SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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:
In the Matter of :
:
PUBLIC SERVICE COMPANY OF OKLAHOMA : CERTIFICATE
:
CENTRAL AND SOUTH WEST CORPORATION : OF
:
File No. 70-8887 : NOTIFICATION
:
(Public Utility Holding Company Act of 1935) :
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This report is filed under Rule 24 of the Public Utility Holding Company Act
of 1935 by Public Service Company of Oklahoma (PSO) a subsidiary of Central and
South West Corporation (CSW). Pursuant to an Order of the Securities and
Exchange Commission dated December 30, 1996 (HCAR 35-26638), PSO must file
semi-annual reports providing the following information with respect to the
activities related to its investment in Nuvest, L.L.C.(Nuvest), which provides
services to public utility companies through its subsidiaries, Numanco, Inc. and
Numanco, L.L.C. (collectively, together with Nuvest, referred to as the Numanco
Companies): 1) a description of all services performed by the Numanco Companies
during the most recent six month period (the reporting period), 2) a description
of any services provided to PSO by the Numanco Companies during the reporting
period, 3) a statement of any dividends or interest paid to PSO, both for the
reporting period and cumulatively, as a result of its equity interests in the
Numanco Companies, and 4) a statement regarding the nature and consequences of
any event of default under the member agreement occurring during the reporting
period.
This report covers the period July 1, 1997 through December 31, 1997.
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1) Description of all services performed by the Numanco Companies
during the reporting period
* The Numanco Companies provided services in each of the following
four areas: health physics services, mechanical services, quality
assurance services and training services. Of the services listed,
over 99% of all work performed was in commercial nuclear power
plants within the United States. Of the four types of services
listed above, over 90% of revenues were derived from the provision
of health physics services.
* As previously reported, the Numanco Companies continue to provide
health physics and mechanical personnel as a result of a joint
venture with a third party. This joint venture provides turn-key
tank cleaning to utilities, heavy industry, the U.S. Department of
Energy (DOE) and the U.S. Department of Defense. This venture has
not received any significant work to date, but it is bidding on some
projects for the DOE, one electric utility and several
petro-chemical facilities.
* During the period, the Numanco Companies assumed the operations and
acquired the assets of its joint venture partner in the tank
cleaning business described above. The joint venture partner owned
the submersible pumps and provides the proprietary and patented
technology used in the tank cleaning operations. The Numanco
Companies have spent considerable time and expense qualifying the
technology for use at DOE sites. The Numanco Companies are using
its mechanical contract labor, existing management and
administrative infrastructure to operate the joint venture
partner's company. In the short-term, this arrangement allows the
Numanco Companies to better utilize its existing manpower and
administrative support. The long-term goal is for this business to
provide new service opportunities for the Numanco Companies. The
operation and acquisition of the joint venture partner company will
not adversely impact the Numanco Companies' results of operation or
financial position.
2) Description of any services provided to PSO by the Numanco Companies during
the reporting period
* No services were provided to PSO during the reporting period by the
Numanco Companies.
3) Statement of any dividends or interest paid to PSO, both for the
reporting period and cumulatively, as a result of its equity interests in the
Numanco Companies
* No interest was paid to PSO during the reporting period or
cumulatively.
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* No dividends were paid to PSO during the reporting period or
cumulatively.
* As a Limited Liability Company, all of the Numanco Companies'
earnings must be distributed to its members. In 1997, PSO accrued
$1,874,348 equity earnings associated with its investment in the
Numanco Companies.
4) Statement regarding the nature and consequences of any event of default
under the member agreement occurring during the period
* No events of default occurred during the reporting period.
Exhibits filed herewith:
1. Amended and Restated Member Agreement
2. Amended and Restated Articles of Organization of Nuvest
3. Amended and Restated Operating Agreement of Nuvest
4. Amended and Restated Articles of Organization of Numanco
5. Amended and Restated Operating Agreement of Numanco
6. Form of Noncompetition Agreement
7. New Manager's Agreement
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S I G N A T U R E
As requested by order of this Commission pursuant to the Public Utility
Holding Company Act of 1935, Public Service Company of Oklahoma has duly caused
this report to be signed on its behalf on this 27th day of February 1998.
Public Service Company of Oklahoma
/s/ R. Russell Davis
R. Russell Davis
Controller and Chief
Accounting Officer
AMENDED AND RESTATED
MEMBER AGREEMENT
This Amended and Restated Member Agreement (the "Agreement") entered
into on the ____ day of __________, 1997, by and among Public Service Company of
Oklahoma, an Oklahoma corporation ("PSO"); Monika Smith, a natural person
("Monika"); Nuvest, L.L.C., an Oklahoma limited liability company ("Nuvest");
Numanco, L.L.C., an Oklahoma limited liability company ("Numanco LLC"); and NSS
Numanco, Inc., a Pennsylvania Corporation ("Numanco Inc.").
W I T N E S S E T H:
1. In consideration of the mutual promises set forth herein, the parties
agree as follows:
Recitals.
1.1. Pursuant to an agreement dated February 22, 1996 (the "Initial
Agreement"), PSO advanced an aggregate of $3,700,000 (the "PSO Advance" to
Canton, L.L.C., an Oklahoma limited liability company ("Canton"). Canton, in
turn, loaned such amount to Nuvest for the purpose of acquiring all of the
capital stock of Numanco Inc. Such acquisition was consummated on or about
February 26, 1996.
1.2. Contemporaneously with the execution of the Initial Agreement, PSO
made application to the Securities and Exchange Commission ("SEC") for
permission under the 1935 Act to acquire an equity interest in Nuvest. Such SEC
approval was obtained in December, 1996.
1.3. Subsequent to Nuvest's acquisition of Numanco Inc., Nuvest and
Numanco Inc. formed Numanco LLC, and Nuvest assumed all of Canton's obligation
to repay the PSO Advance. The parties entered into the original version of this
Agreement effective as of December 31, 1996, to memorialize the parties'
respective rights and obligations with respect to the management of the
businesses in which the Nuvest and its subsidiaries, Numanco Inc. and Numanco
LLC, are engaged, all as described in the Business Plan.
1.4 PSO and Monika (hereinafter referred to as the "Members"), and the
other parties hereto, now desire to amend and restate this Agreement for the
purpose of memorializing certain changes to the buy-sell rights of the Members;
provided, all changes effected hereby shall be deemed effective as of December
31, 1996.
2. Amendments to Charter Documents.
2.1. Contemporaneously with the execution and delivery of this
Agreement:
(a) PSO and Monika shall execute and deliver (i) Amended and
Restated Articles of Organization for Nuvest in the form attached as Exhibit A,
and (ii) an Amended and Restated Operating Agreement for Nuvest in the form
attached as Exhibit B, and
(b) Nuvest and Numanco Inc. shall execute and deliver (i)
Amended and Restated Articles of Organization for Numanco LLC in the form
attached as Exhibit C, and (ii) an Amended and Restated Operating Agreement for
Numanco LLC in the form of Exhibit D.
3. PSO's Investment in Nuvest.
3.1. Effective as of December 31, 1996, $700,000 of the PSO Advance was
converted to a contribution by PSO to the capital of Nuvest, the balance ($3
million) was returned to PSO, and the PSO Advance was deemed repaid in full. The
parties acknowledge that no interest, stand-by, option, or similar fee was or
will be paid to PSO in connection with the PSO Advance, nor was PSO under any
obligation to indemnify Canton or any of the parties to this Agreement against
any market risk or any other claim, loss, damage or liability whatsoever.
3.2. PSO guaranteed:
(a) For a period not to exceed three (3) years, the
performance of the Numanco Companies' obligations under that certain promissory
note in the amount of $3,000,000, by Nuvest to Bank of Oklahoma, N.A. (the
"Bank"), the proceeds of which were used by Nuvest to return to PSO the amount
described in Section 3.1, and
(b) For a period not to exceed three (3) years, the
performance of the Numanco Companies' obligations under a revolving line of
credit in the amount of $9,000,000, secured by short-term receivables of the
Numanco Companies.
4. Conditions Precedent to PSO's Obligations.
Before PSO shall have any obligation to execute and deliver this
Agreement or perform its obligations under Section 3, each of the following
conditions shall be fulfilled to PSO's satisfaction:
4.1. PSO shall have obtained the approval from the SEC for its
participation in the transactions contemplated by this Agreement, or shall have
obtained advice of counsel that such approval is not required.
4.2. No breach shall have occurred of any of the covenants of parties
other than PSO under the Initial Agreement, this Agreement, or of Richard Smith
under his Manager's Agreement with Nuvest and Numanco LLC;
4.3. The amendments to the Articles of Organization and Operating
Agreement of Nuvest and Numanco LLC, as described in Section 2 above, shall have
been effected;
4.4. The representations and warranties contained in Section 6 below
shall be true and correct.
5. Definitions.
When used herein, the following terms shall have the meanings ascribed
to them:
5.1. "Affiliate" means any Person that directly or indirectly controls,
is controlled by, or is under common control with, such Person. As used in this
definition of "Affiliate," the term "control" means either (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise or (ii) a direct or indirect equity
interest of ten percent (10%) or more in the entity.
5.2. "Business Plan" means the operating plan of the Numanco Companies,
which shall include a description of lines of business, targeted gross margins,
targeted fixed operating costs, and a pro forma cash flow budget, profit and
loss statement, and balance sheet, as same may be amended from time to time
pursuant to Section 6.21.
5.3. "Capital Expenditures" means, for any period, amounts added or
required to be added to the property, plant and equipment or other fixed assets
account on the balance sheet of any Numanco Company, prepared in accordance with
GAAP, in respect of (a) the acquisition, construction, improvement or
replacement of land, buildings, machinery, equipment, leaseholds and any other
real or personal property, (b) to the extent not included in clause (a) above,
materials, contract labor and direct labor relating thereto (excluding amounts
properly expensed as repairs and maintenance in accordance with GAAP) and (c)
software development costs to the extent not expensed.
5.4. "Capitalized Lease" means any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
5.5. "Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including Statement Nos.
13 and 98 of the Financial Accounting Standards Board.
5.6. "Cash Equivalents" means: (a) negotiable certificates of deposit,
time deposits (including sweep accounts), demand deposits and bankers'
acceptances having a maturity of nine months or less and issued by any United
States financial institution having capital and surplus and undivided profits
aggregating at least $100,000,000 and rated at least Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Ratings Group; (b) corporate
obligations having a maturity of nine months or less and rated at least Prime-1
by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings Group;
(c) any direct obligation of the United States of America or any agency or
instrumentality thereof, or of any state or municipality thereof, (i) which has
a remaining maturity at the time of purchase of not more than one year or which
is subject to a repurchase agreement with any financial institution referred to
in clause (a) above, exercisable within one year from the time of purchase, and
(ii) which, in the case of obligations of any state or municipality, is rated at
least Aa by Moody's Investors Service, Inc. or AA by Standard & Poor's Ratings
Group; and (d) any mutual fund or other pooled investment vehicle rated at least
Aa by Moody's Investors Service, Inc. or AA by Standard & Poor's Ratings Group
which invests principally in obligations described above.
5.7. "Code" means the federal Internal Revenue Code of 1986.
5.8. "Distribution" means, with respect to each Numanco Company: (a)
the declaration or payment of any dividend or distribution, including dividends
payable in shares of capital stock of or other equity interests in the Numanco
Company on or in respect of any shares of any class of capital stock of or other
equity interests in the Numanco Company; (b) the purchase, redemption or other
retirement of any shares of capital stock of or other equity interest in the
Numanco Company or of options, warrants or other rights for the purchase of such
shares, directly or indirectly; (c) any other distribution on or in respect of
any shares of capital stock of or equity or other beneficial interest in the
Numanco Company; (d) any payment of principal or interest with respect to, or
any purchase, redemption or defeasance of, any Indebtedness of the Numanco
Company; and (e) any loan or advance by the Numanco Company to, or any other
Investment by the Numanco Company in, the holder of any shares of any class of
capital stock of or equity interest in the Numanco Company, or any Affiliate of
such holder; provided, however, that the term "Distribution" shall not include
(i) any payment in the ordinary course of business in respect of (A) reasonable
compensation paid to employees, officers, directors and managers, (B) advances
to employees for travel expenses, drawing accounts and similar expenditures, or
(C) rent paid to, or accounts payable for services rendered or goods sold by,
any person who is not an Affiliate of the Numanco Company or (ii) any payment by
the Numanco Company which constitutes repayment of an Indebtedness permitted
under Sections 6.13(e) and (f).
5.9. "Environmental laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment, including the Federal Occupational Health and
Safety Act.
5.10. "ERISA" means the federal Employee Retirement Income Security
Act of 1974.
5.11. "Financing Debt" means each of the items described in clauses (a)
through (f) of the definition of the term "Indebtedness".
5.12. "GAAP" means generally accepted accounting principles as from
time to time in effect, including the statements and interpretations of the
United States Financial Accounting Standards Board.
5.13. "Guarantee" means, with respect to each Numanco Company: (a) any
guarantee by the Numanco Company of the payment or performance of, or any
contingent obligation by the Numanco Company, in respect of, any Indebtedness or
other obligation of any primary obligor; (b) any other arrangement whereby
credit is extended to a primary obligor on the basis of any promise or
undertaking of the Numanco Company, including any binding "comfort letter" or
"keep well agreement" written by the Numanco Company, to a creditor or
prospective creditor of such primary obligor, to (i) pay the Indebtedness of
such primary obligor, (ii) purchase an obligation owed by such primary obligor,
(iii) pay for the purchase or lease of assets or services regardless of the
actual delivery thereof or (iv) maintain the capital, working capital, solvency
or general financial condition of such primary obligor; (c) any liability of the
Numanco Company, as a general partner of a partnership in respect of
Indebtedness or other obligations of such partnership; (d) any liability of the
Numanco Company as a joint venturer of a joint venture in respect of
Indebtedness or other obligations of such joint venture; and (e) reimbursement
obligations, whether contingent or matured, of the Numanco Company with respect
to letters of credit, bankers acceptances, surety bonds, other financial
guarantees; whether or not any of the foregoing (a) through (e) are reflected on
the balance sheet of the Numanco Company or in a footnote thereto.
5.14. "Hazardous Material" means any pollutant, toxic or hazardous
material or waste, including any "hazardous substance" or "pollutant" or
"contaminant" as defined in section 101(14) of the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or any other
Environmental Law or regulated as toxic or hazardous under the Federal Resource
Conservation and Recovery Act or any other Environmental Law.
5.15. "Indebtedness" means, with respect to each Numanco Company, all
obligations, contingent or otherwise, which in accordance with GAAP are required
to be classified upon the balance sheet of the Numanco Company as liabilities,
but in any event including (without duplication): (a) borrowed money; (b)
indebtedness evidenced by notes, debentures or similar instruments; (c)
Capitalized Lease Obligations; (d) the deferred purchase price of assets or
securities, including related noncompetition, consulting and stock repurchase
obligations (other than ordinary trade accounts payable within six months after
the incurrence thereof in the ordinary course of business); (e) mandatory
redemption or dividend rights on capital stock (or other equity); (f)
reimbursement obligations, whether contingent or matured, with respect to
letters of credit, bankers acceptances, surety bonds, and other financial
guarantees; (g) unfunded pension liabilities; (h) obligations that are
immediately and directly due and payable out of the proceeds of or production
from property; (i) liabilities secured by any Lien existing on property owned or
acquired by the Numanco Company, whether or not the liability secured thereby
shall have been assumed; and (j) all Guarantees in respect of Indebtedness of
others.
