EXHIBIT 10.01
Operating Agreement
of
Pine Needle LNG Company, LLC
Dated August 8, 1995
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- iv -
Operating Agreement
of
Pine Needle LNG Company, LLC
Table of Contents
1 Definitions and Construction........................................1
1.1 Definitions................................................1
1.1.1 Act.............................................1
1.1.2 Additional Necessary Regulatory Approvals.......1
1.1.3 Affiliate.......................................1
1.1.4 AFUDC...........................................1
1.1.5 Articles of Organization........................1
1.1.6 Authorizations..................................1
1.1.7 Bankrupt Member.................................1
1.1.8 Business Day....................................2
1.1.9 Capital Account.................................2
1.1.10 Capital Contribution............................2
1.1.11 Certificate.....................................2
1.1.12 Certified Public Accountants....................2
1.1.13 Code............................................2
1.1.14 Commitment......................................2
1.1.15 Commitment Date.................................2
1.1.16 Company.........................................2
1.1.17 CO&M Agreement..................................2
1.1.18 Cost of the Facilities..........................2
1.1.19 Cost of the Modification........................2
1.1.20 Customer........................................3
1.1.21 Default Interest Rate...........................3
1.1.22 Dispose, Disposing or Disposition...............3
1.1.23 Estimated Cost of the Facilities................3
1.1.24 Estimated Cost of the Modification..............3
1.1.25 Facilities......................................3
1.1.26 FERC............................................3
1.1.27 FERC Application................................3
1.1.28 FERC Rehearing Date.............................4
1.1.29 Financing Commitment............................4
1.1.30 Financing Corporation...........................4
1.1.31 Formation Date..................................4
1.1.32 General Interest Rate...........................4
1.1.33 Governmental Authority..........................4
1.1.34 Member..........................................4
1.1.35 Membership Interest.............................4
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1.1.36 Modification....................................5
1.1.37 Necessary Regulatory Approvals..................5
1.1.38 Operator........................................5
1.1.39 Parent..........................................5
1.1.40 Permitted Transferee............................5
1.1.41 Piedmont Interstate 5
1.1.42 Person..........................................5
1.1.43 Pre-Formation Date Expenditures.................5
1.1.44 Proceeding......................................5
1.1.45 PUHCA...........................................5
1.1.46 Representative..................................6
1.1.47 Rule 16.........................................6
1.1.48 Sharing Ratio...................................6
1.1.49 Service Agreements..............................6
1.1.50 Supermajority Vote..............................6
1.1.51 Transco.........................................6
1.1.52 TransCarolina...................................6
1.2 Construction...............................................6
2 Formation and Purpose of the Company................................6
2.1 Formation..................................................6
2.2 Name.......................................................6
2.3 Registered Office, Registered Agent........................6
2.4 Offices....................................................7
2.5 Purposes...................................................7
2.6 Foreign Qualification......................................7
2.7 Term.......................................................7
2.8 No State-Law Partnership...................................7
3 Membership; Disposition of Interests................................7
3.1 Initial Members............................................7
3.2 Restrictions on the Disposition of an Interest.............8
3.3 Additional Members........................................12
3.4 Interests in a Member.....................................12
4 Representations, Warranties and Covenants; Information.............12
4.1 Commitment to Construct the Facilities....................12
4.2 Development of a Modification.............................13
4.3 Commitment to Construct a Modification....................14
4.4 General Representations and Warranties....................15
4.5 Regulatory Status.........................................15
4.6 Representations, Warranties and Covenant Concerning PUHCA.15
4.7 Governmental Applications.................................16
4.8 Information...............................................16
4.9 Liability to Third Parties................................17
4.10 Withdrawal................................................17
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4.11 Lack of Authority.........................................17
4.12 Reasonable and Necessary Efforts..........................17
5 Capital Contributions..............................................17
5.1 Pre-Formation Date Expenditures...........................17
5.2 Requests for Capital Contributions........................18
5.3. Loans.....................................................19
5.4 Equalization of Capital Accounts..........................20
5.5 Voluntary Contributions...................................20
5.6 Return of Contributions...................................20
5.7 Capital Accounts..........................................20
6 ALLOCATIONS AND DISTRIBUTIONS......................................21
6.1 Allocations...............................................21
6.2 Distributions.............................................21
7 MANAGEMENT.........................................................22
7.1 Management by Representatives.............................22
7.2 Actions by Representatives; Committees;
Delegation of Authority and Duties.......................24
7.3 Number and Term of Office.................................25
7.4 Vacancies; Removal; Resignation...........................25
7.5 Chairman and Secretary....................................25
7.6 Meetings..................................................25
7.7 Action by Written Consent or Telephone Conference.........26
7.8 Conflicts of Interest.....................................27
8 ACTION OF MEMBERS..................................................27
8.1 Action of Members.........................................27
9 OPERATION OF THE FACILITIES........................................27
9.1 Operator..................................................27
10 INDEMNIFICATION....................................................27
10.1 Right to Indemnification..................................27
10.2 Advance Payment...........................................28
10.3 Indemnification of Officers, Employees and Agents.........28
10.4 Appearance as a Witness...................................29
10.5 Nonexclusivity of Rights..................................29
10.6 Insurance.................................................29
10.7 Member Notification.......................................29
10.8 Savings Clause............................................29
11 TAXES..............................................................30
11.1 Tax Returns...............................................30
11.2 Tax Elections.............................................30
11.3 "Tax Matters Partner".....................................30
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12. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS.........................31
12.1 Maintenance of Books......................................31
12.2 Reports...................................................31
12.3 Accounts..................................................33
13 INSPECTION.........................................................33
13.1 Inspection of Facilities and Records......................33
14. BANKRUPTCY OF A MEMBER.............................................33
14.1 Bankruptcy Members........................................33
15 DISSOLUTION, LIQUIDATION, AND TERMINATION..........................34
15.1 Dissolution...............................................34
15.2 Liquidation and Termination...............................34
15.3 Deficit Capital Accounts..................................35
15.4 Articles of Dissolution...................................35
16 GENERAL PROVISIONS.................................................35
16.1 Offset....................................................35
16.2 Notices...................................................35
16.3 Entire Agreement; Supersedure.............................36
16.4 Effect of Waiver or Consent...............................36
16.5 Amendment or Modification.................................36
16.6 Binding Effect............................................36
16.7 Governing Law; Severability...............................36
16.8 Further Assurances........................................36
16.9 Indemnification...........................................37
16.10 Notice to Members of Provisions of this Agreement.........37
16.11 Counterparts..............................................37
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2
Operating Agreement
of
Pine Needle LNG Company, LLC
This Operating Agreement of Pine Needle LNG Company, LLC, a Limited
Liability Company under the laws of the State of North Carolina (the "Company"),
is executed and agreed to by the Members (as defined below) as of the 8th day of
August, 1995.
1 Definitions and Construction. The terms defined in this Section 1 shall,
for all purposes of this Agreement, have the meanings set forth below:
1.1 Definitions.
1.1.1 Act. The North Carolina Limited Liability Company
Act as set forth in Chapter 57C of the North
Carolina General Statutes.
1.1.2 Additional Necessary Regulatory Approvals. All
Authorizations as may be required (but excluding
Authorizations of a nature not customarily obtained
prior to commencement of construction of facilities
of the nature of the Modification in question) in
connection with (a) the ownership, construction and
operation of a Modification and (b) the storage of
the natural gas in connection with such
Modification.
1.1.3 Affiliate. Any Person that, directly or indirectly
through one or more intermediaries, controls or is
controlled by or is under common control with any
other Person in question, including, but not
limited to: a Parent of a Member; a corporation
100% of the outstanding voting stock of which is
owned by a Member or a Parent of a Member; or a
corporation 100% of the outstanding voting stock of
which is owned by a corporation 100% of the
outstanding voting stock of which is owned by a
Member or a Parent of a Member.
1.1.4 AFUDC.Allowance for funds used during construction.
1.1.5 Articles of Organization. The Articles of
Organization of the Company filed with the
Secretary of State of North Carolina under and
pursuant to the Act on August 8, 1995.
1.1.6 Authorizations. Licenses, certificates, permits,
orders, approvals, determinations and
authorizations from Governmental Authorities having
jurisdiction.
1.1.7 Bankrupt Member. A member who shall take or be
subject to any of the actions described
in Section 57C-3-02(3)a through f of the Act.
1.1.8 Business Day. A day on which commercial banks are
open for the transaction of business
in New York, New York.
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1.1.9 Capital Account. See Section 5.7.
1.1.10 Capital Contribution. Any contribution by a Member
to the capital of the Company.
1.1.11 Certificate. The certificate(s) of public
convenience and necessity issued by the FERC
pursuant to the FERC Application.
1.1.12 Certified Public Accountants. The firm(s) of
nationally recognized independent public
accountants selected from time to time by the
Operator.
1.1.13 Code. The Internal Revenue Code of 1986, as
amended, or any successor or replacement statute.
1.1.14 Commitment. In the case of a Member executing this
Agreement as of the date of this Agreement or a
person acquiring that Membership Interest, the
amount specified for that Member as its Commitment
on Appendix A. In the case of a Membership Interest
issued pursuant to Section 3.3, the Commitment
established pursuant thereto in each case, subject
to adjustments on account of Dispositions of
Membership Interests permitted by this Agreement.
1.1.15 Commitment Date. The date of the vote of the
Representatives committing the Company to
construction of the Facilities pursuant to Section
4.1.
1.1.16 Company. Pine Needle LNG Company, LLC, a Limited
Liability Company under the laws of the State of
North Carolina.
1.1.17 CO&M Agreement. The Construction, Operating and
Maintenance Agreement provided for in
Section 9.1.
1.1.18 Cost of the Facilities. All costs and expenses,
including without limitation AFUDC and
Pre-Formation Date Expenditures, borne by the
Operator or the Company for the acquisition,
planning, design, engineering, financing,
administration, construction and start-up of the
Facilities, and securing all Authorizations
required therefor.
1.1.19 Cost of the Modification. All costs and expenses,
including without limitation AFUDC, borne by the
Operator or the Company for the acquisition,
planning, design, engineering, financing,
administration construction and start-up of a
Modification, and securing all Authorizations
required therefor.
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1.1.20 Customer. A Person who, with the approval of the
Representatives, has entered into a Service
Agreement with the Company (or, where applicable, a
precedent agreement relating thereto) for the
receipt, liquefaction, storage, vaporization and
delivery of natural gas or liquefied natural gas by
means of the Facilities.
1.1.21 Default Interest Rate. A rate per annum equal to
the lesser of (a) two percent (2%) per annum over
the prime rate of Citibank, N.A. (or its successor)
from time to time publicly announced and in effect,
or (b) the maximum interest rate allowed for this
purpose pursuant to the laws of the State of North
Carolina.
