Operating Agreement dated as of June 23, 2006, by and between Xethanol Corporation and Global Energy and Management LLC. OPERATING AGREEMENT OF NEWENGLANDXETHANOL, LLC, a Delaware limited liability company
Exhibit
1.2
Operating
Agreement dated as of June 23, 2006, by and between Xethanol Corporation and
Global Energy and Management LLC.
OF
NEWENGLANDXETHANOL,
LLC,
a
Delaware limited liability company
THIS
OPERATING AGREEMENT (this "Agreement")
of
NewEnglandXethanol, LLC, a Delaware limited liability company (the "Company"),
is
made effective as of this 23rd day of June, 2006, by and among the Company and
the individuals and entities listed on Schedule
A
hereto
(each individually a "Member"
and
collectively the "Members").
WHEREAS,
the Company has been formed pursuant to the Act by the filing of Certificate
of
Formation in the office of the Secretary of State of Delaware on April 27,
2006;
WHEREAS,
the Members wish to set forth their respective rights, obligations and duties
with respect to the Company and its business, management and
operations.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which the parties hereby acknowledge, and in consideration of the premises
and
the mutual agreements contained herein, the parties hereby agree as
follows:
ARTICLE
1
DEFINITIONS
1.1 Certain
Definitions.
As used
in this Agreement:
1.1.1 Act
shall
mean means the Delaware Limited Liability Company Act set forth in Sections
18-101 to 18-1109 of Title 6 of the Delaware Code, as amend-ed from time to
time
(or any corresponding provision or provisions of succeeding law).
1.1.2 Adjusted
Capital Account
shall
mean, with respect to the Capital Account of any Member, the balance of such
Member's Capital Account after giving effect to adjustments related to any
credit or debit to such Capital Account as required by the Code or the
Regulations promulgated thereunder.
1.1.3 Affiliate
shall
mean, with respect to any specified person or entity,
(i) any
person or entity that directly or indirectly controls, is controlled by, or
is
under common control with such specified person or entity; (ii) any person
or
entity that directly or indirectly controls 10 percent more of the outstanding
equity securities of the specified entity or of which the specified person
or
entity is directly or indirectly the owner of 10 percent or more of any class
of
equity securities; (iii)
any
person or entity that
is
an officer of, manager of, director of, partner in, or trustee of, or serves
in
a similar capacity with respect to, the specified person or entity or of which
the specified person or entity is an officer, director, partner, manager or
trustee, or with respect to which the specified person or entity serves in
a
similar capacity; or (iv) any person that is a member of the immediate family
of
the specified person.
1.1.4 Agreement
shall
mean this Operating Agreement, as it may be amended, supplemented or restated
from time to time.
1.1.5 Articles
of Organization
shall
mean the Certificate of Formation creating the Company, as it may be amended
from
time
to
time in accordance with the Act.
1.1.6 Board
of Managers
shall
have the meaning ascribed to such term in Section 7.1.
1.1.7 Capital
Account
shall have the meaning ascribed to such term in Section 3.3.
1.1.8 Capital
Contribution
means
the amount of cash or the fair market value of property contributed to the
Company by a Member as the consideration for such Member's interest in the
Company. Any reference in this Agreement to the Capital Contribution of a then
Member shall with respect to an Interest in the Company shall include a Capital
Contribution previously made by any prior Member with respect to that interest
of such then Member in the Company. The initial capital contributions of the
Members are as set forth on Schedule B.
1.1.9 Class
A Units
shall
have the meaning ascribed to such term
in Section
4.1.
1.1.10 Class
A Member
shall
mean a Member holding Class A Units.
1.1.11 Class
B Units
shall
have the meaning ascribed to such term in Section 4.1.
1.1.12 Class
B Member
shall
mean a Member holding Class B Units.
1.1.13 Closing
shall
have the meaning ascribed to such term in Section 9. 4.1.
1.1.14 Code
shall
mean the Internal Revenue Code of 1986, as amended from time to
time.
1.1.15 Common
Stock
shall
mean the $.001 par value Common Stock of Xethanol Corporation.
1.1.16 Company
shall
mean NewEnglandXethanol, LLC.
1.1.17 Confidential
Information
shall
have the meaning ascribed to such term in Section 5.3.
1.1.18 Facility
shall
mean a biorefinery for the production of ethanol having an annual production
capacity of 15,000,000 to 25,000,000 barrels of ethanol per year.
1.1.19 GAAP
shall
mean United States generally accepted accounting principles consistently
applied.
2
1.1.20 Involuntary
Transfer
shall
have the meaning ascribed to such term in Section 9.2.
1.1.21 Managers
shall
have the meaning ascribed to such term in Section 7.2.
1.1.22 Members
shall
mean all of the individuals or entities holding Units set forth on Schedule
A
hereto,
and any person or entity as may from time to time become an additional,
substitute or replacement Member upon such terms and conditions as provided
by
this Agreement and the Act,
in
such person's
capacity as a Member of the Company. "Members" shall refer collectively to
all
such persons in their capacities as Members.
1.1.23 Permitted
Transferee
shall
mean the other Members of the Company existing at the time of the proposed
Transfer.
1.1.24 Project
shall
mean the acquisition, development, construction and operation of a Facility
within the Territory.
1.1.25 Purpose shall
have the meaning ascribed to such term in Section 2.4.
1.1.26 Regulations
means
the Treasury Regulations promulgated under the Code, as from time to time in
effect.
1.1.27 Special
LLC
shall
mean a limited liability company that is formed by the Company for the purposes
of a single Project.
1.1.28 Territory
shall
mean the States of Connecticut, Massachusetts, Rhode Island, New Hampshire,
Vermont and Maine.
1.1.29 Transfer
means
any disposition or attempted disposition, directly or indirectly, by operation
of law or otherwise, voluntarily or involuntarily, of the Units (as defined
below) or any right, power or interest therein, including, without limitation,
any sale, gift, pledge, encumbrance, creation of a security interest of, in
or
pertaining to the units, regardless of whether the person effecting, causing
to
be effected or permitting such disposition or attempted disposition is a Member,
an assignee, heir, legatee, executor or administrator thereof, or a trustee,
receiver, conservator, liquidator or guardian appointed under any bankruptcy,
debtor relief or other law, or otherwise.
1.1.30 Unit
or
Units
shall
have the meanings ascribed to such terms in Section 4.1.
1.1.31 Unrecovered
Capital Contribution
means
the portion of a Member's Capital Contribution attributable that a Member’s
Units which has not been distributed to that Member pursuant to Section 6.4
or
paid to that Member under Section 6.6 and recovered against distribution
otherwise payable under Section 6.4.
1.1.32 Value
means
the fair market value of a Unit if sold in an arms’ length transaction to a
willing buyer, without applying any discounts for marketability, lack of control
or similar matters and assuming the continued operation of the Company and
each
Special LLC in the ordinary course. If the Member tendering Units and the
purchaser (the Company or the other Member, as the case may be) cannot agree
upon the Value within twenty (20) days of the notice or event that gave rise
to
the need for determination of the Value of a Unit, the parties will refer the
matter for appraisal in accordance with the following:
3
(a) The
parties shall
endeavor
in good faith to
agree, within
ten (10) days of
the
last day of the twenty
(20) day period, upon a sole appraiser to conduct the appraisal. Such appraiser
shall conduct an appraisal of the Value of the Units within thirty (30) days
of
his selection, which appraisal shall be binding on the parties.
(b) If
the
parties cannot agree upon a sole appraiser within ten (10) days of the last
day
of the 20-day period referred to above, each of the Members and the Company
(as
applicable) will select an appraiser and the two appraisers will select a third
appraiser. The three appraisers shall be known as the "Appraisal
Panel".
(c) Each
appraiser will be qualified by education, experience or training to render
a
decision in the matters submitted.
(d) If
an
Appraisal Panel is selected, within thirty (30) days of the selection of the
third appraiser, the first two appraisers, after having conducted such
investigation as they deem necessary, will each submit the Value which it
believes is accurate (the "Submitted
Valuation"),
together with all of the information and data on which it based its
determination, to the third appraiser.
(e) Within
sixty (60) days after the third appraiser has received the Submitted Valuations,
such appraiser will render a decision determining the Value, as follows: if
the
Submitted Valuations are within ten percent (l0%) of the higher Submitted
Valuation, then the Value shall be the average of the Submitted Valuations.
