EXHIBIT 3.1
ATLANTIC CITY ELECTRIC
TRANSITION FUNDING LLC
---------------------
LIMITED LIABILITY COMPANY AGREEMENT
---------------------
dated as of April 11, 2001
TABLE OF CONTENTS
ARTICLE ONE Definitions and Rules of Construction 1
Section 1.1 Definitions 1
Section 1.2 Rules of Construction 4
ARTICLE TWO General Provisions Regarding LLC Formation 5
Section 2.1 Formation 5
Section 2.2 Name 5
Section 2.3 Purpose 5
Section 2.4 Place of Business; Books and Records 5
Section 2.5 Fiscal Year 5
Section 2.6 Registered Office and Registered Agent 5
ARTICLE THREE Interests; Capital Contributions; Capital Accounts 6
Section 3.1 Interests; Capital Contributions 6
Section 3.2 Capital Accounts 6
ARTICLE FOUR Allocations 6
Section 4.1 Allocation of Profits and Losses 6
Section 4.2 Allocations upon Liquidating Dispositions 6
Section 4.3 Tax Credits 6
ARTICLE FIVE Distributions 7
Section 5.1 Distribution Policy 7
Section 5.2 Distributions on Dissolution 7
ARTICLE SIX Management and Control of the Company 7
(a) 7
Section 6.2 Appointments of the Managing Board 9
Section 6.3 Reliance by the Managing Board 9
Section 6.4 Indemnification 12
ARTICLE SEVEN Transferability of Membership Interest and Admission of Member 12
Section 7.1 Assumption of Obligations 12
Section 7.2 Substitution of Member 12
ARTICLE EIGHT Member Liability, Etc. 12
Section 8.1 Member Liability 12
ARTICLE NINE Duration, Termination and Dissolution 12
Section 9.1 Duration 13
Section 9.2 Events of Dissolution 13
Section 9.3 Distribution upon Liquidation 13
Section 9.4 Capital Accounts upon Liquidation 13
Section 9.5 Certificate of Cancellation 14
ARTICLE TEN Certain Tax Matters 14
Section 10.1 Preparation of Tax Return 14
Section 10.2 Certain Tax Elections 14
ARTICLE ELEVEN Miscellaneous 14
Section 11.1 Governing Law; Severability 14
Section 11.2 Notices 14
Section 11.3 Title to Company Assets 15
Section 11.4 Waiver 15
Section 11.5 Further Action 15
Section 11.6 Beneficiaries 15
Section 11.7 Changes in Writing 15
-3-
ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT is dated as of April 11, 2001
(this "Agreement"), by ATLANTIC CITY ELECTRIC COMPANY a New Jersey corporation
with a business office at 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (together
with its successors and assigns, "ACE ").
WHEREAS, pursuant to this Agreement, ACE wishes to establish a limited
liability company under the laws of the State of Delaware to be known as
"Atlantic City Electric Transition Funding LLC" (the "Company");
WHEREAS, the purpose of the limited liability company will be, among
other things, to engage in any lawful act or purpose for which a Delaware
limited liability company may be formed and any activities necessary or
incidental thereto; and
WHEREAS, it is intended that ACE will be the sole member of the Company
and that the Company will be disregarded for federal, state and local income tax
purposes pursuant to Treas. Reg. Section 301.7701-3(b);
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants, rights and obligations set forth in this Agreement, the benefits to
be derived therefrom and other good and valuable consideration, the receipt and
the sufficiency of which are hereby acknowledged and recognized by the Member,
the Member hereby agrees as follows:
ARTICLE ONE
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this ARTICLE ONE have the meanings herein assigned to them and the
capitalized terms defined in the Recitals and subsequent Sections by inclusion
in quotation marks and parentheses have the meanings so ascribed to them.
"Affiliate," with respect to any Person, means any other Person 50% or
more of the voting stock of which or 50% or more of the membership interests
entitled to vote is beneficially owned, directly or indirectly, either by such
Person or by an Affiliate of such Person.
"Agreement" means this Limited Liability Company Agreement, as in
effect at the time of reference, as may be hereinafter modified, amended,
supplemented and/or restated.
"Allocation Period" means a Taxable Year or an Interim Period, as the
case may be.
"Capital Account" means, with respect to each Member, the aggregate
Capital Contributions made by such Member to the Company,
(i) reduced by
(A) any Losses (or items thereof)
allocated to such Member and
(B) any distributions of Net Cash Flow
and the Fair Market Value of other
distributions made to such Member
reduced by the amount of
liabilities secured by the property
that such Member assumes (or takes
subject to) under section 752 of
the Code, and
(ii) increased by any Profits (or items thereof) allocated
to such Member.