5.16. "Investment" means, with respect to each Numanco Company: (a) any
share of capital stock, partnership, membership, or other equity interest,
evidence of Indebtedness or other security issued by any other Person; (b) any
loan, advance or extension of credit to, or contribution to the capital of, any
other Person; (c) any Guarantee of the Indebtedness of any other Person; (d) any
acquisition of all or any part of the business of any other Person or the assets
comprising such business or part thereof; and (e) any other similar investment.
The investments described in the foregoing clauses (a) through (e) shall be
included in the term "Investment" whether they are made or acquired by purchase,
exchange, issuance of stock or other securities, merger, reorganization or any
other method; provided, however, that the term "Investment" shall not include
(i) current trade and customer accounts receivable for property leased, goods
furnished or services rendered in the ordinary course of business and payable in
accordance with customary trade terms, (ii) advances and prepayments to
suppliers for property leased, goods furnished and services rendered in the
ordinary course of business, (iii) advances to employees for travel expenses,
drawing accounts and similar expenditures, (iv) stock or other securities
acquired in connection with the satisfaction or enforcement of Indebtedness or
claims due to the Numanco Company or as security for any such Indebtedness or
claim, (v) demand deposits in banks or similar financial institutions, or (vi)
investment in ARC, L.L.C., ESG, L.L.C., and ESGI, Inc.
5.17. "Lien" means, with respect to each Numanco Company: (a) any lien,
encumbrance, mortgage, pledge, charge or security interest of any kind upon any
property or assets of the Numanco Company, whether now owned or hereafter
acquired, or upon the income or profits therefrom; (b) the acquisition of, or
the agreement to acquire, any property or asset upon conditional sale or subject
to any other title retention agreement, device or arrangement (including a
Capitalized Lease); (c) the sale, assignment, pledge or transfer for security of
any accounts, general intangibles or chattel paper of the Numanco Company, with
or without recourse; (d) the transfer of any tangible property or assets for the
purpose of subjecting such items to the payment of previously outstanding
Indebtedness in priority to payment of the general creditors of the Numanco
Company; and (e) the existence for a period of more than 120 consecutive days of
any Indebtedness against the Numanco Company which if unpaid would by law be
given any priority over general creditors.
5.18. "Numanco Companies" means, collectively, Numanco Inc., Nuvest,
and Numanco LLC, and each direct or indirect subsidiary of each such company;
individually, each such entity shall be referred to as a "Numanco Company."
5.19. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company, business trust, trust, organization, business or
government or any governmental agency or political subdivision thereof.
5.20. "Plan" means, at any date, any pension benefit plan subject to
Title IV of ERISA maintained, or to which contributions have been made or are
required to be made, by any Numanco Company within six years prior to such date.
5.21. "Smith" means Richard H. Smith, the current Manager of the
Numanco Companies.
5.22. "Buy-Sell Event" shall have the meaning ascribed to it in
Section 7.
5.23. "Interest" shall mean a Member's direct and indirect interest in
the capital and profits of the Numanco Companies as a whole, as determined from
the Member's Sharing Ratio set forth in each Numanco Company Operating
Agreement.
5.24. "Exercising Party" shall have the meaning ascribed to it in
Section 8.5(a).
5.25. "Agreed Value" shall have the meaning ascribed to it in
Section 8.6.
5.26. "Purchase Price" shall have the meaning ascribed to it in
Section 8.6.
5.27. "Contract" shall have the meaning ascribed to it in
Section 8.6(a).
5.28. "Valuation Date" shall have the meaning ascribed to it in
Section 8.6(a).
5.29. "Direct Costs" shall have the meaning ascribed to it in
Section 8.6(c).
5.30. "Prime Rate" shall have the meaning ascribed to it in
Section 8.6(e).
5.31. "FMV Net Worth" shall mean (i) ninety percent (90%) of the
Purchase Price calculated pursuant to subsections (a) through (h) of Section
8.6, (ii) plus all current assets of the Numanco Companies, (iii) plus all fixed
assets of the Numanco Companies at an agreed upon value, and (iv) less all
liabilities of the Numanco Companies (except the fee payable to Smith under
Section 5.5 of the Manager's Agreement). An example calculation of the FMV Net
Worth is set forth in Exhibit F.
5.32. "Request Date" shall have the meaning ascribed to it in
Section 8.8(a).
5.33. "Manager's Agreement" shall mean the agreement between Smith and
the Numanco Companies relating to Smith's appointment as Manager of such
companies.
5.34. "1935 Act" shall mean the Public Utility Holding Company Act of
1935, as amended, and the rules and regulations promulgated thereunder by the
SEC.
6. Covenants, Representations and Warranties.
Except as may be otherwise mutually agreed upon in writing, (i) Monika
agrees to vote her interest in Nuvest to authorize the Manager and the Numanco
Companies to accomplish the following, and (ii) Nuvest, Numanco LLC, and Numanco
Inc. hereby jointly and severally covenant, represent and warrant to PSO the
following:
6.1. Books and Records. Each Numanco Company shall make and keep books,
records and accounts, which, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of its assets, and devise and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles or any other criteria applicable to such
statements and to maintain accountability for assets, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
6.2. Financial Information. Each Numanco Company shall furnish the
following reports to PSO:
(a) As soon as practicable after the end of each fiscal year,
and in any event within 120 days thereafter, a balance sheet of the Numanco
Company as of the end of such fiscal year, and a statement of income and a
statement of changes in financial position of the Numanco Company for such year,
prepared in accordance with GAAP and setting forth in each case in comparative
form the figures of the previous fiscal year, all in reasonable detail including
all supporting schedules and comments.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Numanco
Company, and in any event within 45 days thereafter, a balance sheet of the
Numanco Company as of the end of each such quarterly period, and a statement of
income and a statements of changes and financial condition of the Numanco
Company and its subsidiaries (if any) for such period and for the current fiscal
year to date, prepared in accordance with GAAP, setting forth in each case
comparisons to the Business Plan (as hereinafter defined) and the corresponding
period to the previous fiscal year, all in reasonable detail and signed, subject
to changes resulting from year-end audit adjustments, by the Manager.
(c) As soon as available after the end of each month, and in
any event within thirty (30) days thereafter, (i) a balance sheet of the Numanco
Company as of the end of such month, and a statement of income and changes in
financial position for the month and for the current fiscal year to date, both
prepared in accordance with GAAP setting forth in each case comparisons to the
Business Plan and the corresponding periods of the previous fiscal year; (ii) a
pro forma cash flow statement of anticipated cash flow for the next succeeding
90 day period of the Numanco Company prepared on a consolidated basis setting
forth, in each case, comparisons to the Business Plan and the corresponding
periods of the previous fiscal year, all in reasonable detail and signed,
subject to changes resulting from year-end audit adjustments, by the Manager and
accompanied by a statement explaining any material differences between budgeted
and actual results; and (iii) a memorandum from the Manager reporting on the
Numanco Company's operations, describing significant events or circumstances
affecting operations and containing such other matters as are requested by PSO.
6.3. Additional Information. Each Numanco Company shall furnish to
PSO:
(a) Upon request from a Member, a certificate executed by the
Manager stating that neither the Numanco Company nor any of its subsidiaries is
in default under its Articles of Organization or Operating Agreement, this
Agreement, any promissory note, or any other material agreement to which it is a
party or to which it or any of its properties is subject.
(b) Promptly following receipt thereof, any letters furnished
to the Numanco Company by its independent public accountants which comment on
the accounting practices of the Numanco Company.
(c) Promptly (but in any event within five days) after the
discovery of any material adverse event or circumstance affecting the Numanco
Company including, but not limited to, the filing of any material litigation
against the Numanco Company or any subsidiary and the discovery that the Numanco
Company is not, or with the passage of time will not be, in compliance with any
provision of this Agreement, any promissory note, or any other material
agreement of the Numanco Company, a notice specifying the nature and period of
existence thereof, and the actions the Numanco Company has taken and/or proposes
to take with respect thereto. The Numanco Company shall furnish the Members with
monthly reports updating and describing any developments relating to matters
described under this subparagraph and will promptly notify the Members of any
material developments or changes relating thereto.
(d) Promptly following the preparation thereof, copies of the
minutes of proceedings (or consents) of the Numanco Company's Manager and the
Members together with all written materials given to the Manager.
(e) With reasonable promptness, such other information and
data with respect to the Numanco Company and its subsidiaries (if any) as any
Member may from time to time reasonably request.
6.4. Audit and Inspection. From time to time at reasonable intervals
upon request of PSO, each Numanco Company shall furnish to PSO such other
information regarding the business, assets, financial condition, income or
prospects of the Numanco Company PSO may reasonably request, including copies of
all tax returns, licenses, agreements, leases and instruments to which any of
the Numanco Company is party. PSO shall have the right during normal business
hours upon reasonable notice and at reasonable intervals to examine the books
and records of the Numanco Company, to make copies and notes therefrom for the
purpose of ascertaining compliance with or obtaining enforcement of this
Agreement.
6.5. Confidentiality of Information. With respect to each Numanco
Company (a) PSO agrees that any information obtained by it pursuant to this
Agreement or which is proprietary to the Numanco Company or otherwise
confidential will not be disclosed without the prior written consent of the
Numanco Company except as may be required to be disclosed in order to comply
with any applicable law, rule, regulation, order or request of any governmental
agency or authority; provided, that without the prior written consent of the
Numanco Company, PSO may disclose such information to its parent corporation,
Central and South West Corporation, any direct or indirect subsidiary of such
parent, or any governmental agency having jurisdiction over any such entity; and
(b) similarly, the Numanco Company agrees that any information obtained by it
pursuant to this Agreement or which is proprietary to PSO or otherwise
confidential will not be disclosed without the prior written consent of PSO
except as may be required to be disclosed in order to comply with any applicable
law, rule, regulation, order or request of any governmental agency or authority.
Each Numanco Company shall require each of its employees who is expected to
become familiar with the Numanco Company's trade secrets or other proprietary or
confidential information to execute a confidentiality agreement containing
appropriate terms to protect such information.
6.6. Property and Liability Insurance. Each Numanco Company shall cause
to be kept insured all of the Numanco Company's assets which are of insurable
character, and which are customarily insured by companies engaged in the same or
similar businesses by financially sound and reputable insurers against loss or
damage by fire, explosion or other hazards customarily insured against by such
comparable companies with extended coverage in amounts sufficient to prevent the
Numanco Company from becoming a co-insurer, except for normal deductibles, but
not, in any event, less than eighty percent (80%) of the insurable value of the
property. Each Numanco Company will maintain, with financially sound and
reputable insurers, such insurance against hazards and risks and liabilities to
persons and property as are customarily insured against by companies engaged in
the same or similar businesses. The amount of liability insurance shall be at
least $1,000,000 for property damage and $1,000,000 for personal injury
regardless of the number of persons injured. Each Numanco Company will promptly
notify PSO of any change in insurance coverage. The Numanco Company shall
promptly cause all policies of insurance obtained by it in accordance with its
obligations hereunder to provide that they may not be cancelled unless the
insurance carrier gives PSO (or, if the insurer requires, a designated
representative of PSO) at least 30 days prior written notice thereof.
6.7. Licenses, Permits, Franchises, Etc. Each Numanco Company shall
qualify to conduct business in each jurisdiction in which the nature of its
business or activities requires it to so qualify, shall remain in good standing
in each such jurisdiction, and shall acquire and keep in force all other
licenses, permits, franchises, and other rights necessary to the operation of
its business.
6.8 Preservation of Goodwill. Each Numanco Company shall preserve
intact the present business organization, rights and privileges and present
goodwill and, to the best of its ability relationships existing with other
parties and will at all times cause to be done all things necessary to maintain,
preserve, and renew its existence and will observe and conform with all valid
requirements of all governmental authorities relating to the conduct of the
business of the Numanco Company, the failure of which would have a material
adverse effect on the Numanco Company.
6.9. Compliance with Laws. Each Numanco Company shall comply with all
applicable laws, rules and regulations of all governmental authorities, the
violation of which might have a material adverse effect upon its business or
financial condition. Without limiting the effect of the foregoing, each Numanco
Company shall (a) use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance therewith, and
handle all Hazardous Materials in material compliance with all applicable
Environmental Laws, and (b) shall immediately notify PSO, and provide copies
upon receipt, of all written claims, complaints, notices or inquiries from any
third party (including, but not limited to, any governmental authorities)
relating to the condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed with prejudice to
the satisfaction of PSO any actions and proceedings relating to compliance with
Environmental Laws.
6.10. ERISA. Each Numanco Company shall comply in all material respects
with the provisions of ERISA and the Code applicable to each Plan. Each Numanco
Company shall furnish to PSO as soon as available the following items with
respect to any Plan (a) any request for a waiver of the funding standards or an
extension of the amortization period, (b) any reportable event (as defined in
section 4043 of ERISA), unless the notice requirement with respect thereto has
been waived by regulation, (c) any notice received by the Company that the
Pension Benefit Credit Corporation has instituted or intends to institute
proceedings to terminate any Plan, or that any Multiemployer Plan is insolvent
or in reorganization, and (d) notice of the possibility of the termination of
any Plan by its administrator pursuant to section 4041 of ERISA.
6.11. Compliance with Obligations. Each Numanco Company shall comply
with all of the obligations which it has incurred or to which it becomes subject
pursuant to any contract or agreement, whether oral or written, express or
implied, the breach of which might have a material adverse effect upon its
business or financial condition, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate
reserves have been set aside on its books with respect thereto.
6.12. Taxes. Each Numanco Company shall pay and discharge all taxes,
assessments, interest and installments on mortgages and governmental charges
against it or against any of its properties, upon the respective dates when due,
except to the extent that (i) such taxes, assessments, interest, installments
and governmental charges are contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect on its
financial condition or loss of any right of redemption from any sale, and (ii)
the Numanco Company shall have set aside on its books reserves (segregated to
the extent required by generally accepted accounting principles) adequate with
respect to such liabilities.
6.13. Indebtedness. No Numanco Company shall create, incur, assume or
otherwise become or remain liable with respect to any Indebtedness except the
following:
(a) Indebtedness under this Agreement.
(b) Current liabilities, other than Financing Debt, incurred
in the ordinary course of business.
(c) To the extent that payment thereof shall not at the time
be required by Section 6.12, Indebtedness in respect of taxes, assessments,
governmental charges and claims for labor, materials and supplies.
(d) Indebtedness in respect of deferred taxes arising in the
ordinary course of business.
(e) Up to $12 million of Indebtedness owed by Nuvest, Numanco
Inc., and/or Numanco LLC to Bank of Oklahoma, N.A., or any substantially
equivalent financial institution, provided the payment of such Indebtedness is
secured by a pledge of the Numanco Companies' accounts receivables and the
proceeds of such Indebtedness are used in accordance with the Business Plan.
