Exhibit 10.BB.1
FIFTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CHAPARRAL INVESTORS, L.L.C.
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TABLE OF CONTENTS
PAGE
ARTICLE I FORMATION AND CONTINUATION OF CHAPARRAL............................................. 2
Section 1.1 Formation and Continuation of Chaparral........................................ 2
Section 1.2 Name........................................................................... 2
Section 1.3 Business of Chaparral.......................................................... 3
Section 1.4 Location of Principal Place of Business; Registered Office..................... 3
Section 1.5 Filings; Registered Agent...................................................... 3
Section 1.6 Term........................................................................... 4
Section 1.7 Title to Chaparral Property.................................................... 4
Section 1.8 Payments of Individual Obligations............................................. 4
ARTICLE II DEFINITIONS......................................................................... 5
Section 2.1 Definitions.................................................................... 5
Section 2.2 Rules of Construction.......................................................... 5
ARTICLE III INTERESTS; MEMBERS; CAPITAL CONTRIBUTIONS; ADDITIONAL AGREEMENTS.................... 5
Section 3.1 Interests...................................................................... 5
Section 3.2 Class A Member and Class B Members............................................. 5
Section 3.3 Additional Capital Contributions............................................... 6
Section 3.4 Additional Agreements Among Members............................................ 8
ARTICLE IV ALLOCATION OF NET INCOME AND NET LOSS............................................... 10
Section 4.1 Allocation of Net Income and Net Loss.......................................... 10
Section 4.2 Allocations During and After Earn-Out Period................................... 11
Section 4.3 Allocations Following Xxxx-to-Market........................................... 12
Section 4.4 Special Tax Allocations........................................................ 12
Section 4.5 Curative Allocations........................................................... 14
Section 4.6 Loss Limitation................................................................ 15
Section 4.7 Other Allocation Rules......................................................... 15
Section 4.8 Tax Allocations; Code Section 704(c)........................................... 15
Section 4.9 Order of Allocations........................................................... 16
ARTICLE V DISTRIBUTIONS; WITHDRAWALS.......................................................... 17
Section 5.1 Distributions.................................................................. 17
Section 5.2 More than One Class A Member or Class B Member................................. 19
Section 5.3 Amounts Withheld............................................................... 19
Section 5.4 Payments from the Overfund Trust............................................... 19
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Section 5.5 Deemed Distributions to Class A Member......................................... 19
Section 5.6 Notice of Certain Distributions................................................ 20
ARTICLE VI MANAGEMENT.......................................................................... 21
Section 6.1 Management of Chaparral........................................................ 21
Section 6.2 Right to Rely on the Managing Member........................................... 23
Section 6.3 Decisions Requiring Unanimous Member Consent................................... 23
Section 6.4 Consents of the Class A Member................................................. 28
Section 6.5 Duties and Obligations of the Managing Member.................................. 28
Section 6.6 Compensation and Expenses...................................................... 32
Section 6.7 Demand on El Paso Loans Held by Mesquite or Mesquite's Subsidiaries............ 32
Section 6.8 Execution of other Transaction Documents; Matters Relating to Mesquite
and the Overfund Trust......................................................... 32
Section 6.9 Determination of Interest Rate on El Paso Loans................................ 33
Section 6.10 Additional Financing Costs; New Administrative Expenses........................ 33
Section 6.11 Certain Assets................................................................. 34
Section 6.12 Covenant of the Managing Member................................................ 34
ARTICLE VII ROLE OF NON-MANAGING MEMBERS........................................................ 34
Section 7.1 Rights or Powers............................................................... 34
Section 7.2 Voting Rights.................................................................. 35
Section 7.3 Procedure for Consent.......................................................... 35
Section 7.4 Special Rights of the Class A Member........................................... 35
ARTICLE VIII ACCOUNTING; BOOKS AND RECORDS....................................................... 35
Section 8.1 Accounting; Books and Records.................................................. 35
Section 8.2 Reports........................................................................ 36
Section 8.3 Tax Matters.................................................................... 39
Section 8.4 Proprietary Information........................................................ 40
ARTICLE IX AMENDMENTS; MEETINGS................................................................ 40
Section 9.1 Amendments..................................................................... 40
Section 9.2 Meetings of the Members........................................................ 40
Section 9.3 Unanimous Consent.............................................................. 41
ARTICLE X TRANSFERS OF INTERESTS.............................................................. 41
Section 10.1 Restriction on Dispositions of Interests....................................... 41
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Section 10.2 Prohibited Dispositions........................................................ 42
ARTICLE XI RETIREMENT OPTION; PURCHASE OPTION; EARN-OUT PERIOD................................. 42
Section 11.1 Class B Member's Retirement Option............................................. 42
Section 11.2 Class B Member's Purchase Option............................................... 44
Section 11.3 Asset Remedy................................................................... 46
Section 11.4 Earn-Out Period................................................................ 48
ARTICLE XII DISSOLUTION AND WINDING UP.......................................................... 49
Section 12.1 Liquidating Events............................................................. 49
Section 12.2 Winding Up..................................................................... 49
Section 12.3 No Restoration of Deficit Capital Accounts; Compliance With Timing
Requirements of Regulations.................................................... 50
Section 12.4 Deemed Distribution and Recontribution......................................... 51
Section 12.5 Rights of Members.............................................................. 51
Section 12.6 Notice of Dissolution.......................................................... 52
Section 12.7 Character of Liquidating Distributions......................................... 52
Section 12.8 The Liquidator................................................................. 52
Section 12.9 Form of Liquidating Distributions.............................................. 52
Section 12.10 Liquidation Notice............................................................. 53
ARTICLE XIII MISCELLANEOUS....................................................................... 54
Section 13.1 Amendments..................................................................... 54
Section 13.2 Notices........................................................................ 54
Section 13.3 No Waiver; Cumulative Remedies................................................. 54
Section 13.4 Waiver of Jury Trial........................................................... 54
Section 13.5 Counterparts................................................................... 55
Section 13.6 Survival of Representations, Warranties and Indemnities: Entire Agreement...... 55
Section 13.7 Severability................................................................... 55
Section 13.8 Construction................................................................... 55
Section 13.9 Determination of Capital Accounts.............................................. 55
Section 13.10 Governing Law.................................................................. 55
Section 13.11 Waiver of Action for Partition................................................. 56
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Section 13.12 Consent to Jurisdiction........................................................ 56
Section 13.13 Specific Performance........................................................... 56
Section 13.14 Limitation of Liability........................................................ 56
Section 13.15 Consent to Collateral Assignment by Class A Member; Rights of Action........... 56
Section 13.16 Effectiveness.................................................................. 57
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ANNEX
Annex A: Definitions
SCHEDULES
Schedule 3.2(a) Members and Capital Accounts
Schedule 3.2(b) Existing Assets and Specified New Assets
Schedule 6.3(f) Budget Parameters
Schedule 13.2 Notice Information
EXHIBITS
Exhibit A: Form of Membership Interest
Exhibit B: Form of El Paso Note
Exhibit C: Form of Contingent Debt Instrument
Exhibit D: Form of Confidentiality Agreement
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FIFTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CHAPARRAL INVESTORS, L.L.C.
FIFTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"CHAPARRAL LLC AGREEMENT") of Chaparral Investors, L.L.C. ("CHAPARRAL"), dated
as of April 12, 2002, among Chaparral, El Paso Chaparral Investor, L.L.C., a
Delaware limited liability company ("EL PASO CHAPARRAL"), El Paso Chaparral
Holding II Company, a Delaware corporation ("EL PASO CHAPARRAL HOLDING II") and
Limestone Electron Trust, a Delaware business trust ("LIMESTONE").
PRELIMINARY STATEMENTS
Chaparral was formed as a limited liability company under and pursuant to
the provisions of the LLC Act (as hereinafter defined), with El Paso Chaparral
as the initial member of Chaparral, pursuant to the filing of the Chaparral
Certificate of Formation on July 28, 1999, and the execution of the Limited
Liability Company Agreement of Chaparral Investors, L.L.C. dated as of July 28,
1999 (the "ORIGINAL LLC AGREEMENT"). On August 12, 1999, El Paso Chaparral and
Chaparral entered into the First Amended and Restated Limited Liability Company
Agreement (the "FIRST AMENDED AND RESTATED LLC AGREEMENT") amending, restating
and superseding the Original LLC Agreement. On August 12, 1999, El Paso
Chaparral and Limestone Investors, L.L.C., a Delaware limited liability company
("LIMESTONE INVESTORS") entered into that certain Purchase Agreement (the
"LIMESTONE INVESTORS PURCHASE AGREEMENT") pursuant to which Limestone Investors
agreed to purchase El Paso Chaparral's Class A Member Interest subject to the
execution of the Second Amended and Restated Limited Liability Company Agreement
of Chaparral dated August 19, 1999 (the "SECOND AMENDED AND RESTATED LLC
AGREEMENT"). Simultaneously with the execution of the Second Amended and
Restated LLC Agreement and the consummation of the transactions contemplated by
the Limestone Investors Purchase Agreement, Limestone Investors was admitted to
Chaparral as a Class A Member of Chaparral, and El Paso Chaparral withdrew as a
Class A Member of Chaparral. On September 28, 1999, Chaparral, El Paso Chaparral
and Limestone Investors entered into the First Amendment to the Second Amended
and Restated LLC Agreement. On December 22, 1999, Chaparral, El Paso Chaparral,
Limestone Investors and El Paso Chaparral Holding II entered into a Second
Amendment to the Second Amended and Restated LLC Agreement, pursuant to which El
Paso Chaparral Holding II was admitted to Chaparral as a Class B Member.
Pursuant to an Assignment and Assumption Agreement dated as of December 28, 1999
(the "ASSIGNMENT AND ASSUMPTION AGREEMENT"), and in accordance with the timing
set forth in the Third Amended and Restated Limited Liability Company Agreement
of Chaparral dated as of December 28, 1999 (the "THIRD AMENDED AND RESTATED LLC
AGREEMENT"), Limestone acquired from Limestone Investors all of Limestone
Investors' right, title and interest in its Class A Member Interest and assumed
the debt of Limestone Investors specified therein, subject to the execution of
the Third Amended and Restated LLC Agreement. Simultaneously with the execution
of the Third Amended and Restated LLC Agreement, (i) Limestone was admitted to
Chaparral as the sole
Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
Class A Member of Chaparral and (ii) Limestone Investors withdrew as a Class A
Member of Chaparral. Simultaneously with the execution of the Fourth Amended and
Restated Limited Liability Company Agreement of Chaparral dated as of March 27,
2000, (the "FOURTH AMENDED AND RESTATED LLC AGREEMENT"), (i) Limestone made an
additional capital contribution in the amount of $1,027,250,000 to Chaparral to
increase its Capital Account attributable to its Class A Member Interest, (ii)
pursuant to a demand by Chaparral, El Paso repaid $61,600,509.17 of principal
and $1,200,716.02 of accrued interest on the Existing El Paso Demand Note
leaving an unpaid principal balance of $11,149,490.83 on the Existing El Paso
Demand Note and El Paso amended and restated such Existing El Paso Demand Note
and delivered such amended and restated note (the "AMENDED EL PASO/CHAPARRAL
NOTE") to Chaparral, and (iii) Chaparral (a) made a demand on the Existing El
Paso Demand Note as described in the preceding clause (ii), (b) paid to
Limestone an amount equal to $1,200,716.02, representing all priority return
accrued on the Class A Member Interest through March 27, 2000, (c) paid certain
fees and expenses in connection with the offering and sale of the Initial Notes
and the Subsequent Certificates in accordance with the Participation Agreement
and the Note Purchase Agreement in an aggregate amount of approximately
$14,177,430.00, (d) contributed approximately $796,013,202.43 of cash to
Mesquite thereby increasing the value of its investment represented by the
Mesquite LLC Interest, (e) upon receipt of the Amended El Paso/Chaparral Note,
returned the Existing El Paso Demand Note to El Paso for cancellation and (f)
contributed the Overfund Amount to El Paso Electron Overfund Trust, a Delaware
statutory business trust (the "OVERFUND TRUST"), in further consideration for
the sole beneficial ownership interest in the Overfund Trust.
The parties hereto have agreed to enter into this Chaparral LLC Agreement
to further amend and restate the Fourth Amended and Restated LLC Agreement
effective on and as of the Effective Date in accordance with Section 13.16.
ARTICLE I
FORMATION AND CONTINUATION OF CHAPARRAL
Section 1.1 Formation and Continuation of Chaparral. Chaparral was formed
as a limited liability company under the LLC Act by the filing of the Chaparral
Certificate of Formation (as defined below) on July 28, 1999, with the Office of
the Secretary of State. The parties hereto agree to continue Chaparral as a
limited liability company. The Members agree that the Fourth Amended and
Restated LLC Agreement is hereby further amended and restated in its entirety as
set forth in, and is hereby superseded in its entirety by, this Chaparral LLC
Agreement effective as of the Effective Date.
Section 1.2 Name. The name of Chaparral shall continue to be "Chaparral
Investors, L.L.C.", and all business of Chaparral shall continue to be conducted
in such name or, in the discretion of the Managing Member, under any other name;
provided, however, that (a) in no event shall the name of Chaparral include (i)
the name of the Class A Member, (ii) to the extent that the Managing Member
shall have actual knowledge thereof, the name of any Affiliate of the Class A
Member, (iii) the name of any Certificateholder or, to the extent that the
Managing Member shall have actual knowledge thereof, the name of any
Certificateholder Related Person,
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
or (iv) any abbreviation of any name described in clause (i), (ii) or (iii), and
(b) the Managing Member may change the name of Chaparral only upon executing and
filing an amendment to the Chaparral Certificate of Formation.
Section 1.3 Business of Chaparral. The purposes of Chaparral are limited
to (i) engaging in the business of owning investments in Chaparral Permitted
Assets, managing, protecting and conserving such investments in Chaparral
Permitted Assets, and making additional investments in Chaparral Permitted
Assets, (ii) entering into, and performing its obligations under and
consummating the transactions contemplated by, the Chaparral Documents, (iii)
holding the sole beneficial interest in the Overfund Trust, (iv) engaging in
such additional business endeavors as are permitted under this Chaparral LLC
Agreement and (v) engaging in activities related or incidental to the foregoing.
Chaparral, and the Managing Member on behalf of Chaparral, may enter into and
perform the Chaparral Documents and, subject to Sections 6.3 and 7.4, all
documents, agreements, certificates and financing statements contemplated
thereby or related thereto, all without further act, vote or approval of any
Person. The authorization set forth in the preceding sentence shall not be
deemed a restriction on the power and authority of the Managing Member to enter
into other agreements or documents on behalf of Chaparral in accordance with the
terms of this Chaparral LLC Agreement and the other Chaparral Documents, and the
Managing Member is hereby directed by the Members to enter into on behalf of
Chaparral, the Chaparral Documents to which Chaparral is or is to be a party and
which have not been previously entered into by or on behalf of Chaparral.
Chaparral shall have the power to do any and all acts necessary, appropriate,
proper, advisable, incidental or convenient to or in furtherance of the purposes
of Chaparral set forth in this Section 1.3 and shall have, without limitation,
any and all powers that may be exercised on behalf of Chaparral by the Managing
Member pursuant to Article VI.
Section 1.4 Location of Principal Place of Business; Registered Office.
The principal place of business of Chaparral shall be at c/o Wilmington Trust
Company, Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000-0000, Attention: Corporate Trust Administration. The registered office of
Chaparral in the State of Delaware is located at c/o Wilmington Trust Company,
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000.
Section 1.5 Filings; Registered Agent.
(a) Filings. The Managing Member shall take any and all other actions
necessary to perfect and maintain the status of Chaparral as a limited liability
company under the laws of the State of Delaware, including the preparation,
execution and filing of amendments to the Chaparral Certificate of Formation and
such other certificates, documents and instruments as may be required by law. In
addition, the Managing Member in its sole discretion may register or qualify
Chaparral as a limited liability company in any other jurisdiction in the United
States, including each other jurisdiction in which registration or qualification
is necessary or appropriate because the properties or activities of Chaparral
are located in that jurisdiction; provided, however, that (i) the Managing
Member shall notify the Class A Member if, following reasonable investigation,
the Managing Member knows or reasonably should know that, solely as a result of
Chaparral doing business in any other such jurisdiction, the Class A Member or
any Certificateholder Related Person would be required under the laws of such
jurisdiction to qualify
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
to do business in such jurisdiction and (ii) Chaparral shall not conduct
business in any jurisdiction other than the State of Delaware wherein the
conduct by Chaparral of business in such jurisdiction would reasonably be
expected to subject the Class A Member or any Certificateholder Related Person
to any penalty, liability or cost except to the extent that (x) such penalty,
liability or cost results from the activities of the Class A Member or any
Certificateholder Related Person in such jurisdiction (other than those
activities in connection with the transactions contemplated hereby) or (y) the
Class A Member or any Certificateholder Related Person is indemnified (or would
have been indemnified if it had complied with the provisions of the Transaction
Documents applicable to it) for such penalty, liability or cost under Section
3.4(f) or under any other provision under this Chaparral LLC Agreement or any
other Transaction Document and such penalty, liability or cost is not a criminal
penalty or liability.
(b) Delivery of Certificates, etc. in Connection With Qualification of
Chaparral. At the request of the Managing Member, each Member shall execute,
acknowledge, swear to and deliver all certificates and other instruments
conforming with this Chaparral LLC Agreement that are necessary or appropriate
to form, qualify, continue and terminate Chaparral as a limited liability
company under the laws of the State of Delaware and to qualify, continue and
terminate Chaparral as a foreign limited liability company in all other
jurisdictions in which Chaparral may so qualify, all to the extent contemplated
and required by this Chaparral LLC Agreement.
(c) Registered Agent. The registered agent for service of process on
Chaparral in the State of Delaware shall be Wilmington Trust Company, 0000 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000 or any successor as
appointed by the Managing Member in accordance with the LLC Act.
(d) Dissolution. Upon the dissolution and completion of the winding up and
liquidation of Chaparral, the Liquidator, as an authorized person within the
meaning of the LLC Act, shall promptly execute and cause to be filed statements
of intent to dissolve and certificates of cancellation in accordance with the
LLC Act and the laws of any other states or jurisdictions in which the
Liquidator deems such filing necessary or advisable.
Section 1.6 Term. The term of Chaparral commenced on the date the
certificate of formation described in Section 18-201 of the LLC Act (as amended
from time to time, the "CHAPARRAL CERTIFICATE OF FORMATION") was filed in the
office of the Secretary of State of the State of Delaware in accordance with the
LLC Act and shall continue until the winding up and liquidation of Chaparral and
the completion of its business following a Liquidating Event as provided in
Article XII.
Section 1.7 Title to Chaparral Property. All Chaparral Property shall be
owned by Chaparral as an entity, and no Member shall have any ownership interest
in such property in its individual name or right. Each Member's interest in
Chaparral shall be personal property for all purposes. Chaparral shall hold all
of its property in the name of Chaparral and not in the name of any Member.
Section 1.8 Payments of Individual Obligations. Chaparral's credit and
assets shall be used solely for the benefit of Chaparral, and no asset of
Chaparral shall be transferred or encumbered for or in payment of any individual
obligation of any Member.
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
ARTICLE II
DEFINITIONS
Section 2.1 Definitions. Unless otherwise defined herein or the context
otherwise requires, capitalized terms used in this Chaparral LLC Agreement
(including the Preliminary Statements and the Schedules and Exhibits hereto)
shall have the meanings set forth in Section 1.01 of Annex A hereto.
Section 2.2 Rules of Construction. This Chaparral LLC Agreement and the
definitions referred to in Section 2.1 shall be governed by, and construed in
accordance with, the rules of construction set forth in Section 1.02 of Annex A
hereto.
ARTICLE III
INTERESTS; MEMBERS; CAPITAL CONTRIBUTIONS; ADDITIONAL AGREEMENTS
Section 3.1 Interests. There shall be two classes of Interests: a Class A
Member Interest and a Class B Member Interest. Certificates in the form attached
as Exhibit A hereto (each, a "CERTIFICATE OF INTEREST") shall be issued to each
Class A Member and Class B Member to evidence their respective Interests herein.