Any other item that is required to be reflected in a Member's Capital Account
under SECTION 3.2 or otherwise under this Agreement shall be so reflected.
"Capital Contribution" means a capital contribution made by a
Member to the Company in accordance with ARTICLE THREE. Any Capital Contribution
of property other than cash shall be taken into account at the net book value of
such property.
"Code" means the Internal Revenue Code of 1986, or any
successor thereto, as in effect at the time of reference.
"Company" means Atlantic City Electric Transition Funding LLC,
the limited liability company formed by this Agreement.
"Delaware Act" means the Delaware Limited Liability Company
Act, Delaware Code Title 6, Sections 18-101, et seq., or any successor
statute thereto, as in effect at the time of reference.
"Fair Market Value" means the price that would be paid for a
given asset in an arm's length transaction between a willing seller and willing
buyer, as determined by the Managing Board in its sole discretion.
"GAAP" means the generally accepted accounting principles in
the United States of America, as in effect from time to time, applied on a
consistent basis both as to classification of items and amounts.
"Interim Period" means any interim accounting period within a
Taxable Year established by the Member and which is permitted or required by
section 706 of the Code.
"Liquidation" shall mean (i) when used with reference to the
Company, the earlier of (a) the date upon which the Company is terminated under
section 708(b)(1) of the Code and
-5-
(b) the date upon which the Company ceases to be a going concern, and (ii) when
used with reference to a Member, the earlier of (a) the date upon which there is
a Liquidation of the Company and (b) the date upon which the Member's entire
interest in the Company is terminated other than by transfer, assignment or
other disposition to a Person other than the Company.
"Liquidator" has the meaning given to it in SECTION 10.3.
"Managing Board" shall mean ACE , or any Person that may be
designated by ACE from time to time.
"Member" shall mean a member of the Company.
"Membership Interest" means the membership interests in the
Company held by the Members, including the right of the Members to any and all
benefits to which the Members may be entitled as provided in this Agreement,
together with the obligations of the Members to comply with all the terms and
provisions of this Agreement; 100% of the Membership Interests will initially be
owned by ACE .
"Net Cash Flow" shall mean all cash revenues and funds
received by the Company (including the proceeds of any insurance or condemnation
awards but not including funds received as Capital Contributions), less the sum
of the following (to the extent not made from Capital Contributions): (i) all
principal, interest, premiums, fees and expenses paid to lenders in such period,
(ii) all cash expenditures (including capital expenditures approved pursuant to
the terms hereof) made in such period incident to the normal operation of the
Company's business, and (iii) such working capital and cash reserves as the
Managing Board reasonably determines to be necessary for the proper operation of
the Company's business.
"Person" means an individual or a corporation, association,
partnership, limited liability company, joint venture, organization, firm,
business, trust, or any other entity or unincorporated organization, domestic or
foreign, including a municipality, county, state, body politic or other
government (including any federal or foreign government), dependency or colony,
or any subdivision or agency thereof.
"Profits" or "Losses" means, for each period taken into
account under ARTICLE FOUR, an amount equal to the Company's taxable income or
taxable loss for such period, as determined for federal income tax purposes,
with the following adjustments:
(a) There shall be added to such taxable income or taxable
loss an amount equal to any income received by the Company
during such period which is wholly exempt from federal income
tax (e.g., interest income which is exempt from federal income
tax under section 103 of the Code);
-6-
(b) Any expenditures of the Company described in section
705(a)(2)(B) of the Code or treated as section 705(a)(2)(B)
expenditures pursuant to Treas. Reg. Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses, shall be subtracted from such
taxable income or loss;
(c) In the event the fair market value of any Company Asset is
adjusted pursuant to this Agreement, the amount of such
adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing
Profits or Losses, and shall be allocated in accordance with
the provisions of ARTICLE FOUR;
(d) Gain or loss resulting from any disposition of property or
assets of the Company with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the fair market value of such property or
assets disposed of, notwithstanding that the adjusted tax
basis of such property or assets differs from its fair market
value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year or other period; and
(f) To the extent an adjustment to the adjusted tax basis of
any Company Asset pursuant to section 734(b) or section 743(b)
of the Code is required pursuant to Treas. Reg. Section
1.704-1(b)(2)(i)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
Liquidation of the Member's Membership Interest in the
Company, the amount of such adjustment shall be treated as an
item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken
into account for purposes of computing Profits or Losses.
"Taxable Year" means the Company's accounting period for
federal income tax purposes, which shall be, until modified by the Member, the
calendar year ending each December 31.