If
the Submitted Valuations diverge by more than ten percent (10%) of the higher
Submitted Valuation, then the third appraiser shall determine the Value by
selecting one of the Submitted Valuations.
1.1.33 Unit
shall mean a Unit of interest in the Company, each of which shall represent
an
interest in the Company pro rata
to the
number of outstanding Units and shall entitle the holder thereof to those rights
that are set forth in this Operating Agreement.
1.1.34 Voting
Members
shall
mean the holders of the Class A Units and the holders of Class B
Units.
1.2 Singular/Plural,
Gender, Etc.
In the
case of all terms used in this Agreement, the
singular.
shall
include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, as the context requires.
ARTICLE
2
NAME,
OFFICE AND FORMATION OF THE COMPANY
2.1 Name.
The
name of the Company is NewEnglandXethanol, LLC or such other name as the Voting
Members may from time to time determine. The Board of Managers shall cause
to be
filed on behalf of the Company such corporate, assumed or fictitious name or
foreign qualification certificate or certificates as may from time to time
be
required by law.
4
2.2 Registered
Office and Agent.
The
Company may establish an office and resident agent for service of process and
may establish offices and appoint agents for service of process in other
jurisdictions as determined by the Board of Managers from time to
time.
2.3 Principal
Place of Business.
The
principal place of business of the Company shall be 000 Xxxxxxxx Xxxxx,
Xxxxxxxxx, XX 00000. The Company may change its principal place
of
business and
establish other places of business as determined by the Board of Managers from
time to time.
2.4 Purpose.
The
Company has been formed for the purpose (the “Purpose”)
of (i)
initiating, developing, investing in and managing Facilities for the production
of ethanol in the Territory; (ii) engaging in any or all general business
activities that may be related or incidental to, or may appear conducive or
expedient for the accomplishment of, the foregoing; and (iii) engaging in any
business or activity that might be engaged in or carried on by a limited
liability company formed under the Act that is not beyond the scope of the
purposes set forth in the preceding subparagraphs (i) and (ii). Without limiting
the generality of he foregoing, the Company shall (a) form one or more Special
LLCs, each of which shall be formed for the purpose of engaging in a single
Project (b) obtain investment capital from third parties in such Special LLCs,
to be used for purposes of the applicable Project, and (c) through the Manager
of the Company, serving as the Manager of each Special LLC.
Subject
to all other provisions of this Agreement, in furtherance of the conduct of
its
business, the Company is hereby authorized to do as follows:
2.4.1 to
enter
into, execute, modify, amend, supplement, acknowledge, deliver, perform and
carry out contracts of any kind, including operating agreements of limited
liability companies (whether as a member or manager), joint venture agreements,
limited partnership and general partnership agreements, contracts with
Affiliates, and including other contracts establishing business arrangements
or
organizations, necessary to, in connection with, or incidental to the
accomplishment of the purposes of the Company;
2.4.2 to
acquire, purchase, own, hold, invest in, manage, finance, refinance, pledge,
sell, dispose of, and otherwise deal in and with equity and debt securities
of
any kind;
2.4.3 to
vote,
grant proxies for, exercise consent or approval rights pertaining to, and
otherwise exercise all rights, powers, privileges, and other incidents of
ownership with respect to the assets of the Company;
2.4.4 to
incur,
create, assume, novate, guaranty, or otherwise be or become liable for any
indebtedness (for borrowed money or otherwise), to issue evidences of any such
indebtedness, to secure any such indebtedness by mortgage, deed of trust,
pledge, charge, security interest, or other lien on any or all assets or
property of the Company, and to pay, prepay, extend, or amend or otherwise
modify the terms of any indebtedness;
2.4.5 to
open,
deposit assets into, maintain, appoint and remove authorized signatories for,
issue instructions with respect to, withdraw assets from, close, and otherwise
deal in and with bank accounts, accounts with securities brokerage firms, and
other investment accounts;
5
2.4.6 to
employ, engage, retain, pay compensation to, reimburse for costs and expenses,
indemnify, terminate or modify the engagement of, or otherwise deal with agents,
employees, officers, managers, accountants, attorneys, consultants, and other
Persons;
2.4.7 to
commence, extend, renew, modify, adjust, submit to arbitration, prosecute,
defend, settle, and compromise any cause of action, proceeding, or claim of
the
Company;
2.4.8 to
acquire, purchase, own, hold, invest in, manage, lease, sell, dispose of,
transfer, assign, pledge, encumber, and otherwise deal in real and personal
property of any kind, including commodities and equity and debt securities
and
all or substantially all of the business of the Company in one or more
transactions;
2.4.9 to
enter
into or engage in any kind of activity necessary to, in connection with, or
incidental to the accomplishment of the purposes of the Company, so long as
said
activities may be lawfully carried on or performed by a limited liability
company under the laws of the State of Delaware; and
2.4.10 to
take
any other action not prohibited under the Act or other applicable
law.
2.5 Term.
The
Company shall have no specific date of dissolution.
2.6 Fiscal
Year.
The
fiscal year of the Company shall be the calendar year.
ARTICLE
3
CAPITALIZATION
3.1 Initial
Capital Contributions.
The
Members have each made and have agreed to make Capital
Contributions
to the Company as set forth on Schedule
B.
3.2 Additional
Capital Contributions.
Pursuant to the terms set forth herein, the holders of Class A Units, the
holders of Class B Units and persons who hereafter acquire Units may make
additional Capital Contributions and Schedule
B
shall be
amended by the Board of Managers to reflect such additional Capital
Contributions and any sale of additional Units.
3.3 Capital
Accounts.
A
capital account shall be established for each Member (each, a “Capital
Account”).
The
Capital Account of each Member shall be initially credited with the amount
of
such Member's initial Capital Contribution and (i) shall be increased by the
amount of any additional Capital Contributions by the Member and allocations
to
the Member of items of income and gain, (ii) shall be decreased by the amount
of
cash or the fair market value of property distributed to the Member or set
aside
and reserved in accordance with Section 6.4 hereof and allocations to the Member
of items of loss and deduction, and (iii) shall otherwise be appropriately
adjusted to reflect the transactions of the Company and the Members in
accordance with Regulation Section 1.704-1(b). Upon the admission of additional
Members, the Company's profits or losses for the fiscal period ending on the
day
before such admission shall be allocated among the Members immediately prior
to
such admission, and thereafter Capital Accounts shall be established for the
newly-admitted Members. The Capital Account of each Member upon admission as
Members of the Company is set forth on Schedule
A attached
hereto. No Member shall be obligated to the Company, to any other Member, or
to
any third party to restore or repay any deficit in its Capital Account. Upon
the
transfer of a Member's entire interest in the Company, the Capital Account
of
such Member shall carry over to the transferee. Upon the transfer of a portion
of a Member's interest in the Company, the portion of such Member’s Capital
Account attributable to the transferred portion shall carry over to the
transferee. If distributions under this Agreement are insufficient to return
to
any Member the full amount of such Member's capital contributions to the
Company, such Member shall have no recourse against any other Member for the
return of such capital contributions.
6
3.4 Return
of Capital and Waiver of Partition.
No
Member has the right to demand or receive from the
Company
any return of capital contributions made pursuant to this Agreement, except
with
respect to distributions during the term of this Agreement or upon dissolution
of the Company. No Member has the right to demand and receive any distribution
from the Company in any form other than cash.
ARTICLE
4
MEMBERSHIP
UNITS
4.1 Designation
of Units.
The
units of the Company (each, a "Unit"
and
collectively, the "Units") shall be divided into two classes: Class A (the
"Class
A Units")and
Class B (the "Class
B Units"},
which
shall have the rights and privileges set forth below in this Agreement. The
Class A Units and Class B Units that are currently held by each Member are
set
forth on Schedule
A
hereto.
Except as otherwise expressly indicated in this Agreement, the relative rights,
powers and duties of the Class A Units and Class B Units shall be identical.
4.2 Voting
Rights.
At
every meeting of the Members (including actions taken without a meeting by
written consent of Members), the holders of Class A Units and the holders of
Class B Units shall have one vote for each Unit held by them. All matters coming
before the Members shall be determined by the affirmative vote or written
consent of the holders of a majority of then outstanding Class A Units and
Class
B Units, except as set forth in Section 4.3.