Each of the parties hereto hereby acknowledges and agrees that the Interests
shall constitute "securities" governed by Article 8 of the Uniform Commercial
Code as in effect in any applicable jurisdiction. The holder of the Class A
Member Interest shall have all of the rights and obligations provided to the
Class A Member under this Chaparral LLC Agreement, and the holders of the Class
B Member Interests shall have all of the rights and obligations provided to the
Class B Members under this Chaparral LLC Agreement; provided, that if any
Additional Class B Member Interest is held by the Class A Member, the Class A
Member shall not with respect to such Additional Class B Member Interest, except
as specifically provided herein, be subject to or bound by any terms of this
Chaparral LLC Agreement which are applicable to a Class B Member.
Section 3.2 Class A Member and Class B Members.
(a) Class A Member. On and as of the Closing Date, Limestone, as Class A
Member, made a Capital Contribution to Chaparral in Cash in the amount of
$1,027,250,000. On and as of the Closing Date and after giving effect to the
Capital Contribution referred to in the preceding sentence, the Distribution to
the Class A Member described in the first sentence of Section 5.1(a) and the
other transactions described in the Preliminary Statements hereto, but without
giving effect to any allocations of Net Income and Net Losses or any items of
Chaparral income, gain, loss or deduction for the period commencing on January
1, 2000 and ending on the Closing Date, the name and address of the Class A
Member and the Capital Account balance of the Class A Member was reflected in
the books and records of Chaparral as set forth in Schedule 3.2(a) hereto, and
the Managing Member executed on behalf of Chaparral a Certificate of Interest in
the name of the Class A Member representing its Class A Member Interest.
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
(b) Class B Members. (i) Prior to the Closing Date, the Primary Class B
Member made a Capital Contribution to Chaparral of the Existing Assets
identified as contributions on Schedule 3.2(b) hereto and Chaparral contributed
all of the Existing Assets to Mesquite. The names and addresses of the Class B
Members and the respective approximate Capital Account balances of the Class B
Members on and as of the Closing Date and after giving effect to the
transactions referred to in the Preliminary Statements hereto, but without
giving effect to any allocation of Net Income and Net Losses or any items of
Chaparral income, gain, loss or deduction for the period commencing on January
1, 2000 and ending on the Closing Date, was reflected in the books and records
of Chaparral as set forth in Schedule 3.2(a) hereto, and the Managing Member
executed on behalf of Chaparral a Certificate of Interest in the name of each
Class B Member representing its Class B Member Interest.
(ii) Each Class B Member (including the Class A Member as holder of
any Additional Class B Member Interest) other than the Primary Class B Member
hereby designates and appoints the Primary Class B Member as its
attorney-in-fact, in its name and stead, to give or withhold all consents and
approvals that such Class B Member shall be entitled to give or withhold, and to
exercise all other voting rights and other rights, and take all other actions,
that such Class B Member is entitled to exercise or take, pursuant to the
provisions of this Chaparral LLC Agreement (including, without limitation,
Section 7.3 and Article IX), until such time as such designation and appointment
is revoked in writing by notice to all other Members, and this Section
3.2(b)(ii) shall be, to the extent required by the LLC Act to give it effect,
construed as a proxy in favor of the Primary Class B Member.
(iii) Upon the contribution (or deemed contribution) by the holder
of the El Paso Interest of any amount pursuant to Section 3.03 of the Limestone
Trust Agreement, Chaparral shall issue to the Class A Member a Class B Member
Interest (an "ADDITIONAL CLASS B MEMBER INTEREST"), together with a Certificate
of Interest executed by the Managing Member evidencing such Interest, whereupon
the Class A Member shall be admitted to Chaparral as an additional Class B
Member in respect of the Additional Class B Member Interest. Upon the issuance
of such Additional Class B Member Interest and upon any subsequent deemed
Distribution under Section 5.5(b), as applicable, the Capital Account in respect
of such Additional Class B Member Interest shall be credited in an amount equal
to the contribution (or deemed contribution) made by the holder of the El Paso
Interest pursuant to Section 3.03 of the Limestone Trust Agreement.
(c) Separate Capital Accounts for Class A Member Interest and Class B
Member Interests. If an Additional Class B Member Interest is issued to the
Class A Member pursuant to Section 3.2(b)(iii), the Class A Member's Capital
Account shall be maintained separately for each of its Class A Member Interest
and Additional Class B Member Interest, which shall each be adjusted in
accordance with Article IV, and allocations and Distributions to the Class A
Member shall be deemed to be with respect to its Class A Member Interest and
allocations and Distributions to the Class B Members shall be deemed to be made
with respect to their Class B Member Interests.
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
Section 3.3 Additional Capital Contributions.
(a) Capital Contributions by Class B Members. The Class B Members shall be
permitted to make the following additional Capital Contributions to Chaparral
("ADDITIONAL CAPITAL CONTRIBUTIONS"):
(i) Capital Contributions of Chaparral Permitted Assets. The
Primary Class B Member may contribute from time to time
additional Financial Investments and, subject to Sections
6.3(b) and 6.3(c), additional Chaparral Permitted Assets.
(ii) Capital Contributions with Respect to Additional Financing
Costs. If Chaparral is required to make any payment of
Additional Financing Costs to the Class A Member, the Primary
Class B Member shall make a Capital Contribution to Chaparral,
in Cash, in an aggregate amount equal to the aggregate amount
of such Additional Financing Costs required to be paid. Such
Capital Contributions shall be made to Chaparral within a
sufficient time to provide Chaparral with sufficient funds to
enable Chaparral to make any payment under Section 6.10 when
due.
(iii) Certain Payments Deemed Capital Contributions. (A) With
respect to (x) the proceeds of any remarketing of the Shares
received by the Indenture Trustee or Limestone, (y) any
payments required to be made by El Paso in connection with a
Failed Remarketing, and (z) any Redemption Proceeds received
by the Indenture Trustee or Limestone in each case, pursuant
to the Remarketing Agreement and Share Trust Agreement, the
Primary Class B Member shall be deemed to have made, on the
date any such amounts are distributed to Limestone or by the
Indenture Trustee to the holders of the Limestone Notes, a
Capital Contribution to Chaparral in the amount of such
proceeds and payments, and the Primary Class B Member's
Capital Account shall be increased by the amount of such
deemed Capital Contribution.
(B) With respect to any contribution to the Overfund Trust
required to be made by El Paso pursuant to Section 3.02(b) of
the Overfund Trust Agreement, the Primary Class B Member shall
be deemed to have made, on the date any such amounts are
distributed by the Indenture Trustee to the holders of the
Limestone Notes, a Capital Contribution to Chaparral in the
amount of such contribution and the Primary Class B Member's
Capital Account shall be increased by the amount of such
deemed Capital Contribution.
(C) With respect to any New Notes Liquidity Payments or any
payment made by the Guarantor pursuant to Section 3.01 of the
New Indenture, the Primary Class B Member shall be deemed to
have made, on the date such amounts are distributed by the New
Indenture Trustee to, or are otherwise received by, the New
Noteholders, a Capital Contribution to
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Fifth Amended and Restated Chaparral LLC Agreement
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Chaparral in the amount so distributed or otherwise received,
and the Primary Class B Member's Capital Account shall be
increased by the amount of such deemed Capital Contribution.
(b) Capital Contributions by Class A Member. Except as provided in Section
3.2(a) and Section 5.4, the Class A Member shall make no additional Capital
Contributions to Chaparral without the prior written consent of all of the
Members.
Section 3.4 Additional Agreements Among Members.
(a) Return of Capital Contributions. Except as otherwise provided in
Article V, Section 11.1, Article XII or in the LLC Act, no Member shall be
entitled to demand or receive a return of its Capital Contributions or withdraw
its capital from Chaparral without the consent of all Members. Under
circumstances requiring a return of any Capital Contributions, no Member shall
have the right to receive property other than Cash except as specifically
provided in this Chaparral LLC Agreement.
(b) No Interest or Draw. No Member shall receive any interest or draw with
respect to its Capital Contributions or its Capital Account, except as otherwise
provided in this Chaparral LLC Agreement.
(c) Obligations of Chaparral. No Member (including the Managing Member)
shall be liable for the debts, liabilities, contracts or any other Obligations
of Chaparral. Except as otherwise provided by mandatory provisions of applicable
state law or the provisions of this Article III and except for the obligation of
the Primary Class B Member under Section 3.3(a)(ii), a Member shall not be
required to lend any funds to Chaparral or to make any additional Capital
Contributions to Chaparral. No Member shall have personal liability for the
repayment of any Capital Contributions of the other Members.
(d) Other Investments. Subject to Section 3.4(e) and subject, in the case
of the Managing Member, to Sections 6.5(d) and 6.5(e), each Member acknowledges
that the other Members and their Affiliates are free to engage or invest in an
unlimited number of activities or businesses, any one or more of which may be
related to the activities or businesses of Chaparral, without having or
incurring any obligation to offer any interest in such activities or businesses
to Chaparral or any Member, and neither this Chaparral LLC Agreement nor any
activity undertaken pursuant to this Chaparral LLC Agreement shall prevent any
Member or its Affiliates from engaging in such activities, or require any Member
to permit Chaparral or any Member or its Affiliates to participate in any such
activities, and as a material part of the consideration for the execution of
this Chaparral LLC Agreement by each Member, each Member hereby waives,
relinquishes, and renounces any such right or claim of participation. Each
Member acknowledges that certain conflicts of interest may thus arise and hereby
agrees that the specific rights with respect to the Members' and their
Affiliates' freedom of action provided in this Section 3.4(d), together with the
other provisions of this Chaparral LLC Agreement, are sufficient to protect
their respective interests in relation to such possible conflicts and are to be
in lieu of all other possible limitations which might otherwise be implied in
fact, in law or in equity.
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(e) Future Acquisitions of Non-Utility Generation Assets. Each Class B
Member agrees that (x) so long as no Irrevocable Election and Purchase Option
Notice or Retirement Option Notice shall have been delivered and no Liquidation
Notice shall have been delivered and (y) except during any Replacement Period,
none of the Class B Members, El Paso or any controlled Affiliate of El Paso,
will acquire subsequent to January 1, 2000 any existing Non-Utility Generation
Assets unless the Primary Class B Member, subject to the proviso below and the
last sentence hereof, shall have first used its best, good faith efforts to
cause Chaparral to cause Mesquite to acquire such assets directly or indirectly
through Mesquite's Subsidiaries (subject to the consent rights of the Class A
Member under Section 6.3(b)); provided, that (i) the acquisition of such
Non-Utility Generation Assets is reasonably expected to be accomplished by
Mesquite without requiring any financing, capital contribution, indemnification,
guaranty or other current, future or contingent investment by any Class B Member
or El Paso or any other El Paso Affiliate (other than Mesquite) and (ii) debt
consents, FERC approvals and Governmental Approvals in connection with the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and other
third party approvals and filings (including without limitation those required
for the acquisition of such Non-Utility Generation Assets by Mesquite and/or its
subsidiaries) can be obtained or made on a commercially reasonable basis and
within a time frame that will not adversely affect the successful, timely
negotiation or consummation of the proposed acquisition and (iii) the Managing
Member, in its reasonable judgment, expects that (A) Mesquite or any other
applicable Project Company will be able to finance such acquisition through the
use of Available Cash of Mesquite and/or Mesquite Permitted Financial
Obligations having commercially reasonable terms and such terms would not cause
a reduction in the Management Fees that El Paso or its affiliates would have
otherwise been able to actually receive on a pro forma basis if such financing
had not occurred and (B) the financing described in clause (A) can be committed
for, arranged and consummated within the time periods necessary to make a
timely, effective and competitive purchase offer to, and fully finance (in a
manner consistent with clause (i) above) the acquisition from, the seller of
such Non-Utility Generation Assets or otherwise as specified by such seller and
(C) the Primary Class B Member does not have any reasonable expectation that the
asset proposed to be acquired may result in a material adverse Chaparral
Extraordinary Liability. Any Class B Member (or El Paso or any El Paso
Affiliate) may acquire, outside of the structure comprised of Chaparral and its
Subsidiaries, any Non-Utility Generation Asset if (i) Mesquite is unable to
complete the acquisition in a timely manner, (ii) any of the tests set forth in
this clause (e) are not satisfied or (iii) the Class A Member of Chaparral
declines to consent to the purchase of the asset in circumstances in which such
consent is required pursuant to this Chaparral LLC Agreement.
(f) Payment of Certain Costs. If the Class A Member, any Certificateholder
or any Certificateholder Related Person incurs any costs with respect to (a) any
legal requirement that requires the Class A Member, any such Certificateholder
or any Certificateholder Related Person to be licensed or qualified to do
business in any jurisdiction solely as a result of the Class A Member holding
the Class A Member Interest or any Additional Class B Member Interest, or such
Certificateholder or Certificateholder Related Person holding its Limestone
Certificate or interest in a Limestone Certificate, as the case may be, or (b)
any legal requirement that requires the Class A Member, any such
Certificateholder or any Certificateholder Related Person to obtain any permits,
licenses or regulatory approvals solely as a result of the Class A Member
holding the Class A Member Interest or any Additional Class B Member Interest,
or such Certificateholder or Certificateholder Related Person holding its
Limestone Certificate or interest
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in a Limestone Certificate, as the case may be, then the Class A Member, any
such Certificateholder or any Certificateholder Related Person shall provide the
Primary Class B Member with an invoice of such costs setting forth the
calculation of such amounts in reasonable detail. Within five Business Days
after receipt of such invoice, the Primary Class B Member shall pay all such
amounts (other than Taxes) on an After-Tax Basis to the Class A Member for its
own account or for distribution to such Certificateholder or Certificateholder
Related Person, as applicable. Any such payment shall not constitute a
Distribution and shall not affect the Class A Member's Capital Account balance.
(g) Investment of Certain Proceeds. Upon receipt by Chaparral of the
proceeds of any payment from the Indenture Trustee pursuant to Section 5.04(b)
or 5.04(d) of the Indenture, Chaparral shall invest such proceeds in El Paso
Loans or other Chaparral Permitted Assets (including a capital contribution to
Mesquite), as directed by the Managing Member in its sole discretion.
ARTICLE IV
ALLOCATION OF NET INCOME AND NET LOSS
Section 4.1 Allocation of Net Income and Net Loss. The Members agree to
treat Chaparral as a partnership and the Members as partners thereof for Federal
income tax purposes and shall file all tax returns accordingly. For purposes of
this Article IV, cumulative Net Income and items of income or gain and
cumulative Net Losses and items of deduction or loss shall include all such
items of Net Income and Net Losses and all income, gain, loss and deduction as
were allocated to the respective Members for the period beginning from January
1, 2000 through the end of the relevant Allocation Period. Except as otherwise
provided in this Article IV, Chaparral's Net Income or Net Loss, as the case may
be, and each item of income, gain, loss and deduction entering into the
computation thereof, for each Allocation Period ending prior to the earlier of
(x) the day immediately following the Xxxx-to-Market Measurement Date and (y)
the commencement of the Earn-Out Period, shall be allocated to the Members as
follows:
(a) Net Income. Net Income shall be allocated in the following order
and priority:
(i) First, 100% to the Class B Members in an amount equal to the
excess, if any, of (i) the cumulative items of deduction or
loss allocated to the Class B Members pursuant to Section
4.4(a)(i) for the current and all prior Allocation Periods,
excluding for this purpose, items of Depreciation attributable
to Closing Costs or Additional Financing Costs, to the extent
capitalized, over (ii) the cumulative Net Income allocated to
the Class B Members pursuant to this Section 4.1(a)(i) for all
prior Allocation Periods;
(ii) Second, 100% to the Class A Member in an amount equal to the
excess, if any, of (i) the cumulative Net Losses and items of
deduction or loss allocated to the Class A Member pursuant to
Section 4.1(b)(iii) for the current and all prior Allocation
Periods, over (ii) the cumulative Net
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Income allocated to the Class A Member pursuant to this
Section 4.1(a)(ii) for all prior Allocation Periods;
(iii) Third, 100% to the Class B Members in an amount equal to the
excess, if any, of (x) the cumulative Net Losses and items of
deduction or loss allocated to the Class B Members pursuant to
Section 4.1(b)(iv) for the current and all prior Allocation
Periods, over (y) the cumulative Net Income allocated to the
Class B Members pursuant to this Section 4.1(a)(iii) for all
prior Allocation Periods;
(iv) Fourth, 80% to the Class A Member and 20% to the Class B
Members until the Class A Member's Capital Account Balance is
an amount which if distributed with respect to the Limestone
Equity PIK Component at the time the allocation is made would
produce an IRR of 21% with respect to the Limestone Equity PIK
Component; and
(v) Fifth, 1% to the Class A Member and 99% to the Class B
Members.
(b) Net Losses. Net Losses shall be allocated in the following order and
priority:
(i) First, 1% to the Class A Member and 99% to the Class B Members
to the extent of the excess, if any, of (x) the cumulative Net
Income and items of income or gain allocated the pursuant to
Section 4.1(a)(v) for the current and all prior Allocation
Periods, over (y) the cumulative Net Losses allocated pursuant
to this Section 4.1(b)(i) for all prior Allocation Periods;
(ii) Second, 80% to the Class A Member and 20% to the Class B
Members to the extent of the excess, if any, of (x) the
cumulative Net Income and items of income or gain allocated
the pursuant to Section 4.1(a)(iv) for the current and all
prior Allocation Periods, over (y) the cumulative Net Losses
allocated pursuant to this Section 4.1(b)(ii) for all prior
Allocation Periods;
(iii) Third, 100% to the Class A Member until the Class A Member's
Capital Account equals the aggregate outstanding principal
amount and accrued and unpaid interest on the Limestone Notes
and the New Limestone Notes; and
(iv) Fourth, 100% to the Class B Members.
Section 4.2 Allocations During and After Earn-Out Period. For each
Allocation Period during the Earn-Out Period, Sections 4.1, 4.4(a)(iii) and 4.5
shall not apply, and
(a) All items of Gross Income shall be allocated:
(i) First, 100% to the Class A Member until the amount allocated
pursuant to this Section 4.2(a)(i) is equal to the excess, if any, of (x) the
cumulative Net Losses and items of deduction allocated to the Class A Member
pursuant to Section 4.1(b) over (y) the cumulative
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Net Income and items of income or gain allocated to the Class A Member pursuant
to Section 4.1(a) in each case for all Allocation Periods ending before the
commencement of the Earn-Out Period; and
(i) Second, 100% to the Class B Members.
(b) All Net Losses, computed after taking into account the allocations
made pursuant to Section 4.2(a), shall be allocated to the Class B Members.
(c) If no Liquidating Event shall have occurred, then on and after the
Earn-Out Period Termination Date, all items of Gross Income, deduction and loss
shall be allocated to the Class B Members except as provided pursuant to the
Regulatory Allocations.
Section 4.3 Allocations Following Xxxx-to-Market. During the period
commencing on the day immediately after the Xxxx-to-Market Measurement Date, all
allocations of Net Income, Gross Income, Net Losses and other items of income,
loss, deduction, gain or credit shall be allocated 100% to the Class B Members.
Section 4.4 Special Tax Allocations.
(a) Depreciation, Interest, Restructuring Losses and Items Relating to
Extraordinary Expenditures.
(i) All items of loss and deduction attributable to Depreciation,
Restructurings, and interest expense that are realized by Chaparral in any
Allocation Period shall be allocated 100% to the Class B Members in such
Allocation Period.
(ii) Items of deduction in an amount equal to Extraordinary
Expenditures incurred in any Allocation Period shall be allocated 100% to
the Class B Members.
(iii) Items of Gross Income in an amount equal to the Extraordinary
Expenditure Recoveries realized in any Allocation Period shall be
allocated 100% to the Class B Members in such Allocation Period.
In applying this Section 4.4(a), the amounts to be allocated shall be the
component items of income, gain, loss and deduction that constitute Chaparral's
distributive share of income, gain, loss and deduction from any Project Company,
or any Qualified Energy Assets even if such component items are not required to
be separately stated.
(b) Minimum Gain Chargeback/Member Minimum Gain Chargeback. If there is a
net decrease in "partnership minimum gain" (within the meaning of Regulation
Section 1.704-2(d)) for an Allocation Period with respect to Chaparral, then
there shall be allocated to each Member items of income and gain of Chaparral
for that Allocation Period (and if necessary subsequent Allocation Periods)
equal to that Member's share of the net decrease in partnership minimum gain
(within the meaning of Regulation Section 1.704-2(g)(2)), subject to the
exceptions set forth in Regulation Section 1.704-2(f)(2) and (3), and to any
exceptions provided by the Commissioner of the Internal Revenue Service pursuant
to Regulation Section 1.704-2(f)(5), provided, that if Chaparral has any
discretion as to an exception provided pursuant to Regulation Section
1.704-2(f)(5), the Tax
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Matters Partner may exercise reasonable discretion on behalf of Chaparral, which
discretion shall be exercised in good faith so as not to prejudice the interests
of any Member. The foregoing is intended to be a "minimum gain chargeback"
provision as described in Regulation Section 1.704-2(f) and shall be interpreted
and applied in all respects in accordance with that Regulation.