"Third Party" means any Person which is not the Company, a
Member or an Affiliate of a Member.
Section 1.2 Rules of Construction. For purposes of this
Agreement (including all exhibits, schedules and amendments), unless the context
otherwise requires, (i) all terms defined herein include the plural as well as
the singular, (ii) the masculine, feminine or neuter gender include the others
whenever the context so requires, (iii) all accounting terms used herein but not
otherwise defined herein have the meaning given to them under GAAP, and (iv)
references to any Person include successors of such Person by consolidation and
merger and transferees of all or substantially all its assets (provided that
such successor has duly assumed in writing all such Person's obligations, if
any, hereunder). Reference to ARTICLES and SECTIONS are, unless otherwise
specified, to ARTICLES and SECTIONS of this Agreement. Words such as "herein,"
"hereinafter,"
-7-
"hereof," "hereto," "hereby" and "hereunder," and words of like import refer to
this Agreement unless the context requires otherwise. References herein to any
agreement or other instrument shall, unless the context otherwise requires (or
the definition thereof otherwise specifies), be deemed references to the same as
it may from time to time be changed, amended or extended in accordance with its
terms. Neither the captions to ARTICLES, SECTIONS or subdivisions thereof nor
the Table of Contents shall be deemed to be a part of this Agreement.
ARTICLE TWO
GENERAL PROVISIONS REGARDING LLC FORMATION
Section 2.1 Formation. ACE hereby forms a limited liability
company pursuant to the Delaware Act. The rights and duties of the Members shall
be as provided in the Delaware Act, except as modified by this Agreement.
Section 2.2 Name. The name of the Company shall be ATLANTIC
CITY ELECTRIC TRANSITION FUNDING LLC, or such other name or names as may be
designated from time to time by the Managing Board. The formation of the Company
through the execution and filing of a certificate of formation with the
Secretary of State of Delaware setting forth the information required by Section
18-201 of the Delaware Act is hereby confirmed, ratified and approved.
Section 2.3 Purpose. The purpose of the Company is, inter
alia, to engage in the ownership and operation of various permitted business
activities determined to be appropriate or desirable by the Managing Board,
together with any and all activities incidental or ancillary thereto, and to
engage in any and all other lawful activities for which limited liability
companies may be organized under the Delaware Act. Specifically (but without
limiting in any way the permitted business activities of the Company), the
nature of the business of the Company and the object or purposes to be
transacted or carried on thereby currently is to serve as a special purpose
financing entity.
Section 2.4 Place of Business; Books and Records. The Company
shall maintain its principal place of business at 000 Xxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, or such other place or places as may be designated from time to
time by the Managing Board. The Company shall maintain complete and accurate
books of account of the Company's affairs at the Company's principal office. The
Company's books and records shall be kept on the accrual basis.
Section 2.5 Fiscal Year. The fiscal year of the Company shall
be the calendar year ending each December 31, unless otherwise determined by the
Managing Board.
Section 2.6 Registered Office and Registered Agent. The
address of the registered office of the Company in the State of Delaware shall
be at 000 Xxxx Xxxxxx, Xxxxxxxxxx or such other place as may be designated from
time to time by the Managing Board. The name of the registered agent for service
of process on the Company in the State of Delaware shall be Conectiv Resource
Partners, Inc. c/o Legal Department or such other Person as may be designated
from time to time by the Managing Board, at such address in the State of
Delaware as shall be designated by the registered agent from time to time.
-8-
Section 2.7 Status of the Company for Tax Purposes. ACE
intends that the Company shall be disregarded as a separate entity for federal,
state and local income tax purposes pursuant to Treas. Reg. Section
301.7701-3(b). All provisions of this Agreement shall be interpreted and
construed so as to effectuate such treatment, and the Managing Board shall take
appropriate action to ensure such treatment. However, ACE intends that the
Company be recognized for all other purposes, and ACE intends that this
Agreement shall not be construed to suggest otherwise.
ARTICLE THREE
INTERESTS; CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
Section 3.1 Interests; Capital Contributions. The Members
shall not be paid interest on any Capital Contribution. The Members shall not be
required under the terms of this Agreement to make any further capital
contributions. No Membership Interest shall constitute a security within the
meaning of Article 8 or Article 9 of the Uniform Commercial Code as in effect in
any state, including the States of Delaware and New Jersey.
Section 3.2 Capital Accounts. The Company shall establish and
maintain a Capital Account for each Member in accordance with this Agreement.
The Capital Account so determined shall be maintained in accordance with section
704(b) of the Code and the regulations thereunder, with such adjustments as may
be required thereby. The Capital Account shall be maintained in, and all
allocations pursuant to this Agreement shall be made in, United States dollars.