1.1.22 Dispose, Disposing or Disposition. A sale,
assignment, transfer, exchange, mortgage, pledge,
grant of a security interest, or other disposition
or encumbrance (including, without limitation, by
operation of law), or the acts thereof.
1.1.23 Estimated Cost of the Facilities. The estimated
total Cost of the Facilities as determined by the
Operator from time to time.
1.1.24 Estimated Cost of the Modification. The estimated
total Cost of the Modification as determined by the
Operator from time to time.
1.1.25 Facilities. The real, personal, mixed and
contractual property (whether tangible or
intangible) to be owned and operated by the Company
for the receipt, liquefaction, storage,
vaporization and delivery of natural gas or
liquefied natural gas, all as more fully described
in Appendix B, with such changes in size, design
and location as may be approved by the
Representatives (including, but not limited to, a
Modification approved by the Representatives
pursuant to Section 4.2).
1.1.26 FERC. The Federal Energy Regulatory Commission or
any commission, agency or other governmental body
succeeding to the powers of such commission.
1.1.27 FERC Application. The documents pursuant to which
application for a certificate(s) of public
convenience and necessity is made to the FERC by
the Company for authority to construct, own and
operate the Facilities and to receive, store and
deliver natural gas by means of the Facilities (not
including any Modifications). The FERC Application
shall seek authority to operate the facilities in
accordance with the FERC's "open access"
regulations and the provisions of Order No. 636
(including the capacity releases provisions).
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1.1.28 FERC Rehearing Date. The date upon which the order
issuing the Certificate is no longer subject to
rehearing before the FERC.
1.1.29 Financing Commitment. Definitive agreements between
one or more financial institutions or other Persons
and the Company or the Financing Corporation
pursuant to which such financial institutions or
other Persons agree, subject to the conditions set
forth therein, to lend money to, or purchase
securities of, the Company or the Financing
Corporation, the proceeds of which shall be used to
finance all or a portion of the Facilities.
1.1.30 Financing Corporation. A corporation or trust
wholly owned by the Company that may be organized
for the purpose of issuing securities, the proceeds
from which are to be advanced directly or
indirectly to the Company to finance all or a
portion of the Facilities.
1.1.31 Formation Date. The date on which the Articles
of Organization was filed with the
Secretary of State of North Carolina.
1.1.32 General Interest Rate. A rate per annum equal to
the lesser of (a) the prime rate of Citibank, N.A.
(or its successor) from time to time publicly
announced and in effect, or (b) the maximum
interest rate allowed for this purpose pursuant to
the laws of the State of North Carolina.
1.1.33 Governmental Authority. Any court, agency,
authority, board, bureau, commission, department,
office or instrumentality of any nature whatsoever
of any governmental or quasi-governmental unit,
whether federal, state, parish, county, district,
municipality, city, political subdivision or
otherwise, domestic or foreign whether now or
hereafter in existence.
1.1.34 Member. Any Person executing this Agreement as of
the date of this Agreement or who is hereafter
admitted to the Company as a member as provided in
this Agreement, but does not include any Person who
has ceased to be a member of the Company.
1.1.35 Membership Interest. All of a Member's rights in
the Company, including, without limitation, the
Member's share of profits and losses of the
Company, the right to receive distributions of the
Company's assets, any right to vote, and any right
to participate in the management of the Company.
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1.1.36 Modification. Any facilities installed (a) to
modify, improve, expand or increase the capacity or
scope of the Facilities or any portion thereof
after the Commitment Date (except in connection
with customary maintenance) or (b) to provide a new
point of delivery or receipt of natural gas for the
Facilities after the Commitment Date.
1.1.37 Necessary Regulatory Approvals. All Authorizations
as may be required (but excluding Authorizations of
a nature not customarily obtained prior to
commencement of construction of facilities such as
the Facilities) in connection with (a) the
construction and operation of the Facilities (not
including any Modifications), (b) the formation of
the Company, and (c) the receipt, liquefaction,
storage, vaporization and delivery of natural gas
or liquefied natural gas under the Gas Service
Agreements.
1.1.38 Operator. Pine Needle Operating Company, its
successors and assigns, pursuant to the CO&M
Agreement.
1.1.39 Parent. Any Person who directly or indirectly owns
more than 50% of the outstanding voting stock of a
Member.
1.1.40 Permitted Transferee. See Section 3.2.2.
1.1.41 Person. An individual, a trust, an estate, a
domestic corporation, a foreign corporation, a
professional corporation, a partnership, a limited
partnership, a limited liability company, a foreign
limited liability company, an unincorporated
association, or another entity.
1.1.42 Piedmont Interstate. See Section 3.1(b).
1.1.43 Pre-Formation Date Expenditures. Expenditures made
by any Member or any of its Affiliates prior to the
Formation Date, if approved by the Representatives
pursuant to Section 5 if required to be so
approved, including, but not limited to,
expenditures made in the course of activities
reasonably related to preparing this Agreement and
the CO&M Agreement, creating the Company, planning
and designing the Facilities, acquiring rights of
way, preparing the FERC Application and obtaining
the Necessary Regulatory Approvals.
1.1.44 Proceeding. See Section 10.1.
1.1.45 PUHCA. The Public Utility Holding Company Act of
1935, as amended (or any successor statute
thereto).
1.1.46 Representative. The Person designated by a Member
to represent that Member in accordance with the
terms of this Agreement.
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1.1.47 Rule 16. 17 C.F.R.ss.250.16 or any successor
provision thereto.
1.1.48 Service Agreements. The agreement(s) by and between
the Company and the Customers for the receipt,
liquefaction, storage, vaporization and delivery of
natural gas or liquefied natural gas by means of
the Facilities.
1.1.49 Sharing Ratio. With respect to any Member, the
fraction (expressed as a percentage), the numerator
of which is that Member's Commitment and the
denominator of which is the sum of the Commitments
of all Members.
1.1.50 Supermajority Vote. A vote of Members representing
not less than 75% of the Sharing
Ratios of all Members.
1.1.51 Transco. Transcontinental Gas Pipe Line
Corporation, a Delaware corporation, its successors
and assigns.
1.1.52 TransCarolina. See Section 3.1(a).
1.2 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine
and neuter. All references to Sections refer to sections of
this Agreement (unless the context clearly indicates
otherwise), and all references to Appendices are to Appendices
attached to this Agreement, each of which is made a part
hereof for all purposes.
2 Formation and Purpose of the Company.
2.1 Formation. The Company has been organized as a North Carolina
limited liability company by the filing of the Articles of
Organization under and pursuant to the Act with the Secretary
of State of North Carolina.
2.2 Name. The name of the Company is "Pine Needle LNG Company,
LLC."
2.3 Registered Office, Registered Agent. The location of the
registered office of the Company shall be in Mecklenburg
County, North Carolina; the street address of the registered
office of the Company shall be 1915 Rexford Road, Charlotte,
North Carolina 28211; the mailing address of the registered
office shall be P. O. Box 33068, Charlotte, North Carolina
28233; and the registered agent shall be Martin C. Ruegsegger
or such other Person or Persons as the Representatives may
designate from time to time in the manner provided by law.
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2.4 Offices. The principal offices of the Company shall be at such
place as the Members may from time to time determine. Notice
of any change in such offices shall be given to each Member by
the Representatives. The Company may have such other offices
as the Members may designate from time to time.
2.5 Purposes. The purposes of the Company shall be to plan,
design, develop, construct, own and provide for the operation
and maintenance of the Facilities and conduct such business
activities that are necessary or incidental in connection
therewith.
2.6 Foreign Qualification. Prior to the Company conducting
business in any jurisdiction other than North Carolina, the
Members shall cause the Company to comply, to the extent
procedures are available and those matters are reasonably
within the control of the Members, with all requirements
necessary to qualify the Company as a foreign limited
liability company in that jurisdiction. Each Member shall
execute, acknowledge, swear to, and deliver all certificates
and other instruments conforming with this Agreement that are
necessary or appropriate to qualify, continue, and terminate
the Company as a foreign limited liability company in all such
jurisdictions.
2.7 Term. The Company commenced on the date of the filing of the
Articles of Organization with the Secretary of State of North
Carolina and shall continue in existence until the latest date
on which the Company is to dissolve as provided in the
Articles of Organization or until such earlier date as the
Company may be dissolved as provided in this Agreement.
2.8 No State-Law Partnership. The Members intend that the Company
not be a partnership (including, without limitation, a limited
partnership) or joint venture, and that no Member or
Representative be a partner or joint venturer of any other
Member or Representative as a result of this Agreement, for
any purposes other than federal and state tax purposes, and
this Agreement may not be construed to suggest otherwise.
3 Membership; Disposition of Interests.
3.1 Initial Members. The initial members of the Company are the
following:
(a) TransCarolina LNG Company ("TransCarolina"), a
corporation organized under the laws of the State
of Delaware, with its principal office and address
at P.O. Box 1396, Houston, Texas 77251-1396 (2800
Post Oak Boulevard, Houston, Texas 77056).
(b) Piedmont Interstate Pipeline Company ("Piedmont
Interstate"), a corporation organized under the
laws of the State of North Carolina, with its
principal office and address at P.O. Box 33068,
Charlotte, North Carolina 28233 (1915 Rexford Road,
Charlotte, North Carolina 28211).
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3.2 Restrictions on the Disposition of an Interest.
3.2.1 Except as specifically provided in Section 3.2 of
this Agreement, a Disposition of an interest in the
Company may not be effected without the consent of
Members holding at least 75% of the Sharing Ratios
of all Members. Any attempted Disposition by a
Person of an interest or right, or a part thereof,
in or in respect of the Company other than in
accordance with Section 3.2 of this Agreement shall
be null and void ab initio.
3.2.2Notwithstanding the provisions of Section 3.2.1, the
interest of any Member in the Company may be
transferred without the consent of Members if the
transfer is to an Affiliate of such Member. In
addition, Piedmont Interstate or TransCarolina may
transfer a portion of its Membership Interest to one or
more Permitted Transferees without the consent of
Members provided such transfer takes place prior to the
date the FERC Application is filed with the FERC and
further provided that the transferee agrees in writing
to avoid conflicts of interest by agreeing not to have
an interest in any project intended to directly compete
with the liquefied natural gas business of the Company.
A "Permitted Transferee" is any one or more of the
following Persons or an Affiliate of such Persons:
Mobil Natural Gas Inc., Public Service Company of North
Carolina, Inc., North Carolina Natural Gas Corporation,
Amerada Hess Corporation and the Municipal Gas
Authority of Georgia.