If during an Allocation Period there is a net decrease in "partner
nonrecourse debt minimum gain" (as determined in accordance with Regulation
Section 1.704-2(i)(3)) with respect to Chaparral, then, in addition to the
amounts, if any, allocated pursuant to the preceding paragraph, any Member with
a share of that partner nonrecourse debt minimum gain (determined in accordance
with Regulation Section 1.704-2(i)(5)) as of the beginning of the Allocation
Period shall, subject to the exceptions set forth in Regulation Section
1.704-2(i)(4), be allocated items of income and gain of such Allocation Period
for the Allocation Period (and, if necessary, for subsequent Allocation Periods)
equal to that Member's share of the net decrease in the partner nonrecourse
minimum gain. The foregoing is intended to be the "chargeback of partner
nonrecourse debt minimum gain" required by Regulation Section 1.704-2(i)(4) and
shall be interpreted and applied in all respects in accordance with that
Regulation.
(c) Qualified Income Offset. If during any Allocation Period a Member
unexpectedly receives any adjustment, allocation or distribution described in
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or
increases a deficit balance in such Member's Adjusted Capital Account, there
shall be allocated to such Member items of income and gain (consisting of a pro
rata portion of each item of income, including gross income, and gain of
Chaparral for such Allocation Period) in an amount and manner sufficient to
eliminate such deficit as quickly as possible provided that an allocation
pursuant to this Section 4.4(c) shall be made only if and to the extent that the
Class A Member would have a deficit balance in its Adjusted Capital Account
after all other allocations provided for in this Article IV have been
tentatively made as if this Section 4.4(c) were not in the Chaparral LLC
Agreement. The foregoing is intended to be a "qualified income offset" provision
as described in Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
and applied in all respects in accordance with that Regulation.
(d) Gross Income Allocation.
(i) In any Allocation Period ending prior to the beginning of any
Applicable Termination Period, Gross Income equal to the excess, if any,
of (x) the amount of the Class A Member's Cumulative Priority Return, as
of the end of such Allocation Period, over (y) amounts previously
allocated pursuant to this Section 4.4(d)(i), shall be allocated to the
Class A Member;
(ii) In the event that the Class A Member has a deficit balance in
its Adjusted Capital Account at the end of any Allocation Period, the
Class A Member shall be allocated items of income and gain in the amount
of such deficit as quickly as possible; provided that an allocation
pursuant to this Section 4.4(d)(ii) shall be made only if and to the
extent that the Class A Member would have a deficit balance in its
Adjusted Capital Account after all other allocations provided for in this
Article IV have been tentatively made as if Section 4.4(c) and this
Section 4.4(d)(ii) were not in the Chaparral LLC Agreement.
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(e) Member Nonrecourse Deductions. Notwithstanding anything to the
contrary in this Article IV, losses, deductions, or expenditures subject to Code
Section 705(a)(2)(B) that are attributable to a particular partner nonrecourse
liability shall be allocated to the Member that bears the economic risk of loss
for the liability in accordance with the rules of Regulation Section 1.704-2(i).
(f) Nonrecourse Deductions. Nonrecourse deductions, within the meaning of
Regulation Sections 1.704-2(b)(1) and 1.704-2(c) shall be allocated 100% to the
Class B Members.
(g) Section 754 Adjustments. To the extent Capital Accounts are required
under Code Section 734(b), including by reason of Regulation Section
1.704-1(b)(2)(iv)(m)(2) or (4), to reflect the adjustment to the adjusted tax
basis of an asset as a result of the distribution to the Class A Member in
complete liquidation of the Class A Member Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment is an
increase) or loss (if the adjustment is a decrease) that is allocated to the
Members in accordance with their interests pursuant to Regulation Section
1.704-1(b)(2)(iv)(m)(2) or to the member to whom such distribution was made
pursuant to Regulation Section 1.704-1(b)(2)(iv)(m)(4) as applicable.
(h) Allocations Relating to Taxable Issuance of Membership Interests or
Contingent Debt Instrument. Any income, gain, loss or deduction realized as a
direct or indirect result of (x) the issuance of an interest by Chaparral to a
Member, other than pursuant to Code Section 707(a)(2) ("ISSUANCE ITEMS") or (y)
the income tax treatment of any Contingent Debt Instrument other than as a debt
instrument subject to Regulation Section 1.1275-4(b) ("MODIFIED ITEMS") shall be
allocated among the members and other such allocations to be made under this
Chaparral LLC Agreement shall be adjusted so that, to the extent possible, the
net amount of such Issuance Items and Modified Items, together with all other
allocations under this Chaparral LLC Agreement to the Class A Member, shall be
equal to the net amount that would have been allocated to such Member if the
Issuance Items and Modified Items had not been realized.
(i) Additional Financing Costs. Any Additional Financing Costs paid by
Chaparral for any Allocation Period shall be allocated 100% to the Class B
Members.
(j) Allocations Relating to Purchase Option. Notwithstanding any other
provision of this Article IV, if the Class A Member Interest is purchased
pursuant to Section 11.2, items of income, gain, loss, deduction, and expense of
the year of purchase shall be allocated as necessary to cause the Class A
Member's Capital Account (after all adjustments hereunder) to equal the amount
payable under Section 11.2.
Section 4.5 Curative Allocations. The allocations set forth in Sections
4.4(b), 4.4(c), 4.4(d)(ii), 4.4(e), 4.4(f), and 4.4(g) (the "REGULATORY
ALLOCATIONS") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with allocations of other items of income, gain, loss or deduction of
Chaparral pursuant to this Section 4.5. Therefore, notwithstanding any other
provision of this Article IV (other than the Regulatory Allocations), the
Managing Member shall make such offsetting allocations of income, gain, loss or
deduction of Chaparral in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the
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extent possible, equal to the Capital Account balance such Member would have had
if the Regulatory Allocations were not part of the Chaparral LLC Agreement and
all items of Chaparral were allocated pursuant to this Article IV without regard
to the Regulatory Allocations. In exercising its discretion under this Section
4.5, the Managing Member shall take into account future Regulatory Allocations
under Section 4.4(c) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 4.4(e) and 4.4(f).
Section 4.6 Loss Limitation. The Net Losses allocated pursuant to Section
4.1(b) and Section 4.3 and the items of loss or deduction allocated pursuant to
Sections 4.3, 4.4, and 4.5 to the Class A Member shall not exceed the maximum
amount of Net Losses and items of loss or deduction that can be so allocated
without causing the Class A Member to have a deficit balance in its Adjusted
Capital Account at the end of any Allocation Period. All Net Losses and items of
loss or deduction in excess of the limitation set forth in this Section 4.6
shall be allocated to the Class B Members.
Section 4.7 Other Allocation Rules. (a) Net Income, Net Losses and any
other items of income, gain, loss or deduction shall be allocated to the Members
pursuant to this Article IV as of the last day of each Allocation Period;
provided that Net Income, Net Losses and such other items shall also be
allocated at such other times as the Gross Asset Values of Chaparral Property
are adjusted pursuant to clause (ii) of the definition of Gross Asset Value.
(b) The Members hereby agree to be bound by the provisions of this Article
IV in reporting their shares of Chaparral income and loss for income tax
purposes, except to the extent otherwise required by law. Notwithstanding any
requirements of law, the Members agree, for purposes of maintaining their
Capital Accounts, to be bound by the allocations contained in this Article IV,
notwithstanding any allocations for income tax purposes.
(c) Solely for purposes of determining the Members' proportionate share of
the "excess non recourse liabilities" of Chaparral within the meaning of
Regulation Section 1.752-3(a)(3), the Members' interests in profits of Chaparral
are as follows: 0% to the Class A Member and 100% to the Class B Members.
(d) To the extent permitted by Regulation Section 1.704-2(h)(3), the
Managing Member shall endeavor to treat distributions of Cash as having been
made from the proceeds of a nonrecourse liability (within the meaning of
Regulation Section 1.704-2(b)(3)) only to the extent that such distributions
would cause or increase any deficit balance of the Class A Member's Adjusted
Capital Account.
Section 4.8 Tax Allocations; Code Section 704(c). In accordance with Code
Section 704(c) and the applicable Regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to Chaparral shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to Chaparral for
federal income tax purposes and its Initial Gross Asset Value.
In the event the Gross Asset Value of any asset of Chaparral is adjusted
pursuant to clause (ii) or (iv) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the
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adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the applicable
Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the Managing Member in any manner that reasonably reflects the purpose
and intention of this Chaparral LLC Agreement, provided that Chaparral shall
elect to apply any allocation method permitted by the Regulations under Code
Section 704(c). In furtherance of the foregoing, Chaparral shall use any
reasonable method, in the discretion of the Managing Member, such that the
amount of such tax items allocable to the Class A Member hereunder for any
Allocation Period equal in the aggregate to the amount of book deductions
allocable to the Class A Member hereunder for such Allocation Period.
Allocations pursuant to this Section 4.8 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Net Income, Net Losses,
other items, or distributions pursuant to any provision of this Chaparral LLC
Agreement.
Except as otherwise provided in this Chaparral LLC Agreement, for Federal
state and local income tax purposes, all items of income, gain, loss, deduction,
and any other allocations not otherwise provided for shall be allocated to the
Members in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to Sections 4.1, 4.2 and 4.4.
To the extent that allocations made pursuant to this Article IV for any
Allocation Period ending prior to the commencement of the Earn-Out Period, if
any, include the allocation of an item of income or gain that is recaptured as
ordinary income under Code SectionSection 1245, 1250 and 1254 and that is
attributable to deductions TAken prior to the Closing Date, such ordinary income
shall be allocated to the Member to whom the deduction was allocated.
Section 4.9 Order of Allocations. All allocations made pursuant to this
Article IV shall be made in the following order:
(i) Section 4.2;
(ii) Section 4.4(a);
(iii) Section 4.4(b);
(iv) Section 4.4(c);
(v) Section 4.4(d);
(vi) Section 4.4(e);
(vii) Section 4.4(f);
(viii) Section 4.4(h);
(ix) Section 4.4(i);
(x) Section 4.4(j); and
(xi) Section 4.1.
Such provisions shall be applied as if all distributions and allocations were
made at the end of the applicable Allocation Period. Where any provision depends
on the balance of a Capital Account of any Member, that Capital Account shall be
determined after the operation of all preceding provisions for the applicable
Allocation Period. These allocations shall be made consistently with the
requirements of Regulation Section 1.704-2(j).
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ARTICLE V
DISTRIBUTIONS; WITHDRAWALS
Section 5.1 Distributions.
(a) Class A Member's Cumulative Priority Return. On the Closing Date,
Chaparral Distributed to the Class A Member an amount equal to $1,200,716.02,
representing all priority return accrued on the Class A Member Interest through
March 27, 2000 and the Class A Member's Capital Account was reduced by such
amount. Except as otherwise provided in Article XII, on or before 11:00 a.m.
(New York City time) on each Distribution Date occurring prior to the Earn-Out
Period Commencement Date, Available Cash of Chaparral shall be distributed 100%
to the Class A Member, until the Class A Member receives an amount equal to the
excess, if any, of (i) the Class A Member's Cumulative Priority Return without
regard to clause (b)(iv) of the definition of Class A Member's Priority Return
as of such Distribution Date, over (ii) all prior distributions to the Class A
Member pursuant to this Section 5.1(a).
(b) Earn-out Period.
(i) On each Earn-Out Distribution Date, all Available Cash of
Chaparral (after provision for the payments required by clause (d) below)
shall be distributed to the Class A Member until the Capital Account of
the Class A Member shall equal zero (after taking into account all
allocations required to be made to the Class A Member pursuant to Section
4.2 as of such Earn-Out Distribution Date).
(ii) On each Earn-Out Distribution Date, Chaparral shall pay the
Class A Member, to the extent of all Available Cash (after providing for
the payments required by 5.1(b)(i)), an amount equal to the Termination
Period Guaranteed Payment, if any. Such amount shall be treated for income
tax purposes as a "guaranteed payment" within the meaning of Code Section
707(c) and, whether or not paid, shall not affeCT the Class A Member's
Capital Account.
(c) Special Class A Tax Distribution. Unless the Earn-Out Period
Commencement Date shall have occurred, five Business Days prior to each date on
which an individual taxpayer is required to make a quarterly payment of
estimated United States federal income taxes, Chaparral shall distribute to the
Class A Member an amount equal to the excess of (x): the product of (i) the Tax
Rate multiplied by (ii) the excess, if any, of (A) the projected net taxable
income, if any, allocated or allocable to the Class A Member for the period
commencing on December 28, 1999 and ending on the last day of the preceding
calendar month (determined as if the end of the preceding calendar month had
been the end of an Allocation Period), over (B) the Class A Member's Cumulative
Priority Return without regard to clause (b)(iv) of the definition of Class A
Member's Priority Return for the period described in clause (A), over (y) all
amounts previously distributed pursuant to this Section 5.1(c) or pursuant to
Section 5.01(c) of the Third Amended and Restated LLC Agreement. Upon the making
of any distribution pursuant to this Section 5.1(c), Chaparral shall provide the
Class A Member with notice of such distribution,
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including the amount of such distribution and that such distribution is a
special Class A Member tax distribution.
(d) Distributions in Connection with Asset Remedy. In connection with an
exercise of the Asset Remedy by the Class A Member, Chaparral shall Distribute
to the Class A Member, not later than 4:00 p.m. (New York City time) on the date
of each sale of an asset pursuant to such Asset Remedy, Cash in an aggregate
amount equal to the lesser of (i) the aggregate proceeds of such sale or sales
and (ii) the positive balance in the Class A Member's Capital Account, in each
case, as of such date after taking into account all allocations required to be
made to the Class A Member pursuant to Article IV as of such date; provided,
that, no Distributions shall be made to the Class A Member pursuant to this
clause (d) after the Earn-Out Period Termination Date; provided, further, that
the preceding proviso shall not be applicable to any Distributions to the Class
A Member pursuant to this clause (d) with respect to the proceeds of any Asset
Remedy occurring prior to the Earn-Out Period Termination Date which have not
been distributed on or prior to the Earn-Out Period Termination Date.
(e) Distributions During Liquidation Period. If an Earn-Out Period
Commencement Date has not occurred, then during the Applicable Termination
Period, Chaparral shall not make Distributions under any provision of this
Section 5.1 other than this Section 5.1(e). As compensation for the use by
Chaparral during such Applicable Termination Period of amounts in the Capital
Account of the Class A Member, Chaparral shall pay (i) on each Distribution Date
occurring during such Applicable Termination Period, an amount of Cash equal to
the amount of the Class A Member's Priority Return that would otherwise have
been distributed pursuant to Section 5.1(a) hereof to the Class A Member on such
Distribution Date (such payment to constitute a partial payment of the
Termination Period Guaranteed Payment) and (ii) without duplication, the amount
that Chaparral would have been required to distribute pursuant to Section 5.1(c)
if the Class A Member Interest had not been deemed to be retired and treating
for that purpose amounts distributed pursuant to this Section 5.1(e)(ii) as
having been distributed pursuant to Section 5.1(c)(y).
(f) Distributions to Class B Members. On and after the date on which all
Limestone Notes and all New Limestone Notes shall have been paid in full, the
Earn-Out Period Termination Date shall have occurred and no Liquidating Event
shall have occurred, all Available Cash of Chaparral shall be Distributed to the
Class B Members on such dates as the Primary Class B Member shall direct.
(g) Distributions in Connection with the Special Management Replacement
Date. After the Special Management Replacement Date, Chaparral shall Distribute
to the Class A Member, not later than 4:00 p.m. (New York City time) on the date
of each sale of an asset by the Managing Member (each, an "Asset Disposition"),
Cash in an aggregate amount equal to the lesser of (i) the aggregate proceeds of
each such Asset Disposition and (ii) the positive balance in the Class A
Member's Capital Account, in each case, as of such date after taking into
account all allocations required to be made to the Class A Member pursuant to
Article IV as of such date; provided, that, no Distributions shall be made to
the Class A Member pursuant to this clause (g) after the Earn-Out Period
Termination Date; provided, further, that the preceding proviso shall not be
applicable to any Distributions to the Class A Member pursuant to this clause
(g) with respect to the proceeds of any Asset Dispositions occurring after the
Special Management
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
Replacement Date but prior to the Earn-Out Period Termination Date the proceeds
of which have not been distributed on or prior to the Earn-Out Period
Termination Date.
(h) No Other Distributions. Except as provided in this Section 5.1,
Section 11.1(d), Section 11.2(e) and Section 12.2, no other Distributions shall
be permitted.
Section 5.2 More than One Class A Member or Class B Member.
(a) More than One Class A Member. In the event that there is more than one
Class A Member, allocations to the Class A Member pursuant to Article IV,
Distributions to the Class A Member, and all other references in this Chaparral
LLC Agreement and the Transaction Documents referring to amounts shall be
divided among the Class A Members in proportion to their respective Class A
Percentages. All references in this Chaparral LLC Agreement and the other
Transaction Documents to the Class A Member shall be deemed to refer to all of
such Class A Members, collectively.
(b) More than One Class B Member. In the event that there is more than one
Class B Member, allocations to the Class B Members pursuant to Article IV,
Distributions to the Class B Members, and all other references in this Chaparral
LLC Agreement and the other Transaction Documents referring to amounts shall be
divided among the Class B Members in proportion to their respective Class B
Percentages.
Section 5.3 Amounts Withheld. All amounts withheld or required to be
withheld pursuant to the Code or any provision of any state, local or foreign
Tax law, with respect to any payment, distribution or allocation to Chaparral or
the Members and treated by the Code (whether or not withheld pursuant to the
Code) or any such Tax law as amounts payable by or in respect of the Members or
any Person owning an interest, directly or indirectly, in such Member shall be
treated as a Distribution to the Members with respect to which such amount was
withheld pursuant to this Article V for all purposes under this Chaparral LLC
Agreement (including an appropriate debit to such Member's Capital Account).
Section 5.4 Payments from the Overfund Trust. All amounts paid from the
Overfund Trust to the Indenture Trustee or Limestone pursuant to the Overfund
Trust Agreement or Section 5.5(b) of the Participation Agreement shall be
treated for GAAP accounting and tax purposes and for all purposes under the
Transaction Documents as having been Distributed by Chaparral to the Class A
Member pursuant to Section 5.1(a), and the Capital Account of the Class A Member
shall be reduced by the amount of each such payment. Any amounts disbursed by
the Indenture Trustee to Chaparral pursuant to Section 5.04(b) or 5.04(d) of the
Indenture shall be treated for GAAP accounting and tax purposes and for all
purposes under the Transaction Documents as a Capital Contribution to Chaparral
in respect of the Class A Member Interest, and the Capital Account of the Class
A Member shall be increased by the amount of such disbursement.
Section 5.5 Deemed Distributions to Class A Member.
(a) Upon application by the Indenture Trustee or Limestone of (x) any
proceeds of any remarketing of the Shares, (y) any payments required to be made
by El Paso in connection with a Failed Remarketing, or (z) any Redemption
Proceeds received by the Indenture Trustee or
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
Limestone, in each case, pursuant to the Remarketing Agreement and Share Trust
Agreement, the Class A Member shall be deemed, for GAAP accounting and tax
purposes and all purposes under the Transaction Documents, to have received a
Cash Distribution with respect to its Class A Member Interest in the amount of
such proceeds and payments.
(b) Following the contribution (or deemed contribution) by the holder of
the El Paso Interest of any amount pursuant to Section 3.03 of the Limestone
Trust Agreement, the Class A Member shall be deemed, for GAAP accounting and tax
purposes and all purposes under the Transaction Documents, to have received, on
the date any such amounts are distributed by the Indenture Trustee or the New
Indenture Trustee to the holders of the Limestone Notes or the holders of the
New Limestone Notes, as applicable, in connection with a contribution or deemed
contribution pursuant to Section 3.03(a) or (c) of the Limestone Trust
Agreement, as the case may be, or on the date on which Limestone Trust receives
any contributions pursuant to Section 3.03(b) of the Limestone Trust Agreement,
a Cash Distribution with respect to its Class A Member Interest equal to the sum
of (x) the outstanding principal amount of, and the accrued and unpaid interest
(including Default Interest, if any) to the date of repayment or redemption on,
the Limestone Notes or the New Limestone Notes so repaid or redeemed, as the
case may be, and (y) the amount of any payments received by Limestone Trust
pursuant to Section 3.03(b) of the Limestone Trust Agreement.