Section 3.3 Additional Members. The Managing Board shall have
the right to admit additional members upon such terms and conditions, at such
time or times, and for such capital contributions and percentage interests as
shall be determined by the Managing Board.
ARTICLE FOUR
ALLOCATIONS
Section 4.1 Allocation of Profits and Losses. Except as
otherwise provided in this ARTICLE FOUR, Profits and Losses for any Allocation
Period shall be allocated to the Members as of the end of such Allocation Period
in proportion to their Membership Interests.
Section 4.2 Allocations upon Liquidating Dispositions.
Notwithstanding anything to the contrary in SECTION 4.1, Profits or Losses
resulting from the sale or other disposition of all or substantially all of the
assets of the Company shall be allocated so that immediately after such
allocation, each Member has a positive balance in its Capital Account equal to
the amount such Member would be entitled to receive pursuant to SECTION 5.2.
Section 4.3 Tax Credits. All tax credits of the Company for a
fiscal year shall be allocated to the Members in the same manner as Profits and
Losses are allocated.
-9-
ARTICLE FIVE
DISTRIBUTIONS
Section 5.1 Distribution Policy. Except as provided in SECTION
5.2, distributions of Net Cash Flow, securities or other property shall be made
by the Company to the Members at any time and from time to time as determined by
the Managing Board. The amount of any distribution of property shall be equal to
its Fair Market Value on the date of its distribution, as determined by the
Managing Board.
Section 5.2 Distributions on Dissolution. If the Company is
dissolved, distributions shall be made to the Members, after taking into account
all adjustments thereto for the Taxable Year(s) during which such dissolution
occurs, in accordance with SECTION 10.3.
ARTICLE SIX
MANAGEMENT AND CONTROL OF THE COMPANY
Section 6.1 Management of the Company by the Managing Board.
The Managing Board shall manage, operate and control the business and affairs of
the Company in accordance with this Agreement, and no power or authority to
manage, operate or control the Company is delegated to any other Person, without
specific instruction and authority of the Managing Board acting in such
capacity. The Managing Board shall have all such rights, powers and authorities
as are provided in the Delaware Act and as otherwise provided by law. The
Managing Board hereby agrees to cause the Company to take such actions (or omit
to take such actions) as shall be necessary or appropriate under this Agreement
or otherwise in furtherance of the terms and provisions of this Agreement or any
other matter relating to (i) the formation of this limited liability company and
(ii) the operation of the Company's business. Without limiting the generality of
the foregoing, the Managing Board shall also cause the Company to abide by the
terms of this Agreement.
(b) The Managing Board shall consist of three managers which
number shall be increased or decreased by the Managers from time to time. ACE
hereby designates the following individuals as the initial Board Members:
Xxxxxx X. Xxxxxxxx
Xxxx X. xxx Xxxxx, Xx.
Xxxxx X. Xxxxx
Section 6.2 Appointments of the Managing Board.
(a)Power to Appoint. The Managing Board may authorize
third parties to undertake certain of its authorities and responsibilities for
day-to-day operation of the business and affairs of the Company, but such
authorizations shall not relieve the Managing Board of any of its duties,
responsibilities and obligations hereunder to manage the business and affairs of
the Company. Pursuant to such authority, the Managing Board may appoint
individuals with such titles as it may desire, including as officers of the
Company the titles of chairperson, president,
-10-
one or more vice presidents, treasurer, assistant treasurer, controller,
secretary, assistant secretary and chief financial officer, to act on behalf of
the Company with such power and authority as specified herein. Any individual
may hold any number of offices. No officer need be a resident of the State of
Delaware or a citizen of the United States. The Managing Board members may serve
as officers of the Company if appointed by the Managing Board. The officers
shall exercise such powers and perform such duties as specified in this
Agreement and as shall be determined from time to time by the Managing Board.
(i) Chief Executive Officer. The Chief
Executive Officer shall have, subject to the supervision, direction and control
of the Managing Board, the general powers and duties of supervision, direction
and management of the affairs and business of the Corporation usually vested in
the chief executive officer of a corporation, including, without limitation, all
powers necessary to direct and control the organizational and reporting
relationships within the Corporation. If at any time the office of the Chairman
of the Board and the Vice Chairman of the Board shall not be filled, or in the
event of the temporary absence or disability of the Chairman of the Board and
the Vice Chairman of the Board, the Chief Executive Officer shall have the
powers and duties of the Chairman of the Board.