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3.2.3If Piedmont Interstate wishes to transfer any of its
Membership Interest to a Person other than Piedmont
Interstate's Affiliate or a Permitted Transferee, the
following procedures shall apply: After receiving a
bona fide offer from a Person to purchase its interest,
Piedmont Interstate shall give written notice to
TransCarolina of the terms of the offer and of its
intent to accept the offer unless TransCarolina
exercises its right of first refusal as provided in
this Section 3.2.3. Upon receipt of such notice,
TransCarolina shall have the right, exercisable by the
giving of written notice to Piedmont Interstate within
30 days of the receipt of such notice, to purchase
Piedmont Interstate's interest on the same terms and
conditions as the bona fide offer (except the purchase
price shall be the lesser of that amount set forth in
the bona fide offer or the balance in Piedmont
Interstate's Capital Account on the date of the
proposed transfer). If TransCarolina does not give the
notice of its intent to exercise its right of first
refusal within the 30-day period provided above,
Piedmont Interstate shall be free to complete the
transfer to the Person making the bona fide offer. If
the transfer to the Person making the bona fide offer
is not consummated within 90 days after the 30-day
period referred to above, Piedmont Interstate may not
transfer its interest without again complying with this
Section 3.2.3.
3.2.4If a Permitted Transferee wishes to transfer any of
its Membership Interest to a Person other than
Permitted Transferee's Affiliate, the following
procedures shall apply: After receiving a bona fide
offer from a Person to purchase its interest, the
Permitted Transferee shall give written notice to
TransCarolina of the terms of the offer and of its
intent to accept the offer unless TransCarolina or
Piedmont Interstate exercises its right of first
refusal as provided in this Section 3.2.4. Upon receipt
of such notice, TransCarolina shall have the right,
exercisable by the giving of written notice to such
Permitted Transferee within 30 days of the receipt of
such notice, to purchase the Permitted Transferee's
interest on the same terms and conditions as the bona
fide offer (except the purchase price shall be the
lesser of that amount set forth in the bona fide offer
or the balance in the Permitted Transferee's Capital
Account on the date of the proposed transfer). If
TransCarolina does not give the notice of its intent to
exercise its right of first refusal within the 30-day
period provided above, the Permitted Transferee shall
give written notice to Piedmont Interstate of the terms
of the offer and of its intent to accept the offer
unless Piedmont Interstate exercises its right of first
refusal as provided in this Section 3.2.4. Upon receipt
of such notice, Piedmont Interstate shall have the
right, exercisable by the giving of written notice to
such Permitted Transferee within 30 days of the receipt
of such notice, to purchase the Permitted Transferee's
interest on the same terms and conditions as the bona
fide offer (except the purchase price shall be the
lesser of that amount set forth in the bona fide offer
or the balance in the Permitted Transferee's Capital
Account on the date of the proposed transfer). If
neither TransCarolina nor Piedmont Interstate gives the
notice of intent to exercise its right of first refusal
within the periods provided above, the Permitted
Transferee shall be free to complete the transfer to
the Person making the bona fide offer. If the transfer
to the Person making the bona fide offer is not
consummated within 90 days after the last of the 30-day
periods referred to above, the Permitted Transferee may
not transfer its interest without again complying with
this Section 3.2.4.
<PAGE>
3.2.5If TransCarolina wishes to transfer any of its Membership
Interest to a Person other than an Affiliate or a Permitted
Transferee, the following procedures shall apply. After
receiving a bona fide offer from a Person to purchase its
interest, TransCarolina shall give written notice to
Piedmont Interstate of the terms of the offer and of its
intent to accept the offer unless Piedmont Interstate
exercises its right of first refusal as provided in this
Section 3.2.5. Upon receipt of such notice, Piedmont
Interstate shall have the right, exercisable by the giving
of written notice to TransCarolina within 30 days of the
receipt of such notice, to purchase TransCarolina's interest
on the same terms and conditions as the bona fide offer
(except the purchase price shall be the lesser of that
amount set forth in the bona fide offer or the balance in
TransCarolina's Capital Account on the date of the proposed
transfer). If Piedmont Interstate does not give the notice
of its intent to exercise its right of first refusal within
the 30-day period provided above, TransCarolina shall be
free to complete the transfer to the Person making the bona
fide offer. If the transfer to the Person making the bona
fide offer is not consummated within 90 days after the
30-day period referred to above, TransCarolina may not
transfer its interest without again complying with this
Section 3.2.5.
3.2.6If a Member shall cease to be controlled by the same
Persons who control it as of the date of that Member's
admission to the Company, the Member shall provide written
notice thereof to the other Members. On or before 30 days
after such notice is received by the other Members, such
other Members shall have the option to buy that Member's
Membership Interest at a purchase price equal to the balance
in that Member's Capital Account on the date the option is
exercised. If more than one of such other Members wishes to
exercise such option, they shall exercise such option on the
same date and share in such purchase on a pro rata basis
based on their respective Sharing Ratios. This paragraph
shall not apply to a change in control that results from the
merger or consolidation of the corporation who directly
controls a Member ("Parent Corporation") with another
corporation or the sale of all or substantially all of the
assets of a Member's Parent Corporation if, in each such
case, (a) the Parent Corporation shall not have been formed
for the principal purpose of directly controlling the
Member, and (b) either (i) such Parent Corporation shall be
the continuing corporation and shall continue to directly
control the Member, or (ii) the successor corporation (if
other than the Parent Corporation of the Member) shall be a
corporation organized and existing under the laws of the
United States of America or a state thereof or the District
of Columbia and such successor corporation shall continue to
be in substantially the same business as the Parent
corporation.
<PAGE>
3.2.7Subject to the provisions of Sections 3.2.8, 3.2.9 and
3.2.10, a Person (who is not already a Member) to whom
a Membership Interest is proposed to be transferred has
the right to be admitted to the Company as a Member
only with the consent of Members holding at least 75%
of the Sharing Ratios of all Members. Except as
provided in Section 3.2.2, any consent given pursuant
to Section 3.2.1 shall be deemed a consent only to the
transfer of the rights to allocations and distributions
to which the transferring Person would be entitled but
for the Disposition, unless such consent expressly
consents to the admission of the transferee as a
Member.
3.2.8The Company may not recognize for any purpose any
purported Disposition of all or part of a Membership
Interest unless and until the other applicable
provisions of Section 3.2 of this Agreement have been
satisfied and the Members have received, on behalf of
the Company, a document (i) executed by both the Member
effecting the Disposition and the Person to whom the
Membership Interest or part thereof is Disposed, (ii)
including the notice address of any Person to be
admitted to the Company as a Member and its agreement
to be bound by this Agreement in respect of the
Membership Interest or part thereof being obtained,
(iii) setting forth the Sharing Ratios and the
Commitments after the Disposition of the Member
effecting the Disposition and the Person to whom the
Membership Interest or part thereof is Disposed (which
together must total the Sharing Ratio and the
Commitment of the Member effecting the Disposition
before the Disposition), and (iv) containing a
representation and warranty that the Disposition was
made in accordance with all applicable laws and
regulations (including securities laws) and, if the
Person to whom the Membership Interest or part thereof
is Disposed is to be admitted as a Member, its
representation and warranty that the representations
and warranties in Sections 4.4 and 4.5 are true and
correct with respect to that Person. Each Disposition
and, if applicable, admission complying with the
provisions of this Section 3.2.8 is effective as of the
first day of the calendar month immediately succeeding
the month in which the Representatives receive the
notification of Disposition and the other requirements
of Section 3.2 of this Agreement have been met.
3.2.9For the right of a Member to Dispose of a Membership
Interest or any part thereof or of any Person to be
admitted to the Company in connection therewith to
exist or be exercised, (i) either (A) the Membership
Interest or part thereof subject to the Disposition or
admission must be registered under the Securities Act
of 1933, as amended, and any applicable state
securities laws or (B) the Company must receive a
favorable opinion of the Company's legal counsel or of
other legal counsel acceptable to the Members to the
effect that the Disposition or admission is exempt from
registration under those laws and (ii) the Company must
receive a favorable opinion of the Company's legal
counsel or of other legal counsel acceptable to the
Members to the effect that the Disposition or
admission, when added to the total of all other sales,
assignments, or other Dispositions within the preceding
12 months, would not result in the Company being
considered to have terminated within the meaning of the
Code. The Members, however, may waive the requirements
of this Section 3.2.9.
<PAGE>
3.2.10 The Member effecting a Disposition and any Person
admitted to the Company in connection therewith shall
pay, or reimburse the Company for, all costs incurred
by the Company in connection with the Disposition or
admission (including, without limitation, the legal
fees incurred in connection with the legal opinions
referred to in Section 3.2.9) on or before the 30th day
after the receipt by that Person of the Company's
invoice for the amount due. If payment is not made by
the date due, the Person owing that amount shall pay
interest on the unpaid amount from the date due until
paid at a rate per annum equal to the Default Interest
Rate.
3.3 Additional Members. Additional Persons may be admitted to the
Company as Members and Membership Interests may be created and
issued to those Persons and to existing Members only upon a
Supermajority Vote. The terms of admission or issuance must
specify the Sharing Ratios and the Commitments applicable
thereto and may provide for the creation of different classes
or groups of Members and having different rights, powers and
duties. The Members shall reflect the creation of any new
class or group in an amendment to this Agreement indicating
the different rights, powers, and duties. Any such admission
also must comply with the provisions of Sections 3.2.8(i) and
(ii) and is effective only after the new Member has executed
and delivered to the other Members a document including the
new Member's notice address, its agreement to be bound by this
Agreement and its representation and warranty that the
representation and warranties in Sections 4.4 and 4.5 are true
and correct with respect to the new Member. The provisions of
this Section 3.3 shall not apply to Dispositions of Membership
Interests.
3.4 Interests in a Member. A Member may not cause or permit an
interest direct or indirect, in itself to be Disposed of such
that, after the Disposition, the Company would be considered
to have terminated within the meaning of section 708 of the
Code.
4 Representations, Warranties and Covenants; Information.
4.1 Commitment to Construct the Facilities.
4.1.1Within the time requirements specified in the FERC's
regulations for acceptance of the Certificate, the
Members shall vote on whether the Company shall (a)
accept the Certificate, (b) reject the Certificate
and/or (c) seek rehearing of the order issuing the
Certificate. Within 30 days after the FERC Rehearing
Date, if applicable, the Members shall vote on whether
the Company shall appeal the order issuing the
Certificate. A Member may vote to reject the
Certificate only if a condition of the Certificate is
unacceptable in the Member's reasonable opinion.
Failure of the FERC to preserve the rights of Piedmont
Natural Gas Company, Inc. to receive two Bcf of storage
capacity from the Facilities will be considered an
unacceptable certificate condition. In the event the
Certificate is not ultimately accepted by a
Supermajority Vote of the Members, the Company shall be
dissolved.
