with preparation of such Member's own tax
affairs, shall be furnished to the Members within ninety (90)
calendar days after the end of each Fiscal Year. The Company
shall bear the costs of preparing, filing and distributing
any tax returns.
11.2 TAX STATUS.
Without a Supermajority Vote of the Members, neither the
Company nor anyone acting on its behalf shall be permitted to
make any filing or election that would terminate the
Company's classification as a partnership for federal income
tax purposes.
11.3 TAX MATTERS.
The Tax Matters Partner shall provide each Member with prompt
notice of the initiation of all tax examinations or
proceedings, shall thereafter promptly provide copies of all
written information issued by or delivered to governmental
authorities in connection with any such examinations or
proceedings, and shall further provide each Member with
prompt, reasonable, and continuous opportunity to review and
provide comment with respect to the subject matter of each
such examination or proceedings. Each Member agrees to
cooperate fully with the Tax Matters Partner and to do or
refrain from doing any and all things reasonably required by
the Tax Matters Partner to conduct such proceedings. Subject
to the terms hereof, the Tax Matters Partner shall not have
the right to settle any audit or examination without first
consulting with and receiving approval of a majority of the
Members.
11.4 TAX ELECTIONS.
The Company shall make the following elections on the
appropriate tax returns:
(a) to adopt the calendar year as the Company's
tax year for federal and state income tax
purposes;
(b) to adopt the accrual method of accounting
and to keep the Company's books and records
on the income-tax method; and
(c) and any other elections not inconsistent
with the above that the Management
Committee may deem appropriate.
46
12. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS.
12.1 MAINTENANCE OF BOOKS AND RECORDS.
The Company shall maintain the following accurate and
complete records at the Principal Office or at such other
locations as may be provided by the Members:
(a) a current list of the full name and last
known business address of each Member;
(b) a copy of the Certificate of Formation and
all amendments thereto;
(c) copies of each of the Company's Federal,
state and local tax returns and reports, as
filed, for the last seven taxable periods;
(d) copies of this Agreement, including all
amendments thereto;
(e) Company audited financial statements for
the last seven Fiscal Years;
(f) books and records of the Company; and
(g) minutes of meetings of the Management
Committee.
12.2 ACCOUNTING BASIS.
Books and records of the Company shall be maintained on an
accrual accounting basis, and the Company's net profit or net
loss shall be determined on the basis of the Fiscal Year and
in accordance with GAAP as consistently applied.
12.3 FINANCIAL REPORTS.
The Management Committee shall cause the following financial
statements to be prepared, in each case in accordance with
GAAP as consistently applied on a consolidated and
consolidating (i.e., by line of business) basis, but
unaudited except in the case of the reports called for in
Section 12.3(d), and shall cause to be delivered to each
Person who was a Member during the applicable period
described below:
(a) a balance sheet and statement of income,
statement of cash flow and Member's capital
account as of the end of or for, as the
case may be, each month, each within thirty
(30) days after the end of each month;
(b) (i) a balance sheet as of the end of each
fiscal quarter of the Company; (ii) an
income statement for such quarters and
year-to-date; (iii) a statement of each
Member's Capital Account as of the end of
such quarters; and (iv) a statement of cash
flows for such
47
quarter and year-to-date (including
sufficient information to permit the
Members to calculate their tax accruals),
each within forty-five (45) days after the
end of such quarters (or more frequently if
agreed by the Management Committee);
(c) (i) a balance sheet as of the end of each
Fiscal Year of the Company; (ii) an income
statement for such fiscal years; (iii) a
statement of each Member's Capital Account
as of the end of such fiscal years; and
(iv) a statement of cash flows for such
fiscal years, each within ninety (90) days
after the end of such fiscal years; and
(d) audited annual financial statements
prepared by a national CPA firm selected by
the Management Committee within ten (10)
days after such statements are issued to
the Company but in no event later than
ninety (90) days after the end of each
Fiscal Year of the Company. These financial
statements shall be accompanied by a report
of the Certified Public Accountants
certifying the statements and stating that
(a) their examination was made in
accordance with generally accepted auditing
standards and, in their opinion, the
financial statements present fairly the
financial position, financial results of
operations, and changes in Members' capital
in accordance with GAAP and (b) in making
the examination and reporting on the
financial statements described above,
nothing came to their attention that caused
them to believe that (i) the income and
revenues were not paid or credited in
accordance with the financial and
accounting provisions of their Agreement,
(ii) the costs and expenses were not
charged in accordance with the financial
and accounting provisions of this
Agreement, or (iii) the Members or any
Member failed to comply in any material
respect with the financial and accounting
provisions of this Agreement, or if they do
conclude that a Member so failed,
specifying the nature and period of
existence of the failure.
12.4 FISCAL YEAR.
The fiscal year of the Company (the "Fiscal Year") shall end
on December 31 unless otherwise required by the Code or
approved by a Supermajority Vote of the Members.
12.5 ACCOUNTS.
The Company shall maintain a record of each Member's Capital
Account in accordance with Section 5.7.
12.6 OTHER NOTICES.
48
The Company shall notify each Member in writing of any of the
following immediately upon learning of the occurrence
thereof, describing the same and, if applicable, the steps
being taken by the Company with respect thereto:
(a) the occurrence of the default by the
Company under any material note, indenture,
loan agreement, mortgage, lease, deed or
other material similar agreement to which
the Company is a party or by which it is
bound;
(b) the institution of any litigation,
arbitration proceeding or governmental
proceeding affecting the Company, whether
or not considered to be covered by
insurance, if the damages being sought in
such litigation exceed $100,000 or, if not
specified in such litigation, could
reasonably be expected to exceed $100,000;
and
(c) the entry of any judgment or decree against
the Company, if the amount of such judgment
exceeds $10,000.
12.7 GOVERNMENTAL REPORTS.
The Operator shall prepare and file, or cause to be prepared
and filed, all reports prescribed or required by the FERC or
any other Governmental Authority having jurisdiction over the
Company.
12.8 COST OF PREPARING AND DISTRIBUTING REPORTS.
The Company shall bear the costs of (1) preparing and
distributing the tax returns described in Section 11.1 and
any reports required or permitted in Sections 12.3 and 12.7,
and (2) legal, accounting, and other fees and expenses
reasonably incurred by Dominion Greenbrier in the capacity as
Tax Matters Partner.
12.9 ACCOUNTS.
The Members shall cause to be established and maintained one
or more separate bank and investment accounts and arrangement
for Company funds in the Company' name with financial
institutions and firms that the Members determine. The
Company's funds may not be commingled with the funds of any
Member.
13. INSPECTION.
13.1 INSPECTION OF FACILITIES AND RECORDS.
Subject to the provisions of Section 4.8, each Member shall
have the right at all reasonable times during usual business
hours upon providing reasonable notice to the Operator to
inspect the Facilities and other properties of the Company
and to audit, examine and make copies of the books of account
and other records of the company. Such right may be exercised
through any agent or employee of such
49
Member designated in writing by it or by an independent
public accountant, engineer, attorney or other consultant so
designated. The Member making the request shall bear all
reasonable costs and expenses incurred by such Member, the
Company or the Operator in connection with any inspection,
examination or audit made on such Member's behalf.
14. BANKRUPTCY OF A MEMBER.
14.1 BANKRUPTCY MEMBERS.
If any Member becomes a Bankrupt Member, that Person ceases
to be a Member of the Company. The successor in interest to
that Person holds that Person's Membership Interest in the
capacity of a non-Member with none of the rights and powers
of a Member, except the right to such Person's Profits,
Losses and Distributions.
15. DISSOLUTION, LIQUIDATION, AND TERMINATION.
15.1 DISSOLUTION.
The Company shall dissolve and its affairs shall be wound up
on the first to occur of the following:
(a) the unanimous written consent of the
Members;
(b) the time, if any, specified in the
Certificate of Formation;
(c) under the circumstances specified in
Section 4.1.1 and 4.1.2;
(d) pursuant to Section 7.1.4(d); and
(e) entry of a decree of judicial dissolution
of the Company under Section 18-802 of the
Act.
15.2 LIQUIDATION AND TERMINATION.
On dissolution of the Company, the Members shall act as
liquidator or may appoint one or more Members as liquidator.
The liquidator shall proceed diligently to wind up the
affairs of the Company and make final distributions as
provided herein and in the Act. The costs of liquidation
shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the
Company properties with all of the power and authority of the
Members. The steps to be accomplished by the liquidator are
as follows:
(a) as promptly as possible after dissolution and again
after final liquidation, the liquidator shall cause
a proper accounting to be made by the Certified
Public Accountants of the Company's assets,
liabilities, and operations
50
through the last day of the calendar month in which
the dissolution occurs or the final liquidation is
completed, as applicable;
(b) Profit or Loss from the sale or distribution of
Company property incurred upon or during liquidation
and termination of the Company shall be allocated
among the Members as provided in Section 6 of this
Agreement; and
(c) the liquidator shall distribute the Company's assets
in the following manner, subject to the Act:
(i) First, to satisfy debts and obligations of
the Company, including those owed to
Members or their Affiliates;
(ii) Second, to fund any reserves deemed
appropriate by the Management Committee;
and
(iii) Third, to the Members in accordance with
the positive balance in their Capital
Accounts, after giving effect to all
contributions, distributions and
allocations for all periods.