(ii) The President. The President shall
serve as chief operating officer and shall have such other powers and perform
such other duties as may be delegated to him or her from time to time by the
Managing Board or the Chief Executive Officer.
(iii) The Vice Presidents. Each Vice
President shall have such powers and perform such duties as may from time to
time be assigned to him or her by the Managing Board, the Chief Executive
Officer, or the President.
(iv) The Secretary and the Assistant
Secretary. (a) The Secretary shall attend meetings of the Managing Board and
meetings of the members and record all votes and minutes of all such proceedings
in a book kept for such purpose. He or she shall have all such further powers
and duties as generally are incident to the position of Secretary or as may from
time to time be assigned to him or her by the Managing Board, the Chief
Executive Officer, or the President.
Each Assistant Secretary shall have such
powers and perform such duties as may from time to time be assigned to him or
her by the Managing Board, the Chief Executive Officer, the President, or the
Secretary. In case of the absence or disability of the Secretary, the Assistant
Secretary designated by the Chief Executive Officer (or, in the absence of such
designation, by the Secretary) shall perform the duties and exercise the powers
of the Secretary.
(v) The Treasurer and the Assistant
Treasurer. (a) The Treasurer shall have custody of the Corporation's funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit or cause
to be deposited moneys or other valuable effects in the name and to the credit
of the Corporation in such depositories as may be
-11-
designated by the Managing Board. The Treasurer shall also maintain adequate
records of all assets, liabilities, and transactions of the Corporation and
shall see that adequate audits thereof are currently and regularly made. The
Treasurer shall have such other powers and perform such other duties that
generally are incident to the position of Treasurer or as may from time to time
be assigned to him or her by the Managing Board, the Chief Executive Officer, or
the President.
Each Assistant Treasurer shall have such powers and
perform such duties as may from time to time be assigned to him or her by the
Managing Board, the Chief Executive Officer, the President, or the Treasurer. In
case of the absence or disability of the Treasurer, the Assistant Treasurer
designated by the Chief Executive Officer (or, in the absence of such
designation, by the Treasurer) shall perform the duties and exercise the powers
of the Treasurer.
(vi) Controller. The Controller
shall be responsible for maintaining the accounting records and statements, and
shall properly account for all monies and obligations due the Corporation and
all properties, assets, and liabilities of the Corporation. The Controller shall
render to the Chairman of the Board or the President such periodic reports
covering the results of operations of the Corporation as may be required by
either of them or by law.
(b) Removal, Resignation and Filling of Vacancy of
Officers. Subject to the rights, if any, of an officer under a contract of
employment, any officer may be removed, either with or without cause, by the
Managing Board at any time. Any officer may resign at any time by giving written
notice to the Managing Board. Any resignation shall take effect at the date of
the receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Company under any contract to which the
officer is a party. A vacancy in any office position because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in this Agreement for regular appointments to that office.
(c) Salaries of Officers. The salaries, if any, of
all officers of the Company shall be fixed by resolution of the Managing Board.
Section 6.3 Reliance by the Managing Board. The Managing Board
shall, in the performance of its duties, be fully protected in relying in good
faith upon the records of the Company and upon information, opinions, reports or
statements presented to such Managing Board by any other Person as to matters
the Managing Board reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Company.
Section 6.4 Indemnification.
(a) General. To the fullest extent permitted under applicable
law, the
-12-
Company shall indemnify the Company's officers and the Managing Board (and the
respective officers, directors, employees, agents, members and shareholders of
each of the foregoing) (each of the foregoing, an "Indemnitee") in connection
with the management of the Company when the same shall be acting within the
scope of their authority conferred by the provisions of this Agreement or
pursuant to a duly authorized delegation of authority from the Managing Board;
provided that no such indemnification shall be available in respect of (i) any
loss or damage resulting solely from intentional misconduct, gross negligence or
a knowing violation of law by the party seeking indemnification or its Affiliate
or (ii) a transaction for which the Person seeking indemnity hereunder or its
Affiliate received a personal benefit in violation or breach of the provisions
of this Agreement. To the extent that an Indemnitee is successful on the merits
or otherwise in any Proceeding (as hereafter defined), such Indemnitee shall be
indemnified by the Company against all expenses actually and reasonably incurred
by such Indemnitee or on such Indemnitee's behalf in connection therewith. If an
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify such Indemnitee against
all expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. For purposes
of this Section 6.4(a) and without limitation, the termination of any claim,
issue or matter in such a Proceeding by dismissal or withdrawal with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter. For purposes of this Section 6.4(a), "Proceeding" includes any action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing and any other proceeding (including any appeals from any
of the foregoing) whether civil, criminal, administrative or investigative that
arise out of or otherwise relate to this Agreement and the terms hereof. The
Company shall advance all reasonable expenses incurred by or on behalf of an
Indemnitee in connection with any Proceeding within 20 days after the receipt by
the Company of a statement or statements from the Indemnitee requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the expenses incurred by the Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of any Indemnitee to
repay any expenses advanced if it shall ultimately be determined that such
Indemnitee is not entitled to be indemnified against such expenses. If the
Company fails to indemnify or advance an Indemnitee with 20 days after a written
claim is received by the Company, the Indemnitee has the right to bring a suit
against the Company to recover the unpaid amount, and if successful, shall be
entitled to recover expenses incurred in prosecuting the claim However, the
Company shall not be required to indemnify or advance expenses to any Indemnitee
seeking indemnification or advancement in connection with a proceeding initiated
by such Indemnitee against the Company unless the proceeding was authorized by
the Managing Board
(i) To the extent that, at law, or in equity, the
Managing Board members or any officer has duties (including fiduciary duties)
and liabilities relating thereto to the Company or the Members, such managing
Board Member or officer shall have no liability to the Company or any Member so
long as such Managing Board member or such officer has relied in good faith on
the terms and provisions of this Agreement. The terms and provisions of this
Agreement including, without limitation, this Section 6.4 constitute a
restriction on the duties and liabilities of the Managing Board members and
officers.