(c) Upon the distribution by the New Indenture Trustee to the New
Noteholders of proceeds of (i) any New Notes Liquidity Payment or (ii) any
payment by El Paso under the El Paso Guarantee, the Class A Member shall be
deemed, for GAAP accounting and tax purposes and all purposes under the
Transaction Documents, to have received, on the date any such amounts are
distributed by the New Indenture Trustee to the New Noteholders, a Cash
Distribution in respect of its Class A Member Interest equal to the outstanding
principal amount to the extent so distributed and the accrued and unpaid
interest (including Default Interest, if any) to the date of such distribution
to the New Noteholders. To the extent that any New Notes Liquidity Payments or
other payments made by El Paso under the El Paso Guarantee are used by the New
Indenture Trustee to pay New Administrative Expenses or Additional Financing
Costs, the Class A Member shall be deemed to have received in such amount a
"guaranteed payment" within the meaning of Code Section 707(c) for income tax
purposes.
Section 5.6 Notice of Certain Distributions. If Chaparral Distributes any
amount to the Class A Member in order to cause the redemption, in whole or in
part, of (a) the Limestone Notes pursuant to the terms of the Indenture and/or
(b) upon and after payment in full of the Limestone Notes, the New Limestone
Notes pursuant to the terms of the New Indenture, Chaparral shall notify
Limestone in writing (with a copy to the Indenture Trustee and/or the New
Indenture Trustee, as applicable), that such Distribution is being made in order
to cause such redemption and specifying the amount of such Distribution to be
used for such purpose and the relevant Optional Redemption Date, Mandatory
Redemption Date or Special Redemption Date, as applicable.
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
ARTICLE VI
MANAGEMENT
Section 6.1 Management of Chaparral.
(a) Managing Member. The management of Chaparral shall be vested in the
Managing Member, which shall be a "manager" within the meaning of the LLC Act,
and except as otherwise provided in this Chaparral LLC Agreement, the Managing
Member shall have full power and authority to manage the business and affairs of
Chaparral to the extent provided in the LLC Act, and no other Member shall have
any such management power or authority.
The Primary Class B Member shall be the Managing Member at all times prior
to the appointment of a replacement Managing Member in accordance with this
Section 6.1. The Class A Member shall have the right to remove the Primary Class
B Member as Managing Member upon the occurrence of any of the following events:
(i) the Bankruptcy of El Paso, El Paso Chaparral Holding or the Primary Class B
Member; (ii) a material breach by the Primary Class B Member in its capacity as
Managing Member, of its obligations as Managing Member under this Chaparral LLC
Agreement or a material breach by the Management Company of any covenant set
forth in Section 6.2 of the Management Agreement, which breach, in either case,
continues and is uncured in all material respects on the date occurring 30 days
after El Paso or any Affiliate of El Paso receives written notice or has actual
knowledge thereof; (iii) the gross negligence of the Primary Class B Member, in
its capacity as Managing Member, in the performance of its obligations as
Managing Member under this Chaparral LLC Agreement or the gross negligence of
the Management Company in the performance of its obligations under the
Management Agreement, in either case, that continues and is uncured in all
material respects on the date occurring 30 days after El Paso or any Affiliate
of El Paso receives written notice or has actual knowledge thereof; or (iv) a
Specified Equity Event. The Class A Member shall exercise such right of removal
by providing written notice of such exercise to the Primary Class B Member after
the occurrence of any of the foregoing events and such notice shall become
effective (x) in the case of any notice under clause (i) above, immediately, (y)
in the case of any notice under clause (ii) or (iii) above, upon the expiration
of the applicable grace and cure periods referred to in such clause (ii) or
(iii), as applicable, and (z) in the case of any notice under clause (iv) above,
on the Special Management Standstill Expiration Date if the Specified Equity
Cure has not occurred on or before the 30th day after the relevant Specified
Equity Event; provided, however, that, in each case, if the Certificate Purchase
Option is consummated prior to the date on which such notice becomes effective,
then such notice shall be deemed to have been revoked and shall be of no further
force or effect. On the date any notice under this Section 6.1(a) becomes
effective, the Class A Member or its designee shall (unless the Primary Class B
Member shall be actively contesting such removal in good faith by appropriate
proceedings) without further act become the Managing Member of Chaparral for all
purposes of this Chaparral LLC Agreement and the Primary Class B Member shall no
longer be the Managing Member.
(b) Authority of Managing Member. The Managing Member shall have the
authority on behalf and in the name of Chaparral to perform all acts necessary
and desirable to the objects and purposes of Chaparral, subject only to the
restrictions expressly set forth in this Chaparral
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
LLC Agreement (including Sections 6.3 and 6.5) and subject to the rights of the
Liquidator to liquidate Chaparral and take all actions incidental thereto during
the Liquidation Period. Subject to such restrictions, the authority of the
Managing Member shall include the authority to:
(i) engage in transactions and dealings on behalf of Chaparral,
including transactions and dealings with any Member or any Affiliate of
any Member;
(ii) call meetings of Members or any class thereof;
(iii) vote any Equity Interests, Financial Investments or other
Chaparral Permitted Assets held by Chaparral;
(iv) purchase or otherwise acquire, or dispose of, Chaparral
Permitted Assets and cause Mesquite to purchase or otherwise acquire, or
dispose of, Mesquite Permitted Assets;
(v) determine and make Distributions, in Cash or otherwise, on the
Interests in accordance with the provisions of this Chaparral LLC
Agreement and the LLC Act;
(vi) appoint (and dismiss from appointment) officers, attorneys and
agents on behalf of Chaparral, and engage (and dismiss from engagement)
any and all Persons providing legal, accounting or financial services to
Chaparral, or such other Persons as the Managing Member deems necessary or
desirable for the management and operation of Chaparral;
(vii) incur and pay all expenses and obligations incidental to the
operation and management of Chaparral, including all Company Expenses of
Chaparral and all fees, expenses and other amounts payable pursuant to the
Management Agreement;
(viii) open accounts (including, without limitation, the Chaparral
Investor's Account);
(ix) subject to Article XII, effect a dissolution of Chaparral after
the occurrence of a Liquidating Event;
(x) bring and defend (or settle) on behalf of Chaparral actions and
proceedings at law or equity before any court or governmental,
administrative or other regulatory agency, body or commission or any
arbitrator or otherwise;
(xi) prepare or cause to be prepared reports, statements and other
relevant information for distribution to the Members as may be required by
this Chaparral LLC Agreement or the LLC Act and any additional information
determined to be appropriate by the Managing Member from time to time;
(xii) execute and deliver, perform Chaparral's obligations under and
exercise Chaparral's rights under, any Chaparral Documents to which
Chaparral is a party, including any certificates and other documents and
instruments related thereto;
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
(xiii) prepare and file all necessary returns and statements and pay
all taxes, assessments and other impositions applicable to Chaparral
Property pursuant to Section 8.3; and
(xiv) execute all other documents or instruments, perform all
duties, exercise all powers, and do all things for and on behalf of
Chaparral necessary or desirable for or incidental to the foregoing.
The Managing Member is hereby authorized and directed to enter into the
Management Agreement, pursuant to which it will delegate to the Manager certain
of its duties as Managing Member hereunder and on behalf of Chaparral, as sole
member of Mesquite, as more specifically provided in the Management Agreement,
any or all of which duties may be subcontracted to third Persons by the Manager.
Section 6.2 Right to Rely on the Managing Member.
(a) Any Person dealing with Chaparral may rely (without duty of further
inquiry) upon a certificate signed by the Managing Member as to:
(i) The identity of the Managing Member, the Class A Member or the
Class B Members;
(ii) The existence or nonexistence of any fact or facts that
constitute a condition precedent to acts by the Managing Member or that
are in any other manner germane to the affairs of Chaparral;
(iii) The Persons who are authorized to execute and deliver any
instrument or document of Chaparral; and
(iv) Any act or failure to act by Chaparral or any other matter
whatsoever involving Chaparral or any Member.
(b) The signature of the Managing Member shall be sufficient to convey
title to any property owned by Chaparral, and all of the Members agree that a
copy of this Chaparral LLC Agreement may be shown to the appropriate parties in
order to confirm the same, and further agree that the signature of the Managing
Member shall be sufficient to execute any documents necessary to effectuate this
or any other provision of this Chaparral LLC Agreement.
Section 6.3 Decisions Requiring Unanimous Member Consent. Notwithstanding
any power or authority granted the Managing Member under the LLC Act, the
Chaparral Certificate of Formation or this Chaparral LLC Agreement (including
Sections 6.1 and 6.5), the Managing Member may not make any decision or take any
action for which the consent of all the Members is expressly required by the
Chaparral Certificate of Formation or this Chaparral LLC Agreement, without
first obtaining such consent. The Managing Member shall not have the authority
to, and covenants and agrees that it shall not, take any of the following
actions without the consent of all of the Members:
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
(a) Contravention. Act in contravention of this Chaparral LLC Agreement or
any other Transaction Document applicable to Chaparral or Mesquite or, when
acting on behalf of Chaparral, on its own account or on behalf of Chaparral as a
member of Mesquite, engage in activities inconsistent with the purposes of this
Chaparral LLC Agreement, the purposes of the Mesquite LLC Agreement or the terms
of the Management Agreement, respectively;
(b) Acquisitions. To ensure, to the extent commercially reasonable in the
circumstances, that the Qualified Energy Assets acquired by Chaparral and
Mesquite after the Closing Date are, when considered with all other Qualified
Energy Assets of Chaparral and Mesquite, reasonably geographically and
commercially diverse, cause or permit Chaparral, or cause Chaparral to cause or
permit Mesquite, to acquire by purchase, contribution or exchange in any single
transaction or series of related transactions with the same Person, (i)
Qualified Energy Assets using Mesquite equity in an amount in excess of 6.91085%
of the total assets of Chaparral as of the Closing Date, as shown on the pro
forma balance sheet delivered pursuant to Section 8.2(f), as consideration
therefor (excluding from such calculation funds of Mesquite used in such
acquisition transaction that are derived from Mesquite Permitted Financial
Obligations recourse for the payment of which does not extend to assets of
Mesquite other than Qualified Energy Assets of Mesquite) or (ii) any CDI Project
Interest;
(c) Character of Permitted Investments. (i) Cause or permit Chaparral to
acquire, by purchase, contribution or exchange, any assets other than Chaparral
Permitted Assets or (ii) cause Chaparral to cause or permit Mesquite to acquire
by purchase, contribution or exchange any assets other than Mesquite Permitted
Assets, in each case, regardless of amount;
(d) Dispositions by Chaparral. Cause or permit Chaparral to Dispose of any
Chaparral Property (other than a Disposition that constitutes the granting of a
Chaparral Permitted Lien); provided, however, that the unanimous consent of all
the Members shall not be required for, and the Managing Member shall have the
authority and be permitted to, cause or permit any such Disposition (other than
a Disposition of (i) Chaparral's interest in the Overfund Trust or (ii) the
Amended El Paso/Chaparral Note) if the consideration therefor is not less than
the greater of (x) the then-present Asset PV of the asset being Disposed of and
(y) the Gross Asset Value of such asset; provided, further, that this clause (d)
shall not apply to any Disposition of assets in connection with, or to produce
funds to successfully effect, (x) the Purchase Option, the Retirement Option or
an Asset Remedy, (y) any enforcement of, or levy on, a judgment obtained in
accordance with Section 2.05(f) of the New Indenture by the New Indenture
Trustee or the New Noteholders in connection with the occurrence of a New
Indenture Event of Default or (z) any Asset Disposition made by the Managing
Member after the Special Management Replacement Date;
(e) Dispositions by Mesquite and Other Project Companies. With respect to
Mesquite and with respect to any other Project Company the disposition of assets
of which is subject to the unilateral control of Mesquite or as to which
Mesquite has shared control or consent, veto or other rights, cause or permit
Chaparral: (i) to cause or permit
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
Mesquite to Dispose of, (ii) to cause or permit Mesquite to cause or permit any
such Project Company to Dispose of, (iii) to cause or permit Mesquite to
exercise its shared control, consent, veto or other right to cause or permit any
such Project Company to Dispose of or (iv) to fail to prevent any such Project
Company from Disposing of, any of the Qualified Energy Assets of such Project
Company, other than (A) any Disposition in connection with a Restructuring, (B)
any Disposition pursuant to any of the Project Documents and outside of the
control of El Paso or its Affiliates, (C) any Disposition in connection with
Ordinary Project Activities, (D) any Disposition of assets that are worn out or
obsolete, (E) any pledge of assets or lien or realization on any pledge of
assets or lien in connection with Mesquite Financing Documents (other than
Mesquite Specified Credit Documents), and (F) any demand on any El Paso Loan
held by Mesquite or any Project Company if the proceeds of the payment of such
El Paso Loan are used by Mesquite or such Project Company, as the case may be,
to acquire additional Qualified Energy Assets; provided, however, that in
addition to the exceptions set forth above, the unanimous consent of all the
Members shall not be required for, and the Managing Member shall have the
authority and be permitted to, cause or permit any such Disposition if the
consideration therefor is not less than (1) in the case of a Disposition of a
Qualified Energy Asset by Mesquite, the greater of (x) the then-present Asset PV
of the asset being Disposed of and (y) the Gross Asset Value of such asset or
(2) in the case of a Disposition of a Qualified Energy Asset by any Project
Company other than Mesquite, the greater of (x) the then-present Asset PV of the
asset being Disposed of or (y) the portion of the Gross Asset Value of the
interest in such Project Company owned by Mesquite that is allocable to such
Qualified Energy Asset; provided, further, that this clause (e) shall not apply
to any Disposition of assets in connection with, or to produce funds used to
successfully effect, (x) the Purchase Option, the Retirement Option or an Asset
Remedy, (y) any enforcement of, or levy on, a judgment obtained in accordance
with Section 2.05(f) of the New Indenture by the New Indenture Trustee or the
New Noteholders in connection with the occurrence of a New Indenture Event of
Default or (z) any Asset Disposition made by the Managing Member after the
Special Management Replacement Date;
(f) Budgets. Approve or amend, or cause or permit Chaparral to permit
Mesquite to approve or amend, any annual aggregate operating or capital budget
of Mesquite and Chaparral that El Paso has not certified (an "UNCERTIFIED
BUDGET") as falling within Budget Parameters agreed to by the Members as of the
Closing Date, as normalized for additional acquisitions and/or dispositions;
provided, that if the Members do not unanimously approve any such Uncertified
Budget, the prior year's operating and capital budget (as normalized for
acquisitions, dispositions and inflation, the "TEMPORARY BUDGET") shall continue
until a new operating and capital budget can be determined by a professional
retained by the Members to prepare such new budget (a "REPLACEMENT BUDGET"),
which Temporary Budget (pending preparation of a definitive Replacement Budget)
and Replacement Budget (when it becomes definitive) shall be final and shall not
require the approval of the Members;
(g) Indebtedness, Etc. (i) Cause or permit Chaparral to incur, assume or
obligate itself by contract for any Permitted Financial Obligations owing by
Chaparral (except that Chaparral may enter into and incur obligations under the
Transaction
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
Documents, including costs, expenses, indemnities, fees (including reasonable
attorneys' and accountants' fees), Additional Financing Costs and Taxes) or (ii)
cause or permit Chaparral to cause or permit Mesquite to incur, assume or
obligate itself by contract for any Permitted Financial Obligations owing by
Mesquite other than Mesquite Permitted Financial Obligations and Company
Expenses of Mesquite;
(h) Issuance of Additional Interests; Admission of Additional Members. (i)
Cause or permit Chaparral to issue additional Interests other than the Class A
Member Interest and the Class B Member Interests (including any Additional Class
B Member Interests), or to admit any Class A Member or Class B Member to
Chaparral other than pursuant to Section 3.2(b)(iii), Article X or Article XI,
or (ii) cause or permit Chaparral to cause or permit Mesquite to issue
additional interests, other than the Mesquite LLC Interest, or to admit any
member to Mesquite other than Chaparral; provided, that Capital Contributions
made by any existing Member of Chaparral or by Chaparral as the sole member of
Mesquite shall not constitute the admission of a member or the issuance of
additional Interests in Chaparral or member interests in Mesquite, as the case
may be;
(i) Distributions or Redemptions of Member Interests. Cause or permit (i)
any Distribution in respect of Interests in Chaparral or member interests in
Mesquite or (ii) any redemption of Interests in Chaparral or member interests in
Mesquite, other than, in each case in clause (i) or (ii) above, as permitted or
contemplated by the Transaction Documents;
(j) Transactions with Affiliates. Cause or permit any violation of the
second sentence of Section 6.5(a)(ii);
(k) Changes to Chaparral Documents. Cause or consent to any amendment,
waiver or other modification of Chaparral's rights or obligations under any
Chaparral Document except (i) to cure any ambiguity, omission, defect or
inconsistency or (ii) to comply with Section 5.1(a) of the Participation
Agreement (provided that in connection with any amendment, waiver or
modification described in (i) or (ii) that has not been consented to by all the
Members, the Managing Member shall have delivered to each Member a legal opinion
of nationally recognized counsel experienced in structured finance (including
Xxxxx, Day, Xxxxxx & Xxxxx and Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx) to the
effect that such amendment, waiver or other modification complies with this
clause k);
(l) Amendments to El Paso Notes or Mesquite Specified Credit Documents.
Cause or consent to any amendment, waiver or modification of Chaparral's rights
or obligations under, or cause or give any consent, approval or make any
election under, any El Paso Note or the Mesquite Specified Credit Documents
except, in either case, for such amendments, waivers, modifications, consents,
approvals and elections made solely for the purpose of increasing the amount
available for borrowings thereunder (and making conforming changes to the
Mesquite Pledge Agreement and the notes delivered in connection with the
Mesquite Credit Agreement, if applicable).
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
(m) Mergers. Cause or permit Chaparral, or cause or permit Chaparral to
cause or permit Mesquite, to legally merge or consolidate with or into any
Person;
(n) Bankruptcy. Cause or permit Chaparral, or cause or permit Chaparral to
cause or permit Mesquite, to commence any Voluntary Bankruptcy, or commence, or
solicit others to commence, an Involuntary Bankruptcy against Mesquite;
(o) Extension of Term. Cause or permit the extension of the term of
Chaparral or Mesquite;
(p) Resignation as Managing Member. (i) Undertake to resign as the
Managing Member of Chaparral except in connection with any event referred to in
Section 6.1(a), or (ii) cause or permit Chaparral to undertake to resign or
withdraw as the sole member of Mesquite;
(q) Successor Manager Under Management Agreement. Cause or permit
Chaparral, or cause or permit Chaparral to cause or permit Mesquite, to cause
the appointment of a successor manager to the Management Company under the
Management Agreement, except in accordance with Section 5 of the Management
Agreement and Section 7.4 hereof;
(r) [Reserved];
(s) Possession of Property. Under any circumstances (i) possess Chaparral
Property for other than a purpose of Chaparral or (ii) cause or permit Mesquite
to possess Mesquite Property for other than a Mesquite purpose;
(t) Fiscal Year. Cause or permit Chaparral or Mesquite to change its
Fiscal Year;
(u) Tax Treatment, etc. Take any of the following actions:
(i) Cause Chaparral to be treated as a corporation or other
association taxable as a corporation for federal income tax
purposes or to take a position inconsistent with Chaparral not
being treated as a corporation or other association taxable as
a corporation except as required by Applicable Law; or
(ii) Cause Mesquite to fail to be a disregarded entity for federal
income tax purposes or to take a position inconsistent with
such treatment except as required by Applicable Law;
(v) ERISA. Cause or permit Chaparral or Mesquite to create or contribute
to any multiple employer plan, multi-employer or single-employer plan as defined
in Section 4001 of ERISA;
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Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
(w) Distribution from Overfund Trust. Cause or consent to any
Distribution of any amount or asset held in or by the Overfund Trust
except as required or permitted by the Transaction Documents; and
(x) Pledge of Interest in Overfund Trust. Except as required or
permitted by the Transaction Documents, enter into any contract, option or
other arrangement or undertaking, or permit the Overfund Trust to enter
into any contract, option, arrangement or undertaking, with respect to the
direct or indirect pledge of any interest in, or the control of,
Chaparral's interest in the Overfund Trust.