The distribution of cash and/or property to a Member in accordance
with the provisions of this Section 15.2 constitutes a complete return
to the Member of its Capital Contributions and a complete distribution
to the Member of its Membership Interest and all the Company's
property and constitutes a compromise to which all Members have
consented. To the extent that a Member returns funds to the Company,
it has no claim against any other Member for those funds.
15.3 DEFICIT CAPITAL ACCOUNTS.
Notwithstanding anything to the contrary contained in this
Agreement, and notwithstanding any custom or rule of law to
the contrary, to the extent that the deficit, if any, in the
Capital Account of any Member results from or is attributable
to deductions and Losses of the Company (including non-cash
items such as depreciation), or distributions of money
pursuant to this Agreement to all Members in proportion to
their respective Sharing Ratios, upon dissolution of the
Company such deficit shall not be an asset of the Company and
such Members shall not be obligated to contribute such amount
to the Company to bring the balance of such Member's Capital
Account to zero.
15.4 CERTIFICATE OF CANCELLATION.
On completion of the distribution of Company assets as provided
herein, the Company is terminated, and the Members (or such other
Person or Persons as the Act may require or permit) shall cause to be
filed a Certificate of Cancellation with the Delaware Secretary of
State as required by Section 18-203 of the Act,
51
cancel any other filing made pursuant to Sections 2.3 or 2.6, and take
such other actions as may be necessary to terminate the Company.
16. GENERAL PROVISIONS.
16.1 OFFSET.
Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from
that sum before payment.
16.2 NOTICES.
Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or
permitted to be given under this Agreement must be in
writing. Notices and other communications will be deemed to
have been given (a) on the date when delivered by hand or by
means of electronic transmission (and followed by electronic
confirmation of receipt), (b) on the date after the day when
deposited for delivery with a nationally recognized air
courier, or (c) on the third Business Day after being
deposited in the United States mail, postage prepaid return
receipt requested. All notices, requests, and consents to be
sent to a Member must be sent to or made at the addresses
given for that Member on the signature pages of this
Agreement, or such other address as that Member may specify
by notice to the other Members. Any notice, request, or
consent to the Company must be given to the Management
Committee at the address designated by the Company pursuant
to Section 2.4. Whenever any notice is required to be given
by law, the Certificate of Formation or this Agreement, a
written waiver thereof, signed by the Person entitled to
notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
16.3 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement of the
Members and their Affiliates relating to the Company and
supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
16.4 EFFECT OF WAIVER OR CONSENT.
A waiver or consent, express or implied, to or of any breach
or default by any Person in the performance by that Person of
its obligations with respect to the Company is not a consent
or waiver to or of any other breach or default in the
performance by that Person of the same or any other
obligations of that Person with respect to the Company.
Failure on the part of a Person to complain of any act of any
Person or to declare any Person in default with respect to
the Company, irrespective of how long that failure continues,
does not constitute a waiver by that Person of its rights
with respect to that default until the applicable
statute-of-limitations period has run.
52
16.5 AMENDMENT OR MODIFICATION.
This Agreement may be amended or modified from time to time
only by a written instrument adopted by at least a
Supermajority Vote of the Members, provided that no amendment
or modification having a material affect on the rights or
obligations of a Member shall be adopted without the written
consent of such Member. No amendment or modification of this
Agreement shall be deemed to exist as the result of any oral
statement, action, waiver or delay by a Member or group of
Members on any occasion(s).
16.6 BINDING EFFECT.
Subject to the restrictions on Dispositions set forth in this
Agreement, this Agreement is binding on and inures to the
benefit of the Members and their respective heirs, legal
Managers, successors and assigns.
16.7 SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF.
The parties acknowledge and agree that any breach or
violation of this Agreement has the potential to cause
irreparable and continuing harm that cannot be adequately
cured or remedied by monetary damages alone. In recognition
of the foregoing, the parties hereby agree that the remedies
for breach or violation of this Agreement shall include,
without limitation, the remedies of specific performance and
injunctive relief. In any action, suit or other proceeding
involving the enforcement of this Agreement, each party
hereby waives all rights to claim or assert that monetary
damages alone constitute a sufficient remedy, or that
specific performance or injunctive relief should be denied.
Each party agrees that the preceding waiver is irrevocable
and unconditional, and shall have the broadest possible scope
and application.
16.8 GOVERNING LAW; SEVERABILITY.
THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCLUDING
ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE
GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW
OF ANOTHER JURISDICTION. In the event of a direct conflict
between the provisions of this Agreement and (a) any
provision of the Certificate of Formation, or (b) any
mandatory provision of the Act, the application provision of
the Certificate of Formation or the Act shall control. If any
provision of this Agreement or the application thereof to any
Person or circumstance is held invalid or unenforceable to
any extent, the remainder of this Agreement and the
application of that provision to other Persons or
circumstances is not affected thereby and that provision
shall be enforced to the greatest extent permitted by law.
16.9 NO THIRD PARTY BENEFICIARIES.
53
Nothing in this Agreement shall provide any benefit to any
third party or entitle any third party to any claim, cause of
action, remedy or right of any kind, it being the intent of
the Members that this Agreement shall not be construed as a
third party beneficiary contract.
16.10 CREDITORS.
None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the
Company.
16.11 FURTHER ASSURANCES.
In connection with this Agreement and the transactions
contemplated hereby, each Member shall execute and deliver
any additional documents and instruments and perform any
additional acts that may be necessary or appropriate to
effectuate and perform the provisions of this Agreement and
those transactions.
16.12 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT.
By executing this Agreement, each Member acknowledges that it
has actual notice of (a) all of the provisions of this
Agreement, including, without limitation, the restrictions on
the transfer or Disposition of Membership Interests set forth
in Section 3 and (b) all of the provisions of the Certificate
of Formation. Each Member hereby agrees that this Agreement
constitutes adequate notice of all such provisions, and each
Member hereby waives any requirement that any further notice
thereunder be given.
16.13 PRESS RELEASES.
Prior to the filing of the FERC Application, without first
obtaining the agreement of the other Members by Supermajority
Vote, no Member shall make any press release or public
statement about the Company, the business of the Company, or
the transactions or operations contemplated hereby, unless
legal counsel for such Member determines that such statement
is required by applicable law. At any time subsequent to the
filing of the FERC Application, no Member may make a press
release or public statement disclosing Confidential
Information without first obtaining the agreement of the
Company unless legal counsel for such Member determines that
such statement is required by applicable law, in which event,
such Member may issue a statement to the extent legally
required, provided, however, prior to the In-Service Date,
the disclosing Member shall give the other Members the
opportunity to review a copy of such statement and consult
with such Member prior to the release thereof.
16.14 COUNTERPARTS.
This Agreement may be executed in any number of counterparts
with the same effect as if all signing parties had signed the
same document. All counterparts shall be construed together
and constitute the same instrument.
54
16.15 SUPERCEDES.
This Agreement amends and supercedes in all respects that
certain Operating Agreement for Greenbrier Pipeline Company,
LLC dated as of July 12, 2001 between Greenbrier Pipeline
Company, LLC and Dominion Greenbrier, Inc., which shall have
no further force or effect.
IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first set forth above.
MEMBERS:
DOMINION GREENBRIER INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Title: Chief Executive Officer
PIEDMONT GREENBRIER PIPELINE COMPANY,
LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
55
APPENDIX A
(CERTIFICATE OF FORMATION)
A-l
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, ▇▇▇▇▇▇▇ ▇▇▇▇▇ WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
FORMATION OF "GREENBRIER PIPELINE COMPANY, LLC", FILED IN THIS OFFICE ON THE
TWELFTH DAY OF JULY, A.D. 2001, AT 3 O'CLOCK P.M.
[SEAL] /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Windsor
----------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ WINDSOR, SECRETARY OF STATE
AUTHENTICATION: 1243122
DATE: 07-16-01
CERTIFICATE OF FORMATION
OF
GREENBRIER PIPELINE COMPANY, LLC
This Certificate of Formation of Greenbrier Pipeline Company, LLC (the
"LLC") dated as of July 12, 2001, is being duly executed and filed by ▇. ▇.
▇▇▇▇▇, III, as an authorized person, to form a limited liability company under
the Delaware Limited Liability Company Act.
FIRST. The name of the limited liability company formed hereby is
Greenbrier Pipeline Company, LLC.
SECOND. The address of the registered office of the LLC in the State
of Delaware is c/o The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, County of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
THIRD. The name and address of the registered agent for service of
process on the LLC in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, County of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as of the date first written above.
/s/ ▇. ▇. ▇▇▇▇▇, III
----------------------------------------
▇. ▇. ▇▇▇▇▇, III
Authorized Person
APPENDIX B
(SHARING RATIOS)
Member Capital Commitment Sharing Ratio
------ ------------------ -------------
Dominion Greenbrier $ * 67%
Piedmont Greenbrier $ * 33%
* Each Member's Capital Commitment shall equal such Member's Sharing Ratio,
multiplied by the Estimated Cost of the Initial Facilities set forth on
Appendix C hereto, as such estimate may be adjusted with respect to the Initial
Facilities and the inclusion of any Modification (i) in the Phase I Capital
Budget, the Phase II Capital Budget and the Phase III Capital Budgets approved
pursuant to this Agreement; and (ii) under Sections 5.2.1(a)(y), 5.2.1(b)(y)
and 5.2.1(c)(y).