(f) Indebtedness owed by Numanco Inc. to Nuvest or by Numanco
LLC to Nuvest.
6.14. Guarantees; Letter of Credit. No Numanco Company shall become or
remain liable with respect to any Guarantee, including reimbursement
obligations, whether contingent or matured, under letters of credit or other
financial guarantees by third parties, except under this Agreement, and except
under a bond or guarantee issued by one Numanco Company to secure the
performance by another Numanco Company of any agreement to furnish temporary
employment services to an unrelated entity.
6.15. Lease Obligations. No Numanco Company shall be or become
obligated as lessee under any lease, except as provided in the Business Plan.
6.16. Liens. No Numanco Company shall create, incur or enter into, or
suffer to be created or incurred or to exist, any Lien, except under this
Agreement, and except Liens granted to secure the Indebtedness described under
Sections 6.13(e) and (f).
6.17. Investments and Acquisitions. No Numanco Company shall have
outstanding, acquire, commit itself to acquire or hold any Investment (including
any Investment consisting of the acquisition of any business) except for (i)
Investments in Cash Equivalents; (ii) Nuvest's Investment in Numanco Inc. and
Numanco LLC; and (iii) Numanco Inc.'s Investment in Numanco LLC. The parties
acknowledge and approve of the formation of A.R.C., L.L.C. and E.S.G., L.L.C.,
each an Oklahoma limited liability company, and the Numanco Companies'
investment in each such entity.
6.18. Distributions. No Numanco Company shall make any Distributions
other than (a) Distributions required for the purpose of paying (i) permitted
Indebtedness, or (ii) income tax liability as set forth in Section 5.01 of the
Numanco Company's Operating Agreement, and (b) Distributions otherwise
contemplated by this Agreement.
6.19. Reimbursement of Expenses. Members shall not be entitled to any
compensation for attendance at meetings of the Members, except that upon a
Member's request the Numanco Company shall reimburse him for all reasonable
travel, food and lodging expenses incurred or paid by him in connection with
attendance at such meetings.
6.20. Maintenance of Properties. Each Numanco Company will maintain and
keep its properties, real and personal, in good repair, working order, and
condition, and from time to time make all necessary or desirable repairs,
renewals, and replacements, so that its business may be properly and
advantageously conducted at all times.
6.21. Business Plan Revisions. The Business Plan may be revised from
time to time in accordance with the following:
(a) At least annually, or more often as the Manager or any
Member may request, the Manager or Member shall furnish a copy of any proposed
revisions to the Manager and the Members at least 30 days prior to the beginning
of its proposed implementation. The proposed amendment to the Business Plan
shall become effective if approved by all the Members and the Manager. A copy of
the Numanco Companies' Business Plan existing as of the date hereof is attached
hereto as Exhibit G.
(b) For all purposes of this Agreement, the term "Business
Plan" shall mean the Business Plan most recently amended pursuant to Section
6.21(a) until further amended.
6.22. Patents, Trademarks and Copyrights. Intellectual property of
the Numanco Company shall be governed by the following provisions:
(a) No Numanco Company will do any act or omit to do any act
whereby any Numanco Company patent or any patent licensed by the Numanco Company
may become abandoned or rendered invalid. Each Numanco Company shall take all
such actions as may be necessary to maintain the validity of all such patents.
(b) No Numanco Company will do any act or omit to do any act
whereby any Numanco Company trademark or any trademark licensed by the Numanco
Company may become abandoned or rendered invalid. Each Numanco Company shall
take all such actions as may be necessary to maintain the validity of all such
trademarks.
(c) Each Numanco Company has placed and will continue to place
appropriate notice of copyright on all copies embodying Numanco Company
copyrighted works which are publicly distributed and the Numanco Company will
not do any act or omit to do any act whereby any Numanco Company copyright may
become invalidated or dedicated to the public domain.
(d) Each Numanco Company will take all steps necessary in the
opinion of counsel in any proceeding before the United States Patent and
Trademark Office, United States Register of Copyrights or similar office or
agency of the United States or any office of the Secretary of State (or
equivalent) of any state thereof, to maintain and prosecute each application and
registration of Numanco Company patents, trademarks and copyrights, including,
without limitation, filing of renewals, extensions, affidavits of use and
incontestability, and opposition, interference and cancellation proceedings.
(e) With respect to each Numanco Company, in the event that
any Numanco Company patent, trademark, or copyright is infringed,
misappropriated or diluted by a third party, the Numanco Company shall, unless
the Numanco Company shall determine in its reasonable business judgment that
such trademark, patent or copyright is of negligible economic value to the
business of the Numanco Company, promptly sue for infringement, misappropriation
and/or dilution and to obtain injunctive relief and recover damages therefor,
and shall take such other actions to protect such patent, trademark, or
copyright, all as the Numanco Company shall deem appropriate in its reasonable
business judgment under the circumstances.
6.23. Merger, Consolidation, Sale of Assets, Organic Changes. No
Numanco Company shall issue or agree to issue any additional stock or membership
interests or cause any division or splitting of any such stock or ownership
interests, reclassification, exchange or substitution thereof or approve or
agree to any reorganization, merger, consolidation or combination with any
corporation or other entity or sell or lease (as lessor) more than 5 percent of
the Numanco Company's total consolidated assets in any 12-month period (other
than sales or other dispositions of inventory in the normal course of business
or as provided in the Business Plan), or liquidate, dissolve recapitalize or
reorganize in any form of transaction. No Numanco Company shall adopt any
amendment, modification or waiver of any provision of its Operating Agreement or
Articles of Organization, except as provided in this Agreement.
6.24. Insider Transactions. No Numanco Company shall engage in any
transaction with its Manager or any of its Members except (a) as provided in
this Agreement, or the Numanco Company's management agreement with the Manager,
or any related Agreement, and (b) reimbursements of reasonable expenses incurred
in the ordinary course of business.
6.25. Type of Business. Each Numanco Company shall engage only in (a)
the business of providing temporary manpower services to the electric utility
industry, and (b) its historical base of business, and (c) other businesses
approved in the Business Plan.
6.26. Conflicting Agreements or Actions. No Numanco Company shall enter
into any agreement or make any amendment to any agreement or take any other
action which would restrict or adversely affect the Numanco Company's
performance of its obligations to PSO under its Articles of Organization, as
amended, its Operating Agreement, this Agreement or any agreement referred to
herein.
6.27. Capital Expenditures. No Numanco Company will make Capital
Expenditure in excess 25% of the amount set forth in the Business Plan during
any one fiscal year.
7. Buy-Sell Events.
Each of the following events shall be a "Buy-Sell Event" (collectively,
the "Buy-Sell Events"):
7.1. If (a) the FMV Net Worth shall fall to zero or below, (b) the
Members and the Manager shall fail to reach agreement on a new or revised
Business Plan within thirty (30) days after PSO has made a request for same, and
(c) PSO shall provide notice to Monika that it desires to invoke the provisions
of this Section 7.1.
7.2. If PSO shall decline to vote its Interest in Nuvest to renew
Smith's Manager's Agreement upon the same terms.
7.3. If any Numanco Company shall default in the payment when due of
any principal or interest on any Indebtedness or shall default under or fail to
perform or observe any material term, covenant or other agreement contained in,
any material agreement, document or instrument to which it is a party or to
which it or its assets is bound, and such default or failure to perform shall
continue and remain unwaived by the obligee for more than thirty (30) days after
written notice thereof or any applicable period of grace therein specified,
whichever is longer, except where the Numanco Company is in good faith and
through appropriate proceedings contesting such default or failure to perform.
7.4. If any covenant, representation or warranty made herein or in
connection with the transactions contemplated in this Agreement shall be
breached or shall prove to have been false or incorrect on the date as of which
made resulting in a material adverse effect on the Numanco Company and such
false or incorrect representation or warranty shall not have been remedied
within thirty (30) days after written notice thereof shall have been given to
the Numanco Company.
7.5. If any Numanco Company shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or an order for relief is entered against the Numanco Company under
any bankruptcy laws or the Numanco Company shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file an answer admitting the material allegations of a
petition filed against the Numanco Company in any such proceeding, or shall seek
or consent to the acquiesce in the appointment of any trustee, receiver or
liquidator of the Numanco Company of all or any substantial part of the
properties of the Numanco Company.
7.6. If Monika shall die, become disabled (such that she cannot perform
her duties as a Member for a period of six continuous months), or file for
protection under the bankruptcy laws, or with respect to any Numanco Company,
there shall occur any other event that, under the laws of the State of Oklahoma,
would result in the dissolution of the Numanco Company (other than the event
described in Section 7.10); provided, none of the foregoing events described in
this Section 7.6 relating to Monika shall result in a Buy-Sell Event under this
Section 7.6 as long as Smith is serving as Manager of each Numanco Company and
Smith either (i) acquires or succeeds to all of Monika's interest in Nuvest and
becomes a Substitute Member of Nuvest, or (ii) becomes trustee of a trust that
acquires or succeeds to all of Monika's interest in Nuvest and, in his capacity
as such trustee, becomes a Substitute Member of Nuvest (provided, it is agreed
that if for any reason Smith ceases to serve as the trustee of such trust, the
interest in Nuvest held by the trust shall automatically convert to an economic
interest having no voting rights), or (iii) acquires or succeeds to all of
Monika's interest in Nuvest through any combination of (i) or (ii).
7.7. If Smith shall:
(a) Make an assignment for the benefit of creditors or file
for protection under the bankruptcy laws or become the subject of an involuntary
petition under such laws, and fail to rescind such assignment or dismiss such
petition within thirty (30) days after his receipt of notice of a complaint of
violation of this Section 7.7(a) by any party hereto; or;
(b) breach his duty of loyalty to any Numanco Company, or any
obligation under his Manager's Agreement, and fail to cure such breach within
thirty (30) days after his receipt of notice of the breach by any party hereto;
or
(c) enter into any transaction in which he derives an improper
personal benefit to the detriment of a Numanco Company, and fail to rescind such
transaction or, if the transaction cannot be rescinded, remit such improper
personal benefit to the Numanco Company within thirty (30) days after his
receipt of notice of a complaint of violation of this Section 7.7(c) by any
party hereto.
7.8. If Smith shall die or suffer a "disability," which shall mean any
physical or mental condition which would prevent him from performing his duties
under his Manager's Agreement for a period of six continuous months.
7.9. If, after December 31, 1999, Smith shall voluntarily resign his
position as Manager of any Numanco Company after providing the Numanco Company
with six (6) months' prior notice.
7.10 If PSO shall involuntarily withdraw, or be ordered to withdraw,
from Nuvest as a result of requirements imposed by regulatory authorities having
jurisdiction over PSO.
7.11 If any one of the following events shall occur:
(a) PSO shall fail to agree to guarantee the lines of credit
necessary to supply the sources of funds budgeted in the most recently approved
Business Plan (to the extent the same cannot be supplied out of current
operations); or
(b) PSO shall fail to approve a proposed amendment to the most
recently approved Business Plan, if such proposed amendment would require PSO to
guarantee a line of credit necessary to supply the sources of funds budgeted in
such proposed amendment (to the extent the same cannot be supplied out of
current operations), so long as (i) such proposed amendment is consistent with
the lines of business described in the most recently approved Business Plan, and
(ii) there has not been a material adverse change in any such lines of business
or in any of the other assumptions underlying such Business Plan; or
(c) All of the following shall occur:
(i) both of the current representatives of PSO (or
the representatives of any affiliate of PSO) who are assigned the primary
responsibility for monitoring PSO's investment in the Numanco Companies and are
serving as the principal contact between PSO and the Manager cease, for any
reason, to serve in such capacity;
(ii) the person or persons appointed by PSO to
replace such representatives, after serving in such capacity for a period of at
least 90 days, are, despite the good faith efforts of such replacements and the
Manager, unsatisfactory to the Manager; and
(iii) the person or persons appointed by PSO, at the
request of the Manager, to replace the persons described in (ii), after serving
in such capacity for a period of at least 90 days, are, despite the good faith
efforts of such replacements and the Manager, unsatisfactory to the Manager;
provided, this Section 7.11(c) shall not apply if the person or persons
appointed by PSO to replace the persons described in (ii) is one or both of the
current representatives of PSO (or its affiliate) described in (i).
8. Consequences of a Buy-Sell Event.
8.1. Indemnity. The Numanco Companies shall be jointly and severally
liable to PSO for any amounts PSO may be required to pay pursuant to its
guaranty of any Indebtedness, and all attorneys fees and additional other costs
PSO may incur in connection therewith. The payment of all of amounts covered by
this indemnity shall be secured by a security interest in the same collateral
held by the creditor to whom such Indebtedness was owed.
8.2. Enforcement. Upon the occurrence of a Buy-Sell Event, PSO may
proceed to protect and enforce its rights by a suit in equity, action at law or
other appropriate proceeding for the collection of amounts it is due, for the
specific performance of any agreement contained herein or in the Operating
Agreement of any Numanco Company or in any other documents executed and
delivered in connection herewith, or for an inunction against a violation of any
of the terms or provisions hereof or thereof or in aid of the exercise of any
power granted hereby or thereby or by law.
8.3. Reallocation of Voting Rights. Notwithstanding the parties'
respective interests in the profits and capital of Nuvest, Voting Rights (as
such term is defined in the Nuvest Operating Agreement) with respect to all
matters coming before a vote of the Members of Nuvest shall be apportioned as
follows:
(a) Prior to the occurrence of a Buy-Sell Event, the Voting
Rights of the Members of Nuvest shall be apportioned 4.9% for PSO, and 95.1% for
Monika.
(b) Upon occurrence of a Buy-Sell Event, the Voting Rights
shall be reapportioned 51% for PSO and 49% for Monika; provided, however, to the
extent required by the 1935 Act, PSO shall limit its control over Nuvest, and,
in turn, Nuvest's control over all other Numanco Companies, to one or more of
the following: (A) electing a new Manager for one or all of the Numanco
Companies, (B) electing new officers for Numanco Inc., (C) overseeing the
development of a restructured operating plan for the Numanco Companies, and/or
(D) liquidating and dissolving the Numanco Companies; provided further, in the
event Monika is entitled to purchase the Interest of PSO pursuant to one of the
provisions of Section 8.4, and Monika provides notice to PSO pursuant to Section
8.5(a) that she is exercising such right, then PSO shall refrain from exercising
its control pursuant to (A), (B), (C), and (D) above until such time as Monika's
right to purchase PSO's Interest lapses because of Monika's failure, for
whatever reason (as long as the reason is not due to any breach of duty by PSO),
to purchase PSO's Interest on the closing date described in Section 8.5(b) and
in accordance with the other terms described in Sections 8.5 and 8.6.
8.4. Buy-Sell. Subject to the provisions of Sections 8.5 and 8.6:
(a) Upon the occurrence of the Buy-Sell Event set forth in
Section 7.1, Monika may purchase all (but not less than all) of PSO's Interest,
and if Monika chooses not to do so, PSO may purchase all (but not less than all)
of Monika's Interest. Monika shall have no right to require PSO to purchase her
Interest.