Section 6.4 Consents of the Class A Member. The Class A Member consents to
the following actions by the Managing Member to the extent that such actions
require the consent of the Class A Member pursuant to Section 6.3 (but such
consent shall not constitute a waiver of any other provision hereof):
(a) The execution and delivery by the Managing Member, on behalf of
Chaparral and Mesquite, as applicable, of each Transaction Document to
which Chaparral or Mesquite is a party;
(b) Any Restructuring entered into by Chaparral or any of its
Subsidiaries or any Project Company; and
(c) The sale of up to 50% of the El Paso Energy West Coast Interest.
Section 6.5 Duties and Obligations of the Managing Member.
(a) Actions of Chaparral. Anything in this Chaparral LLC Agreement to the
contrary notwithstanding, for so long as any Obligation of Chaparral is
outstanding, the Managing Member covenants to conduct the affairs of Chaparral
such that:
(i) Each bank account of Chaparral shall be separate from the bank
accounts of any other Person (subject to the rights of the Managing Member
and the Manager referred to in clause (iii) below).
(ii) Except as otherwise provided in or contemplated by the
Management Agreement, all transactions between any of El Paso, El Paso
Chaparral, or El Paso Chaparral Holding Company (or any of their
respective Affiliates), on the one hand, and any of Chaparral and
Chaparral on behalf of Mesquite, on the other, shall be duly authorized
and documented and recorded accurately in the appropriate books and
records of such entities, except where normal industry practice does not
normally require authorization or documentation. Except as otherwise
provided in or contemplated by the Management Agreement, the Managing
Member shall not cause Chaparral, or cause Chaparral to cause Mesquite, to
enter into any transaction with El Paso or any Affiliate of El Paso (other
than transactions among Chaparral and any of its Subsidiaries or among
Subsidiaries of Chaparral), other than transactions in any calendar
quarter which, taken as a whole, are fair and reasonable and provide, in
the aggregate, for exchanges of fair consideration and reasonably
equivalent value between or among the parties thereto. The
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Members hereby agree that each of the Transaction Documents satisfies the
standards set forth in the preceding sentence.
(iii) Chaparral shall: (x) maintain and prepare separate financial
reports and financial statements in accordance with GAAP, showing its
assets and liabilities separate and apart from those of any other Person,
and will not have its assets listed on the financial statement of any
other Person, provided, however, that its assets may be included on a
consolidated financial statement of its parent if: (A) such consolidated
financial statement contains a footnote to the effect that Chaparral's
assets are owned by Chaparral; and (B) such assets are listed on
Chaparral's own balance sheet; (y) maintain its books, records and bank
accounts separate from those of its Affiliates, any constituent party and
any other Person; and (z) not permit any Affiliate or constituent party
independent access to its bank accounts (other than access by the Managing
Member in its capacity as such and access by the Manager in connection
with the performance of its duties under the Management Agreement).
(iv) Chaparral shall not commingle or pool any of the funds and
other assets of Chaparral with those of any Affiliate or constituent party
or any other Person, and it shall hold all of its assets in its own name.
(v) Chaparral has done, or caused to be done, and shall do, all
things necessary to observe limited liability company formalities and
other organizational formalities and preserve its existence.
(vi) Chaparral does not, and shall not, guarantee, become obligated
for, or hold itself or its credit out to be responsible for or available
to satisfy, the debts or obligations of any other Person or the decisions
or actions respecting the daily business or affairs of any other Person
(except as provided for in or permitted under the Transaction Documents).
(vii) Chaparral shall not acquire Equity Interests of any Affiliate
or of any of the Members (other than Chaparral Permitted Assets and except
as otherwise provided for in or permitted under this Chaparral LLC
Agreement or the other Transaction Documents). Chaparral shall not buy or
hold any evidence of indebtedness for borrowed money issued by, or make
any loan or advance to, any other Person (other than such evidence of
indebtedness for borrowed money, loan or advance constituting Chaparral
Permitted Assets and except as otherwise provided for in or permitted
under this Chaparral LLC Agreement or the other Transaction Documents).
(viii) Chaparral has not made any loans or advances (other than the
El Paso Loans and other Chaparral Permitted Assets or as otherwise
provided for in or permitted under the Transaction Documents) to, or
pledged its assets (other than as otherwise provided for in or permitted
under the Transaction Documents) for the benefit of, and shall not make
any loans or advances (other than the El Paso Loans and other Chaparral
Permitted Assets or as otherwise provided for in or permitted under the
Transaction Documents) to, or pledge its assets (other than as otherwise
provided for in or permitted
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under the Transaction Documents) for the benefit of, any Person,
including, without limitation, any Affiliate, constituent party, or
Affiliate of any constituent party.
(ix) Chaparral shall not be consensually merged or legally
consolidated with any other Person (other than, for financial reporting
and federal tax purposes, any Person that is owned or partially-owned by
Chaparral or Mesquite).
(b) Limestone Trigger Events, Specified Equity Event and Liquidating
Events. The Managing Member shall notify the Members of the occurrence of any
acceleration of the New Limestone Notes as a result of a New Indenture Event of
Default, Limestone Note Trigger Event, Limestone Certificate Trigger Event,
Specified Equity Event or Liquidating Event or any event that with notice or
lapse of time or both would constitute such an event (other than the event
described in Section 12.1(a)) and the action that the Managing Member has taken
or proposes to take with respect thereto promptly, but no later than five
Business Days, after any Responsible Officer of El Paso has actual knowledge of
such occurrence; provided, that in the case of a Specified Equity Event, the
Managing Member shall provide the Members, within three Business Days after a
Responsible Officer of El Paso obtains knowledge of the occurrence of any
Underlying Default which is continuing or of any event not theretofore remedied
which with notice or lapse of time, or both, would constitute an Underlying
Default, notice of such occurrence together with a detailed statement by a
Responsible Officer of El Paso of the steps being taken by El Paso or the
appropriate subsidiary of El Paso to cure the effect of such Underlying Default.
(c) Maintenance of Chaparral's Existence, etc. At Chaparral's expense, the
Managing Member shall take all actions that may be necessary or appropriate (i)
for the continuation of Chaparral's valid existence as a limited liability
company under the laws of the State of Delaware and its qualification to do
business under the laws of each other jurisdiction in which such existence or
qualification is necessary to protect the limited liability of the Members or to
enable Chaparral to conduct the business in which it is engaged or to perform
its obligations under any agreement to which it is a party, (ii) for the
accomplishment of Chaparral's purposes, including the acquisition, management,
maintenance, preservation, and operation of Chaparral Permitted Assets in
accordance with the provisions of this Chaparral LLC Agreement and applicable
laws and regulations and (iii) to enforce Chaparral's rights under each of the
Chaparral Documents and each El Paso Note. Without limitation of the foregoing,
the Managing Member shall cause Chaparral to maintain all licenses, permits,
registrations, authorizations, use agreements, consents, orders or approvals of
governmental or quasi-governmental agencies and authorities (whether Federal,
state, local, municipal or foreign) necessary to own its properties and to
conduct its activities in accordance with all applicable laws, rules,
regulations and orders, except where any failure to do so would not have an
Aggregate Chaparral Material Adverse Effect.
(d) Devotion of Time; Other Activities. Without limitation of the
Manager's obligations under the Management Agreement, the Managing Member and
any of its Affiliates shall be required to devote only such time to the affairs
of Chaparral as the Managing Member determines in its reasonable discretion may
be necessary to manage and operate Chaparral, giving due consideration to the
provisions of the Management Agreement, and each such Person
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shall be free to serve any other Person or enterprise in any capacity that it
may deem appropriate in its discretion.
(e) Fiduciary Duty. Except as otherwise provided in Section 6.5(d), the
Managing Member shall be under a fiduciary duty to conduct the affairs of
Chaparral in the best interests of Chaparral, including the safekeeping and use
of all of Chaparral Property and the use thereof for the exclusive benefit of
Chaparral and will not conduct the affairs of Chaparral so as to benefit any
other business now owned or hereafter acquired by any Member if such conduct
also produces a detriment to Chaparral.
(f) Making of Payments. Unless otherwise expressly provided herein, all
distributions or payments to the Members pursuant to any provision of this
Chaparral LLC Agreement shall be made no later than 12:00 noon, New York City
time, on the day of distribution or payment, and, at the time of any such
distribution or payment, the Managing Member shall provide to the Members a
notice identifying the nature of the distribution or payment, the Section or
Sections of this Chaparral LLC Agreement pursuant to which it is being made and
the amount being distributed or paid pursuant to each such Section.
(g) Compliance with Chaparral LLC Agreement. The Managing Member shall
cause Chaparral to comply with all of the obligations of Chaparral set forth in
this Chaparral LLC Agreement; provided, however, that the Managing Member shall
have no obligation to cause Chaparral to pay the Class A Member's Priority
Return or make any other Cash distributions or other payments in respect of the
Class A Member Interest under this Chaparral LLC Agreement except to the extent
that there are funds on deposit in the Chaparral Investor's Account or, in
accordance with the Overfund Trust Agreement and Section 5.5(b) of the
Participation Agreement, the Overfund Trust, in either case, that are freely
available to be applied to such payment at the time such payment is due, and
then only from such funds; and provided, further, that in no event shall the
Managing Member have any personal obligation or liability with respect to any
obligations of Chaparral.
(h) Notice Regarding Qualification to Do Business. The Managing Member
shall provide notice to the Members of any state or jurisdiction in which
Chaparral is qualified to do business (other than its jurisdiction of
organization and any jurisdiction in which Chaparral is qualified to do business
on the Closing Date).
(i) Demand on Amended El Paso/Chaparral Note. The Managing Member shall
cause Chaparral to make demand on the Amended El Paso/Chaparral Note (i) within
a sufficient time to enable Chaparral to be able to pay any Distributions to the
Class A Member when due pursuant to Section 5.1(c), which is expected to be in
accordance with Schedule I to the Amended El Paso/Chaparral Note, (ii) on the
occurrence of a Liquidating Event, (iii) on the Retirement Date and (iv) if
requested by the Primary Class B Member, on any Purchase Date; provided,
however, that each such demand shall be made only to the extent necessary to
permit Chaparral to satisfy its obligations under Section 5.1(c), 11.1, 11.2 or
12.2, as applicable.
(j) Payment of Closing Costs. To the extent not paid from other sources,
the Managing Member shall cause Chaparral to pay the Closing Costs on the
Closing Date or, if due after the Closing Date, on the due date therefor.
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Section 6.6 Compensation and Expenses. Except as provided in Section 6.10
or Section 3.4(f), and except pursuant to, or as contemplated by, the Management
Agreement, no Member or Affiliate of any Member shall receive any salary, fee,
or draw for services rendered to or on behalf of Chaparral or otherwise in its
capacity as a Member, nor shall any Member or Affiliate of any Member be
reimbursed for any expenses incurred by such Member or Affiliate on behalf of
Chaparral or otherwise in its capacity as a Member; provided, however, that the
Managing Member shall be promptly reimbursed by Chaparral for all reasonable
costs and expenses incurred by the Managing Member or its Affiliates in
connection with the management and operation of Chaparral.
Section 6.7 Demand on El Paso Loans Held by Mesquite or Mesquite's
Subsidiaries. The Managing Member shall cause Chaparral to cause Mesquite to (x)
make demand on the El Paso Loans held by Mesquite and (y) cause any Subsidiary
of Mesquite to make demand on the El Paso Loans held by such Subsidiary, in each
case, (i) within a sufficient time to provide Chaparral with sufficient funds to
enable Chaparral to pay any distributions to the Class A Member when due
pursuant to Section 5.1(c) that cannot be satisfied from the Amended El
Paso/Chaparral Note, (ii) on the occurrence of a Liquidating Event, (iii) on the
Retirement Date, (iv) if requested by the Class B Member, on any Purchase Date,
(v) to acquire additional Qualified Energy Assets and (vi) to otherwise satisfy
the obligations of Chaparral; provided, however, that, upon the delivery by the
Class A Member of a written request to the Managing Member at any time during
the period from the Earn-Out Period Commencement Date to the Earn-Out Period
Termination Date, the Managing Member shall cause Chaparral to cause Mesquite to
(x) make demand on the El Paso Loans held by Mesquite or (y) cause any
Subsidiary of Mesquite to make demand on the El Paso Loans held by such
Subsidiary, in each case, in the amount specified by the Class A Member in its
notice.
Section 6.8 Execution of other Transaction Documents; Matters Relating to
Mesquite and the Overfund Trust.
(a) Execution of Transaction Documents. On the Signing Date,
simultaneously with the execution and delivery of this Chaparral LLC Agreement,
the Managing Member on behalf of Chaparral shall execute and deliver, or cause
to be executed and delivered, all Transaction Documents to be entered into by
Chaparral on or prior to the Signing Date (to the extent not previously
executed), and any amendments, restatements or supplements thereto, and take
such further actions, as are contemplated in the Closing Agreement and otherwise
in connection with consummation of the Exchange Offer and the transactions
contemplated thereby.
(b) Sole Member of Mesquite; Sole Beneficial Owner of Overfund Trust. The
Managing Member shall cause Chaparral to be the sole member of Mesquite, unless
all of the Members consent in accordance with Section 6.3(h) to the issuance of
additional interests in Mesquite. The Managing Member shall cause Chaparral to
be the sole beneficial owner of the Overfund Trust.
(c) Governmental Permits, etc. of Mesquite. The Managing Member, on behalf
of Chaparral as sole member of Mesquite, shall cause Mesquite to obtain or
effect all Governmental Approvals necessary under, and otherwise comply with,
the laws of the jurisdictions in which it is conducting business and to comply
with all of its Contractual Obligations, except in any case
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above where any failure to do so would not have an Aggregate Chaparral Material
Adverse Effect.
(d) Mesquite Subsidiary Financial Statements, Etc. The Managing Member, on
behalf of Chaparral as sole member of Mesquite, shall cause Mesquite to provide
to any Member promptly following a request therefor by such Members any
financial statements, material operational data, other material reports and
material notices delivered to Mesquite or subsidiaries of Mesquite pursuant to
the Project Documents, subject to the restrictions set forth in Section 8.4.
Section 6.9 Determination of Interest Rate on El Paso Loans. The El Paso
Loans shall be administered by the Managing Member on behalf of Chaparral. Each
Member agrees that in order for the Managing Member to manage effectively the El
Paso Loans, the following provisions shall apply:
(a) The Managing Member shall: (i) determine the El Paso Applicable
Rate for each Eurodollar Period for each El Paso Loan made by Chaparral,
and shall notify El Paso and each of the Members of each such
determination and (ii) at the request of Mesquite or any Subsidiary of
Mesquite, determine the El Paso Applicable Rate for each Eurodollar Period
for each El Paso Loan made by Mesquite or any such Subsidiary, as the case
may be, and shall notify El Paso, each of the Members and Mesquite or such
Subsidiary (as applicable) of each such determination.
(b) Each Member shall promptly notify the Managing Member in the
event any Member receives a notice from any financial institution to the
effect that the Eurodollar Rate does not reflect the cost of funds for
such financial institution in connection with any proposed or current
borrowings by such Member from such financial institution. In the event
any Member has given the notice described in the first sentence of this
clause (b), such Member agrees that in the event subsequent thereto, it
receives a notice from such financial institution to the effect that the
Eurodollar Rate would again reflect the cost of funds for such financial
institution in connection with any proposed or current borrowings by such
Member from such financial institution, such Member shall promptly notify
the Managing Member that it has received such a notice.
(c) Upon its receipt of any notice described in clause (b) of this
Section, the Managing Member shall promptly notify El Paso of the change
in the El Paso Applicable Rate required by any El Paso Note.
Section 6.10 Additional Financing Costs; New Administrative Expenses. The
Class A Member may deliver to the Managing Member and the Class B Members a
notice requesting reimbursement for Additional Financing Costs, which notice
shall (i) be accompanied by supporting documents that demonstrate in reasonable
detail, and shall certify in reasonable detail, the nature of and, if
applicable, the method of computation of, any Additional Financing Costs
requested to be paid, (ii) whether the specified Additional Financing Costs will
be recurring and, if known, the duration of such recurrence and (iii) the
Business Day on which the Class A Member requests the Additional Financing Costs
to be paid (the "ADDITIONAL FINANCING COSTS PAYMENT DATE") (which date shall be
at least five Business Days after the date of such notice;
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provided, however, that if the Additional Financing Costs are recurring and the
duration of such recurrence has been provided to the Managing Member and the
Class B Members and such Additional Financing Costs Payment Date will not be the
first payment date for such recurring Additional Financing Costs, no prior
notice shall be required). The delivery of such notice shall be deemed to be a
demand by the Class A Member for payment by Chaparral of the Additional
Financing Costs requested in such notice.
Upon receipt by Chaparral of a Capital Contribution pursuant to
Section 3.3(a)(ii), the Managing Member shall cause Chaparral to pay to the
Class A Member on or before 12:00 noon (New York City time) on the Additional
Financing Costs Payment Date the amount of Additional Financing Costs requested
and correctly certified in the related notice. Any payment by Chaparral, the
Indenture Trustee or the New Indenture Trustee of or with respect to Additional
Financing Costs or New Administrative Expenses shall be treated as a guaranteed
payment to the Class A Member and shall not affect the Class A Member's Capital
Account balance.
Section 6.11 Certain Assets. The Managing Member hereby represents and
warrants to the Class A Member, as of the Closing Date, as follows: (a) with
respect to the Existing Assets and Specified New Assets listed on Schedule
3.2(b) hereto that are specified as contributed, that the amount shown on such
Schedule below the heading "Asset Value" for each such asset is the lower of (1)
El Paso's book value of such Existing Asset or Specified New Asset at the time
of contribution thereof as reflected on El Paso's books and records in
accordance with GAAP and (2) the Asset PV of such Existing Asset or Specified
New Asset; (b) with respect to the Existing Assets and Specified New Assets
listed on Schedule 3.2(b) hereto that are specified as purchased, that the
amount shown on such Schedule below the heading "Asset Value" is the capitalized
purchase price paid for such property by Mesquite; and (c) prior to the Closing
Date, there have been no adjustments to the Gross Asset Values of such Existing
Assets or Specified New Assets to reflect any Xxxx-to-Market Values.
Section 6.12 Covenant of the Managing Member. Except as otherwise
permitted by this Chaparral LLC Agreement, the Managing Member hereby covenants
and agrees not to (i) take any action to file a certificate of cancellation or
its equivalent with respect to itself, (ii) withdraw or attempt to withdraw from
Chaparral, (iii) exercise any power under the LLC Act to dissolve Chaparral,
(iv) except incident to a Permitted Transfer, Dispose of all or any portion of
its Interest in Chaparral or (v) petition for judicial dissolution of Chaparral.
Further, except incident to a Permitted Transfer, the Managing Member hereby
covenants and agrees to continue to carry out the duties of the Managing Member
under this Chaparral LLC Agreement until Chaparral is dissolved and liquidated
pursuant to Article XII.
ARTICLE VII
ROLE OF NON-MANAGING MEMBERS
Section 7.1 Rights or Powers. No Member (other than the Managing Member)
shall have any right or power to take part in the management or control of
Chaparral or its business
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and affairs or to act for or bind Chaparral in any way. Notwithstanding the
foregoing, the Members shall have all the rights and powers specifically set
forth in this Chaparral LLC Agreement, including those rights set forth in
Section 7.4. Any Member, any Affiliate thereof or an employee, stockholder,
agent, member, manager, director or officer of a Member or any Affiliate
thereof, may also be an employee or agent of Chaparral or a member, manager or
officer of the Managing Member. The existence of these relationships and acting
in such capacities will not result in such Member being deemed to be
participating in the control of the business of Chaparral or otherwise affect
the limited liability of such Member.
Section 7.2 Voting Rights. Except for the Managing Member acting in its
capacity as such, each Member shall have the right to vote only on those matters
expressly reserved for its vote (i) as provided in this Chaparral LLC Agreement
or (ii) as required by mandatory provisions of the LLC Act.
Section 7.3 Procedure for Consent. In any circumstances requiring the
approval or consent of any Member specified in this Chaparral LLC Agreement,
such approval or consent may, except as expressly provided to the contrary in
this Chaparral LLC Agreement, be given or withheld in the sole and absolute
discretion of such Member; provided, however, that, other than with respect to
any approval or consent required pursuant to Section 7.4, if any Member does not
deliver notice of its approval or consent, or its withholding of approval or
consent, within ten Business Days after such Member's receipt of a request for
any such approval or consent, then such Member's approval or consent shall be
deemed given or withheld, as the case may be, as directed by the Managing Member
in its sole discretion. If the Managing Member receives the necessary approval
or consent of the Members to such action, the Managing Member shall be
authorized and empowered to implement such action without further authorization
by the Members.