▇-▇
APPENDIX C
DESCRIPTION OF INITIAL FACILITIES
The Initial Facilities will consist of approximately 200 miles of
30-inch diameter natural gas pipeline extending from proposed points of
interconnection with the Operator's facilities and the facilities of Tennessee
Gas Pipeline in Kanawha County, West Virginia to a point in Rockingham County,
North Carolina. A 24-inch diameter pipeline will extend 44 miles from
Rockingham County to a point in Person County, North Carolina, and a 20-inch
diameter pipeline will extend approximately 18 miles from Person County to a
point in Granville County, North Carolina. Approximately 37,500 horsepower of
compression will be required at appurtenant facilities along the route. The
estimated cost of the Initial Facilities is $480,000,000 plus AFUDC.
The pipeline will have the capacity to transport 600,000 dekatherms
per day. It will have a maximum allowable operating pressure of 1250 pounds per
square inch (psi) and a minimum operating pressure of 650 psi.
APPENDIX D
PRE-EXECUTION DATE EXPENDITURES THROUGH JULY 31, 2001
DOMINION GREENBRIER, INC.
CATEGORY COSTS
-------- -------------
Labor/Benefits/etc. $ 358,596.16
Materials/supplies 58,089.70
Other Costs 57,636.02
Outside Services 1,873,207.38
-------------
Total $2,347,529.26
PIEDMONT GREENBRIER PIPELINE COMPANY, LLC
Outside Services $ 26,674.60
-------------
D-l
APPENDIX E
PHASE I CAPITAL BUDGET
(excluding AFUDC)
COMPRESSOR
PIPELINES STATIONS TOTAL
---------- ---------- ----------
September 2001 $1,558,000 $ 40,000 $1,598,000
October 2001 2,425,000 40,000 2,465,000
November 2001 551,000 40,000 591,000
December 2001 505,000 35,000 540,000
January 2002 471,000 10,000 481,000
----------
Total $5,510,000 $165,000 $5,675,000
E-l
APPENDIX F
CONSTRUCTION, OPERATION AND MAINTENANCE AGREEMENT
BY AND BETWEEN
DOMINION TRANSMISSION, INC.
AND
GREENBRIER PIPELINE COMPANY, LLC
DATED SEPTEMBER 1, 2001
TABLE OF CONTENTS
Page
----
1. Definitions and Construction 1
1.1 Definitions 1
1.2 Construction 5
2. Relationship of the Parties 5
2.1 Appointment as Operator 5
2.2 Operator's Authority to Execute Contracts 6
3. Operation of the Facilities 6
3.1 Operator's Responsibilities 6
3.2 Reasonable Efforts 9
3.3 Claims 9
4. Employees, Consultants and Subcontractors 9
4.1 Operator's Employees, Consultants and Subcontractors 9
4.2 Use of Affiliates or Independent Contractors 10
4.3 Standards for Operator and its Employees 10
4.4 Non-Discrimination and Drugs 10
5. Financial and Accounting 11
5.1 Accounting and Compensation 11
5.2 Budgets and Reports 11
5.3 Disputed Charges 12
5.4 Rate and Tariff Reviews 12
5.5 Audit and Examination 12
6. Intellectual Property; License to Operator 12
7. Indemnification 13
8. Insurance 14
9. Term 15
10. Survival of Obligations 15
11. Law of the Contract and Arbitration 16
11.1 Law of the Contract 16
11.2 Arbitration 16
12. Special and Consequential Damages 18
13. General 18
13.1 Effect of Agreement; Amendments 18
ii
13.2 Notices 18
13.3 Counterparts 19
13.4 Waiver 19
13.5 Assignability; Successors 19
13.6 Third Persons 19
13.7 Laws and Regulatory Bodies 20
13.8 Section Numbers; Headings 20
13.9 Severabilitv 20
13.10 Further Assurances 20
Exhibit A - Accounting Procedure
iii
CONSTRUCTION, OPERATION AND MAINTENANCE AGREEMENT
This agreement ("CO&M Agreement"), made and entered into as of the
first day of September, 2001, is by and between Dominion Transmission, Inc., a
Delaware corporation ("Operator"), and Greenbrier Pipeline Company, LLC, a
Delaware limited liability company ("Company").
1. DEFINITIONS AND CONSTRUCTION.
1.1. DEFINITIONS.
The definitions used in the Amended and Restated Operating Agreement
of the Company, dated September 1, 2001 ("Operating Agreement"),
shall, except as otherwise specifically provided below, have the same
meanings in this CO&M Agreement.
1.1.1. "ACCOUNTING PROCEDURE" means the accounting
procedure set forth in Exhibit A.
1.1.2. "AFFILIATE" means with respect to a Member, any
Person which is (a) a Parent of such Member; or (b)
a corporation as to which the majority of the voting
securities are (directly or through any number of
wholly-owned subsidiaries) owned by such Member or a
Parent of such Member.
1.1.3. "AUTHORIZATIONS" means all licenses, certificates,
permits, orders, approvals, determinations and
authorizations from Governmental Authorities having
jurisdiction.
1.1.4. "BUSINESS DAY" means a day, other than Saturday or
Sunday, on which commercial banks are open for the
transaction of business in New York, New York.
1.1.5. "CERTIFICATE" means the Certificate(s) of public
convenience and necessity issued by the FERC
pursuant to the FERC Application.
1.1.6. "CERTIFICATE OF FORMATION" means the Certificate of
Formation filed with the Delaware Secretary of State
pursuant to the Delaware Limited Liability Act on
July 12, 2001 and attached to the Operating
Agreement as Appendix A.
1.1.7. "COMPANY" means Greenbrier Pipeline Company, LLC, a
Delaware limited liability company.
1.1.8. "CO&M AGREEMENT" means this Construction, Operating
and Maintenance Agreement between the Company and
the Operator.
1
1.1.9. "CONFIDENTIAL INFORMATION" means unique and specific
information about the Facilities, the Operating
Agreement, this CO&M Agreement, a Member, the
Company, rate strategies or marketing strategies
that is not generally available to the public, and
in the case of a Member or the Company, that such
Member or the Company has designated as
confidential, Upon the filing of the FERC
Application, the terms and conditions of this CO&M
Agreement and any information about the Facilities
disclosed in the FERC Application (except for any
terms and conditions or information for which
confidential treatment may have been requested and
not refused by the FERC) shall be deemed to be
generally available to the public and shall not be
considered Confidential Information.
1.1.10. "CUSTOMER" means a Person who has entered into a
Service Agreement with the Company (or, where
applicable, a precedent agreement relating thereto)
for the receipt, transportation, and delivery of
natural gas by means of the Facilities.
1.1.11. "DECISION NOTICE" has the meaning set forth in
Section 11.2.
1.1.12. "DEFAULT RATE" means an interest rate equal to the
lesser of (a) two percent (2%) per annum over the
prime rate of Chase Manhattan Bank, N.A. (or its
successor) as in effect from time to time while such
default is outstanding; or (b) the maximum interest
rate allowed for this purpose pursuant to the law of
Delaware.
1.1.13. "DOMINION GREENBRIER" means Dominion Greenbrier,
Inc., a Delaware corporation.
1.1.14. "EXECUTION DATE" means September 1, 2001.
1.1.15. "FACILITIES" means the Initial Facilities together
with any and all Modifications.
1.1.16. "FERC" means the Federal Energy Regulatory
Commission or any commission, agency or other
governmental body succeeding to the powers of such
commission.
1.1.17. "FERC APPLICATION" means the documents pursuant to
which application for a certificate(s) of public
convenience and necessity is made to FERC by the
Company for authority to construct, own, lease and
operate the Initial
2
Facilities and to receive, transport and deliver
natural gas by means of the Initial Facilities.
1.1.18. "FINANCING COMMITMENT" means the agreements between
one or more financial institutions or other Persons
and the Company or the Financing Corporation
pursuant to which such financial institutions or
other Persons agree, subject to the conditions set
forth therein, to lend money to, or purchase
securities of, the Company or the Financing
Corporation, the proceeds of which shall be used to
finance all or a portion of the Facilities.
1.1.19. "FISCAL YEAR" means the fiscal year adopted by the
Company from time to time.
1.1.20. "GOVERNMENTAL AUTHORITY" means any court, agency,
authority, board, bureau, commission, department,
office or instrumentality of any nature whatsoever
of any governmental or quasi-governmental unit,
whether federal, state, parish, county, district,
municipality, city, political subdivision or
otherwise, domestic or foreign whether now or
hereafter in existence.
1.1.21. "INITIAL FACILITIES" means the real, personal, mixed
and contractual property (whether tangible or
intangible) to be owned and operated by the Company
for the receipt, transportation and delivery of
natural gas, all as more fully described in Appendix
C to the Operating Agreement (not including any
Modification but including any changes in size,
design capacity and location as may be approved
prior to the date of filing of the FERC
Application).
1.1.22. "LIABILITIES" means actions, claims, settlements,
judgments, demands, costs, expenses (including,
without limitation, expenses attributable to the
defense of any actions or claims), attorneys' fees
and liabilities related to the Operation of the
Facilities.
1.1.23. "MANAGER" has the meaning set forth in Section 7.1.2
of the Operating Agreement.
1.1.24. "MANAGEMENT COMMITTEE" has the meaning set forth in
Section 7.1.2 of the Operating Agreement.
1.1.25. "MEETING" has the meaning set forth in Section 11.2.
1.1.26. "MEMBER" means any Person executing the Operating
Agreement as of the date of the Operating Agreement
or who is hereafter admitted to the Company as a
Member as provided in the Operating Agreement, but
does not include
3
any Person who has ceased to be a Member of the
Company.