<PAGE>
4.1.2Subject to Section 5.1 below, except upon the approval
by a Supermajority Vote, the Company shall not incur
any material costs or obligations with respect to the
Facilities or become obligated under the Financing
Commitment relating to the Facilities until (a) the
Necessary Regulatory Approvals have been obtained and
accepted, (b) the Financing Commitment has been
negotiated and is ready for acceptance by the Company
(with the Members to decide whether such Financing
Commitment utilizes a Financing Corporation), (c) the
Service Agreements have been executed by the Company
and the Customers, (d) the Estimated Cost of the
Facilities has been determined and (e) the Members have
approved the commitment to construct the Facilities as
provided in Section 4.1.3.
4.1.3Immediately following the last to occur of the events
referred to in Section 4.1.2(a), (b) and (d) (provided
that the condition that the event referred to in
Section 4.1.2(a) shall have occurred may be waived by a
Supermajority Vote) and the satisfaction or waiver by
the applicable Customers of all conditions set forth in
the precedent agreements entered into by each of the
Customers for execution of the Service Agreements
(other than the vote of the Members to commit to
construct the Facilities), the Members shall vote on
whether the Company shall be committed to construct the
Facilities (which commitment to construct shall
constitute an acceptance of the Financing Commitment).
In the event the Members do not agree by a
Supermajority Vote to construct the Facilities, the
Company shall be dissolved.
4.1.4 After the Commitment Date, except with the approval
by a Supermajority Vote, the Company shall not
incur any material costs or obligations with
respect to the Facilities until all conditions
precedent to the obtaining by the Company of funds
pursuant to the Financing Commitment relating to
the Facilities have been satisfied.
4.1.5 If at any time the Members by a Supermajority Vote
determine that it is not in the best interests of
the Company to proceed with the construction or
operation of the Facilities, the Company shall not
thereafter incur any additional material costs or
obligations with respect to the Facilities or
become obligated under the Financing Commitment
relating to the Facilities, and the Company shall
be dissolved.
4.2 Development of a Modification.
4.2.1Any Member who desires the Company to construct a
Modification shall notify the other Members and the
Operator of the nature of the proposed Modification,
including such details as are then available, and shall
provide a detailed explanation of the reasons why such
Modification is being requested. Promptly, but in no
event later than one hundred fifty (150) days from the
date requested to do so by majority consent of the
Members, the Operator shall prepare and provide to each
Member a detailed description of the proposed
Modification and an estimate of the cost thereof,
appropriate rate information and the proposed financing
therefor.
<PAGE>
4.2.2Within 60 days after the information described in
Section 4.2.1 has been received by each Member, the
Members shall vote on whether to proceed with the
development of such proposed Modification. Upon the
Supermajority Vote to proceed with the development of
such proposed Modification, the Company shall proceed
with such development, including, but not limited to,
the acquisition of Additional Necessary Regulatory
Approvals and the Financing Commitment. A vote to
proceed with the development of a Modification shall be
without prejudice to the vote on whether the Company
shall be committed to construct such Modification under
Section 4.3.2.
4.3 Commitment to Construct a Modification.
4.3.1Except upon the approval by a Supermajority Vote, the
Company shall not incur material costs or obligations
with respect to a Modification or be obligated under
any Financing Commitment relating to a Modification
until (a) the Additional Necessary Regulatory Approvals
have been obtained and accepted, (b) such Financing
Commitment, if any, as may be required in the opinion
of the Members for such Modification has been
negotiated and is ready for acceptance by the Company
(with the Representatives to decide whether such
Financing Commitment utilizes a Financing Corporation),
(c) if applicable, the Service Agreements for the use
of the capacity of the Modification have been executed
by the Company and by one or more Customers pursuant to
the Company's FERC Gas Tariff, (d) the Estimated Cost
of the Modification has been determined and (e) the
Representatives have approved a commitment to construct
such Modification as provided in Section 4.3.2.
4.3.2Immediately following the last to occur of the events
referred to in Section 4.3.1(a), (b) and (d) (provided
that the condition that the event referred to in
Section 4.3.1(a) shall have occurred may be waived by a
Supermajority Vote), and if the Modification includes
additional capacity, the satisfaction or waiver by the
applicable Customers of all conditions set forth in the
precedent agreements for execution of the Service
Agreements by the Customers that will utilize the
capacity to be created by the Modification (other than
the vote of the Members to commit to construct the
Modification), or at such later time as agreed by the
Members, the Members shall vote on whether the Company
shall be committed to construct the Modification (which
commitment to construct shall constitute an acceptance
of the Financing Commitment, if any). In the event the
Members do not agree by a Supermajority Vote to
construct the Modification, the Modification shall not
be constructed.
<PAGE>
4.3.3 After the Members vote to commit the Company to
construct a Modification, except with the approval
by a Supermajority Vote, the Company shall not
incur any material costs or obligations with
respect to such Modification until all conditions
precedent to the obtaining by the Company of funds
pursuant to a Financing Commitment (if any)
relating to such Modification have been satisfied.
4.4 General Representations and Warranties. Each Member hereby
represents and warrants to the Company and to each other
Member (a) that it is duly organized, validly existing, and in
good standing under the law of the state of its incorporation
and is duly qualified and in good standing as a foreign
corporation in the jurisdiction of its principal place of
business (if not incorporated therein); (b) that the Member
has full corporate power and authority to execute and agree to
this Agreement and to perform its obligations hereunder and
that all necessary actions by the board of directors,
shareholders, or other Persons necessary for the due
authorization, execution, delivery and performance of this
Agreement have been duly taken; (c) that the Member has duly
executed and delivered this Agreement; and (d) that the
Member's authorization, execution, delivery and performance of
this Agreement do not and will not contravene or conflict with
any provision of law applicable to such Member or with any
agreement or arrangement to which the Member is a party or by
which it is bound.
4.5 Regulatory Status. Each Member acknowledges that the Company
will be a "natural gas company" under the Natural Gas Act and
that the Company will be subject to all applicable laws,
rules, regulations and orders of any regulatory authority
having jurisdiction.
4.6 Representations, Warranties and Covenant Concerning PUHCA.
4.6.1 Each Member represents and warrants that it is not
(i) a "holding company" or (ii) a "subsidiary
company" or "affiliate" of a "holding company,"
except for a "holding company" that is exempt from
all liabilities, obligations and duties imposed
upon it as a "holding company" by the provisions of
PUHCA and the rules and regulations promulgated
thereunder (other than Section 9(a)(2) of PUHCA);
in each case (and in each case within Sections
4.6.2 and 4.6.3) within the meaning of PUHCA and
the rules and regulations promulgated thereunder.
4.6.2 Except as provided in Section 4.6.3, no Member
shall make any transfer or take other action that
would cause the Company to be a "subsidiary
company" or an "affiliate" of a "holding company,"
except for a "holding company" that is exempt from
all liabilities, obligations and duties imposed
upon it as a "holding company" by the provisions of
PUHCA and the rules and regulations promulgated
thereunder (other than Section 9(a)(2) of PUHCA).
<PAGE>
4.6.3 A Member may make a transfer or take other action
otherwise prohibited by Section 4.6.2, but only so
long as all conditions of Rule 16 are satisfied so
that the Company shall be exempt from all
liabilities, obligations and duties imposed upon it
as an "affiliate" or "subsidiary company" of a
"holding Company."
4.6.4 Each Member covenants that it will take all actions
necessary to assure that the Company will not be
subject to regulation, for any purpose, under
PUHCA, or lose the benefits of the exemption under
Rule 16, as a result of such Member's ownership of
its respective Membership Interest.
4.7 Governmental Applications. Each Member agrees to support the
Company in securing the Necessary Regulatory Approvals,
including, without limitation, preparing, filing and
prosecuting the FERC Application.
4.8 Information.
4.8.1 In addition to the other rights specifically set
forth in this Agreement, each Member is entitled to
all information to which that Member is entitled to
have access pursuant to ss. 57C-3-04 of the Act
under the circumstances and subject to the
conditions therein stated. The Members agree,
however, that the Representatives from time to time
may determine, due to contractual obligations,
business concerns, or other considerations, that
certain information regarding the business,
affairs, properties, and financial condition of the
Company should be kept confidential.
4.8.2Each Member acknowledges that, from time to time, it
may receive information for 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 whom it does business. Each
Member shall hold in strict confidence any information
it receives regarding the Company that is identified as
being confidential (and if that information is provided
in writing, that is so marked) and may not disclose it
to any Person other than another Member, except for
disclosures (i) compelled by law (but the Member must
notify the other Members promptly of any request for
that information, before disclosing it, if
practicable), (ii) to advisers or representatives of
the Member or Persons to which that Member's Membership
Interest may be Disposed as permitted by this
Agreement, but only if the recipients have agreed to be
bound by the provisions of this Section 4.8.2, or (iii)
of information that Member also has received from a
source independent of the Company that the Member
reasonably believes obtained that information without
breach of any obligation of confidentiality. Each
Member acknowledges that breach of the provisions of
this Section 4.8.2 may cause irreparable injury to the
Company for which monetary damages are inadequate,
difficult to compute, or both. Accordingly, each Member
agrees that provisions of this Section 4.8.2 may be
enforced by specific performance.
<PAGE>
4.9 Liability to Third Parties. No Member or Representative shall
be liable for the debts, obligations or liabilities of the
Company by reason of being a Member or Representative or both,
and does not become so liable by participating, in whatever
capacity, in the management or control of the business of the
Company.
4.10 Withdrawal. A Member does not have the right or power to
unilaterally withdraw from the Company.
4.11 Lack of Authority. Except as otherwise specifically provided
herein, no Member or Representative has the authority or power
to act for or on behalf of the Company, to do any act that
would be binding on the Company, or to incur any expenditures
on behalf of the Company.
4.12 Reasonable and Necessary Efforts. Each Member shall devote
such efforts as shall be reasonable and necessary to develop
and promote the business of the Company, taking into account
its respective Sharing Ratio, resources and expertise.
5 Capital Contributions.
5.1 Pre-Formation Date Expenditures.
5.1.1 Set forth on Appendix C are the amounts of
Pre-Formation Date Expenditures that have been
incurred with respect to each Member.
5.1.2 If any Member, or Affiliate thereof, has made
Pre-Formation Date Expenditures during the period
immediately preceding the Formation Date that are
not set forth in Appendix C, such Member shall have
the right to request approval thereof by
Supermajority Vote as soon as practicable after the
Formation Date (but not later than 90 days after
the Formation Date).
5.1.3After all Pre-Formation Date Expenditures to be
considered under Section 5.1.2 have been approved or
disapproved by the Members, to the extent such approval
is required, the applicable Members shall, upon request
of the Representatives pursuant to Section 5.2, make
cash Capital Contributions or advances to the Company
pro rata in proportion to their Sharing Ratios;
provided, however, that to the extent Piedmont
Interstate's Pre-Formation Date Expenditures are
treated as Capital Contributions or advances, Piedmont
Interstate shall not be required to make any such cash
Capital Contributions or advances to the Company until
such time that all Members' Capital Accounts or advance
accounts are initially pro rata in proportion to their
Sharing Ratios.