(b) Upon the occurrence of the Buy-Sell Event set forth in
Section 7.2, Monika may, at her option, either purchase all (but not less than
all) of PSO's Interest, or require PSO to purchase all (but not less than all)
of Monika's Interest. PSO shall have no right to purchase any of Monika's
Interest, should Monika choose not to exercise her rights under this Section
8.4(b).
(c) Upon the occurrence of one of the Buy-Sell Events set
forth in Sections 7.3, 7.4, 7.5, 7.6, or 7.7, PSO shall have the right to
purchase all (but not less than all) of Monika's Interest. Monika shall have no
right to purchase any of PSO's Interest or to require PSO to purchase her
Interest.
(d) Upon the occurrence of one of the Buy-Sell Events set
forth in Section 7.8, Monika may require PSO to purchase all of her Interest. If
Monika chooses not to do so, PSO may purchase not more than fifty percent (50%)
(but not less than 50%) of Monika's Interest, and, at PSO's option, PSO may
cause the Operating Agreements of the Numanco Companies, as applicable, to
convert any Interest retained by Monika in any Numanco Company to a non-voting
Interest.
(e) Upon the occurrence of the Buy-Sell Event set forth in
Section 7.9, PSO may purchase all (but not less than all) of Monika's Interest.
If PSO chooses not to do so, the parties will proceed to sell the Numanco
Companies as soon as is reasonably practicable, and the proceeds of such sale
shall be distributed between PSO and Monika in accordance with their respective
Interests.
(f) Upon the occurrence of the Buy-Sell Event set forth in
Section 7.10, Monika may purchase all (but not less than all) of PSO's Interest.
If Monika chooses not to do so, the parties will proceed to sell the Numanco
Companies as soon as is reasonably practicable, and the proceeds of such sale
shall be distributed between PSO and Monika in accordance with their respective
Interests.
(g) Upon the occurrence of a Buy-Sell Event set forth is
Section 7.11, PSO shall, at Monika's request, purchase all (but not less than
all) of Monika's Interest, [and if Monika chooses not to do so, PSO may purchase
all, but not less than all, of Monika's Interest].
8.5. Purchase Procedures. Any right to compel the purchase or sale
of an Interest under Section 8.4 may be exercised only pursuant to the following
procedures and terms:
(a) The party entitled to exercise the right (the "Exercising
Party") shall provide the other party with notice of the Exercising Party's
intent to purchase the Interest of the other party (or the Exercising Party's
intent to require the other party to purchase the Exercising Party's Interest,
as the case may be) within thirty (30) days after the occurrence of the event
giving rise to the right.
(b) The closing of Monika's purchase of PSO's Interest shall
occur on the one hundred twentieth (120th) day following PSO's receipt of
Monika's notice described in Section 8.5(a), at the corporate offices of PSO in
Tulsa, Oklahoma; provided, in no event shall PSO be obligated to sell its
Interest to Monika unless and until PSO is released of all liability under its
guaranty and any other agreement by which it is or has become responsible for
the payment of all or a part of the Indebtedness.
(c) In the event that notice pursuant to Section 8.5(a) will
result in the purchase by PSO of all or a part of Monika's Interest
(irrespective of whether PSO or Monika is the Exercising Party), PSO shall, as
soon as is reasonably practicable after such notice is given, file an
application with the SEC for approval to acquire such Interest and pursue such
application in good faith and with reasonable diligence. The closing of PSO's
purchase of Monika's Interest shall occur at PSO's corporate offices in Tulsa on
the thirtieth (30th) day following PSO's receipt of an order from the SEC
approving the purchase; provided, if the SEC denies PSO's application or fails
for any reason to rule on the application within ninety (90) days after such
notice is given pursuant to Section 8.5(a), then:
(i) if PSO is the Exercising Party, PSO's purchase
rights shall lapse with respect to the event giving right to such purchase
right; and
(ii) if Monika is the Exercising Party, the parties
shall proceed to sell the Numanco Companies as soon as is reasonably
practicable, and the proceeds of such sale shall be distributed between PSO and
Monika as follows:
(A) Monika shall receive all of the
proceeds of such sale until she has received an amount equal to the Purchase
Price for her Interest that would otherwise have been payable to Monika pursuant
to Section 8.6, plus simple interest on such amount at a varying rate per annum
equal to the Prime Rate (as defined in Section 8.6(e)), plus one percent (1%),
accrued during a period commencing on the date that is 120 days after the date
of the Buy-Sell Event and ending on the date Monika receives payment under this
Section 8.5(c)(ii)(A), and.
(B) The remainder of such proceeds, if any,
shall be paid to PSO; provided further, if such SEC approval is obtained at any
time prior to the consummation of the sale of the Numanco Companies, the Numanco
Companies shall not be sold and PSO and Monika shall proceed with the closing of
the sale of Monika's Interest to PSO on the thirtieth (30th) day after receipt
of the SEC order, at the Purchase Price, plus simple interest on such amount
calculated in accordance with Section 8.5(c)(ii)(A).
8.6. Purchase Price Calculation. The Members shall use their best
efforts to determine the value of each Member's Interest, as of the first day of
each calendar quarter (the "Agreed Value"). The Agreed Value shall not be
effective unless it is reduced to writing and signed by all Members. The
purchase price to be paid for the selling Member's Interest purchase pursuant to
Section 8.4 (the "Purchase Price") shall be the most recently determined Agreed
Value multiplied by the ratio the selling Member's Interest bears to the total
Interests of all Members; provided, if the Members cannot unanimously agree on
the Agreed Value at the quarterly meeting, or if the Agreed Value was not signed
by all Members, or if no Agreed Value was determined within a period of three
(3) months prior to the date of occurrence of the Buy-Sell Event, then the
Purchase Price of the Interest being purchased and sold shall be calculated as
follows:
(a) For each Numanco Company, an estimate shall be made of the
gross proceeds expected to be received from each service "Contract" (defined as
any written or oral agreement or understanding pursuant to which the Numanco
Company has the right to render a service to any Person who is not an Affiliate
of the Numanco Company) in effect as of the ninetieth (90th) day following the
date of the Buy-Sell Event (the "Valuation Date").
(b) There shall be added to or subtracted from the gross
proceeds determined pursuant to Section 8.6(a) any proceeds attributable to any
additions or deletions to the Contract effected through the Valuation Date.
(c) With respect to each Contract, an estimate shall be made
of all "Direct Costs" (defined as the sum of the gross payroll expense, the
pass-through per diem expense, the employer payroll tax expense, and other
direct costs required in order to perform the Contract) the Numanco Company will
be required to incur in order to perform the work specified under the Contract.
(d) With respect to each Contract, the net proceeds of the
Contract shall be determined by subtracting the Direct Costs estimated pursuant
to Section 8.6(c) from the gross proceeds estimated pursuant to Sections 8.6(a)
and (b).
(e) The present value of the net proceeds of each Contract, as
calculated pursuant to Section 8.6(d), shall be determined, using as a discount
rate the "Prime Rate", as published in the Wall Street Journal ("WSJ") on the
Valuation Date (or, if WSJ is not published on the Valuation Date, on the next
date in which the WSJ is published), plus one percent (1%).
(f) The present value of each Contract, as determined pursuant
to Section 8.6(e), shall be added together.
(g) The sum calculated pursuant to Section 8.6(f) shall be
multiplied by the ratio the Interest being purchased and sold bears to the total
Interests of all Members.
(h) The Purchase Price shall be determined by adding the
amount calculated pursuant to Section 8.6(g) to the capital account balance
(including undistributed earnings) in each Numanco Company, as of the Valuation
Date, of the Member whose Interest is being purchased and sold.
8.7 Covenant Not to Compete. The Members acknowledge that any sale
which occurs pursuant to Section 8.4 shall involve the sale of the good will of
the business of the Numanco Companies. The parties agree that the Purchase Price
(whether pursuant to the Agreed Value or the formula set forth in Sections
8.6(a) through (h)) includes consideration for the good will of the business.
Therefore, the selling Member agrees for and in consideration of the Purchase
Price, to execute a Noncompetition Agreement in favor of the Company in the form
attached hereto as Exhibit E.
8.8 Additional Purchase/Sale Rights. Unless the parties otherwise agree
in writing, the Members shall have the following additional purchase and sale
rights:
(a) During the month of January in the year 2000, and during
the month of January of each year thereafter while this Agreement remains in
effect, either Member may request that the other Member purchase the requesting
Member's Interest. The date of any such request shall be referred to herein as
the "Request Date."
(b) If, within thirty (30) days after the Request Date, the
other Member declines the request or the Members are unable to agree upon a
purchase price for the requesting Member's Interest, the Members shall proceed
to sell the Numanco Companies as soon as is reasonably practicable at a sales
price both Members agree upon. However, if
(i) within sixty (60) days after the Request Date,
the Members do not reach agreement as to a sales price for the Numanco Companies
to a third party, or
(ii) the Members agree upon a sales price for the
Numanco Companies to a third party but a letter of intent for the sale of the
Numanco Companies at such price is not signed within one-hundred eighty (180)
days after the Request Date, then the parties shall follow the procedures
described in Section 8.8(d).
(c) If, pursuant to a request made by a Member under Section
8.8(a), the Members do agree upon a purchase price for the requesting Member's
Interest, the Members shall have a period of one-hundred twenty (120) days after
the Request Date to enter into a definitive agreement between themselves for the
purchase and sale of the selling Member's Interest, which agreement shall
provide for the closing of such transaction to occur not later than one-hundred
eighty (180) days after the Request Date. However, if
(i) within the 120-day period following the Request
Date, the Members do not enter into a definitive agreement between themselves
for the purchase and sale of the selling Member's Interest, or
(ii) the Members enter into a definitive agreement
between themselves for the purchase and sale of the selling Member's Interest,
but the closing of the sale of the selling Member's Interest does not, for any
reason (including the failure of the SEC to approve the sale under the
circumstances described in Section 8.8(e)), occur within the 180-day period
following the Request Date, then the parties shall follow the procedures
described in Section 8.8(d).
(d) The parties shall have a period of thirty (30) days after the
occurrence of the final event applicable under Section 8.8(b)(i) or (ii), or the
final event applicable under Section 8.8(c)(i) or (ii), as the case may be, to
agree to continue operating the Numanco Companies under this Agreement, the
Operating Agreements, and the Manager's Agreement, but if the parties cannot
reach agreement to continue operations within such 30-day period, the parties
shall proceed to sell the Numanco Companies at the best sales price available in
the market. The proceeds of a sale effected pursuant to the preceding sentence
shall be distributed between the Members in accordance with the liquidation
provisions of the Operating Agreements of the Numanco Companies. Until the
closing of such sale, all such Operating Agreements, the Managers' Agreement,
and this Agreement shall remain in full force and effect.
(e) If, pursuant to a request made by Monika under Section 8.8(a), PSO
agrees to purchase Monika's Interest for a mutually agreeable purchase price,
then (i) PSO shall, as soon as is reasonably practicable after reaching such
agreement, file an application with the SEC for approval to acquire such
Interest and pursue such application in good faith and with reasonable
diligence, and (ii) the definitive agreement for such purchase and sale shall
provide, as a condition precedent to PSO's obligation to purchase Monika's
Interest, that the SEC shall have issued an order, prior to the expiration of
the 180-day period specified in Section 8.8(c), approving PSO's acquisition of
the Interest.
9. Notices.
9.1. All notices required or given under this Agreement shall be in
writing and shall be deemed given (i) when received, if personally delivered;
(ii) the day after it is sent, if sent by a recognized expedited delivery
service with next-day delivery requested; or (iii) five days after it is sent,
if mailed, postage prepaid, via certified mail, return receipt requested. In
each case, notice shall be sent to:
If to PSO: Public Service Company of Oklahoma
212 East 6th Street
Tulsa, OK 74119-1212
Attn: Thomas W. Reynolds
If to any other party: Monika Smith
7633 East 63rd Place
Fourth Floor
Tulsa, OK 74133
or such other addresses as such party shall have specified by notice in writing
to the other party.
10. Limitation of Members' Liability.
10.1 Limitation of Members' Liability. Anything herein to the contrary
notwithstanding, except as otherwise expressly agreed in writing, no Member
shall be personally liable for any of the obligations created by this Agreement
or for any debts, liabilities, or obligations of any of the Numanco Companies,
whether to any one of such Companies, to any of the other Members, or to
creditors of the Companies, beyond the Member's Capital Account, as defined in
the Operating Agreement for each Numanco Company, together with the Member's
share of the assets and undistributed profits of the Numanco Company.
11. General.
11.1. Entire Agreement. This Agreement constitutes the whole and entire
agreement between the parties pertaining to the subject matter hereof, and
supersedes all prior agreements or understandings. This Agreement may not be
modified except by an instrument in writing signed by all parties.
11.2. Governing Law. The validity, construction and enforcement of, and
the remedies under, this Agreement shall be governed in accordance with the laws
of Oklahoma, except any choice of law provision of Oklahoma law shall not apply
if the law of a state or jurisdiction other than Oklahoma would apply thereby.
11.3. Jurisdiction and Venue. The parties to this Agreement agree that
jurisdiction and venue of any action brought to enforce, or to construe or
determine the validity of, any term or provision contained in this agreement
shall properly lie in the District Court of Tulsa County, Oklahoma, or the
United States District Court for the Northern District of Oklahoma. Such
jurisdiction and venue are merely permissive; jurisdiction and venue shall also
continue to lie in any court where jurisdiction and venue would otherwise be
proper. The parties further agree that the mailing by certified or registered
mail, return receipt requested, of any process required by either such court
shall, when received, constitute valid and lawful service of process against
them, without the necessity for service by any other means otherwise provided by
statute or rule of court.
11.4. Binding Effect; 1935 Act Compliance; Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective personal representatives, successors and permitted assigns; provided,
however, any obligation of PSO hereunder or under any other agreement or
instrument referred to herein shall be conditioned upon compliance with the
regulatory approval requirements of the 1935 Act. No party may assign his
obligations hereunder without the prior written consent of all other parties;
provided, however, without the prior consent of any other party, PSO may assign
this Agreement to its parent corporation, Central and South West Corporation, or
any direct or indirect subsidiary of such parent.
11.5. Injunctive Relief. Each of the parties hereto hereby acknowledges
that in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the parties therefore agrees that in the event of a breach of any material
provision of this Agreement the aggrieved party may elect to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as well as to
obtain damages for breach of this Agreement. By seeking or obtaining any such
relief, the aggrieved party will not be precluded from seeking or obtaining any
other relief to which it may be entitled.
11.6. Waiver. Except as otherwise provided in this Agreement, any
failure of any of the parties to comply with any obligation, covenant, agreement
or condition herein may be waived by the parties entitled to the benefits
thereof only by a written instrument signed by the party granting such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11.7. Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
11.8. Further Action. The parties to this Agreement shall execute and
deliver all documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
11.9. Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute an agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto, independently of the
signature of any other party.
11.10. Severability of Provisions. If any provision of this Agreement
is or becomes invalid, illegal, or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
11.11. Captions. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
11.12. Expenses. Each party to this Agreement shall bear its, his or
her own expenses incurred in connection with negotiation, preparation and
execution of this Agreement and the transactions contemplated herein.