1.1.27. "MODIFICATION" means any additions or modifications
to the Facilities approved after the filing of the
FERC Application installed (a) to modify, improve,
expand, extend or increase the design capacity or
scope of the Facilities or any portion thereof
(except in connection with customary maintenance) or
(b) to provide a new point of delivery or receipt of
natural gas for the Facilities.
1.1.28. "MONTH" means a period of time beginning on the
first day of a calendar month and ending at the same
time on the first day of the next succeeding
calendar month.
1.1.29. "OPERATE THE FACILITIES" means to plan, design,
construct, test, maintain, repair, replace, improve,
expand and/or operate the Facilities, including,
without limitation, the duties identified in Section
3.1 of this CO&M Agreement. Where used in noun form,
such term shall be "OPERATION OF THE FACILITIES."
1.1.30. "OPERATOR" means Dominion Transmission, Inc., a
Delaware corporation, and any of its successors or
assigns, pursuant to this CO&M Agreement.
1.1.31. "PARTY" means the Company or the Operator.
1.1.32. "PERSON" means an individual, a trust, an estate, a
domestic corporation, a foreign corporation, a
professional corporation, a partnership, a limited
partnership, a limited liability company, a foreign
limited liability company, an unincorporated
association, or another entity.
1.1.33. "PHASE II CAPITAL BUDGET" means the capital budget
for the period from the filing of the FERC
Application to the issuance of the Certificate.
1.1.34. "PHASE III CAPITAL BUDGET" means the capital budget
for the period from the issuance of the Certificate
to the In-Service Date.
1.1.35. "PIEDMONT GREENBRIER" means Piedmont Greenbrier
Pipeline Company, LLC, a North Carolina limited
liability company.
1.1.36. "PRE-COMPLETION PERIOD" means the period between the
Execution Date and the date that the Facilities are
placed into service, which latter date shall be
certified in writing by the Operator.
4
1.1.37. "PROCEEDING" means any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or
investigative.
1.1.38. "PROHIBITED CONDUCT" means any action by the
Operator that constitutes bad faith, gross
negligence or willful misconduct.
1.1.39. "REQUIRED ACCOUNTING PRACTICE" means the accounting
rules and regulations, if any, at the time
prescribed by the regulatory bodies under the
jurisdiction of which the Company is at the time
operating and, to the extent of matters not covered
by such rules and regulations, generally accepted
accounting principles applied on a consistent basis
as practiced in the United States at the time
prevailing for companies engaged in a business
similar to that of the Company.
1.1.40. "SERVICE AGREEMENTS" means the service agreement(s)
by and between the Company and the Customers for the
receipt, transportation and delivery of natural gas
by means of the Facilities.
1.1.41. "YEAR" means each twelve (12) Month period beginning
on the first day of a calendar year and ending at
the beginning of the first day of the next calendar
year, provided that the first year hereunder shall
begin on the date hereof, and shall end at the
beginning of the first day of the following calendar
year, and further provided that the last contract
year shall end at the expiration of the term of this
CO&M Agreement pursuant to Section 9 hereof.
1.2. CONSTRUCTION. Whenever the context requires, the gender of
all words used in this CO&M Agreement includes the masculine,
feminine and neuter. All references to Sections refer to
sections of this CO&M Agreement (unless the context clearly
indicates otherwise), and all references to Exhibits are to
Exhibits attached to this CO&M Agreement, each of which is
made a part hereof for all purposes.
2. RELATIONSHIP OF THE PARTIES.
2.1. APPOINTMENT AS OPERATOR. Subject to the terms and conditions
of this CO&M Agreement, the Company hereby appoints the
Operator to act hereunder, and the Operator hereby accepts
such appointment and agrees to act pursuant to the provisions
of this CO&M Agreement and the applicable provisions of the
Operating Agreement. In performing services pursuant to this
CO&M Agreement, the Operator shall be an agent of the
Company.
5
2.2. OPERATOR'S AUTHORITY TO EXECUTE CONTRACTS. Subject to the
terms of this CO&M Agreement, contracts in connection with
Operation of the Facilities may be negotiated and executed or
amended by the Operator as agent for the Company. Copies of
all contracts entered into by the Operator on behalf of the
Company shall be provided to the Company. All contracts and
permits, if any, relating to Company business and executed by
the Operator prior to the Execution Date shall be assigned by
the Operator to the Company as soon as practicable after the
Execution Date.
3. OPERATION OF THE FACILITIES.
3.1. OPERATOR'S RESPONSIBILITIES. The Operator shall be
responsible for the Operation of the Facilities, and, subject
to the provisions of the Operating Agreement, the Operator is
authorized to undertake all activities reasonably necessary
to fulfill such responsibilities, including, but not limited
to:
3.1.1. Prepare, file, execute and prosecute applications
for the Authorizations required by the Company and
make periodic filings required of the Company by
Governmental Authorities having jurisdiction,
including, without limitation, the preparation,
filing, execution and prosecution of the FERC
Application (and any amendments thereto) and the
Company's FERC tariff (and any amendments thereto).
3.1.2. Provide or cause to be provided the day-to-day
operating and maintenance services, administrative
liaison and related services to the Members,
Managers, Management Committee and the Company,
including, but not limited to, Customer support,
regulatory matters (including rate, tariff and
Certificate filings), legal, accounting, electronic
bulletin board design and maintenance, capacity and
informational postings, engineering, construction,
repair, replacement, inspection, operational
planning, budgeting, tax and technical services, and
insurance and regulatory administration and
compliance.
3.1.3. Prepare and/or cause to be prepared the engineering
design and specifications for the Facilities.
3.1.4. Negotiate and execute contracts for the purchase of
materials, equipment and supplies necessary for the
Operation of the Facilities.
3.1.5. Prepare, negotiate and execute in the name of the
Company rights-of-way, land in fee, permits and
contracts, and initiate and prosecute eminent domain
Proceedings,
6
necessary for the Operation of the Facilities, and
resist the perfection of any involuntary liens
against Company property.
3.1.6. Construct and/or install, or cause to be constructed
and/or installed, the Facilities.
3.1.7. Maintain accurate and itemized accounting records
for the Operation of the Facilities, together with
any information reasonably required by the Company
relating to such records, consistent with the
applicable provisions of Section 12 of the Operating
Agreement.
3.1.8. Prepare the financial and other reports set forth in
Section 12 of the Operating Agreement.
3.1.9. Cause the Operation of the Facilities to be in
accordance with the requirements of all Governmental
Authorities having jurisdiction, including, but not
limited to, the requirements of the United States
Department of Transportation set forth in 49 CFR
Parts 190, 191, 192 and 199 and in accordance with
sound and prudent natural gas pipeline industry
practices, and provide or cause to be provided such
appropriate supervisory, audit, administrative,
technical and other services as may be required for
the Operation of the Facilities.
3.1.10. Prepare, or cause to be prepared, and file all
necessary federal and state income tax returns and
all other tax returns and filings for the Company
(including making the elections set forth in Section
11.4 of the Operating Agreement). Each Member shall
furnish to the Operator all pertinent information in
its possession relating to Company operations that
is necessary to enable such returns to be prepared
and filed. The Operator shall pay on behalf of the
Company such taxes as are required to be paid by the
Company.
3.1.11. On behalf of the Company, maintain and administer
bank and investment accounts and arrangements for
receipt of Company funds, draw checks and other
orders for the payment of money, and designate
individuals with authority to sign or give
instructions with respect to those accounts and
arrangements. The Company's funds shall not be
commingled with funds belonging to the Operator.
3.1.12. On behalf of the Company, market the Company's
services, including, but not limited to, conducting
open seasons for new services, receiving and
responding to requests for new services or changes
in existing services, the negotiation,
7
execution and administration of Precedent Agreements
and Service Agreements in accordance with FERC's
policies, rules and Orders and the Company's FERC
Gas Tariff, and the preparation and collection of
all bills to the Customers for services rendered
thereunder.
3.1.13. On behalf of the Company, negotiate, execute and
administer contracts with other pipelines and
service providers, including, but not limited to,
Operational Balancing Agreements, Capacity Leases,
Storage and Transportation Agreements and Balancing
Agreements and to undertake such emergency measures
with third parties necessary to protect the
reliability and safety of the Company's services.
3.1.14. Receive nominations for service, schedule service,
issue confirmations, and administer Customer
contracts, including capacity release, in accordance
with the Company's FERC tariff and FERC policies,
rules and orders.
3.1.15. Establish such procedures as may be reasonable and
appropriate to comply with or to obtain an exemption
from the marketing affiliate rules set forth in the
FERC Order No. 497 as the same may be amended or
superseded.
3.1.16. Dispatch and allocate daily scheduled nominations
for natural gas quantities to be received,
transported and redelivered by means of the
Facilities.
3.1.17. Utilize electronic flow measurement equipment for
volume determinations and natural gas
chromatographs, as deemed appropriate by the
Operator, for heating value determinations as
described in the Company's FERC tariff.
3.1.18. Except as otherwise provided by applicable laws or
governmental regulations or as otherwise directed by
the Company, retain all records, books of account,
Company tax returns, plans, designs, studies,
reports and other documents related to the Operation
of the Facilities for three (3) years from the date
of completion of the activity to which such records
relate (or such longer period as may be required by
law or the Operating Agreement).