4.3 Supermajority
Voting Requirements..
Prior
to the Company taking any of the following actions, the affirmative vote of
all
of the Units held by the Class A Members and the Class B Units shall be
required:
4.3.1 The
formation of a Special LLC and the undertaking of a Project in accordance with
the provisions of Section 5.2.
4.3.2 The
appointment or dismissal of executive officers for the Company, the
establishment of the terms of their employment and any modification to the
terms
of their employment;
4.3.3 Any
transaction between the Company and a related party (which shall include, but
not be limited to, Members, Managers and officers and their respective
relatives);
4.3.4
The
undertaking of any Project or the formation of any Special LLC;
7
4.3.5 The
making of any distributions, other than mandatory distributions required by
Section 6.6 of this Agreement;
4.3.6 The
issuance of any Units other than the Units that are being issued in connection
with the formation of the Company and the execution of this Operating
Agreement;
4.3.7 The
redemption of any Units, except as expressly contemplated by this
Agreement;
4.3.8 The
incurrence by the Company of any indebtedness other than aggregate indebtedness
not in excess of $25,000.00 incurred for the expenses of operating the Company
in the ordinary course.
4.3.9 The
sale
of any Project or the interest of the Company in any Project
4.3.10 The
merger or consolidation of the Company with another entity in a transaction
which the Company is not the surviving entity, or the sale of all or
substantially all of its assets;
4.3.11 The
acquisition by the Company of another entity, whether by purchase, merger or
otherwise;
4.3.12 The
amendment of this Agreement (including any amendment to create additional
classes of Membership); and
4.3.13 The
liquidation or dissolution of the Company.
ARTICLE
5
RIGHTS,
DUTIES AND RESTRICTIONS OF THE MEMBERS
5.1. Membership.
The
percentage interest of each Member in the profits and losses of the Company
shall be allocated as set forth in Article 6.
5.2. Special
LLCs.
5.2.1. Each
Project shall be undertaken by a Special LLC that will be formed by the Company
upon, among other terms, the following terms and conditions:.
5.2.2. The
Company will maintain operating and voting control of each such Special LLC.
The
Members shall designate the Manager of the Company as the Manager of each
Special LLC.
5.2.3. The
Company shall make such contributions to the capital of each Special LLC as
may
be necessary in connection with its formation and initial operations, it being
the intention of the Company and the Members that (a) such additional capital
as
may be required for the Project to be undertaken by such Special LLC shall
be
contributed by third parties and (b) each of the Members will have a right
to
purchase any or all of the interests in such Special LLC to be issued in order
to raise such capital (provided, that if all Members wish to purchase such
interests, they shall have the right to do so pro rata
to their
Interests in the Company, with a right of over allotment if the exercise such
pro rata rights does not result in the sale of all of such interests that the
Members wish to purchase).
8
5.2.4. Each
Special LLC will pay the Class A Member a Technology Access fee that will
entitle it to have access to the technology that is licensed to the Company
pursuant to Section 3.1 and Schedule B. The Technology Access Fee will be equal
to Five Hundred Thousand Dollars ($500,000) (the “Lump
Sum Fee”)
plus a
royalty of five percent (5%) of the gross revenues of such Special LLC (the
“Royalty
Fee”).
The
Lump Sum Fee will be payable in two equal installments of Two Hundred Fifty
Thousand Dollars ($250,000) each, the first of which will be payable on the
date
that the Facility operated by such Special LLC commences commercial operation
and the second of which will be payable on the date that is six (6) months
after
the date that the Facility operated by such Special LLC commences commercial
operation. The Royalty Fee will be payable on or before the tenth
(10th)
day of
each calendar quarter, based upon revenues of such Special LLC (determined
in
accordance with GAAP) for the preceding calendar quarter.
5.2.5. Commencing
on the date of the approval of a Project in accordance with Section 4.3 and
the
formation of the related Special LLC, such Special LLC will pay the Company
a
project management fee of $15,000 per month, which fee shall be payable in
advance on or before the tenth (10th)
day of
each calendar month.
5.3. Confidential
Information.
The
Members acknowledge that, from time to time, they may receive information from
or regarding the Company in the nature of trade secrets or that otherwise is
confidential, the release of which may be damaging to the Company or persons
with which it does business. Each Member shall hold in strict confidence and
not
use for its own benefit (except in connection with the business of the Company)
or for the benefit of anyone else any Confidential Information it receives
regarding the Company; provided, however, that such restrictions shall not
apply
to the disclosure or use by the Class A Member of any of such information in
connection with its own business or the business of any other entity outside
the
Territory. "Confidential
Information"
means
any information concerning the Company or that the Company has developed and
maintained, including without limitation the terms and conditions of this
Agreement, secret and proprietary information concerning products and processes,
trade secrets, methods,
formulas, machines,
prototypes, components, inventions, creations, systems, designs, materials,
software, assembly techniques, pending patent applications, compositions,
improvements, ideas, specifications and arts relating to products and services
and the manufacture, assembly, testing, sale and service of products and
services, business opportunities, marketing plans, financial projections,
financing plans, and. other business information related to present or
prospective business activities or opportunities of the Company, including
without limitation any such information concerning or related to the
construction and operation of facilities for the production of ethanol
biorefineries and to the marketing and sale of the ethanol produced thereby.
The
Class B Member may not disclose Confidential Information to any person other
than another Member, and the Class A Member may not disclose Confidential
Information to any person for use within the Territory other than another
Member, except in each case for disclosures: (i) compelled by law; (ii) to
advisers or representatives of the Member; but only if the recipients have
agreed to be bound by the provisions of this Section 5.2; or (iii) of
information that such Member also has received from a source independent
of
the
Company without
(to the knowledge of such Member) breach of any obligation of confidentiality.
The Members acknowledge that a breach of the provisions of this Section 5.2
may
cause irreparable injury to the Company for which monetary damages are
inadequate, difficult to compute, or both. Accordingly, the Members agree that
the provisions of this Section 5.2 may be enforced by specific
performance.
9
5.4. Non-Competition.
5.4.1. The
Class
A Member shall not, directly or indirectly, either as principal, agent,
stockholder, employee, consultant, representative or in any other capacity:
(i)
own, manage, operate or control, or be concerned, connected or employed by,
or
otherwise associate in any manner with, engage in or have a financial interest
in any business whose primary line of business is in the development or
operation of biorefineries within the Territory; (ii) solicit, divert or
appropriate or attempt to solicit, divert or appropriate any of the Company's
or
any Special LLC’s customers or suppliers, or any prospective customers or
suppliers, for the purpose of competing against the Company or such Special
LLC
or any present or future parent, subsidiary or other affiliate of the Company
which is engaged in the Purpose; (iii) solicit, entice or persuade or attempt
to
solicit, entice or persuade any other employees of or consultants to the
Company, any Special LLC or any present or future parent, subsidiary or
affiliate of the Company to leave the services of the Company or any such
Special LLC, parent, subsidiary or affiliate for any reason. Notwithstanding
the
foregoing, if the Members shall fail to approve any Project in accordance with
Section 4.3 because the Class B Member voted against such approval,, then the
Class A Member may undertake such Project itself, without any obligation to
the
Company or to the Class B Member.
5.4.2. The
Class
B Member shall not, directly or indirectly, either as principal, agent,
stockholder, employee, consultant, representative or in any other capacity:
(i)
own, manage, operate or control, or be concerned, connected or employed by,
or
otherwise associate in any manner with, engage in or have a financial interest
in any business whose primary line of business is in the development or
operation of biorefineries, anywhere in the world, except that nothing contained
herein shall
preclude
any Member from purchasing or owning stock in any such competitive business
if
such stock is publicly traded, and provided that such Member's holdings do
not
exceed five (5 %) percent of the issued and outstanding capital stock of such
business; (ii) solicit, divert or appropriate or attempt to solicit, divert
or
appropriate any of the Company's or any Special LLC’s customers or suppliers, or
any prospective customers or suppliers, for the purpose of competing against
the
Company or such Special LLC or any present or future parent, subsidiary or
other
affiliate of the Company which is engaged in the Purpose; (iii) solicit, entice
or persuade or attempt to solicit, entice or persuade any other employees of
or
consultants to the Company, any Special LLC or any present or future parent,
subsidiary or affiliate of the Company to leave the services of the Company
or
any such Special LLC, parent, subsidiary or affiliate for any reason.