11.13. Confidentiality. The terms of this Agreement shall remain
confidential between the parties, except that without the consent of any other
party, PSO may disclose such terms and furnish a copy of this Agreement to its
parent corporation and affiliates described in Section 10.4 above, and to any
governmental agency having jurisdiction over PSO or any such entity.
11.14. Attorneys Fees. If any action is brought to enforce, or to
construe or determine the validity of, any term or provision of this agreement,
the prevailing party shall be entitled to reasonable attorney's fees and costs
of the action.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Public Service Company of Oklahoma
By:
Title:
Monika Smith
Numanco, L.L.C.
By:
Title:
Nuvest, L.L.C.
By:
Title:
NSS Numanco, Inc.
By:
Title:
Exhibits:
A Amended and Restated Articles of Organization for Nuvest
B Amended and Restated Operating Agreement for Nuvest
C Amended and Restated Articles of Organization for Numanco LLC
D Amended and Restated Operating Agreement for Numanco LLC
E Noncompetition Agreement
F Example of FMV Net Worth Calculation
G Business Plan for the Numanco Companies
NUVEST, L.L.C.
AMENDED AND RESTATED
ARTICLES OF ORGANIZATION
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
The undersigned Members of Nuvest, L.L.C., an Oklahoma limited
liability company (the "Company"), for the purpose of adopting Amended and
Restated Articles of Organization pursuant to Section 2011 of the Oklahoma
Limited Liability Company Act (the "Act"), hereby certifies:
1. The name of this Company is "Nuvest, L.L.C."
2. The name under which this Company was originally organized was
"Nuvest, L.L.C."
3. The Articles of Organization of this Company were originally filed
with the Oklahoma Secretary of State on February 20, 1996.
4. The amendments to the Articles of Organization effected by this
document are to change and restate the provisions relating to the regulation of
the internal affairs of the Company.
5. These Amended and Restated Articles of Organization were duly
adopted by the Members of the Company in accordance with Section 2020 of the
Act, and restate, integrate and further amend the Articles of Organization.
6. The Articles of Organization of the Company are hereby restated as
further amended herein, to read in full, as follows:
"ARTICLES OF ORGANIZATION
OF
NUVEST, L.L.C.
FIRST. The name of the limited liability company is Nuvest, L.L.C.
(the "Company").
SECOND. The latest date on which the Company is to dissolve is 12:00
midnight, December 31, 2015.
THIRD. The purpose of the Company is to engage in any lawful act or
activity for which limited liability companies may be organized under the Act.
FOURTH. The street address of the principal place of business of the
Company in the State of Oklahoma is 7633 East 63rd Place, Fourth Floor, Tulsa,
Oklahoma 74133.
FIFTH. The name and address of the registered agent of the Company in
the State of Oklahoma is Pat Buklin, 7633 East 63rd Place, Fourth Floor, Tulsa,
Oklahoma 74133.
SIXTH. The business of the Company shall be managed by a or Manager
designated pursuant to the terms of the Company's Operating Agreement. Subject
to the restrictions contained herein, any third person dealing with the Company
may rely absolutely upon the act, deed and/or signature of the Manager as being
the act of the Company and no third person shall be obliged or privileged to
inquire into or otherwise ascertain whether the act of the Manager has been duly
authorized.
SEVENTH. Notwithstanding any other provision hereof, unless and until
there shall have occurred a Buy-Sell Event (as such term is defined in the
Company's Operating Agreement), the Manager shall not have the authority to
cause the Company to do or commit to do any of the following acts, without the
prior unanimous written consent of the specific act by the Members; however,
upon the occurrence of a Buy-Sell Event, the Manager shall have the authority to
cause the Company to do or commit to do such acts upon the Majority Vote of the
Members (as such term is defined in the Company's Operating Agreement): (a)
borrow money in excess of the amounts set forth in the Company's Business Plan
(as defined in the Operating Agreement); (b) sell any asset of the Company (or
assets, in related transactions) having a fair market value in excess of
$500,000; (c) enter into any contract involving an anticipated total expenditure
of over $100,000; (d) do any act which would make it impossible to carry on the
ordinary business of the Company; (e) compromise any claim against the Company
over $50,000; (f) admit a person as a Member; (g) knowingly perform any act that
would subject a Member to personal liability; (h) amend the Articles of
Organization; (i) approve any Business Plan of the Company; (j) increase the
compensation of any officer of the Company above the amount set forth in the
Business Plan; or (k) enter the Company into new business ventures, alliances or
teaming agreements."
IN WITNESS WHEREOF, these Amended and Restated Articles of Organization
have been executed on the 11 day of November, 1997, by the undersigned Members.
Public Service Company of Oklahoma
By:
Title:
Monika Smith
NUVEST L.L.C.
AMENDED AND RESTATED
OPERATING AGREEMENT
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") is
entered into as of the day of , 199 , by and among Public Service Company of
Oklahoma, an Oklahoma corporation ("PSO"), and Monika Smith, a natural person
("Monika"), collectively referred to herein as the "Members" of Nuvest L.L.C.,
an Oklahoma limited liability company (the "Company"), and supersedes all prior
operating agreements of the Company. In consideration of the mutual covenants
and conditions hereinafter set forth, the Members hereby agree that the terms of
the Operating Agreement governing the Company shall be as follows:
ARTICLE I
Organizational Matters
1.01 Formation. The Company has been formed as a limited liability
company pursuant to the provisions of the Act (as hereinafter defined). The
rights and obligations of the Members, the Manager designated herein, and the
affairs of the Company, shall be governed first by the mandatory provisions of
the Act, second by the Company's Articles of Organization, third by this
Agreement (except as otherwise provided in Section 14.06), and fourth by the
optional provisions of the Act. In the event of any conflict among the
foregoing, the conflict shall be resolved in the order of priority set forth in
the preceding sentence.
1.02 Name. The name of the Company shall be "Nuvest L.L.C.".
1.03 Principal Office. The principal office of the Company in the State
of Oklahoma shall be located at 7633 East 63rd Place, Fourth Floor, Tulsa,
Oklahoma 74133. The name and address of the resident agent of the Company is Pat
Buklin, 7633 East 63rd Place, Fourth Floor, Tulsa, Oklahoma 74133. The Company
may also maintain offices at such other place or places as the Manager deems
advisable.
1.04 Term. The Company commenced upon the filing for record of the
Company's Articles of Organization with the Oklahoma Secretary of State, and
shall continue until 12:00 midnight, December 31, 2015, unless sooner terminated
as herein provided.
ARTICLE II
Definitions
2.01 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings.
"Act" means the Oklahoma Limited Liability Company Act, 18 Okla. Stat.
ss. 2000 et seq. (Supp. 1993), as it may be amended from time to time, and any
successor to such act.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant taxable year, after giving effect to the following adjustments: (i)
Credit to such Capital Account any amounts which such Member is obligated to
restore or is deemed to be obligated to restore pursuant to the penultimate
sentence of Reg. ss. 1.704-2(g)(1) and (i)(5); and (ii) Debit to such Capital
Account the items described in Reg. ss. 1.704-1(b)(2)(ii)(d)(4),(5) and (6)
(generally including certain Capital Account adjustments for depletion
allowances, certain future allocations of loss and deduction which are
reasonably expected as of year end, and future distributions, in excess of
offsetting Capital Account increases, which are reasonably expected as of year
end). The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Reg.
ss. 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person. As used in this
definition of "Affiliate," the term "control" means either (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise or (ii) a direct or indirect equity
interest of ten percent (10%) or more in the entity.
"Agreement" means this Operating Agreement, as it may be amended or
supplemented from time to time.
"Articles of Organization" means the articles of organization, as
amended from time to time, filed by the Company under the Act.
"Business Day" means Monday through Friday of each week, except legal
holidays recognized as such by the government of the United States or the State
of Oklahoma.
"Business Plan" shall have the meaning ascribed to it in the Member
Agreement.
"Buy-Sell Event" shall have the meaning ascribed to it in the Member
Agreement.
"Capital Account" means each capital account maintained for a Member
pursuant to Section 4.03.
"Capital Contributions" means the sum of the total amount of cash and
the total value of property contributed or a promissory note or other binding
obligation to contribute cash or property to the Company by all Members, or any
one Member, as the case may be.
"Cash Available for Distribution" means, with respect to any period,
all cash receipts and funds received by the Company (except for Capital
Contributions) minus (i) all cash expenditures and (ii) the Company's cash
management fund representing working capital or other reserves as determined by
the unanimous consent of the Members.
"Code" means the Internal Revenue Code of 1986, as amended, as in
effect from time to time.
"Company" means the limited liability company formed by the filing of
the Company's Articles of Organization with the Oklahoma Secretary of State.
"Company Minimum Gain" means that amount determined by first computing
Company Nonrecourse Liability, any gain the Company would realize if it disposed
of the Company Property subject to such liability for no consideration other
than full satisfaction of the liability, and by then aggregating the separately
computed gains. For purposes of determining the amount of such gain, the
additional rules set forth in Reg. ss. 1.704-2(d) shall be followed.
"Company Property" means all property owned, leased or acquired by the
Company from time to time, whether real or personal, tangible or intangible.
"Dissociated Member" shall have the meaning ascribed to it in
Section 12.02.
"Event of Dissociation" has the meaning specified in Section 12.02.
"Event of Termination" shall have the meaning ascribed to it in the
Manager's Agreement.
"Majority Vote of the Members" means the vote of the Members owning a
majority of the Voting Rights.
"Manager" means the Person designated pursuant to Article VI.
"Manager's Agreement" shall mean that certain agreement between the
Manager, the Company, and others, of even date herewith.
"Member Agreement" means that certain Amended and Restated Member
Agreement between PSO, Monika, and certain other Persons, of even date herewith.
"Member Loan Nonrecourse Deductions" shall have the meaning set forth
in Reg. ss. 1.704-2(i)(2). The amount of Member Loan Nonrecourse Deductions with
respect to a Member Nonrecourse Debt for a Company taxable year equals the net
increase, if any, in the amount of Member Minimum Gain attributable to such
Member Nonrecourse Debt during that taxable year, reduced (but not below zero)
by proceeds of the liability distributed during the year to the Member bearing
the economic risk of loss for the liability that are both attributable to the
liability and allocable to an increase in the Member Nonrecourse Debt Minimum
Gain.
"Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Reg. ss. 1.704-2(i).
"Member Nonrecourse Debt" shall have the meaning set forth in Reg.
ss. 1.704-2(b)(4), being generally any nonrecourse debt of the Company for which
any Member (or related person within the meaning of Reg. ss. 1.752-4(b)) bears
the economic risk of loss.
"Members" means the Record Holders of all interests in the profits and
capital of the Company. The term does not include a transferee of an interest
unless the transferee has been admitted as a Substitute Member.
"Nonrecourse Deductions" shall have the meaning set forth in Reg. ss.
1.704-2(b)(1). The amount of Nonrecourse Deductions for a Company taxable year
equals the net increase in the amount of Company Minimum Gain during that
taxable year determined under Reg. ss. 1.704-2(d), reduced (but not below zero)
by the aggregate distributions made during the taxable year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Company Minimum Gain
determined pursuant to Reg. ss. 1.704-2(h).
"Nonrecourse Liability" shall have the meaning set forth in Reg.
ss. 1.704-2(b)(3).
"Person" means a natural person, partnership, domestic or foreign
limited partnership, domestic or foreign limited liability company, trust,
estate, association or corporation.
"PSO" means Public Service Company of Oklahoma, a Member.
"Record Holder" means the Person in whose name an interest in the
profits and capital of the Company is registered on the books and records of the
Company as of the close of business on a particular Business Day.
"Regulations" or "Reg." means the Treasury Regulations promulgated
under the Code, as amended from time to time.
"Substitute Member" means a transferee of an interest in the profits
and capital of the Company who is admitted as a Member to the Company pursuant
to Section 12.01 in place of and with all the rights of a Member.
"Tax Distribution" shall mean an amount of cash equal to the Member's
taxable income from the Company for the previous year, as reported on the
Member's Schedule K-1 for such year, times the Tax Percentage for such year.
"Tax Item" means the Company's taxable income or loss for each taxable
year, determined in accordance with Section 703(a) of the Code, all items of
income, gain, loss, deduction or credit required to be stated separately
pursuant to Section 703(a)(1) of the Code, and the following:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing taxable income;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Reg. ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing taxable income or loss; and
(c) Upon the distribution of property by the Company to a
Member, gain or loss attributable to the difference between the fair market
value of the property and its basis.
"Tax Liability" shall mean the combined federal and state income tax
liability (presuming the maximum federal and state income tax brackets) of the
Members resulting from the operations of the Company; provided (a) the Tax
Liability of PSO shall be based upon the income reported on PSO's Schedule K-1,
and (b) the Tax Liability of Monika Smith shall be based upon the sum of (i) the
income reported on Monika Smith's Schedule K-1, and (ii) the amount of
compensation paid to the Manager in his capacity as Manager and as reported on
the Manager's Form 1099.
"Tax Matters Partner" means the Member designated pursuant to
Section 9.02.
"Tax Percentage" shall mean the greater of (i) PSO's Tax Liability for
a year divided by PSO's share of the total income of the Company for such year,
as reported on PSO's Schedule K-1, or (ii) the Tax Liability of Monika Smith for
a year divided by Monika Smith's share of the total income of the Company for
such year, as reported on Monika Smith's Schedule K-1.
"Term" means the period of time the Company shall continue in existence
as provided in Section 1.04.
"Unit" means an interest in the profits and capital of the Company, to
the extent provided in Articles IV and V.
"Voting Rights" has the meaning specified in Section 7.02.
ARTICLE III
Purpose
3.01 Purpose of the Company. The purpose of the Company is to engage in
any lawful act or activity for which limited liability companies may be
organized under the Act. Such acts or activities may include, but shall not be
limited to, acquiring, operating and maintaining real and personal properties in
the United States and foreign countries. In transacting such business, the
Company may:
(a) acquire an ownership, working, royalty or other interest
in stocks, real estate, oil and gas leases and other properties, either alone or
in conjunction with other parties;
(b) dispose of, rent, lease, transfer, encumber or otherwise
utilize Company Property used in connection with Company operations;
(c) employ such personnel and obtain such legal, accounting,
and other professional services and advice as may be necessary in the course of
the Company's operations under this Agreement;
(d) pay all ad valorem taxes levied or assessed against the
Company's assets, and all other taxes (other than income taxes) directly
relating to operations conducted under this Agreement;
(e) execute all options, leases, contracts, agreements,
documents, or instruments of any kind which are appropriate for carrying out the
purposes of the Company;
(f) procure and maintain in force such insurance, including
public liability, automotive liability, worker's compensation, and employer's
liability insurance, as may be prudent to protect the Company against liability
for loss and damages which may be occasioned by the activities to be engaged in
by the Company;
(g) purchase and establish inventories of equipment and
material required or expected to be required in connection with the Company's
operations;
(h) contract or enter into agreements for the performance of
services and the purchase and sale of material, equipment, supplies, and
property, both real and personal;
(i) conduct operations either alone or as a joint venturer,
co-tenant, partner, member, shareholder or in any other manner of participation
with any Member or third parties and to enter into agreements and contracts
setting forth the terms and provisions of such participation;
(j) borrow money from banks and other lending institutions for
Company purposes and pledge Company Property for the repayment of such loans, it
being understood that no bank or other lending institution to which the Company
makes application for a loan will be required to inquire as to the purposes for
which such loan is sought, and as between the Company and such bank or lending
institution it will be conclusively presumed that the proceeds of such loans are
to be and will be used for purposes authorized under the terms of this
Agreement;
(k) sell, relinquish, release, abandon, or otherwise dispose
of Company Property, including undeveloped, productive, and condemned
properties, in accordance with other provisions herein; and
(l) perform any and all other acts or activities customary or
incident to conducting the above Company operations.