5.1.4 The assets, if any, acquired by means of the
Pre-Formation Date Expenditures of the Members
shall be and are hereby contributed to the Company.
All applicable Members agree to execute and deliver
any and all assignments and conveyances as may be
necessary or appropriate to evidence such
contribution.
<PAGE>
5.2 Requests for Capital Contributions.
5.2.1Except as otherwise provided in Section 5.1 or 5.4, the
Members shall issue or cause to be issued a written request
to each Member for the making of Capital Contributions at
such times and in such amounts as the Members shall approve.
All amounts received by the Company pursuant to this Section
5.2, whether received prior to, on or after the date
specified in Section 5.2.2(d), shall be credited to the
respective Member's Capital Account as of such specified
date (and the Pre-Formation Date Expenditures approved
pursuant to Section 5.1.2 shall be so credited as of the
date specified in Section 5.2.2(d)). All amounts received
from a Member after the date specified in Section 5.2.2(d)
by the Company pursuant to this Section 5.2 shall be
accompanied by interest on such overdue amounts (and the
default shall not be cured unless such interest is also
received by the Company), which interest shall be payable to
the Company and shall accrue from and after such specified
date at the Default Interest Rate. Any such interest paid
with respect to a Capital Contribution shall be credited to
the respective Capital Accounts of all the Members, on a pro
rata basis in proportion to their respective Sharing Ratios
as of the date such payment is made to the Company after
giving effect to the payment of the Capital Contribution
with respect to which such interest accrued.
5.2.2 Each written request issued pursuant to Section
5.2.1 shall include the following information:
(a) The total amount of Capital Contributions
requested from all Members;
(b) The amount of Capital Contribution requested
from the Member to whom the request is
addressed, such amount to be in accordance
with the Sharing Ratio of such Member
(except as provided in Section 5.1 or 5.4);
(c) The purpose for which the funds are to be
applied in such reasonable detail as the
Representatives shall direct;
(d) The date on which payments of the Capital
Contribution shall be made (which date shall
not be less than 30 days following the date
the request is given, unless a sooner date
is approved by the Members) and the method
of payment, provided that such date and
method shall be the same for each of the
members; and
(e) Evidence that the Members have approved the
request in accordance with Section 5.2.1.
5.2.3 Each Member agrees that it shall make payments of
its respective Capital Contributions in accordance
with requests issued pursuant to Section 5.2.1 and
Section 5.2.2.
<PAGE>
5.3. Loans.
5.3.1At any time after the Capital Contributions referred
to in Section 5.1.3 have been made that the Members
determine that the Company needs funds, rather than
calling for Capital Contributions, the Members may
issue or cause to be issued a written request to each
Member for the making of loans or advances to the
Company at such times and in such amounts as the
Members shall approve, by a Supermajority Vote,
provided that the Members shall not call for loans or
advances rather than Capital Contributions if doing so
would breach any Financing Commitment or other
agreement of the Company. All amounts received from a
Member after the date specified in Section 5.3.2(d) by
the Company pursuant to this Section 5.3 shall be
accompanied by interest on such overdue amounts (and
the default shall not be cured unless such interest is
also received by the Company), which interest shall be
payable to the Company and shall accrue from and after
such specified date at a rate equal to the Default
Interest Rate. Any such interest paid shall be credited
to the respective Capital Accounts of all the Members,
on a pro rata basis in proportion to their respective
Sharing Ratios as of the date such payment is made to
the Company, but shall not be considered part of the
principal of the loan.
5.3.2 Each written request issued pursuant to Section
5.3.1 shall include the following information:
(a) The total amount of loans or advances
requested from all Members;
(b) The amount of the loans or advances
requested from the Member to whom the
request is addressed, such amount to be in
accordance with the Sharing Ratio of such
Member;
(c) The purpose for which the funds are to be
applied in such reasonable detail as the
Members shall direct;
(d) The date on which the loans or advances to
the Company shall be made (which date shall
not be less than 30 days following the date
the request is given, unless a sooner date
is approved by the Members) and the method
of payment, provided that such date and
method shall be the same for each of the
members; and
(e) All terms relating to such loans, including
the terms of repayment, provided that such
terms shall be the same for each of the
Members; and
(f) Evidence that the Members have approved the
request in accordance with Section 5.3.1.
5.3.3 Each Member agrees that it shall make its
respective loans or advances in accordance with
requests issued pursuant to Section 5.3.1 and
5.3.2.
<PAGE>
5.4 Equalization of Capital Accounts. It is understood that
Piedmont Interstate's Pre-Formation Expenditures may result in
the Capital Accounts of the two Members not to be initially in
the same ratio as all Members' Sharing Ratios. After the date
that all Members' Capital Accounts first become in the same
ratio as the Members' Sharing Ratios (as a result of the
Members making Capital Contributions under Section 5.2), it is
not anticipated that the provisions of this Agreement would
ever again permit the Capital Accounts of the Members not to
be in the same ratio as their Sharing Ratios. If such event
should ever occur, the Members shall require (and the
applicable Members shall make) Capital Contributions so as to
cause the Members' Capital Accounts to be in the same ratio as
their Sharing Ratios.
5.5 Voluntary Contributions. No Member shall be required or
permitted to make any Capital Contributions or loans to the
Company except pursuant to this Section 5.
5.6 Return of Contributions. A Member is not entitled to the
return of any part of its Capital Contributions or to be paid
interest in respect of either its Capital Account or its
Capital Contributions. An unrepaid Capital Contribution is not
a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the
Company to enable the Company to return any Member's Capital
Contributions.
<PAGE>
5.7 Capital Accounts. A capital account shall be established and
maintained for each Member. Each Member's capital account (a)
shall be increased by (i) the amount of money contributed by
that Member to the Company, (ii) the fair market value of
property contributed by that Member to the Company (net of
liabilities secured by the contributed property that the
Company is considered to assume or take subject to under
section 752 of the Code), and (iii) allocations to that Member
of Company income and gain (or items thereof), including
income and gain exempt from tax and income and gain described
in Treas. Reg. ss. 1.704-1(b)(2)(iv)(g), but excluding income
and gain described in Treas. Reg. ss. 1.704-1(b)(4)(i), and
(b) shall be decreased by (i) the amount of money distributed
to that Member by the Company, (ii) the fair market value of
property distributed to that Member by the Company (net of
liabilities secured by the distributed property that the
Member is considered to assume or take subject to under
section 752 of the Code), (iii) allocations to that Member of
expenditures of the Company described in section 705(a)(2)(B)
of the Code, and (iv) allocations of Company loss and
deduction (or items thereof), including loss and deduction
described in Treas. Reg. ss. 1.704-1(b)(2)(iv)(g), but
excluding items described in clause (b)(iii) above and loss or
deduction described in Treas. Reg. ss. 1.704-1(b)(4)(i) or
Treas. Reg. ss. 1.704-1(b)(4)(iii). The Members' capital
accounts also shall be maintained and adjusted as permitted by
the provisions of Treas. Reg. ss. 1.704-1(b)(2)(iv)(f), and as
required by the other provisions of ss. 1.704-1(b)(2)(iv) and
ss. 1.704-1(b)(4), including adjustments to reflect the
allocations to the Members of depreciation, depletion,
amortization, and gain or loss as computed for book purposes
rather than the allocation of the corresponding items as
computed for tax purposes, as required by Treas. Reg. ss.
1.704-1(b)(2)(iv)(g). A Member that has more than one
Membership Interest shall have a single capital account that
reflects all its Membership Interests, regardless of the class
of Membership Interests owned by that Member and regardless of
the time or manner in which those Membership Interests were
acquired. On the transfer of all or part of a Membership
Interest, the capital account of the transferor that is
attributable to the transferred Membership Interest or part
thereof shall carry over to the transferee Member in
accordance with the provisions of Treas. Reg. ss.
1.704-1(b)(2)(iv)(l).
6 ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations.
6.1.1 Except as may be required by section 704(c) of the
Code and Treas. ss. 1.704-1(b)(2)(iv)(f)(4), all
items of income, gain, loss, deduction, and credit
of the Company shall be allocated among the Members
in accordance with their Sharing Ratios.
6.1.2All items of income, gain, loss, deduction, and credit
allocable to any Membership Interest that may have been
transferred shall be allocated between the transferor and
the transferee based on the portion of the calendar year
during which each was recognized as owning that Membership
Interest, without regard to the results of Company
operations during any particular portion of that calendar
year and without regard to whether cash distributions were
made to the transferor or the transferee during that
calendar year; provided, however, that this allocation must
be made in accordance with a method permissible under
section 706 of the Code and the regulations thereunder.
6.2 Distributions.
6.2.1 From time to time (but at least once each calendar
quarter) the Representatives shall determine in
their reasonable judgment to what extent (if any)
the Company's cash on hand exceeds its current and
anticipated needs, including, without limitation,
for operating expenses, debt service, acquisitions,
and a reasonable contingency reserve. If such an
excess exists, the Members shall cause the Company
to distribute to the Members, in accordance with
their Sharing Ratios, an amount in cash equal to
that excess.
6.2.2 From time to time the Members also may cause
property of the Company other than cash to be
distributed to the Members, which distribution must
be made in accordance with their Sharing Ratios and
may be made subject to existing liabilities and
obligations. Immediately prior to such a
distribution, the capital accounts of the Members
shall be adjusted as provided in Treas. Reg. ss.
1.704(b)(2)(iv)(f).
7 MANAGEMENT
7.1 Management by Members through Representatives.
<PAGE>
7.1.1 Subject to the provisions of Section 7.1.2, (i) the
voting of the Members pursuant to this Agreement
shall be by their respective Representatives, (ii)
the powers of the Company shall be exercised by or
under the authority of, and the business and
affairs of the Company shall be managed under the
direction of, the Members through their respective
Representatives, and (iii) the Members through
their respective Representatives may make all
decisions and take all actions for the Company not
otherwise provided for in this Agreement,
including, without limitation, the following:
(i) entering into, making and performing
contracts, agreements, and other
undertakings binding the Company that may
be necessary, appropriate, or advisable in
furtherance of the purposes of the Company
and making all decisions and waivers
thereunder;
(ii) opening and maintaining bank and
investment accounts and arrangements,
drawing checks and other orders for the
payment of money, and designating
individuals with authority to sign or give
instructions with respect to those
accounts and arrangements;
(iii) maintaining the assets of the Company in good
order;
(iv) collecting sums due the Company;
(v) to the extent that funds of the Company
are available therefor, paying debts and
obligations of the Company;
(vi) acquiring, utilizing for Company purposes,
and Disposing of any asset of the
Company;
(vii) borrowing money or otherwise committing
the credit of the Company for Company
activities and voluntary prepayments or
extensions of debt;
(viii) selecting, removing and changing the
authority and responsibility of lawyers,
accountants, and other advisers and
consultants;
(ix) obtaining insurance for the Company;
(x) determining distributions of Company cash
and other property as provided in Section
6.2;
(xi) establishing a seal for the Company;
(xii) establishing an annual budget for capital
expenditures and operations; and
(xiii) appointing the Operator as agent of the
Company to accomplish one or more of the
foregoing.