5.5. Meetings.
Meetings of the Members may be called at any time by any Member or by the
Manager.
5.6. Place
of Meetings.
Meetings of the Members shall be held anywhere in the United States, at such
place or places as may be fixed by the Manager and stated in the notice of
the
meeting.
5.7. Notice
of Meeting.
Notice
of each meeting of the Members, stating the day, hour and place thereof, shall
be given to each Member by the Member(s) or Manager calling the meeting at
least
five (5) business days before the meeting, by leaving written notice with each
Member at his residence or usual place of business, or by mailing written
notice, postage prepaid, and addressed to such Member at the Member's usual
or
last known business or residence address. Each Member shall promptly notify
the
Company of any change of address. Notice need only contain a summary of the
purpose of the meeting.
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5.8. Quorum.
Members
entitled to vote and holding at least 51% of the aggregate outstanding Units
to
which such voting rights apply, represented in person or by proxy, shall
constitute a quorum at any meeting of Members. In the absence of a quorum at
any
meeting of Members, a majority of the aggregate outstanding Units entitled
to
vote that are so represented may adjourn the meeting from time to time for
a
period not to exceed sixty (60) days without further notice. However, if the
adjournment is for more than sixty (60) days, or if after the adjournment a
new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Member of record entitled to vote at the meeting.
At an adjourned meeting at which a quorum shall be present or represented,
any
business may be transacted which might have been transacted at the meeting
as
originally noticed. The Members present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal during
the meeting of Voting Members having aggregate outstanding Units the absence
of
which would cause there to be less than a quorum.
5.9. Voting.
If a
quorum is present in person or by proxy at the meeting, the consent of the
Members entitled to vote and representing a majority of the outstanding Class
A
Units and the Class B Units shall be the act of the Members, unless the vote
of
a greater or lesser proportion or number is otherwise required by the Act or
by
this Agreement.
5.10. Action
by Consent.
Any
action required or permitted to be taken at any meeting of the Members may
be
taken without a meeting if the same number of Members holding Class A Units
and
Class B Units as are necessary to decide a question at a meeting of the Members
consent to the action in writing and such written consents are filed with the
records of the meeting of the Members. Such consent shall be treated for all
purposes as a vote at a meeting.
5.11. Waiver
of Notice.
Whenever any written notice is required to be given by this Agreement, a waiver
of notice signed either before or after the action for which notice is required
shall have the effect of written notice. Attendance at any meeting shall also
constitute a waiver of notice unless an objection to the lack of notice is
made
by a Member at the meeting.
5.12. Proxy
Voting.
A
Voting Member may vote by written proxy executed in writing by him, her or
it.
All proxies shall be filed with the Company before voting and shall be effective
for no more than six (6) months. No proxy purporting to be executed by or on
behalf of a Member shall be deemed invalid unless challenged at or prior to
its
exercise and the burden of proving invalidity shall rest on the
challenger.
5.13. Common
Stock Purchase Option.
The
Class A Member hereby grants the Class B Member the option to purchase that
number of shares of its Common Stock as is equal to One Million Dollars
($1,000,000) divided by the Option Purchase Price for an aggregate purchase
price of One Million Dollars ($1,000,000). Such Option may be exercised at
any
time from the date hereof until 5:00 p.m. eastern time on or before the date
that is 15 days after the Effective Date by the Class B Member providing written
notice to the Class A Member that it elects to exercise such option.. The
parties agree to use their best efforts to negotiate and complete a subscription
agreement relating to the purchase of such shares and a Registration Rights
Agreement pursuant to which the Class A Member will grant the Class B Member
piggy-back registration rights on generally accepted terms (including
underwriters cutbacks and the coordination of such registration rights with
other holders of shares of Common Stock) within five (5) business days of the
exercise of such option., For purposes of this Section 5.13, the “Option
Purchase Price” shall
be
eighty-five percent (85%) of the average closing price of the Common Stock
for
the five trading days preceding the date on which the Class A Member and the
Class A Member execute a subscription agreement relating to the purchase of
such
shares.
11
ARTICLE
6
DISTRIBUTIONS
AND ALLOCATIONS
6.1.1 Allocation
of Profits and Losses.
Except
as provided in Section 6.2, items of income, gain, loss and deduction shall
be
allocated to cause Adjusted Capital Accounts, to the greatest extent possible,
to be such that if the Company were then liquidated in accordance with Article
11 at book value, distributions in liquidation under Article 11 would be made
to
the Class A and the Class B Members in proportion to their Unit holdings.
6.2 Regulatory
Allocations.
6.2.1 Tax
Allocations;
Code
Section 704(c).
(a) Except
as
otherwise provided herein, all items of income, gain, loss, deduction and credit
realized by the Company shall, for each fiscal year, be allocated for federal
income tax purposes among the Class A and the Class B Members in the same manner
as items of income, gain, loss, deduction and credit are allocated pursuant
to
Section 6.1 or as otherwise determined by the Managers in a manner that
reasonably reflects the purpose and intention of this Agreement.
(b) In
accordance with Code Section 704(c) and the Regulations thereunder, income,
gain, loss, and deduction with respect to any property contributed to the
capital of the Company 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 the Company for federal income tax purposes and its fair market
value at the time of contribution.
(c) In
the
event of a revaluation of Company assets in connection with maintaining Capital
Accounts, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and the new valuation of
such assets in accordance with Code Section 704(c) and the Regulations
thereunder.
(d) Allocations
pursuant to this Section 6.2.1 are solely for purposes of federal income taxes
and shall not affect, or in any way be taken into account in computing, any
Capital
Account
or share of profits, losses, other items, or distributions pursuant to any
provision of this Agreement.
6.2.2 Regulatory
Economic Allocations.
Notwithstanding Section 6.1,
12
(a) The
"minimum gain chargeback requirement" of Regulations Section 1.704-2(f)
shall apply;
(b) The
"chargeback of partner nonrecourse debt minimum gain" requirement of Regulations
Section 1.704-2(i)(4) shall apply;
(c) The
allocation of "partner nonrecourse deductions" required by Regulations Section
1.704-2(i)(2) shall apply; and
(d) No
Member
shall
be
allocated any item of deduction or loss if the allocation causes a deficit
in
the Member's Adjusted Capital Account, and instead such item
shall be
allocated in a manner that does not cause such a deficit. If a Member
unexpectedly receives an allocation of loss or deduction or a distribution
which
causes a deficit in the Member's Adjusted Capital Account at the end of any
taxable year, then items of income and gain of the Company shall
be
allocated to that Member to eliminate such deficit as quickly as possible.
This
paragraph is intended to comply with, and shall be interpreted consistently
with, the "qualified income offset" provisions of the Regulations promulgated
under Code §704(b).
6.2.3 Curative
Allocations.
The
economic arrangement intended by the Members with respect to distributions
on
liquidation is based on Capital Accounts adjusted for profits and losses as
set
forth in Section 6.1 without consideration of the allocations specified in
Section 6.2.2, above. Therefore, in the event the allocations specified in
Section 6.2.2 or any other allocations required by the Code or other applicable
tax law would cause the Capital Accounts balances of the Members to differ
from
the Capital Account balances which would have pertained in the absence of such
allocations, the Managers will specially allocate items of income, gain, loss
and deduction in a manner which complies with Code section 704(b) and causes
the
Capital Account of each Member to equal as closely as practicable the Capital
Account such Member would have had in the absence of any such allocations
required by Section 6.2.2 or other allocations required by the Code or other
applicable tax law.
6.3 Allocations
Upon Transfer or Admittance.
In the
event that a Member acquires an interest in the Company either by transfer
from
a Member or by acquisition from the Company, unless a different method is
selected by the Managers, (i) an equal portion of the profits or losses from
operations of the Company for the quarter in which such acquisition occurs
shall
be allocated to each day of such quarter, and the profits and losses so
allocated to the portion of the quarter prior to the date of the acquisition
of
the interest in the Company by the Member shall be allocated among the Members
without giving effect to such acquisition, and the profits and losses so
allocated to the portion of the quarter from and after the date of the
acquisition of such interest shall be allocated among the Members by giving
effect to such acquisition, and (ii) profits and losses realized from the sale
or other disposition of the assets of the Company shall be allocated among
the
Members based upon the actual ownership of interests in the Company on the
date
of the event giving rise to such profits or losses.