3.1.19. Report to the Company as soon as practicable all
non-routine occurrences that the Operator
determines may have a significant adverse impact
upon the Operation of the Facilities, make any
necessary repairs as a result of such occurrences as
the Operator reasonably deems necessary, and make a
follow-up report at an appropriate time on the
8
Operator's response to each non-routine occurrence;
provided, however, that the Operator shall obtain
the prior approval of the Company prior to
performing repairs with an estimated cost of over
$250,000 unless the non-routine occurrence is of a
nature that immediate repair is required, in which
event the Operator may make such repair without such
prior approval but shall provide a complete and
accurate report to the Company of such repair as
soon as practicable thereafter.
3.1.20. Perform any required major equipment overhaul and
replacement; provided, however, that unless already
previously approved by the Company in a budget
submitted by the Operator, the Operator shall obtain
the prior approval of the Company prior to
performing such overhaul or replacement with an
estimated cost of over $250,000 unless such overhaul
or replacement is of a nature that immediate action
must be taken, in which event the Operator may
perform such overhaul or replacement without such
prior approval but shall provide a complete and
accurate report to the Company of all such actions
as soon as practicable thereafter.
3.1.21. Perform such other duties as are reasonably
necessary or appropriate and enter into such other
arrangements as reasonably requested by the Company
to discharge the Operator's responsibilities under
this CO&M Agreement and the Operating Agreement.
3.2. REASONABLE EFFORTS. Operator agrees to design the Facilities
and to use reasonable efforts to operate the Facilities in
such a manner to provide services as required in the
Shipper's Service Agreements, the Company's FERC Gas Tariff,
and FERC's policies, rules and orders.
3.3. CLAIMS. Any and all claims against the Company instituted by
anyone other than the Operator arising out of the Operation
of the Facilities that are not covered by insurance in
accordance with Section 8 of this CO&M Agreement shall be
settled or litigated and defended by the Operator in
accordance with its best judgment and discretion except when
(a) the amount involved is stated to be (or estimated to be,
as the case may be) greater than $100,000, or (b) criminal
sanction is sought. The settlement or defense of any claim
described in (a) or (b) above shall be decided by the Members
pursuant to the Operating Agreement.
4. EMPLOYEES, CONSULTANTS AND SUBCONTRACTORS.
4.1. OPERATOR'S EMPLOYEES, CONSULTANTS AND SUBCONTRACTORS. The
Operator shall employ or retain and have supervision over the
9
Persons (including consultants and professional service or
other organizations) required or deemed advisable by the
Operator to perform its duties and responsibilities hereunder
in an efficient and economically prudent manner. The Operator
shall pay all reasonable expenses in connection therewith,
including compensation, salaries, wages, overhead and
administrative expenses incurred by the Operator, and if
applicable, social security taxes, workers' compensation
insurance, retirement and insurance benefits and other such
expenses. The compensation for the Operator's employees shall
be determined by the Operator, provided that the amount and
terms of such compensation shall be comparable to those
prevailing in the natural gas industry where Operator's
employees are located for similar work. Subject to the other
provisions of this CO&M Agreement, all authorized expenses
pursuant to this Section 4.1 shall be reimbursed to the
Operator by the Company as provided in the Accounting
Procedure.
4.2. USE OF AFFILIATES OR INDEPENDENT CONTRACTORS. The Operator
may utilize, as it reasonably deems necessary or appropriate,
the services of any independent contractors or of its or any
Member's Affiliates; provided, however, that such services of
the Operator's or any Member's Affiliates must be utilized on
terms no less favorable to the Company than those prevailing
at the time for comparable services of nonaffiliated
independent parties.
4.3. STANDARDS FOR OPERATOR AND ITS EMPLOYEES. The Operator shall
perform its services and carry out its responsibilities
hereunder, and shall require all of its employees and
contractors, subcontractors and materialmen furnishing labor,
material or services for the Operation of the Facilities to
carry out their respective responsibilities in accordance
with sound, workmanlike and prudent practices of the natural
gas pipeline industry and in compliance with the Company's
FERC Gas Tariff, FERC's policies, rules and orders and with
all relevant laws, statutes, ordinances, safety codes,
regulations, rules and Authorizations of Governmental
Authorities having jurisdiction applicable to the Facilities.
4.4. NON-DISCRIMINATION AND DRUGS. In performing under this CO&M
Agreement, the Operator shall not discriminate against any
employee or applicant for employment because of race, creed,
color, religion, sex, national origin, age or disability, and
will comply with all provisions of Executive Order 11246 of
September 24, 1965 and any successor order thereto, to the
extent that such provisions are applicable to the Operator or
the Company. The Company and the Operator do not condone in
any way the use of illegal drugs or controlled substances.
Any Person known by the Operator to be in possession of any
illegal drug or controlled substance will be removed by the
Operator and not permitted to
10
work on or with respect to the Facilities. In addition, the
Operator shall meet all the applicable requirements imposed
by the Department of Transportation as specified in 49
C.F.R., Parts 40 and 199. Furthermore, upon request and to
the extent permitted by law, the Operator will furnish the
Company copies of the records of employee drug test results
required to be kept under the provisions of 49 C.F.R. Part
199. The provisions of this Section 4.4 shall be applicable
to any contractors, consultants and subcontractors retained
in connection herewith, and the Operator shall cause the
agreements with any contractor, consultant or subcontractor
to contain similar language.
5. FINANCIAL AND ACCOUNTING.
5.1. ACCOUNTING AND COMPENSATION.
5.1.1. The Operator shall maintain accounts for the Company
in accordance with the FERC Uniform System of
Accounts and other Required Accounting Practices and
shall keep a full and complete account of all costs,
expenses and expenditures incurred by it in
connection with its obligations hereunder in the
manner set forth in the Accounting Procedure.
5.1.2. The Operator shall be reimbursed by the Company at
the rate and in the manner set forth in the
Accounting Procedure for all costs and expenses of
the Operator subject only to Operator's
demonstration that such costs and expenses were
incurred in connection with the Operation of the
Facilities or otherwise to fulfill the Operator's
duties under this CO&M Agreement and the Operating
Agreement; provided, however, that the Company shall
not be required to reimburse the Operator for costs
and expenses arising out of Prohibited Conduct or
claims for non-payment of any and all contributions,
withholding deductions or taxes measured by the
wages, salaries or compensation paid to Persons
employed by the Operator or any of its Affiliates in
connection herewith. The fact that such costs and
expenses exceed any budget approved by the Company
shall not be sole grounds to deny reimbursement
otherwise required under this CO&M Agreement,
provided the Operator can demonstrate such costs are
reasonably necessary.
5.2. BUDGETS AND REPORTS. The Operator shall, on a timely basis,
prepare and deliver to the Company for approval the following
budgets and reports: (a) The Phase II Capital Budget and Phase
III Capital Budget pursuant to Section 4.1.1 of the Operating
Agreement; and (b) an annual Operating Budget pursuant to
Section 7.6 of the Operating Agreement. Such budgets shall be
11
prepared in sufficient detail to satisfy the requirements of
any lending institution providing financing for the
Facilities.
5.3. DISPUTED CHARGES. The Company may, within the audit period
referred to in Section 5.5 hereof, take written exception to
any ▇▇▇▇ or statement rendered by the Operator for any
expenditure or any part thereof on the ground that the same
was not appropriate for reimbursement under the terms of
Section 5.1.2 above. The Company shall nevertheless pay in
full when due the amount of all statements submitted by the
Operator. Such payment shall not be deemed a waiver of the
right of the Company to recoup any contested portion of any
▇▇▇▇ or statement; provided, however, that if the amount as
to which such written exception is taken or any part thereof
is ultimately determined in accordance with Section 11.2 of
this CO&M Agreement not to be appropriate for reimbursement
under the terms of Section 5.1.2 of this CO&M Agreement, such
amount or portion thereof (as the case may be) shall be
refunded by the Operator to the Company, together with
interest thereon at the Default Rate.
5.4. RATE AND TARIFF REVIEWS. The Operator shall review from time
to time the rates and fees charged for natural gas
transportation services, and the terms and conditions for
such services and any new services deemed appropriate by the
Operator and, subject to the receipt of any required
Regulatory Approvals and the terms of any Service Agreement,
revise such rates, fees, terms and conditions as the Operator
may deem appropriate for the Company.
5.5. AUDIT AND EXAMINATION. The Company or any Member, after
thirty (30) days' notice in writing to the Operator, shall
have the right during normal business hours to audit or
examine, at the expense of the Company or the requesting
Member, as the case may be, all books and records maintained
by the Operator, as well as the relevant books of account of
the Operator's contractors, relating to the Operation of the
Facilities; provided, however, that the total number of full
audits commenced in any Year pursuant to this Section 5.5
shall not exceed two. Such right shall include the right to
meet with the Operator's internal and independent auditors to
discuss matters relevant to the audit or examination. The
Company shall have two Years after the close of a Year in
which to make an audit of the Operator's records for such
Year; provided, however, that any audits relating to
construction costs may be made up to twenty four (24) Months
after the in-service date of the Facilities (not including
any Modifications) or after the date that construction of the
Modification in question was completed, as certified in
writing by the Operator, in the case of a Modification.
6. INTELLECTUAL PROPERTY; LICENSE TO OPERATOR. Each Member hereby grants
to the operator an irrevocable, royalty-free, non-exclusive and
non-assignable license to use, during the term of this
12
CO&M Agreement, any Confidential Information provided to the Company
or the Operator by said Member and designated as such by said Member.