<PAGE>
7.1.2. On all matters decided by the Members, each Representative
shall have a vote equal to the Sharing Ratio of the Member
he or she represents. Except as otherwise provided in this
Agreement, the vote of the Members necessary for a matter to
be approved shall be a majority of the total Sharing Ratios
of the Members. If the requisite majority of Sharing Ratios
is not voted in favor of a matter being voted on, then the
matter shall be deemed to be denied; furthermore, unless
otherwise provided herein, if the matter being voted on
provides for more than two alternatives and no alternative
receives the requisite majority approval then no alternative
shall be selected.
7.1.3 Before any vote of the Members is taken through
their respective Representatives pursuant to
Section 4.1, 4.2 or 4.3 (unless the vote is taken
by written consent pursuant to Section 7.7), all
Representatives shall fully discuss the matter at
the meeting called for such purpose and shall
disclose to each other their intentions with
respect to such vote, so that when the actual vote
is taken each Member may vote in an informed
manner, with full knowledge of how the other
Members will vote on such matter.
7.1.4 Notwithstanding the provisions of Section 7.1.2,
the Members through their respective
Representatives may not cause the Company to do any
of the following without obtaining a Supermajority
Vote:
(a) Causing the FERC Application to provide
for (i) a geographic location, scope or
size of the Facilities different than that
set forth in Appendix B, (ii) other than a
straight-fixed variable rate design, (iii)
(iii) an estimated capital cost of the
Facilities in excess of $107 million, (iv)
a capital structure other than the 50%
equity and 50% debt, or (v) an initial
rate to be other than a cost-based rate
based on a 15% return on equity and a
40-year depreciation period or to exceed
$4.85 per Mcf.
(b) Agreeing to proceed with the development
of a Modification pursuant to Section
4.2.2, approving the incurrence of certain
costs or obligations with respect to a
Modification pursuant to Section 4.3.1 or
4.3.3 or committing to construct a
Modification pursuant to Section 4.3.2.
(c) Approving a sale or abandonment of the
Facilities.
(d) Amending, modifying, changing or otherwise
altering this Agreement.
(e) Electing to dissolve the Company.
(f) Voting at a meeting of the Representatives
on a matter not on the agenda for the
meeting referred to in Section 7.6.1 or
shortening the ten (10) day period
provided in Section 7.6.1.
(g) Approving any matter pursuant to Section 3.3.
<PAGE>
(h) Approving any matter pursuant to Sections 4.1.
(i) Approving any matter pursuant to Section 5.1.2.
(j) Selecting, removing and changing lawyers under
Section 7.1.1 (viii).
(k) Requesting that loans (rather than Capital
Contributions) be made to the Company
pursuant to Section 5.3.1.
(l) Amending, modifying, changing or otherwise
altering the CO&M Agreement pursuant to
Section 9.1.
(m) Shortening the 10-day notice period described
in Section 7.6.1.
(n) Delegating any authority to any committee,
Representative or agent of the Company to
take any action that requires more than a
majority vote of Representatives under
this Section 7.1.4.
(o) Causing any Financing Commitment to be issued
on other than non-recourse basis.
7.2 Actions by Members; Representatives; Committees;
Delegation of Authority and Duties.
7.2.1 In managing the business and affairs of the Company
and exercising its powers, the Members shall act
(i) collectively by their respective
Representatives through meetings and written
consents pursuant to Section 7.6 and 7.7, (ii)
through committees pursuant to Section 7.2.2; and
(iii) through Representatives to whom authority and
duties have been delegated pursuant to Section
7.2.3.
7.2.2 The Members may, from time to time, designate one
or more committees, including chair of each such
committee. The chair shall report to the
Representatives. Any such committee, to the extent
provided in such resolution or in the Articles of
Organization or in this Agreement, shall have and
may exercise all of the authority of the
Representatives, subject to the limitations set
forth in Section 7.1.4(o) and in the Act. The
Representatives may dissolve any committee at any
time, unless otherwise provided in the Articles of
Organization or this Agreement.
7.2.3 Subject to Section 7.1.4(o), the Members may, from
time to time, delegate to one or more
Representatives such authority and duties as the
Representatives may deem advisable. Any delegation
pursuant to this Section 7.2.3 may be revoked at
any time by the Representatives.
<PAGE>
7.3 Number and Term of Office. Each Member shall be authorized to
name one person as a Representative. Each Representative shall
hold office for the term for which he is appointed and
thereafter until his successor shall have been appointed and
qualified, or until his earlier death, resignation or removal.
Each Member may designate from time to time, in writing, an
alternate Representative who shall have the authority set
forth in such writing to act in the absence of the Member's
Representative. Representatives need not be residents of the
State of North Carolina.
7.4 Vacancies; Removal; Resignation. Any person serving as a
Representative of a Member may resign at any time. Such
resignation shall be made in writing and shall take effect at
the time specified therein, or if no time be specified, at the
time of its receipt by the remaining Representative. The
acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
Upon the resignation of a representative, the Member
appointing that representative shall have the right to
designate another person as a Representative.
7.5 Chairman and Secretary. The Members shall elect a Chairman to
serve at the pleasure of the Representatives, provided that
the Chairman must also be a Representative. The Chairman shall
preside at all meetings of Members and shall have such other
duties as may be delegated by the Members. The Members also
shall designate a Secretary to serve at the pleasure of the
Representatives. The Secretary shall record the minutes of the
meetings of Members and shall have such other duties as may be
delegated by the Members.
7.6 Meetings.
7.6.1The Chairman or his/her designee shall preside at all
meetings of the Members, which meetings shall be held
quarterly subject to more or less frequent meetings upon
approval of the Members. A notice of and an agenda for all
meetings shall be provided by the Secretary to all
Representatives at least 10 days prior to the date of such
meetings. The Secretary shall consult with each of the
Representatives prior to preparing each such agenda and
shall place on such agenda any matters requested by a
Representative to be included on such agenda for the
respective meeting. Special meetings of the Members may be
called at such times and places, and in such manner, as any
Member deems necessary. Any Member calling for any such
special meeting shall notify the Chairman and the Secretary;
the Secretary in turn shall notify all Representatives of
the date and agenda for such meeting at least 10 days prior
to the date of such meeting. Such 10-day period may be
shortened by a Supermajority Vote. Written minutes of all
meetings shall be maintained, and the minutes for each
meeting shall be approved at the next meeting of the
Members.
7.6.2 Each Representative or his/her alternate shall
attend each meeting of the Members unless he/she is
unable to do so because of an event beyond his
reasonable control, and (notwithstanding any other
provision in this Agreement) in such an
extraordinary circumstance such Representative
shall immediately so advise the Secretary by
telephone, who in turn shall similarly notify all
other Representatives and shall reschedule such
meeting as soon as practicable.
<PAGE>
7.6.3 A Representative who is present at a meeting of the
Members at which action on any Company matter is
taken shall be presumed to have assented to the
action unless his/her dissent shall be entered in
the minutes of the meeting or unless he shall file
his/her written dissent to such action with the
Person acting as secretary of the meeting before
the adjournment thereof or shall deliver such
dissent to the Company immediately after the
adjournment of the meeting. Such right to dissent
shall not apply to a Representative who voted in
favor of such action.
7.7 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the Articles of Organization
or this Agreement to be taken at a meeting of the Members or
any committee designated by the Members may be taken without a
meeting if a consent in writing, setting forth the action to
be taken, is signed by all the Representatives or members of
such committee, as the case may be. Such consent shall have
the same force and effect as a unanimous consent at a meeting
and may be stated as such in any document or instrument filed
with the Secretary of State of North Carolina, and the
execution of such consent shall constitute attendance or
presence in person at a meeting of the Members or any such
committee, as the case may be. Subject to the requirements of
the Act, the Articles of Organization or this Agreement for
notice of meetings, unless otherwise restricted by the
Articles of Organization, Representatives, or members of any
committee designated by the Members, may participate in and
hold a meeting of the Members or any such committee, as the
case may be, by means of a conference telephone or similar
communications equipment by means of which all Persons
participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and
presence at such meeting, except where a Person participates
in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is
not lawfully called or convened.
7.8 Conflicts of Interest. Except as otherwise provided in this
Agreement, including but not limited to Section 3.2.2, each
Member or Representative at any time and from time to time may
engage in and possess interests in other business ventures of
any and every type and description, independently or with
others, including business ventures in competition with the
Company, with no obligation to offer to the Company or any
other Member or Representative the right to participate
therein. The Company may transact business with any
Representative or Member or affiliate thereof, provided the
terms of those transactions are no less favorable than those
the Company could obtain from unrelated third parties.
<PAGE>
8. ACTION OF MEMBERS.
8.1 Action of Members. Unless otherwise required by this Agreement
or by nonwaiverable provisions of applicable law, all actions
required or permitted to be taken by a Member is delegated by
such Member to the Representative designated to act for such
member. In the event action required to be taken by a Member
cannot be delegated to the Representative representing such
Member, such action may be taken in any manner permitted by
the Act.
9. OPERATION OF THE FACILITIES.
9.1 Operator. The Company entered into a CO&M Agreement with the
Operator on the Formation Date. The Members may, at any time,
upon a Supermajority Vote, agree to an amendment to the CO&M
Agreement provided that the Operator concurs therewith. In the
event that such CO&M Agreement is terminated pursuant to the
terms thereof or the Operator ceases to serve as Operator in
accordance with the terms of the CO&M Agreement, the
Representatives may select a new Operator, provided that any
new Operator must be an Affiliate of Piedmont Interstate
unless Piedmont Interstate agrees otherwise. Any successor
Operator selected pursuant to this Agreement shall execute and
be bound by an operating agreement substantially in the form
of the CO&M Agreement existing immediately prior to such
execution.
10 INDEMNIFICATION
<PAGE>
10.1 Right to Indemnification. Subject to the limitations and
conditions as provided in Section 10 of this Agreement, each
Person who was or is made a party or is threatened to be made
a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a
"Proceeding"), or any appeal in such a Proceeding or any
inquiry or investigation that could lead to such a Proceeding,
by reason of the fact that he or she, or a Person of whom he
or she is the legal representative, is or was a Representative
of the Company or while a Representative of the Company is or
was serving at the request of the Company as a Representative,
director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or
domestic limited liability company, corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise shall be indemnified by the Company
to the fullest extent permitted by the Act, as the same exists
or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said
law permitted the Company to provide prior to such amendment)
against judgments, penalties (including excise and similar
taxes and punitive damages), fines, settlements and reasonable
expenses (including, without limitation, attorneys' fees)
actually incurred by such Person in connection with such
Proceeding, and indemnification under Section 10 of this
Agreement shall continue as to a Person who has ceased to
serve in the capacity which initially entitled such Person to
indemnity hereunder. The rights granted pursuant to Section 10
of this Agreement shall be deemed contract rights, and no
amendment, modification or repeal of Section 10 of this
Agreement shall have the effect of limiting or denying any
such rights with respect to actions taken or Proceedings
arising prior to any such amendment, modification or repeal.