6.4 Distributions
Among Members.
For
each fiscal year, the Manager may, in his sole discretion, recommend to the
Members (who shall vote on such matter in accordance with the provisions of
Section 4.3) that the
Company
make distributions, other than liquidating distributions, to the Members out
of
cash or other property available for distribution (as determined after payment
of, or adequate provision for, Company expenses), and, if such recommendation
is
approved (or if the Members otherwise approve distributions in accordance with
the provisions of Section 4.3), then such distributions shall be made in the
following order of priority:
13
(i) First,
the advance distributions described in Section 6.6 hereof;
(ii) Second,
to the Class B Member, until such Member has received distributions in an amount
equal to all contributions to capital made by such Member in accordance with
Section 3.1 and Schedule B; and
(iii) Third,
to
and among the Class A and the Class B Members in proportion to their Unit
holdings.
Liquidating
distributions shall be apportioned among the Members in accordance with Article
11 hereof.
6.5 Non-cash
Distributions.
If any
non-cash assets of the Company shall be distributed in kind, such assets shall
be distributed on the basis of the then fair market value thereof as determined
by the Company. In the case of a non-cash distribution, the Company shall be
deemed to have recognized income or loss as if the distributed property were
sold for fair market value on the date of distribution as determined in good
faith by the Manager and the Capital Accounts of the Members will be adjusted
accordingly.
6.6 Tax
Distributions.
Notwithstanding the foregoing, to the extent available, the Manager may in
his
sole discretion authorize distributions to the Members at times and in amounts
intended to assist the Members in paying their income tax liabilities for a
Fiscal Year arising from the allocations made pursuant to Section 6.1 and 6.2
hereof. In estimating such distributions, the Company may employ reasonable
uniform assumptions, for example, that each Member is an individual resident
in
New York State taxable in the highest combined state and federal rate applicable
to the type of income allocated to the Member, and that allocations of income
to
a Member in a current year may be offset by prior allocations of net loss to
such Member. Distributions to a Member made under this Section 6.6 shall be
treated as advance payments of, and shall reduce, payments otherwise
distributable to such Member pursuant to Section 6.4 and Article 11. Any
distributions made to a Member pursuant to this Section 6.6 and not recovered
against other distributions payable to such Member shall constitute a debt
of
such Member to the Company payable upon dissolution of the Company or such
earlier time as the Member ceases to be a Member of the Company.
6.7 Amounts
Withheld.
All
amounts withheld pursuant to the Code or any provisions of any state, local
or
foreign tax law with respect to any payment, distribution or allocation to
the
Members shall be treated as amounts paid or distributed, as the case may be,
to
the Members with respect to which such amount was withheld pursuant to this
Section 6.7 for all purposes under this Agreement. The Company is authorized
to
withhold from payments and distributions, or with respect to allocations to
the
Members, and pay over to any federal, state and local government or any foreign
government, any amounts required to be so withheld pursuant to the Code or
any
provisions of any other federal, state or local law or any foreign law, and
shall allocate any such amounts to the Members with respect to which such amount
was withheld.
14
ARTICLE
7
MANAGERS/MANAGEMENT
7.1 Responsibilities.
The
business, property, and affairs of the Company shall be managed by or under
the
direction
of a Board of Managers, which shall have all powers necessary to achieve the
purposes of the Company which are not inconsistent with this Agreement or the
Act. Without limiting the generality of the foregoing (and subject to the rights
reserved to the Members under Section 4.3), the Board of Managers shall have
the
power to approve the following, unless the Members have voted to the contrary
pursuant to the provisions of Section 4.1:
7.1.1 The
hiring or termination of any officer of the Company;
7.1.2 The
approval of or amendment to any operating or capital budget of the Company.
Without limiting the generality of the foregoing, the initial operating budget
of the Company will define the manner in which the payments of its capital
contribution by the Class B Member are to be allocated, and the parties
acknowledge that the first two of such payments should be allocated to
preparatory work for the initial Project to be undertaken by the Company and
for
administrative operating expenses and that the third of such payments should
be
allocated to provide capital for the commencement of the first of such
Projects;
7.1.3 The
approval of the commencement of any Project, which approval shall be based
upon
a detailed analysis of such Project (including, without limitation an
engineering study, capital structure, financing feasibility study (including
information regarding possible investors and lenders and a risk and return
analysis)
7.1.4 Except
as
part of a previously approved budget, any agreement or arrangement, written
or
oral, the payment of any Manager, officer, agent or employee of the Company
or
the entering into of any loan, lease, contract or other transaction with any
employee of the Company or with any Manager or officer of the Company or any
member of such persons immediate family;
7.1.5 The
retaining of and the establishment of any consultant to the Company;
7.1.6 Except
as
part of a previously approved budget, the making of or commitment to make any
capital expenditures;
7.1.7 The
settlement of any claim or litigation by or against the Company or any
regulatory proceedings;
7.1.8 The
assertion of a strategic position with respect to a material matter before
any
governmental authority on behalf of the Company; and
7.1.9 The
entering into of any contract, agreement or other commitment or issuance of
any
purchase order.
7.2 Number
Election and Qualification.
The
Board of Managers shall be composed of four (4) individuals. The number of
Managers of the Company who shall
constitute
the Board of Managers may be fixed, increased or decreased from time to time
by
a vote of the holders of a majority of the outstanding Class A Units and the
outstanding Class B Units, voting as a single class. The Class A Members, voting
separately, shall elect two (2) of the Managers and the Class B Members , voting
separately, shall elect two (2) of the Managers. A Manager need not be a Member.
The members of the Board of Managers are referred to herein as “Managers”.
The
Members of the Board of Managers elected by the Class A Members shall initially
be Xxxxxxxxxxx x’Xxxxxx-Xxxxxx and Xxxxx Xxxxxx, and the Members of the Board of
Managers elected by the Class B Members shall initially be Xxx X. Xxxxx and
Xxxx
Xxxxxxx.
15
7.3 Term.
Each
elected Manager shall hold office until his successor is elected and qualified,
or until he sooner flies, resigns, is removed or becomes
disqualified.
7.4 Meetings.
Meetings of the Board of Managers may be called at any time by or at the request
of any Manager. The person or persons authorized to call the meeting of the
Board of Managers may fix any place as the place for holding any meeting of
the
Board of Managers.
7.5 Notice:
Waiver of Notice.
Written
notice of any special meeting of the Board of Managers shall be given at least
two (2) days before the meeting as follows:
7.5.1 (i)
by
leaving such notice with him at his residence or usual place of business; (ii)
by mailing such notice, postage prepaid, and addressed to such person at his
address as it appears in the records of the Company; (iii) by facsimile or
electronic mail transmission of such notice to such person's usual place of
business; or (iv) by hand delivery or telegram to such person at his usual
place
of business or, in the event such notice is given on a Saturday, Sunday or
holiday, to such person at his residence. If mailed, such notice shall be deemed
to be delivered two (2) business days following the date deposited in the United
States mail properly addressed, with postage thereon prepaid. If notice is
given
by telegram, such notice shall be deemed to be delivered when the telegram
is
delivered to the telegraph company. If notice is given by facsimile or
electronic mail transmission, such notice shall he deemed given upon
confirmation of receipt.
Notice
of
a meeting need not be given to any Manager if a written waiver of notice
executed by such Manager before or after the meeting is filed with the records
of the meeting, or to any Manager who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to such Manager. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Managers need be specified in the notice or waiver
of
notice of such meeting.
7.6 Quorum.
A
majority of the Managers, present in person or by proxy, shall constitute a
quorum for the transaction of business at any meeting of the Board of Managers.
If less than a quorum of such Managers is present at a Board of Managers
meeting, a majority of the Managers present may adjourn the meeting from time
to
time without further notice. No Manager shall fail to attend a meeting of the
Board of Managers for purposes of defeating a quorum or avoiding action by
the
Company.
7.7 Voting.
Except
as otherwise required by the Act, the Articles of Organization or this
Agreement, the affirmative vote of a majority of the Board of Managers shall
be
necessary to take any action at a meeting of the Board of Managers. Each member
of the Board
of
Managers shall have one vote on each matter to come before the Board of
Managers.
7.8 Meetings
by Telecommunications.