For purposes of this section 6, Confidential Information shall
include, but shall not be limited to, inventions (whether patented or
not) and copyrighted or copyrightable material. As a condition
precedent to the effectiveness of such license to use, the Operator
hereby expressly agrees that it will utilize such Confidential
Information solely in connection with the performance of its duties
hereunder and further expressly agrees that it will be subject to and
bound by the provisions set forth in Section 4.8.2 of the Operating
Agreement as if it were a Member. Upon termination of this CO&M
Agreement or its removal as Operator, such license shall terminate
and, upon the request of the Company, the Operator shall either return
all Confidential Information that has been provided to it, together
with all reproductions thereof in the Operator's possession, pursuant
to such license to use, to the Member from whom it obtained such
Confidential Information or certify to such Member that it has been
destroyed.
7. INDEMNIFICATION. The Company agrees to indemnify, hold harmless and
defend the Operator and its Affiliates and their respective officers,
directors, employees and agents (but not including any Member of the
Company, in its capacity as such) from and against, and the
indemnified parties shall have no liability to the Company for, any
and all Liabilities incurred arising out of or relating to this CO&M
Agreement or the Operation of the Facilities, regardless of cause;
provided, however, that the Company shall not be required to indemnify
or hold harmless the indemnified parties from or against any
Liabilities attributable to the actions or omissions of Operator in
maintaining and administering accounts and arrangements as set forth
in Section 3.1.11 of this CO&M Agreement; provided, further, that the
Company shall not be required to indemnify or hold harmless the
indemnified parties from or against any Liabilities attributable to
Prohibited Conduct or claims for non-payment of any and all
contributions, withholding deductions or taxes measured by the wages,
salaries or compensation paid to Persons employed by the Operator or
any of its Affiliates in connection herewith. In the event applicable
law limits in any way the extent to which indemnification may be
provided to an indemnitee, this Section 7 shall be automatically
amended, in keeping with the express intent of the parties hereto, as
necessary to render all the remainder of this CO&M Agreement valid and
enforceable and to provide that the indemnifications provided herein
shall extend and be effective only to the maximum extent permitted by
such law. Upon notice therefor, the Company shall advance to the
indemnified party the costs of any Liabilities for which
indemnification is to be sought hereunder upon the execution by the
indemnified party of a written undertaking to repay any costs for
which indemnification pursuant to this Section 7 is determined to be
improper by mutual agreement or pursuant to the procedures set forth
in Section 11.2 of this CO&M Agreement, together with interest thereon
at the Default Rate. With respect to any claim against any indemnified
party for which indemnification may be
13
sought hereunder, the Company shall not, without the indemnified
party's prior written consent, settle or compromise such claim or
consent to entry of any judgment in respect thereof which imposes any
future obligation on the indemnified party or which does not include,
as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party a release from all liability in
respect of such claim. The Company (a) shall have the right to defend,
at its cost and expense, such claim in all appropriate Proceedings,
and (b) shall have full control (including choice of counsel) of such
defense and Proceedings, including any compromise or settlement
thereof (subject to the foregoing provisions of this Section 7), and
the indemnified parties shall cooperate in such defense in all
reasonable ways. The Company shall not be required to provide
indemnification pursuant to this Section 7 to the extent, if any, that
the Liabilities in question are not borne or incurred by the
indemnified parties because of the availability of insurance proceeds
from the insurance required in Section 8.2 of this CO&M Agreement to
the indemnified parties.
8. INSURANCE.
8.1. During the construction of the Facilities, the Operator shall
cause to be carried and maintained, either directly or
through the contractor(s) building the Facilities, the
equivalent of all-risk builders risk insurance, including the
perils of Flood and Earthquake, if available and deemed
affordable, and including mutually acceptable sublimits of
Offsite Storage and Transit for the full replacement value of
the work with all coinsurance waived and "permission to
occupy" granted. The insurance shall name the Operator and
the Company as insureds, as their respective interests may
appear.
8.2. At all times during the Operation of the Facilities, the
Operator shall provide (a) workers' compensation insurance
granting full compensation under the worker's compensation
law of any state in which operations are conducted, and (b)
employer's liability insurance with limits of not less than
$2,000,000 per occurrence for all of the Operator's employees
engaged in work on the Facilities, and (c) automobile
liability insurance for all vehicles owned or used by the
Operator, covering injuries to or death of Persons and damage
to property, with a combined single limit of not less than
$2,000,000 per occurrence.
8.3. If permitted by applicable law, the Operator may self-insure
the workers' compensation, employer's liability insurance,
and automobile liability insurance required above and, up to
$1,000,000 per occurrence or such other amounts as the
Company authorizes by Supermajority Vote, the general
liability insurance required in section 8.4 below.
14
8.4. To be effective as of the Execution Date, Operator shall
procure and maintain for the benefit of Company and Operator
general liability and/or excess liability insurance with
limits of not less than $10,000,000 per occurrence for bodily
injury and property damage combined. The Company and the
Operator will be the named insureds under such insurance
policy(ies). The Operator's parent and Affiliates and the
Members will be named as additional insureds under such
insurance policy(ies). Such insurance policy(ies) will be
worded to provide primary insurance to the named insureds and
the above additional insureds with respect to the Operation
of the Facilities, and to waive any rights of subrogation
against the above additional insureds. Within 15 days after
execution of this CO&M Agreement, and annually thereafter,
Operator will have a certificate of insurance issued
evidencing this insurance upon the specific request of the
Company or any of its Members.
8.5. The Operator will procure and maintain for the benefit of and
on behalf of the Company and the Operator all-risk property
insurance covering the Facilities with no co-insurance,
including coverage for boiler and machinery, business
interruption (at the Company's option) and natural gas in the
possession of the Company. This insurance will be placed into
effect simultaneously with the termination of the builder's
risk insurance the Operator is required to maintain under
Section 8.1 of this CO&M Agreement. The Company and the
Operator will be the named insureds and loss payees under
such insurance policy. This insurance policy will provide a
waiver of any rights of subrogation against the Operator's
Parent and Affiliates and the Members. Any insurance proceeds
for any losses under this policy will be applied against the
cost to repair or replace the Facilities.
8.6. All policies of insurance shall be written with carriers
holding a current Best's rating of at least A (or if not so
rated, has a creditworthiness comparable to such an A rated
carrier), and shall afford at least 60-days written notice in
the event of cancellation, non-renewal or material reduction
in the coverage required hereunder. The costs for premiums,
deductibles and self-insured retentions for the insurance
maintained by the Operator pursuant to this CO&M Agreement
shall be reimbursable costs pursuant to Section 5 of this
CO&M Agreement. In addition, in the event the Operator
self-insures the general liability insurance required above
as herein permitted, the Operator shall be reimbursed as
provided in Section 2.9 of the Accounting Procedures.
9. TERM. This CO&M Agreement shall be effective as of the date hereof and
shall continue for the term of the Company as provided in the
Company's Certificate of Formation; provided, however, that this CO&M
Agreement shall be terminated earlier upon the first to occur of the
following: (a) the Operator's Affiliates (or any successor Affiliate
of the
15
Operator) that is a Member ceases to be a Member; or (b) the Operator
commits a material default under this CO&M Agreement and such material
default continues for a period of 120 days after notice thereof by the
Company to the Operator (provided, however, that no termination shall
occur if the Operator has initiated action to cure such material
default but, despite its good faith efforts, it has been unable to
complete such cure within such 120 day period).
10. SURVIVAL OF OBLIGATIONS. The termination of this CO&M Agreement shall
not discharge any Party from any obligation that it owes to any other
Party by reason of any transaction, commitment or agreement entered
into, or any Liabilities that shall occur or arise (or the
circumstances, events or basis of which shall occur or arise) prior to
such termination. It is the intent of the Parties that any obligation
owed by a Party to the other Party (whether the same shall be known or
unknown at the time of termination hereof, or whether the
circumstances, events or basis of the same shall be known or unknown
at the termination hereof) shall survive the time of termination of
this CO&M Agreement.
11. LAW OF THE CONTRACT AND ARBITRATION.
11.1. LAW OF THE CONTRACT. THIS CO&M AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE
THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS
CO&M AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.
11.2. ARBITRATION.
11.2.1. In the event that the Parties are unable to agree on
any matter relating to this CO&M Agreement, the
Company or the Operator may upon notice given to the
other call for submission of such matter to
arbitration. The Party requesting arbitration shall
set forth in such notice in adequate detail the
issues to be arbitrated, and within ten (10) days
from the receipt of such notice, the other Party may
set forth in adequate detail additional related
issues to be arbitrated. Within ten (10) days after
the giving of such latter notice, each Party shall
furnish to the other Party a notice ("Decision
Notice") setting forth the decision (on a
word-for-word basis) that such Party wishes the
arbitrator(s) to make with respect to the issues to
be arbitrated. Within ten (10) days after the giving
of the latter of the two Decision Notices, the
Parties shall attend a meeting ("Meeting") at a
mutually acceptable time and place to discuss fully
the content of such Decision Notices
16
and based thereon determine whether either or both
wish to modify their Decision Notices in any way.
Any such modifications shall be discussed with each
other, so that when each Party finalizes its
Decision Notice, it shall do so with full knowledge
of the content of the other Party's final Decision
Notice. The finalization of such Decision Notices
and the delivery of same by each Party to the other
shall occur at the Meeting unless by mutual
agreement they agree to have one or more additional
Meetings for such purposes. If arbitration is
invoked by either Party, the decision of the
arbitrators shall be final and binding upon all
Parties, and neither Party shall seek to have the
applicable issues litigated rather than arbitrated
(except as may be otherwise required by law).