ARTICLE IV
Capital Contributions
4.01 Authorized Units. The Company is authorized to issue an aggregate
of One Thousand (1,000) Units. Upon the execution and delivery of this
Agreement, the Company shall issue Units to the Members in the following
proportions:
Number Percentage of
Member of Units Outstanding Units
PSO 700 70%
Monika 300 30%
1,000 100%
4.02 Capital Contributions. Capital Contributions shall be in the form
of cash or property, or an obligation to contribute cash or property.
4.03 Capital Accounts.
(a) The Company shall maintain for each Member a separate
Capital Account. The term "Capital Account" shall mean as to any Member the
amount of the initial Capital Contribution attributable to the Member, which
amount shall be (i) increased by subsequent Capital Contributions by such
Member, (ii) increased or decreased, as the case may be, by Tax Items allocated
to such Member pursuant to Article V, and (iii) decreased by distributions to
such Member pursuant to Section 5.01. Distributions shall be debited to Capital
Accounts in the year containing the record date for such distribution.
(b) In the event any in-kind contributions are made, the
Capital Account of the Member shall be increased by the fair market value of the
property contributed by such Member.
(c) The foregoing definition of Capital Account and certain
other provisions of this Agreement are intended to comply with Reg. ss.
1.704-1(b), and shall be interpreted and applied in a manner consistent with
that regulation. Such regulation contains additional rules governing maintenance
of capital accounts that have not been addressed in this Agreement.
(d) A transferee of an interest in the profits and capital of
the Company transferred in accordance with Article XI will succeed to the
Capital Account relating to the Member transferring such interest. However, if
the transfer causes a termination of the Company under Section 708(b)(1)(B) of
the Code, the Company Property shall be deemed to have been distributed in
liquidation of the Company to the Members (including the transferee of the
interest) pursuant to Section 13.02 and re-contributed by such Members and
transferees in reconstitution of the Company. The Capital Accounts of such
reconstituted Company shall be maintained in accordance with the principles of
this Section 4.03.
(e) At such times as may be permitted or required by Treasury
Regulations issued pursuant to Section 704 of the Code, the Capital Accounts
shall be revalued and adjusted to reflect the then fair market value of Company
Property and the Capital Accounts shall be maintained to comply with Reg. ss.
1.704-1(b)(2)(iv)(f). All allocations of gain resulting from such revaluation
shall be made consistently with that regulation, and to the extent not
inconsistent therewith, the allocation provisions of Section 5.02 hereof.
4.04 Interest. Any portion of a Member's Tax Distribution that the
Member chooses not to have distributed to him shall bear interest at a floating
annual rate equal to the Company's cost of funds, for as long as such portion
remains undistributed. Otherwise, no interest shall be paid by the Company on
Capital Contributions, on balances in a Member's Capital Account or on any other
funds distributed or distributable under this Agreement.
4.05 No Withdrawal. No Member shall without the written consent of all
remaining Members of the Company have any right to the withdrawal or reduction
of any part of his Capital Contribution.
4.06 Loans. The Company may not make loans to any Member or any
Affiliate of any Member.
4.07 Borrowings. Subject to Section 6.03, the Manager may arrange for
the Company to borrow funds and to pledge Company Property as security therefor.
ARTICLE V
Distributions and Allocations
5.01 Distribution of Cash Available for Distribution. Upon the request
of a Member, the Manager shall distribute to the Member on or before April 15 of
each year an amount equal to the Member's Tax Distribution. All other
distributions from Cash Available for Distribution shall be determined by the
unanimous consent of the Members and the Manager. Any distribution of property
shall be treated as a distribution of cash in the amount of the fair market
value of such property. Except as otherwise provided herein, distributions shall
be allocated between the Members in accordance with their respective Unit
ownership.
5.02 Allocation of Tax Items. All Tax Items shall be allocated between
the Members in accordance with their respective Unit ownership.
5.03 Regulatory Allocations. The following special allocations
shall be made for each Company taxable year in the following order:
(a) Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain (other than Minimum Gain attributable to Member Nonrecourse
Debt or net decreases in Minimum Gain attributable to transactions subject to
the exceptions contained in Reg. ss. 1.704-2(f)(2)-(5)) during any Company
taxable year, each Member shall be specially allocated items of Company income
and gain for such year equal to such Member's share of the net decrease in
Company Minimum Gain during that year. Each Member's share of the net decrease
in Company Minimum Gain shall be determined in accordance with Reg. ss.
1.704-2(g)(2). This Section 5.03(a) is intended to comply with the minimum gain
chargeback requirement in Reg. ss. 1.704-2(f) and shall be interpreted
consistently therewith.
(b) Member Nonrecourse Debt Minimum Gain Chargeback.
If there is a net decrease in Member Minimum Gain attributable to a Member
Nonrecourse Debt during any Company taxable year, each Member with a share of
such Member Minimum Gain attributable to a Member Nonrecourse Debt determined in
accordance with Reg. ss. 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years)
equal to such Member's share of the net decrease in Member Minimum Gain during
such year. Each Member's share of the net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt shall be determined in a manner
consistent with Reg. ss. 1.704-2(g)(2). This subsection is intended to comply
with the minimum gain chargeback requirement in Reg. ss. 1.704-2(i)(4)
pertaining to Member Nonrecourse Debt and shall be interpreted consistently
therewith.
(c) Gross Income Allocation. In the event any Member has a
Capital Account deficit at the end of any Company taxable year which is in
excess of the sum of (i) the amount such Member is obligated to restore, and
(ii) the amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Reg. ss. 1.704-2(g)(1), each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 5.03(c) shall be made only if and to the extent that any such Member
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Article V have been tentatively made as if this
Section 5.03(c) hereof and Section 5.03(d) were not in the Agreement.
(d) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
Reg. ss. 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided
that an allocation pursuant to this Section 5.03(d) shall be made only if and to
the extent that any such Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article V have been tentatively
made as if this Section 5.03(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable year or other periods shall be allocated among the Members in proportion
to their respective Capital Contributions.
(f) Member Loan Nonrecourse Deductions. Any Member Loan
Nonrecourse Deductions for any fiscal year or other period shall be allocated to
the Members who bear the risk of loss with respect to the loan to which such
Member Loan Nonrecourse Deductions are attributable in accordance with Reg. ss.
1.704-2(i).
(g) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company Property pursuant to Section 734(b) or
Section 743(b) of the Code is required, pursuant to Reg. ss.
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Member(s) in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such section of the
Regulations.
5.04 Curative Allocations. The allocations set forth in Section 5.03,
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other Tax Items pursuant
to this Article V. Therefore, notwithstanding any other provision of this
Article V (other than the Regulatory Allocations), the Manager shall make such
offsetting special allocations of Tax Items in whatever manner he determines
appropriate so that, after such offsetting allocations are made, each Member's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the Regulatory Allocations were not part
of the Agreement and all Tax Items were allocated pursuant to Section 5.03. In
exercising his discretion under this Section 5.04, the Manager shall take into
account future Regulatory Allocations under Sections 5.03(a) and (b) that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 5.03(e) and (f).
5.05. Special Allocation of Gain or Loss on Contributed Property. Under
Regulations prescribed by the Secretary of the Treasury pursuant to Section
704(c) of the Code, Tax Items with respect to property contributed to the
Company by a Member shall be shared among Members so as to take account of the
variation between the basis of the property to the Company and its fair market
value at the time of contribution. The Manager shall have the power to make such
elections, adopt such conventions, and allocate Tax Items as he deems
appropriate to comply with Section 704(c) of the Code and any Regulations
promulgated thereunder and to preserve, to the extent possible, uniformity of
the Members' interests in the profits and capital of the Company. Any Tax Items
allocated under this Section 5.05 shall not be debited or credited to Capital
Accounts to the extent that item is already taken into account (upon formation
or otherwise) in determining a Member's Capital Account.
5.06. Change or Transfer of Interests in Profits and Capital. Upon the
transfer of an interest in the profits and capital of the Company in accordance
with Article XI, Tax Items attributable to the transferred interest shall, for
federal income tax purposes, be allocated between the transferor and the
transferee of such interest based on the number of months that each such Person
was the owner of the interest, in a manner determined by the Manager to be
consistent with the requirements of Section 706 of the Code and Regulations or
rulings promulgated thereunder.
5.07. Deemed Income or Gain. If, and to the extent that, any Member is
deemed to recognize income or gain as a result of any transaction between the
Member and the Company pursuant to Sections 482, 483, 1272-1274, or 7872 of the
Code, or any similar provision now or hereafter in effect, any corresponding
resulting loss or deduction of the Company shall be allocated to the Member who
was allocated such income or gain.
5.08. Recapture Items. Any portion of any income or gain attributable
to the sale or other disposition of any depreciable Company Property required to
be recaptured as ordinary income shall, to the maximum extent possible in
accordance with Section 704 of the Code and the Regulations thereunder, be
allocated among the Members for tax purposes in the same ratio as the deductions
giving rise to such recapture were allocated. Any recapture of tax credit shall
be allocated among the Members in accordance with Reg. ss. 1.704-1(b)(4)(ii).
ARTICLE VI
Management and Operation of Business
6.01. Manager. Management of the Company shall be vested in a Manager.
Unless and until there has occurred an Event of Termination, the Manager shall
be R. Smith. Upon the occurrence of an Buy-Sell Event, the holder of a majority
of the Voting Rights shall, subject to the limitations imposed under Section
8.3(b) of the Member Agreement, be entitled to designate a new Manager at any
annual or special meeting called for that purpose.
6.02. Authority of Manager. The Manager may exercise all the powers of
the Company whether derived from law, the Articles of Organization, this
Agreement, or the Manager's Agreement, except such powers as are by statute, by
the Articles of Organization, by this Agreement, or by the Manager's Agreement
vested solely in the Members.
6.03. Restrictions on Manager. Notwithstanding any other provision
hereof, unless and until there shall have occurred a Buy-Sell Event, the Manager
shall not have the authority to cause the Company to do or commit to do any of
the following acts, without the prior unanimous written consent of the specific
act by the Members; however, upon the occurrence of a Buy-Sell Event, the
Manager shall have the authority to cause the Company to do or commit to do such
acts upon the Majority Vote of the Members:
(a) Borrow money in excess of the amounts set forth in the
Business Plan;
(b) Sell any assets of the Company (or assets, in related
transactions) having a fair market value over $500,000;
(c) Enter into any contract involving an anticipated total
expenditure of over $100,000;
(d) Do any act which would make it impossible to carry on the
ordinary business of the Company;
(e) Compromise any claim over $50,000;
(f) Admit a Person as a Member;
(g) Knowingly perform any act that would subject a Member to
personal liability;
(h) Amend the Articles of Organization;
(i) Approve any Business Plan of the Company;
(j) Increase the compensation of Monika or any other officer
of the Company above the amount set forth in the Business Plan; or
(k) Enter the Company into new business ventures, alliances or
teaming agreements.
6.04. Outside Activities. The Members and Manager and their respective
Affiliates have business interests and engage in business activities in addition
to those relating to the Company. No provision of this Agreement shall be deemed
to prohibit the Members, the Manager or their respective Affiliates from
conducting such businesses and activities, provided they are not in direct
competition with the Company. Neither the Company nor any Member shall have any
rights by virtue of this Agreement or the relationship contemplated herein in
any non-competing business ventures of any other Member or the Affiliates of
such Member.
6.05. Limitation on Liability of Manager. No Person serving as Manager
shall be liable to the Company for monetary damages for breach of fiduciary duty
as a Manager; provided, however, that nothing contained herein shall eliminate
or limit the liability of such Person (i) for any breach of the Manager's duty
of loyalty to the Company, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law and, (iii) for
any transaction from which the Manager derived an improper personal benefit.
ARTICLE VII
Rights and Obligations of the Members
7.01 Limitation of Liability. Anything herein to the contrary
notwithstanding, except as otherwise expressly agreed in writing, a Member shall
not be personally liable for any debts, liabilities, or obligations of the
Company, whether to the Company, to any of the other Members, or to creditors of
the Company, beyond the Capital Account of the Member, together with the
Member's share of the assets and undistributed profits of the Company.
7.02 Voting Rights. Action requiring a vote of the Members may be taken
upon a Majority Vote of the Members. Each Unit shall entitle the holder thereof
to one (1) vote; provided, as long as PSO is a Member, Voting Rights shall be
allocated as follows:
(a) Unless and until there shall have occurred an Buy-Sell
Event, PSO shall hold 4.9% of all Voting Rights and Monika shall hold 95.1% of
all Voting Rights.
(b) Upon the occurrence of a Buy-Sell Event, Voting Rights
shall be reapportioned so that PSO shall hold 51% of all Voting Rights and
Monika shall hold 49% of all Voting Rights; provided, the exercise of such
Voting Rights by PSO shall be governed by the provisions of Section 8.3(b) of
the Member Agreement.
7.03 Indemnification.
(a) To the maximum extent permitted by law, the Company shall
indemnify and hold harmless the Manager, all Members, their respective
Affiliates, and the employees and agents of the Company (each, an "Indemnitee")
from and against any and all losses, claims, demands, costs, damages,
liabilities, joint and several, expenses of any nature (including attorneys'
fees and disbursements), judgments, fines, settlements, penalties and other
expenses actually and reasonably incurred by the Indemnitee in connection with
any and all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, by reason of the fact that
the Indemnitee is or was a Manager or Member of the Company or is or was an
employee or agent of the Company, including Affiliates of the foregoing, arising
out of or incidental to the business of the Company, provided, (i) the
Indemnitee's conduct did not constitute willful misconduct or recklessness, (ii)
the action is not based on breach of this Agreement, (iii) the Indemnitee acted
in good faith and in a manner he or it reasonably believed to be in, or not
opposed to, the best interests of the Company and within the scope of such
Indemnitee's authority and (iv) with respect to a criminal action or proceeding,
the Indemnitee had no reasonable cause to believe its conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, in
and of itself, create a presumption or otherwise constitute evidence that the
Indemnitee acted in a manner contrary to that specified above.
(b) Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 7.03 may, from time
to time, be advanced by the Company prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified as
authorized in this Section 7.03.
(c) Indemnification provided by this Section 7.03 shall be in
addition to any other rights to which the Indemnitee may be entitled under any
agreement, vote of the Members, as a matter of law or equity, or otherwise, and
shall inure to the benefit of the successors, assignees, heirs, personal
representatives and administrators of the Indemnitee.