-13-
(ii) The Company may also provide indemnification and
advancement of expenses to employees and agents of the Company.
(b) Insurance. The Company shall have the power to purchase
and maintain insurance on behalf of any Person who is or was a member of the
Company or an officer, employee or other agent of the Company against any
liability asserted against such Person and incurred by such Person in any such
capacity, or arising out of such Person's status as member, officer, employee or
other agent of the Company, as the case may be, whether or not the Company would
have the power to indemnify such Person against such liability hereunder or
under applicable law.
ARTICLE SEVEN
ACTIONS BY MEMBERS
Section 7.1 Meetings. Meetings of the Managing Board, for any
purpose or purposes, may be called by any Member and shall be held at any
location within or without the State of Delaware as approved by all of the
Managing Board. Notice of any such meeting shall be given to each Board Member
at least 10 and no more than 60 days prior to the date thereof. Such notice
shall specify the date, time and place of such meeting and shall set for an
agenda of items to be discussed or acted upon at such meeting.
Section 7.2 Quorum for Meetings of the Managing Board. The
presence in person or by proxy of a majority of the Managing Board shall be
necessary to constitute a quorum for the transaction of business at a meeting of
the Managing Board. No action of the Managing Board shall be valid in the
absence of a quorum, except as provided in Section 7.3 hereof. Where a provision
of this Agreement provides for action to be taken only upon the consent of the
Managing Board, such action shall only be taken upon a unanimous vote.
Section 7.3 Consent of Absentees and Waiver of Notice. The
transactions of any meeting of the Managing Board shall be as valid as though
had at a meeting duly held after proper notice and with a quorum if, either
before or after the meeting, the Member not present in person or by proxy sings
a written waiver of notice or a consent to the holding of such meeting, or
approves the minutes thereof. All such waivers, consents or approvals shall be
filed with the books and records of the Company and made a part of the minutes
of the meeting. Attendance of a Member at any meeting of the Managing Board
shall constitute a waiver of notice of such meeting, except when a Member
attends for the express purpose of objecting to the transaction of any business
because such meeting has not been (or has not allegedly been) duly noticed.
Section 7.4 Written Action without a Meeting; Telephone
Meetings. Any action required or permitted to be taken at any meeting of the
Managing Board may be taken without a meeting, if consent in writing to such
action is provided by all Members of the Managing Board. Such written consent or
consents shall be filed with the minutes of the proceedings of the Managing
Board. Action by written consent shall have the same force and effect as a vote
of the Managing Board. Members may participate in any meeting of the Managing
Board by means of a conference telephone or similar communications equipment by
-14-
means of which all persons participating in the meeting can hear each other at
the same time and participation by such means shall constitute presence in
person at a meeting.
Section 7.5 Proxies. Each Member may appear and vote at any
meeting of the Managing Board, and may execute waivers of notice, consents, or
approvals, through the agency of one or more persons, provided such agents are
authorized to so act on behalf of the Member by the terms of a written proxy
which has been executed by such Member and delivered to the Chairman. The
Chairman shall cause such written proxies to be filed with the books and records
of the Company. If a written proxy authorizes an agent to appear and/or to vote
at any meeting of the Member, such written proxy must be delivered to the
Chairman.