11.2.2. It is the intent of the Parties that, to the extent
practicable, such binding arbitration shall be
conducted by a Person knowledgeable and experienced
in the type of matter that is the subject of the
dispute. In the event the Parties are unable to
agree upon such Person within ten days after the
last Meeting held pursuant to Section 11.2.1 above,
then each Party shall select a Person that it
believes has the qualifications set forth above as
its designated arbitrator (which selection shall be
accomplished by notifying the other Party of the
identity of such Person), and such arbitrators so
designated shall mutually agree upon a similarly
qualified third Person to complete the arbitration
panel; provided, however, that if one of the Parties
fails to select its designated arbitrator as
specified herein within ten (10) days of receiving
notice from the other Party that such other Party
has selected its designated arbitrator then the
arbitration provided for herein shall be conducted
by the one arbitrator so designated. In the event
that the Persons selected by the Parties are unable
to agree on a third member of the panel within ten
(10) days after the selection of the latter of the
two arbitrators, such Person shall be designated by
the American Arbitration Association. Upon final
selection of the entire panel, such panel shall, as
expeditiously as possible (and if possible, within
ninety (90) days after the selection of the last
arbitrator), render a decision on the matter
submitted for arbitration. Such panel shall be
required to adopt either the decision set forth in
the Operator's final Decision Notice or the decision
set forth in the Company's final Decision Notice and
shall have no power whatsoever to reach any other
result. Such panel shall adopt the decision that in
its judgement is the more fair, equitable and in
conformity with this CO&M Agreement. The arbitration
shall be conducted in Charlotte, North Carolina in
accordance with the
17
commercial arbitration rules of the American
Arbitration Association.
11.2.3. Upon the determination of any such dispute, the
arbitrators shall ▇▇▇▇ the costs attributable to
such binding arbitration to the losing Party;
provided, however, that the arbitrators shall be
empowered to apportion such costs between the
Parties if they deem it appropriate.
11.2.4. It is the intent of the Parties that, once
arbitration is invoked by either Party pursuant to
the provisions of this Section 11, the matters set
for arbitration shall be decided as set forth
herein, and they shall not seek to have this Section
11 rendered unenforceable or to have such matter
decided in any other way; provided, however, that
nothing herein shall prevent the Parties from
negotiating a settlement of any issue at any time.
11.2.5. Without limiting any of the foregoing, for purposes
of this CO&M Agreement an independent determination
of whether an action or failure to act constitutes
Prohibited Conduct shall be made by arbitration
pursuant to this Section 11, without regard to the
findings of any court or administrative body or the
settlement or compromise of any claim (other than a
settlement of the type referred to in Section 11.2.4
above).
12. SPECIAL AND CONSEQUENTIAL DAMAGES. The indemnification provided in
Section 7 of this CO&M Agreement shall include without limitation
claims made by any Person for special, indirect, consequential or
punitive damages; otherwise, neither Party shall have any liability
hereunder to the other Party for any special, indirect, consequential
or punitive damages.
13. GENERAL.
13.1. EFFECT OF AGREEMENT; AMENDMENTS. This CO&M Agreement,
together with the Operating Agreement, constitutes the entire
agreement among the Parties with respect to the subject
matter hereof and supersedes all prior agreements and
understandings, oral and written, among the Parties with
respect to the subject matter hereof. This CO&M Agreement can
be amended, restated or supplemented only by the written
agreement of the Operator and the Company.
13.2. NOTICES. Except as expressly set forth to the contrary in
this CO&M Agreement, all notices, requests, or consents
provided for or permitted to be given under this CO&M
Agreement must be in writing. Notices and other
communications will be deemed to have been given (a) on the
date when delivered by hand or by
18
means of electronic transmission (and followed by electronic
confirmation of receipt), (b) on the date after the day when
deposited for delivery with a nationally recognized air
courier, or (c) on the third Business Day after being
deposited in the United States mail, postage prepaid return
receipt requested. All notices, requests, and consents to be
sent to the Operator must be given to the Operator at the
following addresses: Dominion Transmission, Inc., ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, if by
mail or Dominion Transmission, Inc. Fax number (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇ if by facsimile transmission and if
regarding billing and invoicing matters to Dominion
Transmission, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇ if by mail or Dominion Transmission, Inc.
Fax number (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇ if by facsimile
transmission. All notices, requests, and consents to be sent
to the Company must be given to the Management Committee at
the following addresses: Greenbrier Pipeline Company, LLC,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, if by mail or Greenbrier Pipeline Company, LLC, Fax
number (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ if by facsimile.
Whenever any notice is required to be given by law or this
CO&M Agreement, a written waiver thereof, signed by the
Person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of
such notice.
13.3. COUNTERPARTS. This CO&M Agreement may be executed in any
number of counterparts with the same effect as if all Parties
had signed the same document. Each counterpart shall be
deemed an original, but all of which together shall
constitute one and the same instrument.
13.4. WAIVER. A waiver or consent, expressed or implied, to or of
any breach or default by any Person in the performance by the
Person of its obligations with respect to the Company or the
Operator is not a consent or waiver to or of any other breach
or default in the performance by that Person of the same or
any other obligations of that Person with respect to the
Company or the Operator. Failure on the part of a Person to
complain of any act of any Person or to declare any Person in
default with respect to the Company or the Operator,
irrespective of how long that failure continues, does not
constitute a waiver by the Person of its rights with respect
to that default until the applicable statute-of-limitations
period has run.
13.5. ASSIGNABILITY; SUCCESSORS. This CO&M Agreement may not be
assigned by either Party without the written consent of the
other Party; provided, however, that such consent shall not
be withheld unreasonably; provided, further, that this CO&M
Agreement may be pledged by the Company without the consent
of the Operator in connection with any Financing Commitment.
This CO&M Agreement and all of the obligations and rights
herein established
19
shall extend to and be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of
the respective Parties hereto. Unless otherwise agreed, any
assignment of this CO&M Agreement shall not relieve the
assigning Party of any of its obligations hereunder.
13.6. THIRD PERSONS. Except as expressly provided in this CO&M
Agreement, nothing in this CO&M Agreement shall provide any
benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being
the intent of the Parties that this CO&M Agreement shall not
be construed as a third party beneficiary contract. Nothing
in this subsection 13.6 is intended to limit in any way the
right of a Member to bring a derivative action in the right
of the Company under Subchapter X of the Act. Further, in the
specific event that Operator's affiliates own more than fifty
(50) percent of the Membership Interests in the Company, then
any other Member of the Company that holds more than twenty
(20) percent of the Membership Interests in the Company may
independently pursue a cause of action against the Operator
regarding any breach of this CO&M Agreement by Operator if
such Member first makes written demand on the Company to
bring an action with respect to the breach of this CO&M
Agreement by Operator specified in such demand letter and
within thirty (30) days after such demand, the Company fails
to commence action to cause Operator to cure such breach of
this CO&M Agreement or to enforce the Company's rights
against Operator for such breach of this CO&M Agreement.
13.7. LAWS AND REGULATORY BODIES. This CO&M Agreement and the
obligations of the Parties hereunder are subject to all
applicable laws, rules, orders and regulations of
Governmental Authorities having jurisdiction, and to the
extent of conflict, such laws, rules, orders and regulations
of governmental authorities having jurisdiction shall
control.
13.8. SECTION NUMBERS; HEADINGS. Unless otherwise indicated,
references to Section numbers are to Sections of this CO&M
Agreement. Headings and captions are for reference purposes
only and shall not affect the meaning or interpretation of
this CO&M Agreement.
13.9. SEVERABILITY. If any provision of this CO&M Agreement or the
application thereof to any Person or circumstance is held
invalid or unenforceable to any extent, the remainder of this
CO&M Agreement and the application of that provision to other
Persons or circumstances is not affected thereby and that
provision shall be enforced to the greatest extent permitted
by law.
13.10. FURTHER ASSURANCES. In connection with this CO&M Agreement
and the transactions contemplated hereby, each Party shall
execute
20
and deliver any additional instruments and documents and
perform any acts and things as may be necessary or
appropriate to effectuate and perform the terms and
provisions of this CO&M Agreement and those transactions.
21
IN WITNESS WHEREOF, the Parties have caused this CO&M Agreement to be
executed by their duly authorized representatives as of the date first above
written.
OPERATOR: COMPANY:
Dominion Transmission, Inc. Greenbrier Pipeline Company, LLC
By each of its Members:
By: DOMINION GREENBRIER, INC.
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President -
Transmission
By:
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President - Tariff Services
PIEDMONT GREENBRIER
PIPELINE COMPANY, LLC
By:
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
22
1.
2.
3.
4.
5.
6.
7.
8. INSURANCE.
8.1. During the construction of the Facilities, the
Operator shall cause to be carried and maintained,
either directly or through the contractor(s) building
the Facilities, the equivalent of all-risk builders
risk insurance, including the perils of Flood and
Earthquake, if available and deemed affordable, and
including mutually acceptable sublimits of Transit,
Offsite Storage and Transit for the full replacement
value of the work with all coinsurance waived and
"permission to occupy" granted. The insurance shall
name the Operator and the Company as insureds, as
their respective interests may appear.
8.2. At all times during the Operation of the Facilities,
the Operator shall provide (a) workers' compensation
insurance granting full compensation under the
worker's compensation law of any state in which
operations are conducted, and (b) employer's
liability insurance with limits of not less than
$2,000,000 per occurrence for all of the Operator's
employees engaged in work on the Facilities, and (c)
automobile liability insurance for all vehicles
owned or used by the Operator, covering injuries to
or death of Persons and damage to property, with a
combined single limit of not less than $2,000,000
per occurrence.