Unless
the Act otherwise provides, members of the Board of Managers or any committee
designated thereby may participate in a meeting of such board or committee
by
means of a conference telephone or similar communications equipment by means
of
which all persons participating in the meeting can hear each other at the same
time and participation by such means shall constitute presence in person at
a
meeting.
16
7.9 Informal
Action by Managers.
Any
action required or permitted to be taken at any meeting of the Board of Managers
or any committee, if any, may be taken without a meeting if all of the Managers
consent to the action in writing or by electronic transmission and the written
or electronic consents are filed with the records of the meeting. Such consents
shall be treated for all purposes as a vote at a meeting.
7.10 Removal
of Managers.
A
Manager may be removed from. office with cause by a vote of the holders of
a
majority of the outstanding Class A Units or Class B Units, as the case may
be,
entitled to designate such Manager as set forth in Section 7.2, at any meeting
of the Members called at least in part for that purpose; provided that the
Manager shall be given reasonable notice of the reasons for the proposed removal
and an opportunity to be heard by the Class A Members or the Class B Members,
as
applicable, before a removal vote is taken. At the request of any Class A Member
or Class B Member, as applicable, voting with respect to removal of a Manager
shall be by closed ballot.
7.11 Resignation.
Any
Manager of the Company may resign from office by delivering or causing to be
delivered to any officer of the Company, or to the Board of Managers, a written
resignation, which shall take effect upon being so delivered or at such other
time as may be therein specified.
7.12 Vacancies.
Any
vacancy in an elected Manager position shall be filled by the vote of the
holders of at least a majority of the outstanding Class A Units or Class B
Units, as the case may be, entitled to designate such Manager as set forth
in
Section 7.2, and the Manager so elected shall serve for the unexpired portion
of
his predecessor's term of office. The Board of Managers shall have and may
exercise all of its powers notwithstanding the existence of one or more
vacancies in its number.
7.13 Other
Management.
The
Company shall have a Managing Director and such other officers and management
personnel as the Board of Managers may elect or appoint from time to time.
Such
officers and management personnel may be removed with or without cause by the
Board of Managers. Any officer may resign by giving written notice of his
resignation to the Board of Managers and
such
resignation
shall become effective upon delivery of such notice unless a later time is
specified therein. No officer
need be a Member
and two or more offices may be held by any one person. Each officer shall have
such powers and duties as determined by the Board of Managers; provided, that
until the Board of Managers shall determine otherwise, the Managing Director
shall have responsibility for the day-to-day operation of the Company, subject
to the rights reserved to the Board of Managers in Section 7.1 and to the
Members in Section 4.3. The initial Managing Director of the Company shall
be
Xxx X. Xxxxx.
7.14 Manager
Compensation.
The
Company shall reimburse each Manager for his documented travel and other
expenses incurred in order to attend Board of Manager meetings.
17
ARTICLE
8
ADMINISTRATIVE
MATTERS
8.1 Books
of Account.
At all
times the Company shall
maintain
or cause to be maintained true and proper books, records, reports and accounts
in accordance with generally accepted accounting principles consistently applied
on an accrual basis, in which shall be entered fully and accurately all
transactions of the Company. The Company shall keep vouchers, statements,
receipted bills and invoices and all other records in connection with the
Company's business.
8.2 Tax
Matters Handled By the Company.
The
Company shall have full authority to, negotiate with, to conclude agreements
with or to refuse to agree with Federal, state, local and foreign taxing
authorities as to the taxable income of the Company for any taxable period
and
any determination of such taxable income shall be binding upon the Members,
each
of whom individually shall be liable to pay any additional tax and interest
or
entitled to receive any refund and interest resulting from such
determination.
The
Company shall not be responsible for any loss or damage to any Member, as a
result of any such determination or failure to arrive at a determination. The
Company may also make such elections, including, without limitation, an election
under Section 754 of the Code, as the Members may determine.
ARTICLE
9
TRANSFER
OF INTERESTS
9.1. Restrictions
Upon Transfers: Permitted Transfers.
The
Members may not effect, cause to be effected or permit any Transfer of any
of
their Units, whether now owned or hereafter acquired, without the prior written
consent of the holders of a majority of the outstanding Class A Units and Class
B Units except as provided in this Article 9.
9.2. Right
of First Refusal Upon Involuntary Transfer.
The
involuntary transfer of any units by any Member to any transferee other than
a
Permitted Transferee (an "Involuntary
Transfer”)
is
prohibited. As used herein, an Involuntary Transfer shall include a transfer
to
the trustee of a Member's estate in a case under the Bankruptcy Code, a transfer
to a Member as debtor in possession, a transfer to the receiver of a Member's
estate appointed under applicable state law, a transfer to a former spouse
in
dissolution of marriage proceedings, a sale to satisfy a tax lien, an execution
to satisfy a judgment and a transfer compelled by a court or other authority,
including in connection with the death of a Member.
9.2.1. If
a
court or other authority nevertheless requires an Involuntary Transfer, then
within five (5) days after the Company's receipt of notice of the Involuntary
Transfer, the Company shall
give
the
other Members notice of the Involuntary Transfer. Within forty (40) days after
the date of that notice, the Company shall determine the Value of the units
on
the date of the Involuntary Transfer and shall give written notice (the
"Value
Notice")
to the
involuntary transferor, involuntary transferee and the other Member. Within
fifteen (15) days after the date of the Value Notice, the other Member
shall
have
the
right to purchase any or all of the Units allocated in the manner described
in
Subsection 9.2.2.
18
9.2.2. The
purchasing Member shall evidence the election to purchase by written notice
to
the Company, the involuntary transferor and the involuntary transferee,
specifying the number of Units to be purchased. The price shall be the Value
of
the Units. Such price shall be paid in full to the involuntary transferee at
the
Closing in cash or, at the option of the purchasing Member, by a promissory
note
of such Member payable over four (4) years with interest at the prime rate
(as
published by the Wall
Street Journal on
the
date of the Involuntary Transfer) plus two percent (2%); such interest to accrue
until the maturity date.
9.2.3. If
the
purchasing Member does not elect to purchase all of the Units, then, not later
than fifteen (15) days after the date of the Value Notice, the Company may
elect
to purchase all of the Units not elected to be purchased. The Company shall
evidence its election to purchase by written notice to the involuntary
transferor and transferee specifying the number of Units to be purchased. The
price shall be the Value of the Units on the date of the Involuntary Transfer.
Such price shall be paid in full to the. involuntary transferee at Closing
in
cash or, at the option of the Company, by a promissory note of the Company
payable over four years with interest at the prime rate (as published by the
Wall
Street Journal
on the
date of the Involuntary transfer) plus two percent (2%); such interest to accrue
until the maturity date.
9.2.4. If
an
Involuntary Transfer occurs and any right to purchase Units under Subsection
9.2.1 is voided or declared unenforceable under any bankruptcy, debtor relief
or
other law, then the Company shall have a right of first refusal in the event
of
any subsequent proposed transfer by the involuntary transferee. Such right
of
first refusal shall enable the other Member first and if such Units are not
all
purchased by such Member the Company, to purchase any or all of the Units
proposed to be transferred at the same price, if any, and terms as
the
proposed transfer in accordance with the procedures of this Sections9.3..
9.2.5. Exchange
Right.
During
the period commencing on the first anniversary of the date hereof (the
“Option
Period”),
the
Class B Member shall have the right (the “Option”),
to
cause the Class A Member to purchase all of the Units of interest in the company
owned by the Class B Member, in exchange for that number of shares of Common
Stock as is equal to (a) the Value of such Units divided by (b) ninety percent
(90%) of the average closing price of the Common Stock for the fifteen (15)
trading days preceding that date that the Value is finally determined. The
Option may be exercised in whole only, and not in part. The Option may be
exercised during the Option Period by the Class B Member providing written
notice (the “Exercise
Notice”),
to
the Class A Member setting forth the Class B Member’s election to exercise the
Option.
9.3. Closing
of Sale.
9.3.1. The
closing of a sale under this Agreement (the "Closing")
shall
be held at the offices of the Company at 10:00 am local time twenty (20)
business days after the last applicable election period expires or if later,
the
first date following the date upon which any required regulatory approvals
are
obtained. At the Closing, the selling and purchasing parties shall execute
and
deliver to each other the various documents required to carry out their
undertakings hereunder.