It is expressly acknowledged that the indemnification provided
in Section 10 of this Agreement could involve indemnification
for negligence or under theories of strict liability.
10.2 Advance Payment. The right to indemnification conferred in
Section 10 of this Agreement shall include the right to be
paid or reimbursed by the Company the reasonable expenses
incurred by a Person of the type entitled to be indemnified
under Section 10.1 who was, is or is threatened to be made a
named defendant or respondent in a Proceeding in advance of
the final disposition of the Proceeding and without any
determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such
expenses incurred by any such Person in advance of the final
disposition of a Proceeding, shall be made only upon delivery
to the Company of a written affirmation by such Representative
of his or her good faith belief that he or she has met the
standard of conduct necessary for indemnification under
Section 10 of this Agreement and a written undertaking, by or
on behalf of such Person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified Person
is not entitled to be indemnified under Section 10 of this
Agreement or otherwise.
10.3 Indemnification of Agents. The Company, by adoption of a
resolution of the Representatives, may indemnify and advance
expenses to an agent of the Company to the same extent and
subject to the same conditions under which it may indemnify
and advance expenses to Representatives under Section 10 of
this Agreement; and, the Company may indemnify and advance
expenses to Persons who are not or were not Representatives or
agents of the Company but who are or were serving at the
request of the Company as a representative, director, officer,
partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other
enterprise against any liability asserted against him or her
and incurred by him or her in such a capacity or arising out
of his status as such a Person to the same extent that it may
indemnify and advance expenses to Representatives under
Section 10 of this Agreement.
<PAGE>
10.4 Appearance as a Witness. Notwithstanding any other provisions
of Section 10 of this Agreement, upon approval by the Members
the Company shall pay or reimburse expenses incurred by a
Member in connection with that Member or Member's
Representative or other employee's appearance as a witness or
other participation in a Proceeding at a time when that Member
or Member's Representative is not a named defendant or
respondent in the Proceeding.
10.5 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in Section 10 of
this Agreement shall not be exclusive of any other right which
a Representative or other Person indemnified pursuant to
Section 10.3 may have or hereafter acquired under any law
(common or statutory), provision of the Articles of
Organization or this Agreement, agreements, vote of Members or
otherwise.
10.6 Insurance. The Company may purchase and maintain insurance, at
its expense, to protect itself and any Person who is or was
serving as a Representative or agent of the Company or is or
was serving at the request of the Company as a Representative,
director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or
domestic limited liability company, corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise against any expense, liability or
loss, whether or not the Company would have the power to
indemnify such Person against such expense, liability or loss
under Section 10 of this Agreement.
10.7 Member Notification. To the extent required by law, any
indemnification of or advance of expenses to a Representative
in accordance with Section 10 of this Agreement shall be
reported in writing to the Members with or before the notice
or waiver of notice of the next Members' meeting or with or
before the next submission to Members of a consent to action
without a meeting and, in any case, within the 12-month period
immediately following the date of the indemnification or
advance.
10.8 Savings Clause. If Section 10 of this Agreement or any portion
hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Company shall nevertheless
indemnify and hold harmless each Representative or any other
Person indemnified pursuant to Section 10 of this Agreement as
to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect
to any action, suit or proceedings, whether civil, criminal,
administrative or investigative to the full extent permitted
by any applicable portion of Section 10 of this Agreement that
shall not have been invalidated and to the fullest extent
permitted by applicable law.
11 TAXES.
<PAGE>
11.1 Tax Returns. The Members shall cause to be prepared and filed
all necessary federal and state income tax returns for the
Company, including making the elections described in Section
11.2. Each Member shall furnish to the Person preparing such
returns all pertinent information in its possession relating
to Company operations that is necessary to enable such returns
to be prepared and filed.
11.2 Tax Elections. The Company shall make the following elections
on the appropriate tax returns:
(a) to adopt the calendar year as the Company's fiscal
year;
(b) to adopt the accrual method of accounting and to
keep the Company's books and records on the
income-tax method;
(c) if a distribution of Company property as described
in section 734 of the Code occurs or if a transfer
of a Membership Interest as described in section
743 of the Code occurs, on written request of any
Member, to elect, pursuant to section 754 of the
Code, to adjust the basis of Company properties;
(d) to elect to amortize the organizational expenses of
the Company and the start-up expenditures of the
Company under Section 195 of the Code ratably over
a period of 60 months as permitted by section
709(b) of the Code; and
(e) any other election the Members may deem appropriate and in
their best interests.
Neither the Company nor any Representative or Member may make
an election for the Company to be excluded from the
application of the provisions of subchapter K of chapter 1 of
subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this Agreement (including,
without limitation, Section 2.8) shall be construed to
sanction or approve such an election.
<PAGE>
11.3 "Tax Matters Partner." The Members shall designate a Member as
"tax matters partner" of the Company pursuant to section
6231(a)(7) of the Code. TransCarolina shall be the "tax
matters partner" unless and until the Members designate a
different "tax matters partner." Any Member who is designated
"tax matters partner" shall take such action as may be
necessary to cause each other Member to become a "notice
partner" within the meaning of section 6223 of the Code. Any
Member who is designated "tax matters partner" shall inform
each other Member of all significant matters that may come to
its attention in its capacity as "tax matters partner" by
giving notice thereof on or before the fifth Business Day
after becoming aware thereof and, within that time, shall
forward to each other Member copies of all significant written
communications it may receive in that capacity. Before taking
any of the following actions as the "tax matters partner," the
Member then constituting the "tax matter partner" shall obtain
the unanimous consent of the Members to such actions:
(1) Entry into a settlement agreement that under Code Section
6224(c)(3) would bind any Member that is not a party to it;
(2) Filing a petition under Code Section 6226(a);
(3) Intervening pursuant to Code Section 6226(b)(5) in any
action brought pursuant to Code Section 6226(b);
(4) Filing a request for an administrative adjustment
pursuant to Code Section 6227(b);
(5) Filing a petition pursuant to Code Section 6228(a); or
(6) Agreeing to the extension of a period of
assessment, pursuant to Code Section
6229(b)(1)(B).
12. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
12.1 Maintenance of Books. The Company shall keep books and records
of accounts and shall keep minutes of the proceedings of its
Members and each committee. The books of account for the
Company shall be maintained on an accrual basis in accordance
with the terms of this Agreement, except that the capital
accounts of the Members shall be maintained in accordance with
Section 5.7. The calendar year shall be the accounting year of
the Company.
12.2 Reports.
<PAGE>
12.2.1 Annual Reports. On or before the 120th day following the end of the
fiscal year during the term of the Company, the Members shall cause
each Member to be furnished with a balance sheet, an income statement,
and a statement of changes in Members' capital of the Company for, or
as of the end of, that year certified by the Certified Public
Accountants. These financial statements must be prepared in accordance
with accounting principles generally employed for accrual-basis
records consistently applied (except as therein noted) and must be
accompanied by a report of the Certified Public Accountants certifying
the statements and stating that (a) their examination was made in
accordance with generally accepted auditing standards and, in their
opinion, the financial statements present fairly the financial
position, financial results of operations, and changes in Members'
capital in accordance with accounting principles generally employed
for accrual-basis records consistently applied (except as therein
noted) and (b) in making the examination and reporting on the
financial statements described above, nothing came to their attention
that caused them to believe that (i) the income and revenues were not
paid or credited in accordance with the financial and accounting
provisions of this Agreement, (ii) the costs and expenses were not
charged in accordance with the financial and accounting provisions of
this Agreement, or (iii) the Members or any Member failed to comply in
any material respect with the financial and accounting provisions of
this Agreement, or if they do conclude that a Member so failed,
specifying the nature and period of existence of the failure.
12.2.2 Interim Reports. Within 45 days after the end of each fiscal
quarter, the Members shall cause to be prepared and delivered to each
Member, with an appropriate certificate of the Person authorized to
prepare the same (provided that the Members may make any change to the
financial statements required by this Section 12.2.2 as they may deem
appropriate):
(a) A profit and loss statement and a
statement of cash flows for such fiscal
quarter (including sufficient information
to permit the Members to calculate their
tax accruals) and for the portion of the
fiscal year then ended;
(b) A balance sheet and a statement of each
Member's Capital Account as of the end of
such fiscal quarter and the portion of the
fiscal year then ended; and
(c) A statement comparing the actual financial
status and results of the Company as of
the end of or for such fiscal quarter and
the portion of the fiscal year then ended
with the budget and results as of the end
of or for such respective periods.
12.2.3 Governmental Reports. The Operator shall prepare
and file, or cause to be prepared and filed, all
reports prescribed or required by the FERC or any
other Governmental Authority having jurisdiction
over the Company.
12.2.4 Other Reports. The Members also may cause to be
prepared or delivered such other reports
as they may deem appropriate.
12.2.5 Cost of Preparing and Distributing Reports. The
Company shall bear the costs of preparing and
distributing any reports required or permitted in
Section 12.2.1, 12.2.2, 12.2.3 and 12.2.4.
<PAGE>
12.3 Accounts. The Members shall cause to be established and
maintained one or more separate bank and investment accounts
and arrangements for Company funds in the Company's name with
financial institutions and firms that the Members determine.
The Company's funds may not be commingled with the funds of
any Member.
13 INSPECTION
13.1 Inspection of Facilities and Records. Subject to the
provisions of Section 4.8.2, each Member shall have the right
at all reasonable times during usual business hours upon
providing reasonable notice to the Operator to inspect the
Facilities and other properties of the Company and to audit,
examine and make copies of the books of account and other
records of the Company. Such right may be exercised through
any agent or employee of such Member designated in writing by
it or by an independent public accountant, petroleum engineer,
attorney or other consultant so designated. The Member making
the request shall bear all reasonable costs and expenses
incurred by such Member, the Company or the Operator in
connection with any inspection, examination or audit made on
such Member's behalf.