(d) The Company may purchase and maintain insurance, at the
Company's expense, on behalf of any Indemnities against any liability that may
be asserted against or expense that may be incurred by an Indemnitee in
connection with the activities of the Company regardless of whether the Company
would have the power to indemnify such Indemnitee against such liability under
the provisions of this Agreement.
ARTICLE VIII
Books, Records, and Accounting
8.01 Books and Records. Appropriate books and records with respect to
the Company's business shall at all times be kept at the principal office of the
Company or at such other places as agreed to by the Members. Any records
maintained by the Company in the regular course of its business may be kept on,
or be in the form of, magnetic tape, photographs or any other information
storage device, provided that the records so kept are convertible into clearly
legible written form within a reasonable period of time. Each Member shall have
the right upon demand and at such Member's own expense to inspect and copy any
of the Company's books and records and obtain such other information regarding
the affairs of the Company.
8.02 Accounting. The books of the Company for regulatory and financial
reporting purposes shall be maintained on cash basis of accounting. The Company
books for purposes of maintaining and determining Capital Accounts shall be
maintained in accordance with the provisions of this Agreement, Section 704 of
the Code and, to the extent not inconsistent therewith, the principles described
above for financial reporting and regulatory purposes. Comparisons of budgeted
income and expenses to actual income and expenses of the Company shall be on the
accrual basis of accounting.
8.03 Fiscal Year. The fiscal year of the Company shall be the
calendar year, unless otherwise determined by the Manager.
ARTICLE IX
Tax Matters
9.01 Taxable year. The taxable year of the Company shall be the
calendar year, unless otherwise determined by the Manager.
9.02 Tax Controversies. The "Tax Matters Partner" (as defined in
Section 6231(a)(7) of the Code) shall be determined by a Majority Vote of the
Members, and shall be authorized and required to represent the Company, at the
Company's expense, in connection with all examinations of the Company's affairs
by tax authorities, including resulting administrative and judicial proceedings.
Each Member agrees to cooperate with the Tax Matters Partner, and to do or
refrain from doing any or all things reasonably required by the Tax Matters
Partner to conduct such proceedings.
9.03 Taxation as a Partnership. No election shall be made by the
Company or any Member for the Company to be excluded from the application of any
provision of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state tax laws.
ARTICLE X
Transfer of Interests in the
Profits and Capital of the Company
10.01. Transfer.
(a) The term "transfer," when used in this Article X with
respect to an interest in the profits and capital of the Company, shall be
deemed to refer to a transaction by which the Member assigns all or a portion of
its interest to another Person, or by which the holder of an interest assigns
the interest to another Person as assignee, and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, transfer by will or
intestate succession, exchange, or any other disposition.
(b) No interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article X.
Any transfer or purported transfer of any interest not made in accordance with
this Article X shall be null and void. Should a Member attempt to transfer its
interest in contravention of this Article XI, then (i) such an alleged assignee
shall have no right to require any information or account of the Company's
transactions or to inspect the Company's books and records, tax return
information, or any other information, documents, or other data associated with
the Company; and (ii) the Company and the other Members (A) shall be entitled to
treat such assigning Member as the absolute owner thereof in all respects, and
(B) shall incur no liability for distributions or for allocations of income,
gain, loss, deduction or credit, or for transmittal of reports and notices
required to be given to such Member.
(c) A transferee of an interest in the profits and capital
transferred in accordance with this Article XI shall not become a Substitute
Member unless and until admitted as a Substitute Member pursuant to Article XII.
Any such transferee who does not become a Substitute Member shall have no right
to vote or otherwise participate in the Company's affairs as a Member thereof,
but instead shall be a Record Holder only for the purpose of receiving the share
of profits or other compensation by way of income and the return of
contributions to which the transferring Member would otherwise be entitled at
the time said transferring Member would be entitled to receive the same.
10.02. Transfer of Interests by a Member.
(a) No interests in the profits and capital may be transferred
by a Member unless the following conditions are first satisfied:
(i) The assigning Member and his transferee has (A)
delivered to the Company a duly executed and acknowledged counterpart of the
instrument of assignment and such instrument evidences the written acceptance by
the transferee of all of the terms and provisions of this Agreement and
represents that such assignment was made in accordance with all applicable laws
and regulations; and (B) executed and delivered to the Company such other
instruments as the Manager may reasonably deem necessary or desirable to effect
the assignment; and
(ii) The Company has received an opinion from counsel for
the assigning Member, in form and substance satisfactory to the Manager, that
such transfer; (A) would not materially adversely affect the classification of
the Company as a partnership for federal and (as applicable) state income tax
purposes; and (B) would not violate applicable federal and state securities laws
or rules and regulations of the Securities and Exchange Commission, any state
securities commission or any other governmental authority with jurisdiction over
the transfer.
(b) Without the consent of the Manager, no transfer of an
interest in the profits and capital of the Company may be made if such transfer,
when added to the total of all other transfers within the preceding 12 months,
would result in the Company being considered to have terminated within the
meaning of Section 708(b)(1)(B) of the Code.
(c) In no event shall any interest be transferred to a minor
(except in trust pursuant to the Uniform Transfers to Minors Act) or any
incompetent (except in trust).
ARTICLE XI
Admission of Substitute and Additional Members
11.01. Admission of Substitute Members.
(a) Upon a transfer of an interest in the profits and capital
of the Company by a Member in accordance with Article X (but not otherwise), the
transferor shall have the power to give the transferee the right to apply to
become a Substitute Member with respect to the interest acquired, subject to the
conditions of and in the manner permitted under this Agreement. No transferee of
an interest shall become a Substitute Member with respect to the transferred
interest (whether or not such transferee is then a Member or Substitute Member
with respect to other previously acquired interests) unless and until all of the
following conditions are satisfied:
(i) The instrument of assignment sets forth the intentions of
the assignor that the transferee succeed to the assignor's interest as a
Substitute Member in his place;
(ii) The assignor and transferee shall have fulfilled all
other requirements of this Agreement;
(iii) The transferee shall have paid all reasonable legal fees
and filing costs incurred by the Company in connection with his substitution as
a Member; and
(iv) The Members shall have unanimously approved such
substitution in writing, which approval may be granted or withheld by each
Member in its sole and absolute discretion and may be arbitrarily withheld, and
the books and records of the Company have been modified to reflect the
admission; provided, no such approval shall be required with respect to any
transfer by PSO to its parent corporation, Central and South West Corporation,
or any direct or indirect subsidiary of such parent corporation.
(b) The admission of a transferee as a Substitute Member with
respect to a transferred interest shall become effective on the date the Members
give their unanimous written consent to the admission and the books and records
of the Company have been modified to reflect such admission. Any Member who
transfers all of his interest in the profits and capital shall cease to be a
Member of the Company upon a transfer of such interest in accordance with
Article X and the execution of a counterpart of this Agreement by the transferee
and shall have no further rights as a Member in or with respect to the Company
(whether or not the transferee of such former Member is admitted to he Company
as a Substitute Member).
ARTICLE XII
Dissolution and Liquidation
12.01 Dissolution and Liquidation. The Company shall be dissolved and
its affairs shall be wound up upon the occurrence of any of the following: (i)
the term of the Company stated in the Articles of Organization expires; (ii) if,
upon the occurrence of an Event of Dissociation, the remaining Members fail to
continue the Company pursuant to Section 12.02; or (iii) all Members vote to
dissolve the Company.
12.02 Events of Dissociation. Upon the death, incapacity, resignation,
expulsion, bankruptcy or dissolution of a Member, the involuntary withdrawal of
PSO as a result of requirements imposed by regulatory authorities having
jurisdiction over such Member, or the occurrence of any other event which
terminates the continued membership of a Member in the Company (any such Member
shall be referred to herein as a "Dissociated Member" and any of such events
shall be referred to herein as an "Event of Dissociation"), the Company shall
dissolve and its affairs shall be wound up; provided, however, it is agreed that
without the consent of all other Members, no Member may voluntarily resign from
the Company except as otherwise provided in the Member Agreement. The Company
shall thereafter conduct only activities necessary to wind up its affairs,
unless there is at least one (1) remaining Member and within sixty (60) days
after the occurrence of an Event of Dissociation, all the remaining Members
unanimously agree to continue the Company. If any election to continue the
Company is made, then, except as otherwise provided in the Member Agreement or
the Manager's Agreement:
(a) The remaining Members may elect, within thirty (30) days
of the decision to continue the Company, to purchase the Dissociated Member's
interest in the profits and capital of the Company upon such terms and
conditions as the remaining Members and the Dissociated Member or the legal
representative of the Dissociated Member, may agree. In the event the remaining
Members and the Dissociated Member (or such legal representative) do not agree
upon terms and conditions for a purchase of such interest of the Dissociated
Member,the remaining Members shall have an option (to be exercised within sixty
(60) days after the occurrence of the Event of Dissociation, by giving notice to
the Dissociated Member (or such legal representative) to purchase the interest
for a cash purchase price determined by the value of the Capital Account of the
Dissociated Member, as of the end of the calendar month preceding the occurrence
of the Event of Dissociation, adjusted as if all Company Property were sold at
fair market value, and all liabilities of the Company were paid and the Company
was liquidated in accordance with the provisions of Section 12.03.
(b) The Company shall continue until the expiration of the
term for which it was formed or until the occurrence of another Event of
Dissociation, in which event any remaining Members shall again elect whether to
continue the Company pursuant to this Section 12.02.
12.03 Method of Winding Up. Upon dissolution of the Company pursuant to
Section 12.01, the Company shall immediately commence to liquidate and wind up
its affairs. The Members shall continue to share profits and losses during the
period of liquidation and winding up in the same proportion as before
commencement of winding up and dissolution. Unless the Manager shall determine
otherwise, all distributions will be made in cash, and none of the Company
Property will be distributed in kind to the Members. The proceeds from the
liquidation and winding up shall be applied in the following order of priority:
(a) To creditors (other than the Manager), including Members
who are creditors, to the extent permitted by law, in satisfaction of
liabilities of the Company other than liabilities to Members on account of their
Capital Contributions or on account of a Member's withdrawal from the Company or
pursuant to a withdrawal of capital; and
(b) To the Manager, the balance of all sums due pursuant to
the terms and provisions of the Manager's Agreement, except as otherwise
provided pursuant to Section 5.5 of the Manager's Agreement; and
(c) To each Member the amount of his Capital Account balance,
and if the remaining proceeds are insufficient to allow each Member to receive
the full amount in his Capital Account, to the Members pro rata according to
their respective Capital Account balances; and
(d) The balance, if any, to the Members in proportion to their
respective Unit ownership.
12.04 Filing Articles of Dissolution. Upon the completion of the
distribution of Company Property as provided in Section 12.03, Articles of
Dissolution shall be filed as required by the Act, and each member agrees to
take whatever action may be advisable or proper to carry out the provisions of
this Section.
12.05 Return of Capital. The return of Capital Contributions shall be
made solely from Company Property.
ARTICLE XIII
Amendment of Agreement; Meetings
13.01 Amendments. Unless and until there shall have occurred a Buy-Sell
Event, all amendments to this Agreement shall require the unanimous consent of
the Members. Upon the occurrence of a Buy-Sell Event, all amendments to this
Agreement may be effected by a Majority Vote of the Members, subject to the
provisions of Section 13.02.
13.02 Limitations on Amendments. Notwithstanding any other provision of
this Agreement, no amendment to this Agreement may without the unanimous
approval of all Members (i) enlarge the obligations of any Member under this
Agreement or (ii) amend Section 13.01 or this Section 13.02.
13.03 Meetings. Meetings may be called by any Member, by providing at
least five (5) business days prior notice of the time, place and purpose of the
meeting to all Members. The holder of a majority of the Voting Rights,
represented in person or by proxy, shall constitute a quorum at a meeting of
Members.
13.04 Action Without a Meeting. Any action that may be taken by any
vote of all or any part of the Members may be taken without a meeting if a
consent to such action is signed by Members holding not less than the minimum
number of Voting Rights that would be necessary to authorize or take such action
at a meeting at which all Members entitled to vote thereon were present and
voted. Prompt notice of the taking of any action without a meeting shall be
given to those Members who have not consented in writing.
ARTICLE XIV
General Provisions
14.01 Notices. Any notice, demand, request or report required or
permitted to be given or made to a Member under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class mail to the Member. Any notice, payment, or report to be given or
sent to a Member hereunder shall be deemed conclusively to have been given or
sent, upon mailing of such notice, payment, or report to the address shown on
the records of the Company, regardless of any claim of any Person who may have
an interest by reason of an assignment or otherwise.
14.02 Captions. All article and section captions in this Agreement are
for convenience only. They shall not be deemed part of this Agreement and in no
way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
14.03 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
14.04 Further Action. The parties to this Agreement shall execute and
deliver all documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
14.04 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assignees.
14.06 Integration. Subject to the references to the Member Agreement
and the Manager's Agreement, this Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto. In the event of
conflict between this Agreement and the Member Agreement or Manager's Agreement,
such other agreements shall be controlling.
14.07 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
14.08 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute an agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto, independently of the
signature of any other party.
14.09 Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Oklahoma, without regard to its
principles of conflict of laws.
14.10 Invalidity of Provisions. If any provision of this Agreement is
or becomes invalid, illegal, or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
14.11 Conveyances. All of the assets of the Company shall be held in
the name of the Company. Any deed, bill of sale, mortgage, lease, contract of
sale or other instrument purporting to convey or encumber the interest of the
Company of all or any portion of the assets of the Company shall be sufficient
when signed by a Manager.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ______ day of ______________, 199 .
MEMBERS:
------------------------------
MONIKA SMITH
PUBLIC SERVICE COMPANY
OF OKLAHOMA
By:___________________________
Title:________________________
NUMANCO, L.L.C.
AMENDED AND RESTATED
ARTICLES OF ORGANIZATION
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
The undersigned Members of Numanco, L.L.C., an Oklahoma limited
liability company (the "Company"), for the purpose of adopting Amended and
Restated Articles of Organization pursuant to Section 2011 of the Oklahoma
Limited Liability Company Act (the "Act"), hereby certifies:
1. The name of this Company is "Numanco, L.L.C."
2. The name under which this Company was originally organized was
"Numanco, L.L.C."
3. The Articles of Organization of this Company were originally filed
with the Oklahoma Secretary of State on April 8, 1996.
4. The amendments to the Articles of Organization effected by this
document are to change and restate the provisions relating to the regulation of
the internal affairs of the Company.
5. These Amended and Restated Articles of Organization were duly
adopted by the Members of the Company in accordance with Section 2020 of the
Act, and restate, integrate and further amend the Articles of Organization.
6. The Articles of Organization of the Company are hereby restated as
further amended herein, to read in full, as follows:
"ARTICLES OF ORGANIZATION
OF
NUMANCO, L.L.C.
FIRST. The name of the limited liability company is Numanco, L.L.C.
(the "Company").
SECOND. The latest date on which the Company is to dissolve is 12:00
midnight, December 31, 2015.