9.3.2. The
Company shall treat such purchase as completed if the purchasing party or
parties deliver immediately available funds in the amount of that portion of
the
purchase price required at the Closing. The funds shall be delivered to the
selling party if present at the Closing, or, if not, to the Company to hold
for
the selling party. The Company shall have no obligation to invest the
funds.
19
ARTICLE
10
INDEMNIFICATION
10.1 Indemnification
and Advancement of Expenses.
Subject
to the provisions of this Article 10, the Company shall, to the fullest extent
it would be permitted under the Act, as the same may be amended and supplemented
from time to time or any successor provision, indemnify and advance expenses
to
(i) its Managers (as if directors), officers, employees, controlling persons
and
agents and (ii) any Person who at the request of the Company is or was serving
as a director, manager, officer, employee, controlling person or agent of
another corporation, partnership, joint venture, trust or other enterprise,
from
and against any and all of the expenses, liabilities, or other matters referred
to in or covered by the Act. The Company, by action of its Board of Managers,
may indemnify and advance expenses to its other agents and other Persons who
are
not Managers or officers up to the fullest extent permitted by the
Act
provided that such indemnification and advancement of expenses in any given
situation is approved or ratified by
the
Board
of
Managers. The indemnification provided for herein shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any
bylaw,
agreement,
vote of security holders or disinterested directors or managers or otherwise,
both as to action in their official capacity and as to action in another
capacity while holding such office, and shall continue as to a Person who has
ceased to be a director, manager, officer, employee, controlling person or
agent
and shall inure to the benefit of the heirs, executors and administrators of
such a Person.
10.2 Actions
other than by or in the Right of the Company.
The
Company shall indemnify any Person who was or is a party or is threatened to
be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Company) by reason of the fact that such Person is
or
was a Manager, officer, employee, controlling person or agent of the Company,
or
is or was serving at the request of the Company as a director, Manager, officer,
employee, controlling person or agent of another company, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such Person in connection with such action, suit or proceeding
if
such Person acted in good faith and in a manner such Person reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceedings, had no reasonable cause to believe such
Person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere
or
its
equivalent, shall not, of itself, create a presumption that such Person did
not
act in good faith and in a manner which such Person reasonably believed to
be in
or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
Person's conduct was unlawful.
10.3 Actions
by or in the Right of the Company.
The
Company shall indemnify any Person who was or is a party or is threatened to
be
made a party to any threatened, pending or completed action or suit by or in
the
right of the Company to procure a judgment in
its
favor
by
reason of the fact that such Person is or was a Manager, officer, employee,
controlling person or agent of the Company, or is or was serving at the request
of the Company as a director, Manager, officer, employee, controlling person
or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by such Person in connection with the defense or settlement of such
action or suit if such Person acted in good faith and in a manner such Person
reasonably believed to be in or not opposed to the best interests of the Company
and except that no indemnification shall be made in respect of any claim, issue
or matter as to which such Person shall have been adjudged to be liable to
the
Company, unless and only to the extent that a court of the State of Texas or
the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such Person is fairly and reasonably entitled to indemnity for
such
expenses which a court of the State of Texas or such other court shall deem
proper.
20
10.4 Success
on the Merits.
To the
extent that any Person described in Sections 10.1 or 10.2 has been successful
on
the merits or otherwise in defense of any action, suit or proceeding referred
to
in said Subsections, or in defense of any claim, issue or matter therein, such
Person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such Person in connection
therewith.
10.5 Specific
Authorization.
Any
indemnification under Sections 10.2 or 10.3 (unless ordered by a court) shall
be
made by the Company only as authorized in the specific case upon a determination
that indemnification of any Person described in said Subsections is proper
in
the circumstances because such Person has met the applicable standard of conduct
required by said Subsections. Such determination shall be made by the Board
of
Managers by a majority vote of the Managers who were not parties to such action,
suit or proceeding.
10.6 Advance
Payment.
Expenses incurred in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid by the Company in advance
of the final disposition of such action, suit or proceeding upon receipt of
an
undertaking by or on behalf of any Person described in this Article 10 to repay
such amount if it shall ultimately be determined that such Person is not
entitled to indemnification by the Company as authorized in this Article
10.
10.7 Non-Exclusivity.
The
indemnification and advancement of expenses provided by or granted pursuant
to
this Article 10 shall not be deemed exclusive of any other rights to which
those
provided indemnification or advancement of expenses may be entitled under any
agreement, approval of a majority of disinterested Managers or otherwise, both
as to action in such Person's official capacity and as to action
in
another
capacity while holding such office.
10.8 Insurance.
The
Board of Managers may authorize, by a vote of the majority of the Managers,
the
Company to purchase and maintain insurance on behalf of any Person who is or
was
a Manager, officer, employee, controlling person or agent of the Company,
or
is
or
was
serving at the request of the Company as a director, Manager, officer,
employee, controlling person or agent of another corporation, limited liability
company, partnership, joint venture, trust or other enterprise against any
liability asserted against such Person and incurred by such Person in any such
capacity, or arising out of such Person's status as such, whether or not the
Company would have the power to indemnify such Person against such liability
under the provisions of this Article 10.
21
10.9 Continuation
of Indemnification and Advancement of Expenses.
The
indemnification and advancement of
expenses provided by, or granted
pursuant to, this Article 10 shall continue as to a Person who has ceased to
be
a Manager, officer, employee, controlling person or agent and shall inure to
the
benefit of the heirs, executors, administrators and successors of such a
Person.
10.10 Severability.
If any
word, clause or provision of this Article 10 or any award made hereunder shall
for any reason be determined to be invalid, the provisions hereof shall not
otherwise be affected thereby but shall remain in full force and
effect.
10.11 Intent
of Section.
The
intent of this Article 10 is to provide for indemnification and advancement
of
expenses to the fullest extent that would be permitted by the Act if the Company
were a Texas
corporation.
To the extent that the Act or any successor sections thereto may be amended
or
supplemented from time to time, this Article shall be amended automatically
and
construed so as to permit indemnification and advancement of expenses to the
fullest extent from time to time permitted by law.
ARTICLE
11
DISSOLUTION
11.1 Events
of Dissolution.
(a) The
Company shall be dissolved only:
(i) on
a date
and at a time designated by the Board of Managers and the approval of the
holders of a majority of the outstanding Class A Units and Class B Units, voting
as a single class;
(ii) upon
the
closing of a sale of all or substantially all of the assets of the Company;
or
(iii) as
otherwise required by applicable law.
(b) Unless
the holders of a majority of the outstanding Class A Units and the Class B
Units, voting as a single class, elect otherwise, the Company shall be deemed
to
be dissolved upon any merger or consolidation in which (i) the Company is a
constituent party or (ii) a subsidiary of the Company is a constituent party
and
the Company issues securities pursuant to such merger or consolidation (except
any such merger or consolidation involving the Company or a subsidiary in which
the holders of capital stock or membership interests of the Company immediately
prior to such merger or consolidation continue to hold immediately following
such merger or consolidation at least 51% by voting power of the capital stock
or membership interests of (A) the surviving or resulting entity or (B) if
the
surviving or resulting entity is a wholly owned subsidiary of another Company
immediately following such merger or consolidation, the parent entity of such
surviving or resulting entity).
(c) Dissolution
of the Company shall be effective on the day on which the event giving rise
to
the dissolution occurs, but the Company shall not terminate until the Articles
of Organization shall have been cancelled and the assets of the Company shall
have been distributed as provided herein. Notwithstanding the dissolution of
the
Company, prior to the termination of the Company, as aforesaid, the business
of
the Company and the affairs of the Members, Managers and officers, as such,
shall continue to be governed by this Agreement. Upon dissolution, the President
or, if there is none, a liquidator appointed by the Board of Managers, shall
liquidate the assets of the Company and apply and distribute the proceeds
thereof as contemplated by this Agreement and cause the cancellation of the
Articles of Organization. Upon a deemed dissolution pursuant to subsection
(b)
of this Section 11.1, the President shall liquidate and distribute the proceeds
from such deemed liquidation as contemplated by Section 11.2 of this
Agreement.
22
11.2 Distributions
Upon Liquidation.