14. BANKRUPTCY OF A MEMBER
14.1 Bankruptcy Members. If any Member becomes a Bankrupt Member,
the Company shall have the option, exercisable by notice from
the other Members to the Bankrupt Member (or its
representative) at any time prior to the 180th day after
receipt of notice of the occurrence of the event causing it to
become a Bankrupt Member, to buy, and on the exercise of this
option the Bankrupt Member or its representative shall sell,
its Membership Interest. The purchase price shall be an amount
equal to the balance in that Member's Capital Account. The
purchaser shall pay the amount due the Bankrupt Member as so
determined in four equal cash installments, the first due on
closing and the remainder (together with accumulated interest
on the amount unpaid at the General Interest Rate) due on each
of the first three anniversaries thereof. The payment to be
made to the Bankruptcy Member or its representative pursuant
to this Section 14.1 is in complete liquidation and
satisfaction of all the rights and interest of the Bankrupt
Member and its representative (and of all Persons claiming by,
through, or under the Bankrupt Member and its representative)
in and in respect of the Company, including, without
limitation, any Membership Interest, any rights in specific
Company property, and any rights against the Company and
(insofar as the affairs of the Company are concerned) against
the Members, and constitutes a compromise to which all Members
have agreed.
15 DISSOLUTION, LIQUIDATION, AND TERMINATION
15.1 Dissolution. The Company shall dissolve and its affairs
shall be wound up on the first to occur of the following:
(a) the time specified in the Articles of Organization;
<PAGE>
(b) the Certificate is not accepted by Supermajority
Vote (pursuant to Section 4.1.1) or the Members do
not agree by Supermajority Vote to construct the
Facilities (pursuant to Section 4.1.3);
(c) the unanimous written consent of the Members;
(d) any Member shall become a Bankrupt Member (with or
without the consent of Required Interest) or
dissolve, or there shall occur any other event that
terminates the continued membership in the Company
of any Member; and
(e) entry of a decree of judicial dissolution of the
Company under section 57C-6-02 of the Act or the
filing by the Secretary of State of North Carolina
of a certificate of dissolution under section
57C-6-03 of the Act.
The death, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member, or the occurrence of any other event
that terminates the continued membership of a Member in the
Company shall not cause a dissolution of the Company if the
Company exercises its option under Section 14.1 or if, after
the Sharing Ratios of the remaining Members being increased
pro rata so that the total of all Sharing Ratios continues to
be 100%, there is a Supermajority Vote to continue the
existence of the Company.
15.2 Liquidation and Termination. On dissolution of the Company,
the Members shall act as liquidator or may appoint one or more
Members as liquidator. The liquidator shall proceed diligently
to wind up the affairs of the Company and make final
distributions as provided herein and in the Act. The costs of
liquidation shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the
Company properties with all of the power and authority of the
Members. The steps to be accomplished by the liquidator are as
follows:
(a) as promptly as possible after dissolution and again
after final liquidation, the liquidator shall cause
a proper accounting to be made by the Certified
Public Accountants of the Company's assets,
liabilities, and operations through the last day of
the calendar month in which the dissolution occurs
or the final liquidation is completed, as
applicable;
(b) the liquidator shall cause the notice described in
section 57C-6-07 of the Act to be mailed to each
known creditor of and claimant against the Company
in the manner described in section 57C-6-07 of the
Act;
(c) the liquidator shall cause the notice described in
section 57C-6-08 of the Act to be published in the
manner described in section 57-6-08 of the Act.
(d) the Company's assets shall be applied in the manner
provided by Section 57C-6-05 of the Act.
<PAGE>
The distribution of cash and/or property to a Member in
accordance with the provisions of this Section 15.2
constitutes a complete return to the Member of its Capital
Contributions and a complete distribution to the Member of its
Membership Interest and all the Company's property and
constitutes a compromise to which all Members have consented.
To the extent that a Member returns funds to the Company, it
has no claim against any other Member for those funds.
15.3 Deficit Capital Accounts. Notwithstanding anything to the
contrary contained in this Agreement, and notwithstanding any
custom or rule of law to the contrary, to the extent that the
deficit, if any, in the capital account of any Member results
from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or
distributions of money pursuant to this Agreement to all
Members in proportion to their respective Sharing Ratios, upon
dissolution of the Company such deficit shall not be an asset
of the Company and such Members shall not be obligated to
contribute such amount to the Company to bring the balance of
such Member's capital account to zero.
15.4 Articles of Dissolution. On completion of the distribution of
Company assets as provided herein, the Company is terminated,
and the Members (or such other Person or Persons as the Act
may require or permit) shall cause to be filed Articles of
Dissolution with the Secretary of State of North Carolina as
required by section 57C-6-06 of the Act, cancel any other
filing made pursuant to Sections 2.3 or 2.6, and take such
other actions as may be necessary to terminate the Company.
16 GENERAL PROVISIONS
16.1 Offset. Whenever the Company is to pay any sum to any Member,
any amounts that Member owes the Company may be deducted from
that sum before payment.
16.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or
permitted to be given under this Agreement must be in writing
and must be given either by depositing that writing in the
United States mail, addressed to the recipient, postage paid,
and registered or certified with return receipt requested or
by delivering that writing to the recipient in person, by
courier, or by facsimile transmission; and a notice, request,
or consent given under this Agreement is effective on receipt
by the Person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the
addresses given for that Member on the signature pages of this
Agreement or in the instrument described in Section 3.2.8 or
3.3, or such other address as that Member may specify by
notice to the other Members. Any notice, request, or consent
to the Company must be given to the Chairman at the following
addresses: 2800 Post Oak Boulevard, Houston, Texas 77056 if by
mail or (713) 439-4269 if by facsimile transmission and to P.
O. Box 33068, Charlotte, N.C. 28233 if by mail or (704)
364-8320 if by facsimile transmission. Whenever any notice is
required to be given by law, the Articles of Organization or
this Agreement, a written waiver thereof, signed by the Person
entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such
notice.
16.3 Entire Agreement; Supersedure. This Agreement constitutes the
entire agreement of the Members and their Affiliates relating
to the Company and supersedes all prior contracts or
agreements with respect to the Company, whether oral or
written.
<PAGE>
16.4 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any Person in the
performance by that Person of its obligations with respect to
the Company is not a consent or wavier to or of any other
breach or default in the performance by that Person of the
same or any other obligations of that Person with respect to
the Company. Failure on the part of a Person to complain of
any act of any Person or to declare any Person in default with
respect to the Company, irrespective of how long that failure
continues, does not constitute a waiver by that Person of its
rights with respect to that default until the applicable
statute-of-limitations period has run.
16.5 Amendment or Modification. This Agreement may be amended or
modified from time to time only by a written instrument
adopted by a Supermajority Vote.
16.6 Binding Effect. Subject to the restrictions on Dispositions
set forth in this Agreement, this Agreement is binding on and
inures to the benefit of the Members and their respective
heirs, legal representatives, successors and assigns.
16.7 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NORTH CAROLINA, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR
PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION
OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the
event of a direct conflict between the provisions of this
Agreement and (a) any provision of the Articles of
Organization, or (b) any mandatory provision of the Act, the
application provision of the Articles of Organization or the
Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held
invalid or unenforceable to any extent, the remainder of this
Agreement and the application of that provision to other
Persons or circumstances is not affected thereby and that
provision shall be enforced to the greatest extent permitted
by law.
16.8 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute
and deliver any additional documents and instruments and
perform any additional acts that may be necessary or
appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
16.9 Indemnification. To the fullest extent permitted by law, each
Member shall indemnify the Company, each Representative and
each other Member and hold them harmless from and against all
losses, costs, liabilities, damages, and expenses (including,
without limitation, costs of suit and attorney's fees) they
may incur on account of any breach by that Member of this
Agreement.
<PAGE>
16.10 Notice to Members of Provisions of this Agreement. By
executing this Agreement, each Member acknowledges that it has
actual notice of (a) all of the provisions of this Agreement,
including, without limitation, the restrictions on the
transfer of Membership Interests set forth in Section 3 and
(b) all of the provisions of the Articles of Organization.
Each Member hereby agrees that this Agreement constitutes
adequate notice of all such provisions, and each Member hereby
waives any requirement that any further notice thereunder be
given.
16.11 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties
had signed the same document. All counterparts shall be
construed together and constitute the same instrument.
IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first set forth above.
MEMBERS:
TransCarolina LNG Company
By:
Name: Frank J. Ferazzi
Title: Vice President
Date of Execution: August 8, 1995
Piedmont Interstate Pipeline Company
By:
Name: Ware F. Schiefer
Title: Vice President
Date of Execution: August 8, 1995
<PAGE>
APPENDIX A
(SHARING RATIOS)
Member Commitment Sharing Ratio
TransCarolina $26,750,000 50%
Piedmont Interstate $26,750,000 50%
<PAGE>
APPENDIX B
(DESCRIPTION OF FACILITIES)
The Facilities will be constructed on a site consisting of
approximately 828.3 acres of land in northwest Guilford County, North Carolina,
near the town of Stokesdale. The site is accessible from N.C. Highway 68 and Haw
River Road and is approximately one mile northwest of Transco's pipeline.
The Facilities will be comprised of two double shell, suspended deck
storage tanks each of which is capable of storing two Bcf of natural gas
equivalent or approximately 48 million gallons of liquid, a pre-treatment and
liquefaction system, an LNG truck loading and unloading station, a vaporization
and sendout system, a hazard detection/protection system and connection
pipeline. The pre-treatment and liquefaction systems will liquefy at a net rate
of 20 MMcf of natural gas per 24-hour period to storage. The vaporization and
sendout system will be designed to vaporize and sendout not less than 400 MMcf
per 24-hour period. The hazard detection/protection system will include a fire
water system with hydrants, monitors and deluge nozzles as well as fire, gas,
smoke and high temperature detectors that are integrated into a plant-wide alarm
system.
<PAGE>
APPENDIX C
Pre-Formation Date Expenditures
TransCarolina
$100,000
Piedmont Interstate Pipeline Company
All of Piedmont Interstate Pipeline Company's rights and
interest in approximately 828.3 acres of land in northwest Guilford
County, North Carolina, near the town of Stokesdale, along with all
engineering reports, seismic reports and other reports relating to the
use of the land all services performed in connection with the
acquisition and rezoning of the site prior to June 1, 1995, all
consulting and legal fees paid prior to June 1, 1995 to obtain the
present zoning of the site, the acquisition of title, options and
leases to the site, various engineering and seismic studies with
respect to the site, and all planning and design of the site prior to
June 1, 1995, all of which is estimated to have a fair market value of
$2.5 million.
Such rights and interests shall be conveyed subject to the
option of Piedmont Interstate to repurchase the same in the event the
FERC Certificate is not accepted by the Members or the Members vote not
to construct the Facilities under Section 4.1 of the Operating
Agreement. In the event Piedmont Interstate exercises its option to
repurchase, the purchase price shall be $1.00 plus an amount to
reimburse the Company for the costs of any improvements to the
property, including any amounts paid to extend any options to lease or
purchase the property. In order to compensate TransCarolina for its
agreement to take certain frontend regulatory risks, the first $100,000
of such reimbursement shall be credited to TransCarolina. The remainder
of such reimbursement shall be credited to all Members, including
Piedmont Interstate, pro rata based on their Sharing Ratios.