8.3. If permitted by applicable law, the Operator may
self-insure the workers' compensation, employer's
liability insurance, and automobile liability
insurance required above and, up to $1,000,000 per
occurrence or such other amounts as the Company
authorizes by Supermajority Vote, the general
liability insurance required in section 8.4 below.
8.4. To be effective as of the Execution Date, Operator
shall procure and maintain for the benefit of
Company and Operator general liability and/or
excess liability insurance with limits of not less
than $10,000,000 per occurrence for bodily injury
and property damage combined. The Company and the
Operator will be the named insureds under such
insurance policy(ies). The Operator's parent and
Affiliates and the Members will be named as
additional insureds under such insurance
policy(ies). Such insurance policy(ies) will be
worded to provide primary insurance to the named
insureds and the above additional insureds with
respect to the Operation of the Facilities, and to
waive any rights of subrogation against the above
additional insureds. Within 15 days after execution
of this CO&M Agreement and annually thereafter,
Operator will have a certificate of insurance issued
evidencing this insurance upon the specific request
of the Company or any of its Members.
8.5. The Operator will procure and maintain for the
benefit of and on behalf of the Company and the
Operator all-risk property insurance covering the
Facilities with no co-insurance, including coverage
for boiler and machinery, business interruption (at
the Company's option) and natural gas in the
possession of the Company. This insurance will be
placed into effect simultaneously with the
termination of the builder's risk insurance the
Operator is required to maintain under Section 8.1
of this CO&M Agreement. The Company and the Operator
will be the named insureds and loss payees under
such insurance policy. This insurance policy will
provide a waiver of any rights of subrogation
against the Operator's Parent and Affiliates and the
Members. Any insurance proceeds for any losses under
this policy will be applied against the cost to
repair or replace the Facilities.
8.6. All policies of insurance shall be written with
carriers holding a current Best's rating of at least
A (or if not so rated, has a creditworthiness
comparable to such an A rated carrier), and shall
afford at least 60-days written notice in the event
of cancellation, non-renewal or material reduction
in the coverage required hereunder. The costs for
premiums, deductibles and self-insured retentions
for the insurance maintained by the Operator
pursuant to this CO&M Agreement shall be
reimbursable costs pursuant to Section 5 of this
CO&M Agreement. In addition, in the event the
Operator self-insures the general liability
insurance required above as HEREIN PERMITTED, the
Operator shall be reimbursed as provided in Section
2.9 of the Accounting Procedures.
EXHIBIT A
TO
CONSTRUCTION, OPERATING AND MAINTENANCE AGREEMENT
ACCOUNTING PROCEDURE
1. GENERAL PROVISIONS
1.1. STATEMENTS AND ▇▇▇▇▇▇▇▇. Commencing on the first Business Day
after the Execution Date, the Operator shall ▇▇▇▇ the Company
on the first Business Day of each Month or as soon as
practicable thereafter for the estimated costs and expenses
for the Month, including any adjustment that may be necessary
to correct prior estimated ▇▇▇▇▇▇▇▇ to actual costs. If
requested by the Company, the Operator will promptly provide
reasonably sufficient support for the estimated costs and
expenses to be incurred for the Month. Actual bills will be
summarized by appropriate classifications indicative of the
nature thereof and will be accompanied by such detail and
supporting documentation as the Company may reasonably
request.
1.2. PAYMENT BY COMPANY. The Company shall pay all bills presented
by the Operator as provided in the CO&M Agreement and the
Operating Agreement on or before the fifteenth (15th) Day
after the ▇▇▇▇ is received. If payment is not made within
such time, the unpaid balance shall bear interest until paid
at the Default Rate.
1.3. FINANCIAL RECORDS. The Operator shall maintain accurate books
and records in accordance with Required Accounting Practice
covering all of the Company's activities and the Operator's
actions under this CO&M Agreement.
1.4. PURCHASE OF MATERIALS. It is contemplated that most material,
equipment and supplies will be owned by the Company and
purchased or furnished for its account. So far as is
reasonably practical and consistent with efficient, safe and
economical operation as determined by the Operator, only such
material shall be obtained for the Facilities as may be
required for immediate use, and the accumulation of surplus
stock shall be avoided. To the extent reasonably possible,
the Operator shall take advantage of discounts available by
early payments and pass such benefits on to the Company.
1.5. INTEREST-BEARING ACCOUNT. To the extent practicable, the
funds of the Company will be held in one or more
interest-bearing accounts.
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2. COSTS AND EXPENSES
Subject to the limitations hereafter prescribed and the provisions of the CO&M
Agreement, the Operator shall charge the Company for all costs and expenses
provided for in Section 5.1.2 of the CO&M Agreement, including, but not limited
to, the following items
2.1. Rentals. All rentals paid by the Operator.
2.2. Labor Costs. All applicable personnel generating the
following labor costs shall keep time sheets so that the
portion of their salaries and wages chargeable under the CO&M
Agreement may be supported and calculated, and only such
proportionate part of such labor costs shall be charged
pursuant to this Section 2.2:
2.2.1. Salaries and wages of employees of the Operator and
its Affiliates, engaged in connection with the
Operation of the Facilities and, in addition,
amounts paid as salaries and wages of others
temporarily employed in connection therewith. Such
salaries and wages shall be loaded to include the
Operator's actual costs of bonuses, holiday,
vacation, sickness and jury service benefits and
other customary allowances for time not worked paid
to Persons whose salaries and wages are chargeable
under this Section 2.2.1. Direct labor charges shall
be billed so far as costs can be identified and
related to the performance of the Operator's duties
under this CO&M Agreement. As used in this CO&M
Agreement, "Direct Labor" shall include labor costs
in Sections 2.2.1, 2.2.2, and 2.2.3 of this CO&M
Agreement.
2.2.2. Expenditures or contributions made pursuant to
assessments imposed by Governmental Authority that
are applicable to salaries, wages and costs
chargeable under Section 2.2.1 above, including, but
not limited to, FICA taxes and federal and state
unemployment taxes.
2.2.3. The costs of plans incurred by or on behalf of the
Operator for workers' compensation, employers' group
life insurance, hospitalization, disability,
pension, retirement, savings and other benefit
plans, that are applicable to salaries and wages
chargeable under Section 2.2.1 above. Such costs
shall be charged on the basis of a percentage
assessment on the amount of salaries and wages
chargeable under Section 2.2.1 above.
A-2
2.2.4 All other administrative and general expenditures,
including salaries and wages, bonuses, related
benefits and expenses of personnel of the Operator
and/or the Operator's Affiliates (excluding the
personnel who have direct billed in Section 2.2.1)
who render services for the benefit of the Operator
(in the performance of its obligations hereunder) or
the Company, shall be charged from the Execution
Date at five percent (5%) of Direct Labor costs
charged under this CO&M Agreement
2.3. REIMBURSABLE EXPENSES OF EMPLOYEES. Reasonable personal
expenses of Operator's and Operator's Affiliate's employees
reasonably incurred in connection with the performance of the
Operator's duties under this CO&M Agreement. As used herein,
the term "personal expenses" shall mean out-of-pocket
expenditures incurred by Operator's or Operator's Affiliate's
employees in the performance of their duties and for which
such employees are reimbursed. The Operator shall maintain
documentation for such expenses in accordance with the
standards of the Internal Revenue Service.
2.4. MATERIAL, EQUIPMENT AND SUPPLIES. Material, equipment and
supplies purchased or furnished from the warehouse or other
properties of the Operator or Operator's Affiliates, priced
at cost plus the Operator's or Affiliate's appropriate
purchasing and stores overhead ordinarily in use by the
Operator or Affiliate.
2.5. TRANSPORTATION. Transportation of employees, equipment and
material and supplies necessary for the Operation of the
Facilities.
2.6. SERVICES. The cost of contract services and utilities
procured from outside sources.
2.7. LEGAL EXPENSES AND CLAIMS. All costs and expenses of
handling, investigating and settling litigation or claims
arising by reason of the Operation of the Facilities or
necessary to protect or recover any Facilities or property,
including, but not limited to, attorney's fees, court costs,
costs of investigation or procuring evidence and any
judgments paid or amounts paid in settlement or satisfaction
of any such litigation or claims. All judgments received or
amounts received in settlement of litigation with respect to
any claim asserted on behalf of the Company shall be for the
benefit of and shall be remitted to the Company.
2.8. TAXES. All taxes (except those measured by income) of every
kind and nature assessed or levied upon or incurred in
connection with the Operation of the Facilities or on the
Facilities or other property of the Company and which taxes
have been paid by the Operator for the benefit of the
Company, including charges for late payment arising from
A-3
extensions of the time for filing that are caused by the
Company, or that result from the Operator's good faith
efforts to contest the amount or application of any tax.
2.9. INSURANCE. Net of any returns, refunds or dividends, all
premiums, deductibles and self-insured retentions paid and
expenses incurred for insurance required to be carried under
this CO&M Agreement, provided, however, the insurance
required to be carried under Section 8.2 of this CO&M
Agreement shall be reimbursed through the five percent A&G
charge in Section 2.2.4 of this Exhibit A.
2.10. PERMITS, LICENSES AND BOND. Cost of permits, licenses and
bond premiums necessary in the performance of the Operator's
duties.
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