(a) After
payment of liabilities owing to creditors, the Treasurer or, if there be none,
a
liquidator appointed by the Board of Managers shall set up such reserves as
he,
she or it deems reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company. Said reserves may be paid over by
the
Treasurer or such liquidator to a bank, to be held in escrow for the purpose
of
paying any such contingent or unforeseen liabilities or obligations and, at
the
expiration of such period as the Treasurer or such liquidator may deem
advisable, such reserves shall be distributed to the Members or their assigns
in
the manner set forth in Section 11.2(b) below.
(b) After
paying such liabilities and providing for such reserves, and after providing
for
reimbursement of any tax payment advances, the Treasurer or such liquidator
shall cause the remaining net assets of the Company to be distributed to and
among the Members in accordance with the provisions of Article 6.
(c) In
the
event that any part of such net assets consists of notes or accounts receivable
or other non-cash assets, the Treasurer or such liquidator may take whatever
steps he deems appropriate to convert such assets into any other form which
would facilitate the distribution thereof. If any assets of the Company are
to
be distributed in kind, such assets shall be distributed on the basis of their
fair market value.
ARTICLE
12
MISCELLANEOUS
12.1. Amendment.
Subject
to the requirements of the Act, this Agreement may be amended from time to
time
upon a vote of the holders of a
majority of
the
outstanding Class A Units
and the
Class B Units, voting as a single class;
provided, however, that each Member to be affected must give its written consent
to any amendment which would, (a) increase the amount of the Capital
Contribution payable by or Capital Commitment of such Member, (b) cause such
Member's share of the Company's assets, profits or losses to be modified, unless
such modification is in connection with the admission of a new member or members
and all interests of Persons or entities who are Members of the same class
immediately prior to such admission are similarly modified (in which event
this
Agreement may be amended by the Board of Managers without the consent of any
other Member), or (c) increase the liability of any such Member.
12.2. Notwithstanding
the above, the Board of Managers is authorized, without the consent of any
Member, to make amendments to this Agreement (i) to add to the duties or
obligations (but not the powers or rights) of the Managers or surrender any
right or power granted to the Managers herein for the benefit of the Members,
(ii) to preserve the status of the Company as a "partnership" for federal income
tax purposes and (iii) to amend Schedule
A hereto
to
reflect the issuance of Units and the admission or withdrawal of Members as
authorized by this Agreement; provided
that
prompt
notice of each such amendment shall be delivered to each Member.
23
12.3. Waiver.
Any
waiver of any of the terms hereof shall be effective only for the instance
for
which it is given and shall not constitute a waiver of a subsequent occurrence
or
of any
other provision hereof.
12.4. Notices.
All
notices, requests, demands and other communications made with respect to this
Agreement or any other agreements executed in connection herewith shall be
in
writing, and personally delivered, sent by registered or certified mail (postage
prepaid), by telecopier or by prepaid cater service, and shall be deemed to
be
effective on the day that such writing is delivered or, if given by registered
or certified mail, ten (la)
days
after being deposited in the mails, in accordance with the provision of this
Section 13.3. All such notices shall be addressed as follows:
| If to the Company: |
NewEnglandXethanol,
LLC
000
Xxxxxxxx Xx
Xxxxxxxxx,
XX 00000
|
If
to any
Member: At
the
address set forth beside his or its name in Schedule
A.
12.5. or
to
such other address as may be specified in a notice given to the other parties
in
accordance with this Section 12.5.
12.6. Binding
Agreement.
This
Agreement shall be binding upon the executors, administrators, estates, heirs
and legal successors of the parties hereto.
12.7. Governing
Law.
This
Agreement and all questions arising hereunder shall be determined in accordance
with the laws of the State of Delaware including the Act, as interpreted by
the
courts of the State of Delaware, notwithstanding any rules regarding choice
of
law to the contrary of the law of the State of Delaware.
12.8. Severability.
If one
or more provisions in this Agreement is
held
or
found
to be invalid, illegal
or
unenforceable in any respect, the provision(s)
shall be given effect to the
extent permitted by law and
the
invalidity, illegality or unenforceability shall not affect the validity
of
the
remaining provisions of this Agreement.
12.9. Counterparts.
This
Agreement may be executed in several counterparts, and all
so
executed shall constitute one
agreement, binding
on all of the parties hereto, notwithstanding
that all of the parties are not signatories to the original or the same
counterpart.
12.10. Entire
Agreement.
This
Agreement is intended by the Members to constitute the "Company Agreement"
of
the Company within the meaning of the Act. This Agreement contains the entire
understanding among the Members. This Agreement supersedes any prior written
or
oral agreement between the Members with respect to the subject matter hereof.
This Agreement shall be considered as
drafted equally by the Members and any ambiguity
shall
not
be
construed against the Members. The Members hereby
agree that each
Member shall be entitled to rely on the provisions of this Agreement, and no
Member shall be liable to the Company or any other Member for any action or
refusal to act taken in good faith reliance on the terms of this
Agreement.
24
12.11. Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning thereof.
12.12. Waiver
of Partition.
Each
Member agrees that irreparable damage would be done to the Company if any Member
brought an action in court to dissolve the Company. Accordingly, each Member
agrees that he, she or it shall not, either directly or indirectly, take any
action to require partition or appraisal of the Company or of any of the assets
or properties of the Company, and, notwithstanding any provisions of this
Agreement to the contrary, each Member (and his, her or its successors and
assigns) accepts the provisions of the Agreement as his, her or its sole
entitlement on termination, dissolution and/or liquidation of the Company and
hereby irrevocably waives any and all right to maintain any action for partition
or to compel any sale or other liquidation with respect to his, her or its
interest, in or with respect to, any assets or properties of the Company. Each
Member agrees that he, she or it will not petition a court for the dissolution,
termination or liquidation of the Company.
[The
remainder of this page has been intentionally left blank]
25
IN
WITNESS WHEREOF, the parties hereto, have executed, or caused to be executed,
this Agreement as of the date first above written.
|
THE
COMPANY:
NewEnglandXethanol,
LLC
By:
/s/
Xxx X.
Xxxxx
Name:
Xxx X. Xxxxx
Title:
Managing Director
CLASS
A MEMBER:
Xethanol
Corporation
By:
/s/
Xxxxxxxxxxx x’Xxxxxx-Xxxxxx
Name:
Xxxxxxxxxxx x’Xxxxxx-Xxxxxx
Title:
Chairman and CEO
CLASS
B MEMBER:
Global
Energy and Management, LLC
By:
/s/
Xxx X.
Xxxxx
Name:
Xxx X. Xxxxx
Title:
President and CEO
|
26
Schedule
A
Members
and Membership Interests
|
Class
A Member
|
Units
|
|
Xethanol
Corporation
|
5
|
|
1185
Avenue of the Xxxxxxxx, 00xx
Xxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Class
B Member
|
Units
|
|
Global
Energy and Management, LLC
|
5
|
|
000
Xxxxxxxx Xx
|
|
|
Xxxxxxxxx,
XX 00000
|
27
Schedule
B
Members’
Capital Contributions
Xethanol
Corporation
5
Units as a Class A Member
Contribution:
A
grant
to the Company and (subject to its compliance with the terms of this Operating
Agreement relating to technology access fees and royalties) to each Special
LLC
of an exclusive (subject to the provisions of Section5.4.1) license in the
Territory to use all intellectual property (including patents, trade secrets
and
know-how) relating to the development and operation of biorefineries that is
now
and during the term of this Operating Agreement owned by or licensed to (to
the
extent that Xethanol Corporation has the right to grant sublicenses thereof)
for
the production of ethanol including, but not limited to, ethanol production
technologies, plant engineering, technology integration know-how, feedstock
analysis and procurement, plant location, strategic alliances, customers,
corporate branding, plant management, recruitment and training .
Global
Energy and Management, LLC
5
Units as a Class B Member
Contribution:
One
Million Five Hundred Thousand Dollars ($1,500,000), which shall be payable
as
follows:
1. Two
Hundred Fifty Thousand Dollars ($250,000) on the date that both parties have
executed this Operating Agreement;
2. Two
Hundred Fifty Thousand Dollars ($250,000) on the date that is ninety
(90))
days after the date upon which both parties have executed this Operating
Agreement; and
3. One
Million Dollars ($1,000,000) on the date that the Members have approved
proceeding with the first Project in accordance with Section 4.3.3 of this
Operating Agreement.
28