Section 7.4 Special Rights of the Class A Member. Notwithstanding any
other provision hereof, the Class A Member (a) shall have the right and power to
control the liquidation of Chaparral as Liquidator as set forth in Article XII
and (b) shall have the sole right to exercise the rights of Chaparral (for
itself and as the sole member of Mesquite) set forth in Sections 4.3, 4.4, 4.5,
5 and 9 of the Management Agreement and in the definitions of "Applicable
Discount Rate," "Fair Market Value" and "Present Value" or "PV" therein.
ARTICLE VIII
ACCOUNTING; BOOKS AND RECORDS
Section 8.1 Accounting; Books and Records.
(a) Maintenance of Books and Records. Chaparral shall maintain at its
principal place of business or, upon notice to the Members, at such other place
as the Managing Member shall determine, separate books of account for Chaparral,
which shall include a record of all costs and expenses incurred, all charges
made, all credits made and received, and all income derived in connection with
the conduct of Chaparral and the operation of its business in accordance with
this Chaparral LLC Agreement.
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(b) Accounting Methods.
(i) Chaparral shall maintain appropriate books and records in a
manner as necessary to comply with GAAP and with the Code and the
Regulations.
(ii) All amounts payable under any agreement between Chaparral on
the one hand and the Members or their Affiliates (excluding Chaparral) on
the other hand, other than Distributions, shall be treated as occurring
between Chaparral and a Person who is not a Member within the meaning of
Section 707(a)(1) of the Code and such amounts payable by Chaparral to any
Member or such Member's Affiliates shall be considered an expense or
capital cost, as the case may be, of Chaparral for income tax and
financial reporting purposes, and shall not be considered a Distribution
to such Member, including in maintaining such Member's Capital Account,
and any such amounts payable by any Member or its Affiliates to Chaparral
shall not, except as specifically contemplated by Article III, be
considered a contribution to Chaparral, including in maintaining such
Member's Capital Account.
(c) Access to Books, Records, etc. Subject to Section 8.4, each Member or
any agents or representatives of any Member (subject to reasonable safety
requirements), upon reasonable notice and with reasonable frequency, may visit
and inspect any of the properties of Chaparral and examine any information it
may reasonably request and make copies of and abstracts from the financial and
operating records and books of account of Chaparral, and discuss the affairs,
finances and accounts of Chaparral with the Managing Member and directors,
officers and independent accountants of Chaparral at such reasonable times and
as often as such Member or any agents or representatives of such Member may
reasonably request, and Chaparral shall pay or reimburse any such Member for its
reasonable costs and expenses incurred in connection with such visits,
inspections and examinations; provided, however, that Chaparral shall have no
obligation to pay the expense of such visits, inspections and examinations in
any calendar year to the extent that the aggregate amount of all such expenses
of the Class A Member incurred during such calendar year exceeds $50,000, unless
(x) a Limestone Note Trigger Event, Specified Equity Event or Liquidating Event
has occurred and is continuing or (y) the Earn-Out Period Commencement Date has
occurred and the Earn Out Period has not ended. The rights granted to each
Member pursuant to this Section 8.1(c) are expressly subject to compliance by
such Member with the confidentiality procedures and guidelines of Chaparral, as
such procedures and guidelines may be established from time to time.
Section 8.2 Reports.
(a) In General. The Managing Member shall be responsible for the
preparation of financial reports of Chaparral and the coordination of financial
matters of Chaparral with Chaparral's accountants. Each report delivered by
Chaparral to the Members pursuant to this Section 8.2 shall be accompanied by a
representation of a Responsible Officer of El Paso that such report presents
fairly in all material respects the information contained therein, subject, in
the case of the reports to be delivered pursuant to Section 8.2(c), to year-end
audit adjustments.
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(b) Annual Reports. Within 120 days after the end of each Fiscal Year
commencing with the Fiscal Year ending December 31, 1999, the Managing Member
shall cause to be prepared and to be delivered to each other Member, the
following:
(i) Financial Statements. A balance sheet as of the last day of such
Fiscal Year and an income statement and statement of cash flows for
Chaparral for (x) in the case of the Fiscal Year ending December 31, 1999,
the period from formation of Chaparral to December 31, 1999, and (y) in
the case of any other Fiscal Year, such Fiscal Year, and notes associated
with each, in each case prepared in accordance with GAAP and audited by
the Chaparral Accountants; and
(ii) Discussion and Analysis. The Managing Member's discussion and
analysis (a "DISCUSSION AND ANALYSIS") of the performance of Chaparral,
Mesquite and the Project Companies during such Fiscal Year (including
assets acquired during such Fiscal Year), on an aggregate basis,
including: (A) major income statement items and comparison to the prior
period and current period budget; (B) liquidity, capital requirements and
availability of capital resources of the Project Companies and Mesquite,
including any proposed financings; (C) status of Restructurings, including
progress toward prospective Restructurings and material changes to the
expected completion dates and expected gains and losses; (D) summary
description and terms of assets acquired during the period that did not
require consent of the Class A Member; (E) material changes to the
operations of the Project Companies; (F) material changes to the industry
environment which may impact the operations of the business, including
underlying commodity prices and competitive landscape; and (G) any other
information the Managing Member deems reasonably relevant.
The financial statements described in this Section 8.2(b) shall be accompanied
by a representation of the Managing Member stating that (x) the financial
statements described in clause (i) of this Section 8.2(b) present fairly, in all
material respects, the financial position of Chaparral at the end of the most
recently completed Fiscal Year and the results of its operations and its cash
flows for such applicable period, in conformity with GAAP and (y) after
reasonable inquiry, the Managing Member has no actual knowledge of the
occurrence of any Limestone Note Trigger Event, Specified Equity Event,
acceleration of the New Limestone Notes as a result of a New Indenture Event of
Default, Limestone Certificate Trigger Event or Liquidating Event (other than a
Liquidating Event of the type described in Section 12.1(a)), in any such case,
that is then continuing or, if the Managing Member has such actual knowledge,
specifying the then continuing event and the action that the Managing Member has
taken or proposes to take with respect thereto.
(c) Quarterly Reports. Within 60 days after the close of each Fiscal
Quarter during any Fiscal Year beginning with the Fiscal Quarter ending March
31, 2000, the Managing Member shall cause to be prepared and to be delivered to
each other Member the following:
(i) Financial Reports. Unaudited financial statements consisting of
a balance sheet as of the last day of such Fiscal Quarter and an income
statement and a statement of cash flows for Chaparral for such Fiscal
Quarter, in each case prepared in accordance
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with GAAP except that such quarterly financial statements need not include
footnote disclosure and may be subject to ordinary year-end adjustment;
(ii) Officers Certificate. Written certification by a Responsible
Officer of the Managing Member that Chaparral is in compliance with
Section 6.5(a)(ii); and
(iii) Discussion and Analysis. The Managing Member's summary level
Discussion and Analysis of the performance of Chaparral, Mesquite and the
Project Companies during such Fiscal Quarter (including assets acquired
during such Fiscal Quarter), on an aggregate basis.
The financial statements described in this Section 8.2(c) shall be accompanied
by a representation of the Managing Member stating that (x) the financial
statements described clause (i) of this Section 8.2(c) present fairly, in all
material respects, the financial position of Chaparral at the end of the most
recently completed Fiscal Quarter and the results of its operations and its cash
flows for such Fiscal Quarter, in conformity with GAAP, subject to year end
audit requirements, and (y) after reasonable inquiry, the Managing Member has no
actual knowledge of the occurrence of any Limestone Note Trigger Event,
Specified Equity Event, acceleration of the New Limestone Notes as a result of a
New Indenture Event of Default, Limestone Certificate Trigger Event or
Liquidating Event (other than a Liquidating Event of the type described in
Section 12.1(a)), in any such case, that is then continuing or, if the Managing
Member has such actual knowledge, specifying the then continuing event and the
action that the Managing Member has taken or proposes to take with respect
thereto.
(d) Retirement, Purchase Option and Liquidation Date Reports. The Managing
Member shall cause to be prepared and to be delivered to each Member (x) on any
Payment Date, a balance sheet as of the Xxxx-to-Market Measurement Date setting
forth the aggregate Xxxx-to-Market Value for each of the Chaparral Permitted
Assets (a "XXXX-TO-MARKET BALANCE SHEET") together with a certificate by the
Managing Member that such statements have been prepared in accordance with this
Chaparral LLC Agreement, subject to adjustment as a result of the audit to be
provided pursuant to the following clause (y) and (y) on the date on which final
distributions are made to the Members pursuant to Section 12.2 and not later
than seventy-five (75) days after the Retirement Date on which the Class A
Member Interest is retired or the Purchase Date, certification by the Chaparral
Accountants that such statements have been prepared in accordance with this
Chaparral LLC Agreement.
(e) Valuation Reports. The Managing Member shall cause to be prepared
contemporaneously with any adjustment to the Gross Asset Values of Chaparral
assets in accordance with clause (ii) of the definition of Gross Asset Value,
reports required to determine the Xxxx-to-Market Value of such assets and (x) in
the event any Chaparral Permitted Asset is acquired (whether by contribution or
purchase), sold or distributed by Chaparral, with respect to such Chaparral
Permitted Asset only and (y) upon the occurrence of any adjustment to the Gross
Asset Value of all Chaparral Permitted Assets, with respect to all Chaparral
Permitted Assets, and the Managing Member shall furnish such reports to each
Member.
(f) [Reserved].
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Section 8.3 Tax Matters.
(a) Actions by Managing Member. The Managing Member is authorized to make
any and all elections for federal, state, and local tax purposes including any
election, if permitted by applicable law: (i) to adjust the basis of Chaparral
Property pursuant to Code Sections 754, 734(b) and 743(b), or comparable
provisions of state or local law, in connection with Dispositions of Interests
in Chaparral and Chaparral distributions; (ii) with the consent of the Members,
to extend the statute of limitations for assessment of tax deficiencies against
the Members with respect to adjustments to Chaparral's federal, state, or local
tax returns; and (iii) to the extent provided in Code Sections 6221 through
6231, to represent Chaparral and the Members before taxing authorities or courts
of competent jurisdiction in tax matters affecting Chaparral or the Members in
their capacities as Members, and to file or cause to be filed any tax returns
and execute any agreements or other documents relating to or affecting such tax
matters, including agreements or other documents that bind the Members with
respect to such tax matters or otherwise affect the rights of Chaparral and the
Members. The Managing Member is specifically authorized to act as the "TAX
MATTERS MEMBER" under the Code and in any similar capacity under state or local
law.
(b) Tax Information and Filings. The Managing Member shall deliver or
cause to be delivered to each Member necessary tax information for each Member's
estimated quarterly tax filings as soon as practicable after the end of each
quarter of each Fiscal Year of Chaparral. The Managing Member shall deliver or
cause to be delivered to each Member: (i) on or prior to March 30 of each Fiscal
Year, the Managing Member's good faith estimate of the amount of such Member's
allocable share of taxable income or loss of Chaparral for the preceding Fiscal
Year, (ii) on or prior to July 30 of each Fiscal Year, an update of the estimate
for the preceding Fiscal Year delivered pursuant to clause (i) and (iii) as soon
as practicable after the end of each Fiscal Year of Chaparral but not later than
September 15 of the next succeeding Fiscal Year, necessary tax information for
each Member's annual tax filings. The Managing Member shall file or cause to be
filed tax or information returns and all other filings for Chaparral prepared in
accordance with the Code, the Regulations and applicable state and local tax
laws. The Managing Member shall use reasonable efforts to provide the Class A
Member with details concerning the foregoing information upon the Class A
Member's reasonable inquiries.
(c) Tax Classification.
(i) The Managing Member shall take such action as may be required
under the Code and Regulations to cause Chaparral to be treated as a partnership
and Mesquite to be treated as a disregarded entity for United States federal
income tax purposes.
(ii) To the extent Section 8.3(c)(i) does not govern the state and
local tax classification of Chaparral and Mesquite, the Managing Member shall
take such action as may be required under applicable state and/or local law to
cause Chaparral to be treated as, and in a manner consistent with a partnership
(or the functional equivalent thereof) and to cause Mesquite to be treated as,
and in a manner consistent with a disregarded entity (or the functional
equivalent thereof) for state and local income and franchise tax purposes;
provided, that the Managing Member shall not take any action under this clause
(c)(ii) which would be inconsistent with its obligations under Section
8.3(c)(i).
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Section 8.4 Proprietary Information. Notwithstanding any provision of this
Chaparral LLC Agreement or any other Transaction Document to the contrary, the
Class A Member shall not have access to (i) information that the Managing Member
reasonably believes to be in the nature of trade secrets or proprietary
information, (ii) any information subject to the attorney-client privilege or
(iii) any information that is required by Applicable Law or any Contractual
Obligation entered into by any Class B Member, Chaparral or any Project Company
in good faith or other Obligation to be kept confidential, unless, in any such
case, (A) the disclosure of such information to the Class A Member does not
contravene or constitute a default under any Project Document and (B) the Class
A Member shall have executed and delivered to the Managing Member a
confidentiality agreement that (x) is substantially in the form attached hereto
as Exhibit D and is otherwise reasonably acceptable to the Members (including
the Managing Member) and (y) if applicable, complies with all requirements set
forth in any Project Document that restricts access to any such information.
ARTICLE IX
AMENDMENTS; MEETINGS
Section 9.1 Amendments. Amendments to this Chaparral LLC Agreement may be
proposed by the Members. Following such proposal, the Managing Member shall
submit to the Members a verbatim statement of any proposed amendment if counsel
for Chaparral shall have approved of the same in writing as to form, and the
Managing Member shall include in any such submission a recommendation as to the
proposed amendment. The Managing Member shall seek the written vote of the
Members on the proposed amendment or shall call a meeting to vote thereon and to
transact any other business that it may deem appropriate. A proposed amendment
shall be adopted and be effective as an amendment to this Chaparral LLC
Agreement only if it receives the affirmative vote of all of the Members.
Section 9.2 Meetings of the Members. (a) Meetings of the Members may be
called by the Managing Member and shall be called upon the written request of
any Member. The notice shall state the nature of the business to be transacted.
Subject to other requirements specified herein regarding notice periods, notice
of any such meeting shall be given to all Members not less than five Business
Days nor more than thirty days prior to the date of such meeting. Members may
vote in person, by proxy or by telephone at such meeting. Whenever the vote or
consent of Members is permitted or required under this Chaparral LLC Agreement,
such vote or consent may be given at a meeting of Members or may be given in
accordance with the procedure prescribed in Section 9.3. Except as otherwise
expressly provided in this Chaparral LLC Agreement, the unanimous vote of the
Members shall be required to constitute the act of the Members.
(b) For the purpose of determining the Members entitled to vote on, or to
vote at, any meeting of the Members or any adjournment thereof, the Managing
Member or the Member requesting such meeting may fix, in advance, a date as the
record date for any such determination. Such date shall not be more than thirty
days nor less than one Business Day before any such meeting.
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(c) Each Member may authorize any Person or Persons to act for it by proxy
on all matters in which the Member is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. Every proxy must
be signed by the Member or its attorney-in-fact. No proxy shall be valid after
the expiration of eleven months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the Member
executing it or as provided under the terms of such proxy.
(d) Each meeting of Members shall be conducted by the Managing Member or
such other Person as the Managing Member may appoint pursuant to such rules for
the conduct of the meeting as the Managing Member or such other Person deems
appropriate.
Section 9.3 Unanimous Consent. In the event the consent of the Members is
required for any action to be taken by Chaparral, such consent may be given at a
meeting, which may be conducted by conference telephone call, or provided in a
writing executed by all the Members.
ARTICLE X
TRANSFERS OF INTERESTS
Section 10.1 Restriction on Dispositions of Interests.
(a) Dispositions of Class A Member Interest. Except as provided in Article
XI or Section 13.15, the Class A Member shall not Dispose of (other than by a
retirement or redemption) all or any portion of its Class A Member Interest or
withdraw from Chaparral without the prior written consent of the Primary Class B
Member in its sole discretion; provided, however, that no such consent of the
Primary Class B Member shall be required in connection with the Disposition by
the Class A Member of its Class A Member Interest to a Qualified Holder at any
time (x) after (i) the occurrence of a Limestone Note Trigger Event or (ii) the
occurrence of a Specified Equity Event or (y) during the Earn-Out Period.
Following any such Disposition by Limestone of its entire Class A Member
Interest in Chaparral, Limestone shall be deemed withdrawn from Chaparral as a
Class A Member. Upon any Disposition, in whole or in part, made in accordance
with this Section 10.1(a), the transferee of such Interest will be admitted as a
Class A Member of Chaparral without further action or consent by any other
Member.
(b) Dispositions of Class B Member Interest and any Additional Class B
Member Interest. No Class B Member shall Dispose of its Class B Member Interest
to any Person or withdraw from Chaparral without the prior written consent of
the Class A Member; provided, however, that any Class B Member may Dispose of
all or any portion of its Class B Member Interest to any El Paso Affiliate that
is a Qualified Holder and shall, if such interest is transferred in whole, be
deemed withdrawn from Chaparral as a Class B Member. Except as provided in
Article XI or Section 13.15, no holder of any Additional Class B Member Interest
shall Dispose of (other than by a retirement or redemption) all or any portion
of such Additional Class B Member Interest without the prior written consent of
the Primary Class B Member in its sole discretion; provided, that no such
consent of the Primary Class B Member shall be required in connection with the
Disposition by the holder of any Additional Class B Member Interest to a
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Qualified Holder after the occurrence of a Limestone Note Trigger Event,
Specified Equity Event or Limestone Certificate Trigger Event. Following any
Disposition in whole by the holder of any Additional Class B Member Interest,
such holder shall be deemed withdrawn from Chaparral as a Class B Member. Upon
any Disposition made in accordance with this Section 10.1(b), the transferee of
such Interest will be admitted as a Class B Member of Chaparral without further
action or consent by any other Member.
(c) Permitted Transfers. Any Disposition permitted by this Section 10.1
shall be referred to in this Chaparral LLC Agreement as a "PERMITTED TRANSFER,"
the Person to which the Interest is transferred shall be a "PERMITTED
TRANSFEREE" and the Interest transferred shall be a "TRANSFERRED INTEREST." A
Permitted Transferee shall be entitled to become a substituted Member in
Chaparral in respect of the applicable Transferred Interest without any further
act on the part of any other Member or the Managing Member being required. Any
Permitted Transferee of 100% of the Primary Class B Member's Interest shall
become the successor Managing Member hereunder without any further act on the
part of any other Member being required.
Section 10.2 Prohibited Dispositions. Any purported Disposition of an
Interest that is not a Permitted Transfer shall be null and void and of no
effect whatever; provided, however, that, if Chaparral is required to recognize
a Disposition of an Interest that is not a Permitted Transfer, the Transferred
Interest shall be strictly limited to the transferor's rights to allocations and
distributions as provided by this Chaparral LLC Agreement with respect to the
Transferred Interest, which allocations and distributions may be applied
(without limiting any other legal or equitable rights of Chaparral) to satisfy
any debts or obligations, or liabilities for damages that the transferor or
transferee of such Interest may have to Chaparral.
To the fullest extent permitted by law, in the case of a Disposition or
attempted Disposition of an Interest that is not a Permitted Transfer, the
parties engaging or attempting to engage in such Disposition shall be liable to
indemnify and hold harmless Chaparral and the other Members from all losses,
costs, liability, and damages that any of such indemnified Persons may incur
(including incremental tax liability and reasonable lawyers' fees and expenses)
as a result of such Disposition or attempted Disposition and efforts to enforce
the indemnity granted hereby.
ARTICLE XI
RETIREMENT OPTION; PURCHASE OPTION; EARN-OUT PERIOD
Section 11.1 Class B Member's Retirement Option.
(a) The Primary Class B Member may elect, at any time prior to a
Liquidating Event, to cause not less than all of the Class A Member Interest to
be retired in accordance with this Section 11.1 (the "RETIREMENT OPTION"), by
making an Irrevocable Election and giving written notice thereof (a "RETIREMENT
NOTICE") to Chaparral, the other Members, the Indenture Trustee (if any
Limestone Notes are then Outstanding) and the New Indenture Trustee (if any New
Limestone Notes are then Outstanding); provided, however, that (i) the
Retirement Option shall
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not be exercised by the Primary Class B Member if the Retirement Amount payable
in connection with such Retirement Option would exceed the balance of the Class
A Member's Capital Account immediately after giving effect to the adjustments
and allocations required by the first sentence of Section 11.1(c) and (ii) the
Retirement Option may not be exercised during the Earn-Out Period at any time
following the date on which an Asset Remedy Notice becomes effective pursuant to
Section 11.3(b) until the earlier of the date of (x) the rescission of such
Asset Remedy Notice by the Class A Member and (y) the Distribution of the
proceeds received from the sale of all assets identified in such Asset Remedy
Notice in accordance with Section 5.1(d).