ARTICLE EIGHT
TRANSFERABILITY OF MEMBERSHIP INTEREST AND ADMISSION OF MEMBER
Section 8.1 Assumption of Obligations. ACE may transfer all or
any part of its Membership Interest in the Company without restriction.
Section 8.2 Substitution of Member. ACE and each other Member
shall have the power to substitute for itself any Person as a Member, provided
that the Member cannot assign its rights and obligations under this Agreement to
participate in the management and the operation of the Company without a related
transfer of its Membership Interest. The provisions of this ARTICLE EIGHT shall
control all other provisions herein or otherwise regarding the transferability
of any and all membership interests in the Company. Notwithstanding the
foregoing, any valid transfer, additional contributions or other changes in the
Membership Interests in the Company pursuant to this ARTICLE EIGHT shall be
reflected in the Member's Capital Account.
ARTICLE NINE
MEMBER LIABILITY, ETC.
Section 9.1 Member Liability. The debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and
neither the Members, the Managing Board or any Officer shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a Member, a Manager or an Officer. This provision
notwithstanding, the Members may, by any other agreement or instrument, agree to
be obligated personally for any or all of the debts, obligations and liabilities
of the Company.
-15-
ARTICLE TEN
DURATION, TERMINATION AND DISSOLUTION
Section 10.1 Duration. The term of the Company commenced on
the date its Certificate of Formation was filed with the Secretary of State of
Delaware and shall continue until the filing of a Certificate of Cancellation
with the Secretary of State of Delaware as provided in SECTION 10.5.
Section 10.2 Events of Dissolution. The happening of any one
of the following events shall work dissolution of the Company:
(a) The bankruptcy, insolvency, termination,
dissolution, liquidation or other cessation, removal, withdrawal of, or
assignment for the benefit of creditors by the Managing Board shall dissolve the
Company, unless within 90 days thereafter, the Members shall elect to continue
the business of the Company;
(b) The agreement in writing by the Members; or
(c) The termination of the term of the Company
pursuant to SECTION 10.1;
Section 10.3 Distribution upon Liquidation. Upon dissolution of
the Company, unless the business of the Company is continued as provided above,
the Managing Board (or such Person as the Managing Board may designate as
liquidator (the "Liquidator")) shall act as liquidator of the Company. The
Liquidator shall wind up the affairs of the Company, shall sell such of the
assets of the Company as it deems it necessary or appropriate, and, after paying
all debts and liabilities of the Company, including all costs of dissolution,
shall distribute any remaining property of the Company along with any cash
received from the sale of the property as follows:
(a) The Liquidator may set up any reserve it deems
reasonably necessary for any contingent liabilities or obligations of the
company arising out of or in connection with the Company. Such reserve shall be
paid over by the Liquidator to a bank or trust company to act as escrow agent.
Any such escrow agent shall hold such reserves for payment of any of the
aforementioned contingencies, and, at the expiration of such period as the
Liquidator shall designate, distribute the balance thereafter remaining in the
manner hereinafter provided.
(b) Cash and all other assets of the company not sold
pursuant to this SECTION 10.3 shall be distributed among the Members in
accordance with SECTION 10.4. The Member shall continue to be allocated profits,
losses and other tax items during the period of such liquidation in the same
proportions as before dissolution. The Liquidator shall determine whether to
sell any Company property, and if so, whether at a public or private sale, for
what price, and on what terms. If the Liquidator determines to sell or otherwise
dispose of any property of the Company or any interest therein, the Liquidator
shall not be required to do so promptly but shall do so in an orderly and
commercially reasonable manner so as to avoid a distress sale. Notwithstanding
anything to the contrary in this ARTICLE TEN, the timing, manner
-16-
and conduct of any liquidation arising pursuant to this Agreement shall be
subject to SECTION 10.4.
Section 10.4 Capital Accounts upon Liquidation.
Notwithstanding anything to the contrary in this Agreement, upon Liquidation of
the Company, the proceeds of such Liquidation shall be distributed to the
Members by the end of such taxable year (or, if later, within 90 days after the
date of such Liquidation) in proportion to their relative Membership Interests,
except that the proceeds of such Liquidation shall not be required to be
distributed by the end of such taxable year (or, if later, within 90 days after
the date of such Liquidation) to the extent such proceeds constitute (i)
reserves reasonably required to provide for liabilities (contingent or
otherwise) of the Company or (ii) installment obligations owed to the Company,
so long as such withheld amounts are distributed as soon as practicable to the
Members.