(b) Any Retirement Notice shall include the following:
(i) a statement that the entire Class A Member Interest is to be
retired;
(ii) the date on which the retirement distribution shall be made to
the Class A Member (the "RETIREMENT DATE"), which date shall not be less
than ten Business Days nor more than ninety days after the date on which
the Retirement Notice was given; provided, however, that prior to the
Earn-Out Period Commencement Date and so long as any Limestone Notes or
New Limestone Notes are Outstanding, if an Asset Remedy Notice or
Liquidation Notice has been delivered or a Specified Equity Event has
occurred, in each case prior to the delivery of such Retirement Notice,
the Retirement Date shall not be later than (A) the date upon which such
Asset Remedy Notice or Liquidation Notice, as the case may be, becomes
effective pursuant to Section 11.3(a)(i) or Section 12.10(a), respectively
or (B) in the case of a Specified Equity Event, the later to occur of (x)
the earlier of the Special Management Replacement Date and the date on
which an Asset Remedy Notice becomes effective in accordance with Section
11.3(a), as applicable, and (y) the fifth Business Day following delivery
of such Retirement Notice (provided such Retirement Notice is given prior
to either of the dates referred to in clause (x) above); and
(iii) a representation and warranty by the Primary Class B Member
that Chaparral has, or will have on the Retirement Date, Cash in an amount
equal to or greater than the Retirement Amount.
(c) On the Retirement Date, the Gross Asset Values of all of Chaparral
assets shall be adjusted to equal their respective Xxxx-to-Market Values as of
the Xxxx-to-Market Measurement Date and any Net Income, Net Losses and other
items of income, gain, loss and deduction of Chaparral shall be allocated among
the Members as of such Xxxx-to-Market Measurement Date in accordance with
Article IV. Solely for GAAP accounting purposes, the retirement of the Class A
Member Interest pursuant to this Section 11.1(c) shall be deemed to be effective
on the applicable Xxxx-to-Market Measurement Date. For all purposes of the
Transaction Documents, on and after the retirement of the Class A Member
Interest pursuant to this Section 11.1(c), the Class A Member shall be deemed to
have withdrawn as, and no longer be, a Class A Member hereunder.
(d) On the Retirement Date, Chaparral shall Distribute to the Class A
Member Cash in an amount equal to the Purchase Price that would have been
payable on the applicable
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Retirement Date if the Electing Members had delivered a Purchase Option Notice
specifying such Retirement Date as the Purchase Date (the "RETIREMENT AMOUNT").
Such Distribution shall be made to the Class A Member, and the Class A Member
Interest in Chaparral shall be retired, at 11:00 a.m. (New York City time) on
the Retirement Date. Distributions to the Class A Member in connection with a
retirement of the Class A Member Interest shall consist solely of Cash unless
otherwise consented to by the Class A Member.
(e) Treatment as a Retirement under Section 736. Payments made in
liquidation of the Interest of the retiring Class A Member other than the
Termination Period Guaranteed Payment, shall be made in exchange for the
interest of such Member in Chaparral Property pursuant to Section 736(b)(1) of
the Code, including the interest of such Member in the goodwill of Chaparral.
Section 11.2 Class B Member's Purchase Option.
(a) The Primary Class B Member may, at any time permitted pursuant to
Section 11.2(b), elect to purchase or to cause the purchase of the Class A
Member's entire Class A Member Interest (the "PURCHASE OPTION"); provided, that
the Primary Class B Member makes an Irrevocable Election and the Electing
Purchasers give written notice to all the Members, the Indenture Trustee (if any
Limestone Notes are then Outstanding) and New Indenture Trustee (if any New
Limestone Notes are then Outstanding) (the "PURCHASE OPTION NOTICE"). The
Primary Class B Member may designate any Person as having the right, and may
assign to any Person the right, to purchase all or a portion of the Class A
Member Interest (the Primary Class B Member and each such designee or assignee,
an "ELECTING PURCHASER").
(b) The Purchase Option may be exercised at any time prior to the earliest
to occur of: (i) a Liquidating Event, (ii) after a Limestone Note Trigger Event
has occurred, the end of the Asset Remedy Standstill Period for such Limestone
Note Trigger Event or (iii) if a Specified Equity Event has occurred and is
continuing, the earlier of the Special Management Replacement Date and the date
on which an Asset Remedy Notice becomes effective in accordance with Section
11.3(a); provided, however, that the Purchase Option may not be exercised during
the Earn-Out Period at any time following the date on which an Asset Remedy
Notice becomes effective pursuant to Section 11.3(b) until the earlier of the
date of (x) the rescission of such Asset Remedy Notice by the Class A Member and
(y) the Distribution of the proceeds received from the sale of all assets
identified in such Asset Remedy Notice in accordance with Section 5.1(d).
(c) Any Purchase Option Notice shall include the following:
(i) a statement that the entire Class A Member Interest is to be
purchased;
(ii) a statement listing the Electing Purchasers and specifying the
amount of the Class A Member Interest that each such Electing Purchaser has
agreed to purchase; and
(iii) a statement specifying the date on which the closing of the
purchase and sale of the Class A Member Interest shall occur (the "PURCHASE
DATE"), which Purchase Date shall not be less than ten Business Days nor more
than ninety days after the date on which the Purchase Option Notice was given;
provided, however, that prior to the Earn-Out Period
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Commencement Date and so long as any Limestone Notes or New Limestone Notes are
outstanding, if (x) an Asset Remedy Notice or Liquidation Notice has been
delivered or (y) a Specified Equity Event has occurred, in each case prior to
the delivery of such Purchase Option Notice, then the Purchase Date shall not be
later than (A) the date upon which such Asset Remedy Notice or Liquidation
Notice as the case may be, becomes effective pursuant to Section 11.3(a)(i),
Section 12.10(a), respectively or (B) in the case of a Specified Equity Event,
the later to occur of (x) the earlier of the Special Management Replacement Date
and the date on which an Asset Remedy Notice becomes effective in accordance
with Section 11.3(a), as applicable, and (y) the fifth Business Day following
delivery of such Purchase Option Notice (provided that such Purchase Option
Notice is given prior to either of the dates referred to in clause (x) above).
(d) Xxxx-to-Market. On the Purchase Date, the Gross Asset Values of all of
Chaparral assets shall be adjusted to equal their respective Xxxx-to-Market
Values as of the Xxxx-to-Market Measurement Date and any Net Income, Gross
Income, Net Losses and other items of income, loss, gain, deduction and credit
of Chaparral shall be allocated among the Members as of such Xxxx-to-Market
Measurement Date in accordance with Article IV.
(e) Purchase Price/Payment. On the Purchase Date, the Electing
Purchaser(s) shall pay to the Class A Member an amount of Cash equal to the
following (the "PURCHASE PRICE"):
(i) If the Purchase Option is exercised on or prior to the Earn-Out
Period Commencement Date, the Purchase Price shall be the greater of (a)
the sum of (x) the balance of the Class A Member's Capital Account (as of
the Purchase Date and after giving effect to the allocations resulting
from the adjustments described in Section 11.2(d)), and (y) the
Termination Period Guaranteed Payment that would be payable in respect of
the period beginning immediately after the Xxxx-to-Market Measurement Date
and ending on the Purchase Date, and (b) the sum of (I) the accrued Class
A Member's Priority Return accrued from the immediately preceding
Distribution Date to the Purchase Date without regard to the portion
thereof described in clause (b)(iv) of the definition of Class A Member's
Priority Return, (II) the excess as of the immediately preceding
Distribution Date of the amount required to be Distributed pursuant to
Section 5.1(a) on such date over the amount Distributed pursuant to
Section 5.1(a) on such date, (III) the aggregate outstanding principal
amount of the Limestone Notes and the New Limestone Notes, (IV) the
Limestone Equity Cash Component, (V) if no Limestone Note Trigger Event,
Limestone Certificate Trigger Event or Specified Equity Event or
acceleration of the New Limestone Notes as a result of a New Indenture
Event of Default (other than Specified Equity Event arising solely as a
result of an acceleration of the New Limestone Notes as a result of a New
Indenture Event of Default of the type described in Section 9.01(a) of the
New Indenture) has occurred, the Limestone Equity Cash Component
Make-Whole Premium, (VI) the Limestone Equity PIK Component, (VII) if the
Purchase Date is prior to the Maturity Date, the Limestone Equity PIK
Component Make-Whole Premium, if any, and (VIII) all accrued and
unreimbursed Additional Financing Costs, in each case, as of the Purchase
Date; or
(ii) In the event that the Purchase Option is exercised after the
Earn-Out Period Commencement Date, the greater of (a) the amount that
would be determined
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pursuant to Section 11.2(e)(i) and (b) an amount that would if distributed
on the Purchase Date with respect to the Limestone Certificates result in
an IRR of 21% for the period from December 28, 1999 to the Earn-Out Period
Commencement Date and 25% from the Earn-Out Period Commencement Date to
the Purchase Date. For purposes of the determination made pursuant to
clause (a) of the preceding sentence, it shall be assumed that: (I) an
Earn-Out Period Commencement Date has not occurred, except for purposes of
computing any amount (including but not limited to the Class A Member's
Priority Return) that is determined by reference to any date; and (II) a
Limestone Note Trigger Event and Limestone Certificate Trigger Event has
occurred on the date the Purchase Option Notice is delivered and (III)
Section 11.2(e)(i)(b)(VII) shall be applied as if it read in its entirety
"the Unpaid Premium Amount, and."
(f) Purchase. (i) The closing of the purchase and sale of the Class A
Member Interest shall occur on the Purchase Date specified in the Purchase
Option Notice.
(ii) The closing shall occur at such place as is mutually agreeable
to the Members, or upon the failure to agree, at the principal place of
business of Chaparral. On the Purchase Date, the Class A Member shall
deliver to the Electing Purchasers good title to the Class A Member
Interest purchased, free and clear of any liens, claims, encumbrances,
security interests or options.
(iii) On the Purchase Date, the Members shall execute such documents
and instruments of conveyance as may be necessary or appropriate to
effectuate the transaction contemplated hereby, including the Disposition
of the Class A Member Interest. The reasonable costs of such Disposition
and closing, including attorneys' fees and filing fees of the Members,
shall be paid by the Electing Purchasers in proportion to their respective
Class A Member Interest.
(iv) Solely for GAAP accounting purposes and for purposes of the
Act, the purchase of the Class A Member Interest pursuant to this Section
11.2 shall be deemed to be effective as of the close of business on the
applicable Xxxx-to-Market Measurement Date and, thereafter, the Electing
Purchasers shall be admitted as substitute Class A Members of Chaparral in
respect of the portions of Limestone's (or its successor's) Class A Member
Interest acquired thereby and the Class A Member shall be deemed withdrawn
as, and shall no longer be, a Class A Member hereunder.
(g) Treatment as Purchase Under Section 741. The Members agree to treat
the Disposition of the Class A Member Interest to the Electing Purchasers
pursuant to this Section 11.2 as a purchase and sale under Section 741 of the
Code and not as a retirement under Section 736 of the Code.
Section 11.3 Asset Remedy.
(a) Asset Remedy Prior to Earn-Out Period. (i) So long as any Limestone
Notes or any New Limestone Notes are outstanding, the Class A Member may, at any
time following the occurrence of a Limestone Note Trigger Event, or, after the
repayment in full of all Outstanding Limestone Notes, a Specified Equity Event,
elect to cause the sale of one or more assets of
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Chaparral or Mesquite in accordance with paragraph (c) below (the "ASSET
REMEDY"), by delivering to the Managing Member (and, if the Primary Class B
Member is not the Managing Member, the Primary Class B Member) a written notice
of such election specifying the assets subject to such notice (an "ASSET REMEDY
NOTICE"), and such Asset Remedy Notice shall, unless the entire Class A Member
Interest is retired pursuant to Section 11.1 or purchased pursuant to Section
11.2 on or prior to (A) the applicable expiration of the Asset Remedy Standstill
Period or (B) in the case of a Specified Equity Event, the Special Management
Standstill Expiration Date, become effective to cause an Asset Remedy (x) upon
the applicable expiration of the Asset Remedy Standstill Period or (y) in the
case of a Specified Equity Event, the Special Management Standstill Expiration
Date; provided, however, that the Class A Member may rescind such Asset Remedy
Notice by delivering to the Managing Member (and, if the Primary Class B Member
is not the Managing Member, the Primary Class B Member) written notice of such
rescission; provided, further, that in the case of a Specified Equity Event,
such Asset Remedy Notice shall not become effective if the Specified Equity Cure
has occurred on or before the 30th day after the Specified Equity Event;
provided, further, that if the Certificate Purchase Option is consummated prior
to the date on which such notice delivered in connection with such Specified
Equity Event becomes effective, then such notice shall be deemed to have been
revoked and shall be of no further force and effect. Any such rescission shall
not affect the Class A Member's right to deliver any subsequent Asset Remedy
Notice.
(ii) So long as no Limestone Notes and no New Limestone Notes are
outstanding, and provided that the Earn-Out Period has not commenced, the
Class A Member may, at any time following the occurrence and during the
continuance of a failure of the Class A Member to receive any payment of
the Class A Member's Cumulative Priority Return under Section 5.1(a)
within five Business Days of any applicable Distribution Date, elect to
cause the Asset Remedy by delivering to the Managing Member (and, if the
Primary Class B Member is not the Managing Member, the Primary Class B
Member) an Asset Remedy Notice and such Asset Remedy Notice shall become
effective to cause an Asset Remedy on the 10th Business Day following
delivery of such Asset Remedy Notice; provided, however, that the Class A
Member may rescind such Asset Remedy Notice by delivering to the Managing
Member (and, if the Primary Class B Member is not the Managing Member, the
Primary Class B Member) written notice of such rescission; and provided,
further, that if an Irrevocable Election has been made by the Primary
Class B Member and a Purchase Option Notice or a Retirement Notice has
been delivered on or prior to such 10th Business Day, no Asset Remedy
Notice shall become effective to cause an Asset Remedy until the day after
the Purchase Date or Retirement Date, as the case may be, specified in
such notice (and then if, but only if, such purchase or retirement is not
consummated). Any such rescission shall not affect the Class A Member's
right to deliver any subsequent Asset Remedy Notice.
(b) Asset Remedy During Earn-Out Period. The Class A Member may, on any
date during the Earn-Out Period, elect to cause the Asset Remedy by delivering
to the Managing Member (and, if the Primary Class B Member is not the Managing
Member, the Primary Class B Member) an Asset Remedy Notice and such Asset Remedy
Notice shall become effective to cause an Asset Remedy on the 10th Business Day
following delivery of such Asset Remedy Notice; provided, however, that the
Class A Member may rescind any Asset Remedy Notice by
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delivering to the Managing Member (and, if the Primary Class B Member is not the
Managing Member, the Primary Class B Member) written notice of such rescission;
and provided, further, that if an Irrevocable Election has been made by the
Primary Class B Member and a Purchase Option Notice or Retirement Notice has
been delivered on or prior to such 10th Business Day, no Asset Remedy Notice
shall become effective to cause an Asset Remedy until the day after the Purchase
Date or Retirement Date, as the case may be, specified in such notice (and then
if, but only if, such purchase or retirement is not consummated). Any such
rescission shall not affect the Class A Member's right to deliver any subsequent
Asset Remedy Notice.
(c) Dispositions. After the effective election of the Asset Remedy, the
Class A Member shall have the right and authority to cause Chaparral to Dispose
of any Chaparral Property, and cause Chaparral to cause Mesquite to Dispose of
any Mesquite Property; provided, however, that no such Disposition shall be made
to any Person that is the Class A Member, a Certificateholder, or any Restricted
Person.
Section 11.4 Earn-Out Period.
(a) Allocations; Distributions. During the Earn-Out Period (i) Net Income
and Net Losses shall be allocated as set forth in Section 4.2 and (ii)
Distributions shall be made to the Class A Member as set forth in Section
5.1(b).
(b) Restrictions on Authority of Managing Member. Notwithstanding any
power or authority granted the Managing Member under the LLC Act, the Chaparral
Certificate of Formation or this Chaparral LLC Agreement, during the period
commencing on the Earn-Out Period Commencement Date and ending on the Earn-Out
Period Termination Date, (i) the Managing Member shall not have the authority
to, and covenants and agrees that it shall not, take any of the following
actions without the consent of all of the Members: (x) cause or permit Chaparral
or Mesquite to acquire (by purchase, contribution or exchange) any additional
assets, (y) cause or permit Chaparral or Mesquite to incur any additional
Indebtedness, or (z) cause or permit Chaparral or Mesquite to make any
Dispositions other than (1) Dispositions to provide Cash to be Distributed to
Chaparral for the purpose of enabling Chaparral to make Distributions under
Section 5.1(b) and (2) Dispositions of the type described in clause (B), (C), or
(E) of Section 6.3(e), and (ii) the Managing Member, on behalf of Chaparral as
sole member of Mesquite, shall cause Mesquite to distribute to Chaparral all
Available Cash of Mesquite to the extent permitted to be distributed in
accordance with the Mesquite Financing Documents (other than Mesquite Specified
Credit Documents) and the Transaction Documents.
(c) Expiration of Earn-Out Period. If no Liquidating Event shall have
occurred, then on and after the Earn-Out Period Termination Date: (i) the Class
A Member shall have no right or authority to cause Chaparral to take any action
and, without limitation of the foregoing, all of the Class A Member's rights
under Section 7.4 shall be terminated and the Class B Member shall, without
further action, have all of the rights given to the Class A Member under such
Section, (ii) the Class B Member shall have the right and authority to cause
Chaparral to admit one or more additional Members and/or issue additional
membership interests, in each case as directed by the Class B Member, and (iii)
the Class B Member shall have the right to cause Chaparral to retire the Class A
Member Interest for an amount equal to the Class A Member's then current Capital
Account balance.
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ARTICLE XII
DISSOLUTION AND WINDING UP
Section 12.1 Liquidating Events. Chaparral shall dissolve and commence
winding up and liquidating upon the first to occur of any of the following
(collectively, "LIQUIDATING EVENTS"):
(a) Expiration of Term. The tenth anniversary of the Closing Date.
(b) Liquidation Notice. The date on which, pursuant to Section
12.10, a Liquidation Notice becomes effective to cause a Liquidating
Event.
(c) Unanimous Vote. The unanimous vote of the Members to dissolve,
wind up, and liquidate Chaparral or Mesquite.
(d) Voluntary Withdrawal or Removal of Managing Member. The
voluntary withdrawal or removal of the Managing Member.
(e) Illegality, etc. The happening of any event that makes it
unlawful, impossible, or impractical to carry on the business of Chaparral
or the Delaware Court of Chancery has entered a decree pursuant to Section
18-802 of the LLC Act, and such decree has become final.
(f) Failure of Earn-Out. The third anniversary of the Earn-Out
Period Commencement Date shall have occurred and there has been no prior
Earn-Out Period Termination Date.
The Members hereby agree that, notwithstanding any provision of the LLC Act,
Chaparral shall not dissolve prior to the occurrence of a Liquidating Event.
Upon the occurrence of any event set forth in Section 12.1(a) (so long as no
other Liquidating Event has occurred), Chaparral shall not be dissolved or
required to be wound up if at the time of such event there is at least one
remaining Member and that Member carries on the business of Chaparral in
accordance with Section 18-801 of the LLC Act (any such remaining Member being
hereby authorized to carry on the business of Chaparral). If at such time there
is not at least one remaining Member or the remaining Member does not carry on
the business of Chaparral, Chaparral shall be liquidated in accordance with this
Article XII.
Section 12.2 Winding Up. Upon the occurrence of a Liquidating Event,
Chaparral shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Members, and no Member shall take any action with respect to
Chaparral that is inconsistent with the winding up of Chaparral's business and
affairs; provided that all covenants contained in this Chaparral LLC Agreement
and obligations provided for in this Chaparral LLC Agreement shall continue to
be fully binding upon the Members until such time as Chaparral Property has been
distributed pursuant to this Section 12.2 and the Chaparral Certificate of
Formation has been canceled pursuant to the LLC Act. The Liquidator shall be
responsible for overseeing the winding up and dissolution of
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Chaparral. On the occurrence of a Liquidating Event, the Gross Asset Values of
all of Chaparral's assets shall be adjusted to equal their respective Xxxx-to
Market Values as of the Xxxx-to-Market Measurement Date and any Net Income,
Gross Income, Net Losses and other items of income, loss, deduction, gain and
credit of Chaparral shall be allocated among the Members as of such
Xxxx-to-Market Measurement Date in accordance with Article IV. The Liquidator
shall take full account of Chaparral's liabilities and the Chaparral Property
and, except as otherwise provided in Section 12.3, shall, within 75 days of the
occurrence of a Liquidating Event or, in the event that the certification by the
Chaparral Accountants required by Section 8.2(d) has not been delivered by such
75th day as soon as practicable after delivery of such accountant's
certification but in any event within 90 days of such Liquidating Event, cause
the Chaparral Property or the proceeds from the sale or disposition thereof (as
determined pursuant to Section 12.9), to the extent sufficient therefor, to be
applied and distributed, to the maximum extent permitted by Applicable Law and
notwithstanding anything in this Chaparral LLC Agreement to the contrary, in the
following order (without duplication):
(a) First, to creditors (including the Class A Member to the extent
such Member is a creditor, to the extent otherwise permitted by Applicable
Law), other than the Class B Members and their Affiliates, in satisfaction
of all of Chaparral's debts and liabilities other than liabilities for
which reasonable provision for payment has been made;
(b) Second, to the Class A Member in an amount equal to the amount
of any Termination Period Guaranteed Payment to the extent not previously
paid;
(c) Third, to the payment and discharge of all of Chaparral's debts
and liabilities to the Managing Member, the Class B Members and their
Affiliates to the extent adequate provision therefor has not been made;
and
(d) Fourth, the balance to the Members in accordance with their
respective Capital Accounts, as provided under Article IV, immediately
after giving effect to the adjustments and allocations required by the
third sentence of this Section 12.2.
The Managing Member shall not receive any additional compensation for any
services performed pursuant to this Article XII.
The Managing Member understands and agrees that by accepting the
provisions of this Section 12.2 setting forth the priority of the distribution
of the assets of Chaparral to be made upon its liquidation, the Managing Member
expressly waives any right that it, as a creditor of Chaparral, might otherwise
have under the LLC Act to receive distributions of assets pari passu with the
other creditors of Chaparral in connection with a distribution of assets of
Chaparral in satisfaction of any liability of Chaparral, and hereby subordinates
to said creditors any such right.
Section 12.3 No Restoration of Deficit Capital Accounts; Compliance With
Timing Requirements of Regulations. In the event Chaparral is "liquidated"
within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g), (x) distributions
shall be made pursuant to this Article XII to the Members who have positive
Capital Accounts in compliance with Regulation Section 1.704-1(b)(2)(ii)(b)(2),
and (y) if the Class A Member's Capital Account or the Class B
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Member's Capital Account has a deficit balance (after giving effect to all
contributions, distributions, and allocations for all taxable years, including
the taxable year during which such liquidation occurs), the Member whose Capital
Account has a negative balance shall have no obligation to contribute to the
capital of Chaparral the amount necessary to restore such deficit balance to
zero, and such deficit shall not be considered a debt owed to Chaparral or to
any other Person for any purpose whatsoever.
In the discretion of the Liquidator, with the consent of the Members, a
portion (determined in the manner provided below) of the distributions that
would otherwise be made to the Members pursuant to this Article XII may be:
(a) Distributed to a trust established for the benefit of the
Members solely for the purposes of liquidating Chaparral Property,
collecting amounts owed to Chaparral, and paying any contingent or
unforeseen liabilities or obligations of Chaparral or of the Managing
Member arising out of or in connection with Chaparral. The assets of any
such trust shall be distributed to the Members from time to time, in the
reasonable discretion of the Liquidator, in the same proportions as the
amount distributed to such trust by Chaparral would otherwise have been
distributed to the Members pursuant to Section 12.2; or
(b) Withheld to provide a reasonable reserve for liabilities
(contingent or otherwise) of Chaparral and to allow for the collection of
the unrealized portion of any installment obligations owed to Chaparral;
provided, however, that such withheld amounts shall be distributed to the
Members as soon as practicable.
The portion of the distributions that would otherwise have been made to each of
the Members that is instead distributed to a trust pursuant to Section 12.3(a)
or withheld to provide a reserve pursuant to Section 12.3(b) shall be determined
in the same manner as the expense or deduction would have been allocated if
Chaparral had realized an expense equal to such amounts immediately prior to
distributions being made pursuant to Section 12.2.
Section 12.4 Deemed Distribution and Recontribution. Notwithstanding any
other provision of this Section 12, in the event Chaparral is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event
has occurred, the Chaparral Property shall not be liquidated, Chaparral's debts
and other liabilities shall not be paid or discharged, and Chaparral's affairs
shall not be wound up. Instead, solely for federal income tax purposes,
Chaparral shall be deemed to have contributed all of the Chaparral Property and
liabilities to a new limited liability company in exchange for an interest in
such new company and, and immediately thereafter, Chaparral Property will be
deemed to liquidate by distributing interests in the new company to the Members.
Section 12.5 Rights of Members. Each Member shall look solely to the
Chaparral Property for the return of its Capital Contribution and, except as
otherwise provided in Section 12.9, shall have no right or power to demand or
receive property other than Cash from Chaparral.
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Section 12.6 Notice of Dissolution. The Managing Member shall promptly
provide written notice to each of the Members of the occurrence of any
acceleration of the New Limestone Notes as a result of a New Indenture Event of
Default, a Limestone Note Trigger Event, Limestone Certificate Trigger Event,
Specified Equity Event or Liquidating Event (other than a Liquidating Event of
the type described in Section 12.1(a)) in accordance with Section 6.5(b).
Section 12.7 Character of Liquidating Distributions. All payments made in
liquidation of the Interest of a retiring Member (whether pursuant to Article XI
or Article XII), other than the Termination Period Guaranteed Payment, shall be
made in exchange for the interest of such Member in Chaparral Property pursuant
to Code Section 736(b)(1), including the interest of such Member in goodwill of
Chaparral.
Section 12.8 The Liquidator.
(a) Definition. The "LIQUIDATOR" means (i) in the case of any Liquidating
Event described in clause (a), (c) or (e) of Section 12.1, the Primary Class B
Member or any other Affiliate of El Paso appointed as Liquidator by the Primary
Class B Member and (ii) in the case of any other Liquidating Event, the Class A
Member or any other Person appointed as Liquidator by the Class A Member.
The Primary Class B Member (or the Class A Member if it may then appoint
the Liquidator) may appoint an appointee to be Liquidator on or prior to the
date on which a Liquidating Event occurs by delivering written notice of such
appointment to the other Members. Any such appointment may be subsequently
withdrawn by similar written notice.
The Liquidator shall have the rights set forth in Section 18-803(b) of the
LLC Act and exclusively shall have the rights, power and authority of the
Managing Member necessary or appropriate in its discretion to effect the
dissolution, winding up and liquidation of Chaparral. The actions of the
Liquidator shall for all purposes be the actions of Chaparral.
(b) Fees. Chaparral is authorized to pay a reasonable fee to the
Liquidator for its services performed pursuant to this Article XII and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services.
(c) Resignation of Liquidator. At any time any Liquidator may, in its
discretion, resign as Liquidator and the Primary Class B Member (or the Class A
Member if it may then appoint the Liquidator) shall appoint a replacement
Liquidator pursuant to Section 12.8(a).
Section 12.9 Form of Liquidating Distributions.
(a) In General. Except as provided in this Section 12.9, for purposes of
making distributions required by Section 12.2, the Liquidator may determine
whether to distribute all or any portion of Chaparral Property in-kind or to
sell all or any portion of Chaparral Property and distribute the proceeds
therefrom, provided that the Liquidator shall not distribute Chaparral Property
other than Cash to the Class A Member without its consent, and the Liquidator
shall be required to reduce Chaparral Property to Cash to the extent necessary
to make distributions to the Class A Member pursuant to Section 12.2 in Cash.
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(b) Class A Member In-Kind Election. At the election of the Class A
Member, the Liquidator may be required to distribute all of the Chaparral
Property in-kind. In such event, Chaparral Property to be distributed to each
Member shall be determined by the Liquidator; provided that, subject to the next
sentence, distribution of any Chaparral Property to the Class A Member other
than the El Paso Notes or Financial Investments shall require the consent of all
of the Members. If the liquidation of Chaparral is caused by the Bankruptcy of
El Paso, the Class B Member, the Managing Member or Chaparral, upon the request
of the Class A Member, and to the extent so requested, the Liquidator shall
distribute to the Class A Member the El Paso Notes or Financial Investments to
the extent practicable.
Section 12.10 Liquidation Notice.
(a) Liquidating Events Prior to Earn-Out Period. Prior to the Earn-Out
Period Commencement Date, the Class A Member may, at any time on or after the
occurrence of a Limestone Note Trigger Event or a Specified Equity Event,
deliver to the Managing Member (and, if the Primary Class B Member is not the
Managing Member, the Primary Class B Member) a written notice (a "LIQUIDATION
NOTICE") stating that such Limestone Note Trigger Event or such Specified Equity
Event constitutes a Liquidating Event; provided, however, that: (i) the delivery
of a Liquidation Notice shall not become effective to cause a Liquidating Event
until (A) the expiration of the applicable Asset Remedy Standstill Period or (B)
in the case of a Specified Equity Event, the Special Management Standstill
Expiration Date; (ii) the Class A Member may rescind such Liquidation Notice by
delivering to the Managing Member (and, if the Primary Class B Member is not the
Managing Member, the Primary Class B Member) a rescission notice prior to (A)
the end of the applicable Asset Remedy Standstill Period or (B) in the case of a
Specified Equity Event, the Special Management Standstill Expiration Date; and
(iii) if an Irrevocable Election has been made by the Primary Class B Member and
a Purchase Option Notice or Retirement Notice has been delivered prior to (A)
the expiration of the Asset Remedy Standstill Period or (B) in the case of a
Specified Equity Event, the earlier of the Special Management Replacement Date
and the date on which an Asset Remedy Notice becomes effective in accordance
with Section 11.3(a), no Liquidation Notice shall become effective to cause a
Liquidating Event until the day after the Purchase Date or Retirement Date, as
the case may be, specified in such notice (and then if, but only if, such
purchase or retirement is not consummated); provided, further, that in the case
of a Specified Equity Event, such Liquidation Notice shall not become effective
if the Specified Equity Cure has occurred on or before the 30th day after such
Specified Equity Event; provided, further, that if the Certificate Purchase
Option is consummated prior to the date on which such notice becomes effective,
then such notice shall be deemed to have been revoked and shall be of no further
force and effect.
(b) Liquidating Events During Earn-Out Period. The Class A Member may, on
any date during the Earn-Out Period, elect to cause a Liquidating Event by
delivering to the Managing Member (and, if the Primary Class B Member is not the
Managing Member, the Primary Class B Member) a Liquidation Notice; provided,
however, that: (i) the delivery of such Liquidation Notice shall not become
effective to cause a Liquidating Event until the 10th Business Day following
delivery of such Liquidation Notice; (ii) the Class A Member may rescind such
Liquidation Notice by delivering to the Managing Member (and, if the Primary
Class B Member is not the Managing Member, the Primary Class B Member) a
rescission notice prior to such 10th Business Day; and (iii) if an Irrevocable
Election has been made by the
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Primary Class B Member and a Purchase Option Notice or Retirement Notice has
been delivered on or prior to such 10th Business Day, no Liquidation Notice
shall become effective to cause a Liquidating Event until the day after the
Purchase Date or Retirement Date, as the case may be, specified in such notice
(and then if, but only if, such purchase or retirement is not consummated).
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Amendments. No amendment or waiver of any provision of this
Chaparral LLC Agreement, and no consent to any departure by any party herefrom,
shall in any event be effective unless the same shall be in writing and signed
by all Members in accordance with Section 9.1. No such waiver of a provision or
consent to a departure in any one instance shall be construed as a further or
continuing waiver of or consent to subsequent occurrences, or a waiver of any
other provision or consent to any other departure.
Section 13.2 Notices. Any notice, payment, demand, or communication
required or permitted to be given by any provision of Chaparral LLC Agreement
shall be in writing or by facsimile and shall be deemed to have been delivered,
given, and received for all purposes (a) if delivered personally to the Person
or to an officer of the Person to whom the same is directed or (b) when the same
is actually received (if during the recipient's normal business hours if during
a Business Day, or, if not, on the next succeeding Business Day), if sent by
facsimile (followed by a hard copy of the facsimiled communication sent by
certified mail, postage and charges prepaid), or by courier or delivery service
or by mail, addressed, if to any Member or the Managing Member, to such person
at its address or facsimile number set forth on Schedule 13.2 hereto or to such
other address as such Person may from time to time specify by notice, and if to
any other Person, at its address specified in the Transaction Document pursuant
to which such Person is to receive notice or by notice given in the manner
provided herein to each other Person entitled to receive notice hereunder, or,
in each case, to such other address (and with copies to such other Persons) as
the Person entitled to receive notice hereunder shall specify by notice given in
the manner provided herein to the other Persons entitled to receive notice under
the relevant Transaction Document.
Section 13.3 No Waiver; Cumulative Remedies. No failure on the part of any
Person to exercise, and no delay in exercising, any right under this Chaparral
LLC Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Chaparral LLC Agreement preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in this Chaparral LLC Agreement are cumulative and not exclusive of any
remedies provided by Applicable Law.
Section 13.4 Waiver of Jury Trial. EACH PARTY TO THIS CHAPARRAL LLC
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS
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CHAPARRAL LLC AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 13.5 Counterparts. This Chaparral LLC Agreement may be executed in
any number of counterparts and by different parties thereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
This Chaparral LLC Agreement may be delivered by facsimile transmission of the
relevant signature pages thereof.
Section 13.6 Survival of Representations, Warranties and Indemnities:
Entire Agreement. All representations, warranties and indemnities and
undertakings to pay costs and expenses contained in this Chaparral LLC Agreement
or made by or on behalf of the parties hereto, as the case may be, in connection
with this Chaparral LLC Agreement shall survive (a) the execution and delivery
of this Chaparral LLC Agreement and the other Transaction Documents, (b)
performance by each party of its Obligations under this Chaparral LLC Agreement
and each other Transaction Document to which it is a party and (c) the
Disposition (whether or not such Disposition was a Permitted Transfer) by (A) El
Paso Chaparral of all or a portion of its Class B Member Interest in Chaparral
or any termination of its status as a Class B Member of Chaparral pursuant to
this Chaparral LLC Agreement or (B) any other Member of all or a portion of its
interest in Chaparral or any termination of such Person's status as a member of
Chaparral, and may be relied upon by the Persons permitted thereunder,
regardless of any investigation made at any time by or on behalf of such Persons
or any such assignee.
Section 13.7 Severability. Any provision of this Chaparral LLC Agreement
that is prohibited by or unenforceable in any relevant jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions thereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 13.8 Construction. Every covenant, term, and provision of each
Transaction Document shall be construed simply according to its fair meaning and
not strictly for or against any party thereto.
Section 13.9 Determination of Capital Accounts. In the event the Class A
Member or the Class B Member disputes in an appropriate proceeding the
determination of its Capital Account, an independent determination of the
Members' Capital Accounts shall be made without any special weight being given
to any prior determination made within the discretion of the Managing Member.
Section 13.10 Governing Law. THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES) SHALL GOVERN THE VALIDITY OF THIS
CHAPARRAL LLC AGREEMENT, THE CONSTRUCTION OF ITS TERMS, AND THE INTERPRETATION
OF THE RIGHTS AND DUTIES OF THE MEMBERS.
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Section 13.11 Waiver of Action for Partition. Each of the Members
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the Chaparral Property.
Section 13.12 Consent to Jurisdiction. Each Member (i) irrevocably submits
to the jurisdiction of any Delaware State court or federal court sitting in
Wilmington, Delaware in any action arising out of this Chaparral LLC Agreement,
(ii) agrees that all claims in such action may be decided in such court, (iii)
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum and (iv) consents to the service of process by mail. A final
judgment in any such action shall be conclusive and may be enforced in other
jurisdictions. Nothing herein shall affect the right of any party to serve legal
process in any manner permitted by law or affect its right to bring any action
in any other court.
Section 13.13 Specific Performance. Each Member agrees with the other
Members that the other Members would be irreparably damaged if any of the
provisions of this Chaparral LLC Agreement are not performed in accordance with
their specific terms and that monetary damages would not provide an adequate
remedy in such event. Accordingly, it is agreed that, in addition to any other
remedy to which the nonbreaching Members may be entitled, at law or in equity,
the nonbreaching Members shall be entitled to injunctive relief to prevent
breaches of the provisions of this Chaparral LLC Agreement and specifically to
enforce the terms and provisions of this Chaparral LLC Agreement in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction thereof.
Section 13.14 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Chaparral LLC Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally, but
solely as Trustee, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of Limestone is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose of binding only Limestone, (c) nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company, individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties hereto and by any Person claiming by, through or under the parties
hereto and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of Limestone
or be liable for the breach of failure of any obligation, representation,
warranty or covenant made or undertaken by Limestone under this Chaparral LLC
Agreement.
Section 13.15 Consent to Collateral Assignment by Class A Member; Rights
of Action.
(a) Pursuant to the terms of the Indenture, the Class A Member has
transferred and assigned for security purposes, and granted a first priority
security interest in, substantially all of its assets (including, without
limitation, all of the rights of the Class A Member under (i) the Class A Member
Interest, (ii) any Additional Class B Member Interest and (iii) this Chaparral
LLC Agreement) to the Indenture Trustee for the benefit of the holders from time
to time of the Limestone Notes. Chaparral and each Class B Member hereby
acknowledges and consents, for the benefit of the Class A Member and the
Indenture Trustee, on behalf of the holders of the
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Limestone Notes, to such collateral assignment by the Class A Member to the
Indenture Trustee (or to any subsequent transferee following foreclosure on such
security interest) and agrees that the Indenture Trustee, on behalf of the
holders of the Limestone Notes (or any subsequent transferee following
foreclosure on such security interest), shall, on or after a Limestone Note
Trigger Event, have the right to pursue any remedy available to the Class A
Member under this Chaparral LLC Agreement, the other Transaction Documents or in
law to secure the performance by Chaparral, any Class B Member or any other
Person of its obligations hereunder or thereunder.
(b) The parties hereto further acknowledge the rights of action of the New
Indenture Trustee to enforce, and institute and maintain any suit, action or
proceeding against Limestone to enforce, or otherwise act in respect of, the
right of the New Noteholders under the New Indenture and to maintain any
proceeding against the assets of Limestone to enforce, or levy on, any judgment
resulting therefrom, subject to Section 2.05(f) of the New Indenture.
Section 13.16 Effectiveness. This Chaparral LLC Agreement shall take
effect as of the Effective Date.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date above first written.
CLASS A MEMBER:
LIMESTONE ELECTRON TRUST
By: Wilmington Trust Company, not in its individual
capacity but solely as trustee
By: /s/ Xxx Xxxxxxx
-----------------------------
Name: Xxx Xxxxxxx
Title: Assistant Vice President
CLASS B MEMBERS:
EL PASO CHAPARRAL INVESTOR, L.L.C.
By: El Paso Chaparral Holding Company, its sole member
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxx
Title: Senior Vice President
EL PASO CHAPARRAL HOLDING II COMPANY
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxx
Title: Senior Vice President
Fifth Amended and Restated Chaparral LLC Agreement
Chaparral LLC Agreement
ACKNOWLEDGED AND AGREED:
PRIMARY CLASS B MEMBER, as Managing Member:
EL PASO CHAPARRAL INVESTOR, L.L.C.
By: El Paso Chaparral Holding Company,
its sole member
By: /s/ Xxxx X. Xxxxxxxx
------------------------
Name: Xxxx X. Xxxxxxxx
Title: Senior Vice President
ACKNOWLEDGED AND AGREED:
CHAPARRAL INVESTORS, L.L.C.,
By: El Paso Chaparral Investor, L.L.C., as its managing member
By: El Paso Chaparral Holding Company, as its sole member
By: /s/ Xxxx X. Xxxxxxxx
------------------------
Name: Xxxx X. Xxxxxxxx
Title: Senior Vice President
Fifth Amended and Restated Chaparral LLC Agreement