Section 10.5 Certificate of Cancellation. When all debts,
liabilities and obligations of the Company have been paid and discharged or
adequate provisions have been made therefor and all of the remaining property
and assets of the Company have been distributed to the Members, a certificate of
cancellation shall be executed and filed with the Secretary of State of Delaware
in accordance with the Delaware Act.
ARTICLE ELEVEN
CERTAIN TAX MATTERS
Section 11.1 Preparation of Tax Return. The Company shall
arrange for the preparation and timely filing of all tax returns and reports
required to be filed by it. Authorities and principles applicable under relevant
state or local law shall be used in preparing state or local tax returns and
reports.
Section 11.2 Certain Tax Elections. The Managing Board intends
that the Company shall be disregarded as a separate entity for federal, state
and local income tax purposes pursuant to Treas. Reg. Section 301.7701-3(b).
ARTICLE TWELVE
MISCELLANEOUS
Section 12.1 Governing Law; Severability. This Agreement shall
be governed by and construed in accordance with the internal laws (and not the
law of conflicts) of the State of Delaware and, to the maximum extent possible,
in such manner as to comply with all the provisions of the Delaware Act. If it
is determined by a court of competent jurisdiction that any provision of this
Agreement is invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
Section 12.2 Notices. All notices and other communications
required or permitted
-17-
hereunder or under any of documents relating hereto shall be in writing
(including telex, telecopy or telegraphic communication) and shall be delivered
personally, telexed (with appropriate answer back received), telecopied (with
confirmation of receipt immediately thereafter by telephone), telegraphed, sent
by nationally recognized overnight courier (marked for overnight delivery), or
sent by registered, certified or express mail, postage prepaid, return receipt
requested, addressed, in the case of Atlantic City Electric Transition Funding
LLC, to the address set forth in the preamble of this Agreement (or, in the case
of the Company, to its principal place of business) or to such other address as
may be hereafter designated in writing hereunder by the respective parties.
All such notices and communications shall (i) when delivered
in person on any business day between the hours of 9:00 AM to 5:00 PM. Eastern
time, be effective when delivered (or if delivered after 5:00 PM, be effective
on the next business day to occur), (ii) when telexed (provided the correct
answer back has been received) or telecopied (provided receipt is immediately
thereafter confirmed by telephone) or telegraphed, in each case on any business
day between the hours of 9:00 AM to 5:00 PM Eastern time, be effective when
telexed, telecopied or delivered to the telegraph company for immediate
transmittal, respectively (or if telexed, telecopied or delivered to the
telegraph company after 5:00 PM, be effective on the next business day to
occur), (iii) if mailed, be effective three business days after the same has
been deposited in the mails, postage prepaid, by registered or certified mail,
return receipt requested, or (iv) if sent by a nationally recognized overnight
courier service, be effective one business day after the same has been delivered
to such courier service marked for overnight delivery; in each case addressed as
aforesaid.
Section 12.3 Title to Company Assets. All Company Assets shall
be deemed to be owned by the Company as an entity, and the Members shall have no
interest therein. The Members hereby irrevocably waive any and all rights that
they may have to maintain an action for partition of any of the Company Assets.
Legal title to any or all of the Company Assets may be held in the name of the
Company or one or more nominees, as the Managing Board shall determine. All
Company Assets shall be recorded as owned by the Company on the Company's books
and records, irrespective of the name in which legal title to such assets is
held.
Section 12.4 Waiver. No failure by the Members or the Managing
Board to insist upon the strict performance of any covenant, duty, agreement or
condition of this Agreement, or to exercise any right or remedy consequent upon
a breach thereof, shall constitute a waiver of any such breach or any other
covenant, duty, agreement or condition hereof.
Section 12.5 Further Action. The Members shall execute and
deliver all documents, provide all information and take or refrain from taking
all other action as may be necessary, proper or desirable in furtherance of the
purposes of the Company.
Section 12.6 Beneficiaries. This Agreement shall only inure to
the benefit of, and may only be enforced by, the Members and shall not, in any
event, inure to the benefit of, or be enforceable by, any other Person
whatsoever.
Section 12.7 Changes in Writing. No modification, variation or
amendment of this
-18-
Agreement, no determination, evaluation, approval, waiver or other action
permitted or taken hereunder and no further agreement contemplated hereby shall
be of any force unless the same is in writing and has been signed by the
Members.
-19-
IN WITNESS WHEREOF, the Member has caused its duly authorized
officer to set his hand effective as of the date first above written.
ATLANTIC CITY ELECTRIC COMPANY
a New Jersey corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: President
Attest:
By: /s/ Xxxx X. Xxxxxxxx
--------------------
Name: Xxxx X. Xxxxxxxx
Title: Assistant Secretary
-20-