THIRD. The purpose of the Company is to engage in any lawful act or
activity for which limited liability companies may be organized under the Act.
FOURTH. The street address of the principal place of business of the
Company in the State of Oklahoma is 7633 East 63rd Place, Fourth Floor, Tulsa,
Oklahoma 74133.
FIFTH. The name and address of the registered agent of the Company in
the State of Oklahoma is Pat Buklin, 7633 East 63rd Place, Fourth Floor, Tulsa,
Oklahoma 74133.
SIXTH. The business of the Company shall be managed by a or Manager
designated pursuant to the terms of the Company's Operating Agreement. Subject
to the restrictions contained herein, any third person dealing with the Company
may rely absolutely upon the act, deed and/or signature of the Manager as being
the act of the Company and no third person shall be obliged or privileged to
inquire into or otherwise ascertain whether the act of the Manager has been duly
authorized.
SEVENTH. Notwithstanding any other provision hereof, unless and until
there shall have occurred a Buy-Sell Event (as such term is defined in the
Company's Operating Agreement), the Manager shall not have the authority to
cause the Company to do or commit to do any of the following acts, without the
prior unanimous written consent of the specific act by the Members; however,
upon the occurrence of a Buy-Sell Event, the Manager shall have the authority to
cause the Company to do or commit to do such acts upon the Majority Vote of the
Members (as such term is defined in the Company's Operating Agreement): (a)
borrow money in excess of the amounts set forth in the Company's Business Plan
(as defined in the Operating Agreement); (b) sell any asset of the Company (or
assets, in related transactions) having a fair market value in excess of
$500,000; (c) enter into any contract involving an anticipated total expenditure
of over $100,000; (d) do any act which would make it impossible to carry on the
ordinary business of the Company; (e) compromise any claim against the Company
over $50,000; (f) admit a person as a Member; (g) knowingly perform any act that
would subject a Member to personal liability; (h) amend the Articles of
Organization; (i) approve any Business Plan of the Company; (j) increase the
compensation of any officer of the Company above the amount set forth in the
Business Plan; or (k) enter the Company into new business ventures, alliances or
teaming agreements."
IN WITNESS WHEREOF, these Amended and Restated Articles of Organization
have been executed on the _____ day of , 1997, by the undersigned Members.
NUVEST, L.L.C.
By:___________________________
Title:________________________
NSS NUMANCO, INC.
By:___________________________
Title:________________________
NUMANCO L.L.C.
AMENDED AND RESTATED
OPERATING AGREEMENT
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") is
entered into as of the 30 day of November, 1997, by and among Nuvest, L.L.C., an
Oklahoma limited liability company ("Nuvest"), and NSS Numanco, Inc., a
Pennsylvania corporation ("Numanco Inc."), collectively referred to herein as
the "Members" of Numanco L.L.C., an Oklahoma limited liability company (the
"Company"), and supersedes all prior operating agreements of the Company. In
consideration of the mutual covenants and conditions hereinafter set forth, the
Members hereby agree that the terms of the Operating Agreement governing the
Company shall be as follows:
ARTICLE I
Organizational Matters
1.01 Formation. The Company has been formed as a limited liability
company pursuant to the provisions of the Act (as hereinafter defined). The
rights and obligations of the Members, the Manager designated herein, and the
affairs of the Company, shall be governed first by the mandatory provisions of
the Act, second by the Company's Articles of Organization, third by this
Agreement and fourth by the optional provisions of the Act. In the event of any
conflict among the foregoing, the conflict shall be resolved in the order of
priority set forth in the preceding sentence.
1.02 Name. The name of the Company shall be "Numanco L.L.C.".
1.03 Principal Office. The principal office of the Company in the State
of Oklahoma shall be located at 7633 East 63rd Place, Fourth Floor, Tulsa,
Oklahoma 74133. The name and address of the resident agent of the Company is Pat
Buklin, 7633 East 63rd Place, Fourth Floor, Tulsa, Oklahoma 74133. The Company
may also maintain offices at such other place or places as the Manager deems
advisable.
1.04 Term. The Company commenced upon the filing for record of the
Company's Articles of Organization with the Oklahoma Secretary of State, and
shall continue until 12:00 midnight, December 31, 2015, unless sooner terminated
as herein provided.
ARTICLE II
Definitions
2.01 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings.
"Act" means the Oklahoma Limited Liability Company Act, 18 Okla. Stat.
ss. 2000 et seq. (Supp. 1993), as it may be amended from time to time, and any
successor to such act.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant taxable year, after giving effect to the following adjustments: (i)
Credit to such Capital Account any amounts which such Member is obligated to
restore or is deemed to be obligated to restore pursuant to the penultimate
sentence of Reg. ss. 1.704-2(g)(1) and (i)(5); and (ii) Debit to such Capital
Account the items described in Reg. ss. 1.704-1(b)(2)(ii)(d)(4),(5) and (6)
(generally including certain Capital Account adjustments for depletion
allowances, certain future allocations of loss and deduction which are
reasonably expected as of year end, and future distributions, in excess of
offsetting Capital Account increases, which are reasonably expected as of year
end). The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Reg. ss. 1.704- 1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person. As used in this
definition of "Affiliate," the term "control" means either (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise or (ii) a direct or indirect equity
interest of ten percent (10%) or more in the entity.
"Agreement" means this Operating Agreement, as it may be amended or
supplemented from time to time.
"Articles of Organization" means the articles of organization, as
amended from time to time, filed by the Company under the Act.
"Business Day" means Monday through Friday of each week, except legal
holidays recognized as such by the government of the United States or the State
of Oklahoma.
"Business Plan" shall have the meaning ascribed to it in the Member
Agreement.
"Buy-Sell Event" shall have the meaning ascribed to it in the Member
Agreement.
"Capital Account" means each capital account maintained for a Member
pursuant to Section 4.03.
"Capital Contributions" means the sum of the total amount of cash and
the total value of property contributed or a promissory note or other binding
obligation to contribute cash or property to the Company by all Members, or any
one Member, as the case may be.
"Cash Available for Distribution" means, with respect to any period,
all cash receipts and funds received by the Company (except for Capital
Contributions) minus (i) all cash expenditures and (ii) the Company's cash
management fund representing working capital or other reserves as determined by
the unanimous consent of the Members.
"Code" means the Internal Revenue Code of 1986, as amended, as in
effect from time to time.
"Company" means the limited liability company formed by the filing of
the Company's Articles of Organization with the Oklahoma Secretary of State.
"Company Minimum Gain" means that amount determined by first computing
Company Nonrecourse Liability, any gain the Company would realize if it disposed
of the Company Property subject to such liability for no consideration other
than full satisfaction of the liability, and by then aggregating the separately
computed gains. For purposes of determining the amount of such gain, the
additional rules set forth in Reg. ss. 1.704-2(d) shall be followed.
"Company Property" means all property owned, leased or acquired by the
Company from time to time, whether real or personal, tangible or intangible.
"Dissociated Member" shall have the meaning ascribed to it in
Section 12.02.
"Event of Dissociation" has the meaning specified in Section 12.02.
"Event of Termination" shall have the meaning ascribed to it in the
Manager's Agreement.
"Majority Vote of the Members" means the vote of the Members owning a
majority of the Voting Rights.
"Manager" means the Person designated pursuant to Article VI.
"Manager's Agreement" shall mean that certain agreement between the
Manager, the Company, and others, of even date herewith.
"Member Agreement" means that certain Amended and Restated Member
Agreement between Nuvest, Numanco Inc., and certain other Persons, of even date
therewith.
"Member Loan Nonrecourse Deductions" shall have the meaning set forth
in Reg. ss. 1.704-2(i)(2). The amount of Member Loan Nonrecourse Deductions with
respect to a Member Nonrecourse Debt for a Company taxable year equals the net
increase, if any, in the amount of Member Minimum Gain attributable to such
Member Nonrecourse Debt during that taxable year, reduced (but not below zero)
by proceeds of the liability distributed during the year to the Member bearing
the economic risk of loss for the liability that are both attributable to the
liability and allocable to an increase in the Member Nonrecourse Debt Minimum
Gain.
"Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Reg. ss. 1.704-2(i).
"Member Nonrecourse Debt" shall have the meaning set forth in Reg.
ss. 1.704-2(b)(4), being generally any nonrecourse debt of the Company for which
any Member (or related person within the meaning of Reg. ss. 1.752-4(b)) bears
the economic risk of loss.
"Members" means the Record Holders of all interests in the profits and
capital of the Company. The term does not include a transferee of an interest
unless the transferee has been admitted as a Substitute Member.
"Nonrecourse Deductions" shall have the meaning set forth in Reg. ss.
1.704-2(b)(1). The amount of Nonrecourse Deductions for a Company taxable year
equals the net increase in the amount of Company Minimum Gain during that
taxable year determined under Reg. ss. 1.704-2(d), reduced (but not below zero)
by the aggregate distributions made during the taxable year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Company Minimum Gain
determined pursuant to Reg. ss. 1.704-2(h).
"Nonrecourse Liability" shall have the meaning set forth in Reg.
ss. 1.704-2(b)(3).
"Person" means a natural person, partnership, domestic or foreign
limited partnership, domestic or foreign limited liability company, trust,
estate, association or corporation.
"Record Holder" means the Person in whose name an interest in the
profits and capital of the Company is registered on the books and records of the
Company as of the close of business on a particular Business Day.
"Regulations" or "Reg." means the Treasury Regulations promulgated
under the Code, as amended from time to time.
"Substitute Member" means a transferee of an interest in the profits
and capital of the Company who is admitted as a Member to the Company pursuant
to Section 12.01 in place of and with all the rights of a Member.
"Tax Distribution" shall have the meaning ascribed to such term in
Nuvest's Operating Agreement.
"Tax Item" means the Company's taxable income or loss for each taxable
year, determined in accordance with Section 703(a) of the Code, all items of
income, gain, loss, deduction or credit required to be stated separately
pursuant to Section 703(a)(1) of the Code, and the following:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing taxable income;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Reg. ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing taxable income or loss; and
(c) Upon the distribution of property by the Company to a
Member, gain or loss attributable to the difference between the fair market
value of the property and its basis.
"Tax Matters Partner" means the Member designated pursuant to
Section 9.02.
"Term" means the period of time the Company shall continue in existence
as provided in Section 1.04.
"Unit" means an interest in the profits and capital of the Company, to
the extent provided in Articles IV and V.
"Voting Rights" has the meaning specified in Section 7.02.
ARTICLE III
Purpose
3.01 Purpose of the Company. The purpose of the Company is to engage in
any lawful act or activity for which limited liability companies may be
organized under the Act. Such acts or activities may include, but shall not be
limited to, acquiring, operating and maintaining real and personal properties in
the United States and foreign countries. In transacting such business, the
Company may:
(a) acquire an ownership, working, royalty or other interest
in stocks, real estate, oil and gas leases and other properties, either alone or
in conjunction with other parties;
(b) dispose of, rent, lease, transfer, encumber or otherwise
utilize Company Property used in connection with Company operations;
(c) employ such personnel and obtain such legal, accounting,
and other professional services and advice as may be necessary in the course of
the Company's operations under this Agreement;
(d) pay all ad valorem taxes levied or assessed against the
Company's assets, and all other taxes (other than income taxes) directly
relating to operations conducted under this Agreement;
(e) execute all options, leases, contracts, agreements,
documents, or instruments of any kind which are appropriate for carrying out the
purposes of the Company;
(f) procure and maintain in force such insurance, including
public liability, automotive liability, worker's compensation, and employer's
liability insurance, as may be prudent to protect the Company against liability
for loss and damages which may be occasioned by the activities to be engaged in
by the Company;
(g) purchase and establish inventories of equipment and
material required or expected to be required in connection with the Company's
operations;
(h) contract or enter into agreements for the performance of
services and the purchase and sale of material, equipment, supplies, and
property, both real and personal;
(i) conduct operations either alone or as a joint venturer,
co-tenant, partner, member, shareholder or in any other manner of participation
with any Member or third parties and to enter into agreements and contracts
setting forth the terms and provisions of such participation;
(j) borrow money from banks and other lending institutions for
Company purposes and pledge Company Property for the repayment of such loans, it
being understood that no bank or other lending institution to which the Company
makes application for a loan will be required to inquire as to the purposes for
which such loan is sought, and as between the Company and such bank or lending
institution it will be conclusively presumed that the proceeds of such loans are
to be and will be used for purposes authorized under the terms of this
Agreement;
(k) sell, relinquish, release, abandon, or otherwise dispose
of Company Property, including undeveloped, productive, and condemned
properties, in accordance with other provisions herein; and
(l) perform any and all other acts or activities customary or
incident to conducting the above Company operations.
ARTICLE IV
Capital Contributions
4.01 Authorized Units. The Company is authorized to issue an aggregate
of One Thousand (1,000) Units. Upon the execution and delivery of this
Agreement, the Company shall issue Units to the Members in the following
proportions:
Number Percentage of
Member of Units Outstanding Units
Nuvest 900 90%
Numanco Inc. 100 10%
1,000 100%
4.02 Capital Contributions. Capital Contributions shall be in the form
of cash or property, or an obligation to contribute cash or property.
4.03 Capital Accounts.
(a) The Company shall maintain for each Member a separate
Capital Account. The term "Capital Account" shall mean as to any Member the
amount of the initial Capital Contribution attributable to the Member, which
amount shall be (i) increased by subsequent Capital Contributions by such
Member, (ii) increased or decreased, as the case may be, by Tax Items allocated
to such Member pursuant to Article V, and (iii) decreased by distributions to
such Member pursuant to Section 5.01. Distributions shall be debited to Capital
Accounts in the year containing the record date for such distribution.
(b) In the event any in-kind contributions are made, the
Capital Account of the Member shall be increased by the fair market value of the
property contributed by such Member.
(c) The foregoing definition of Capital Account and certain
other provisions of this Agreement are intended to comply with Reg. ss.
1.704-1(b), and shall be interpreted and applied in a manner consistent with
that regulation. Such regulation contains additional rules governing maintenance
of capital accounts that have not been addressed in this Agreement.
(d) A transferee of an interest in the profits and capital of
the Company transferred in accordance with Article XI will succeed to the
Capital Account relating to the Member transferring such interest. However, if
the transfer causes a termination of the Company under Section 708(b)(1)(B) of
the Code, the Company Property shall be deemed to have been distributed in
liquidation of the Company to the Members (including the transferee of the
interest) pursuant to Section 13.02 and re-contributed by such Members and
transferees in reconstitution of the Company. The Capital Accounts of such
reconstituted Company shall be maintained in accordance with the principles of
this Section 4.03.
(e) At such times as may be permitted or required by Treasury
Regulations issued pursuant to Section 704 of the Code, the Capital Accounts
shall be revalued and adjusted to reflect the then fair market value of Company
Property and the Capital Accounts shall be maintained to comply with Reg. ss.
1.704-1(b)(2)(iv)(f). All allocations of gain resulting from such revaluation
shall be made consistently with that regulation, and to the extent not
inconsistent therewith, the allocation provisions of Section 5.02 hereof.
4.04 Interest. No interest shall be paid by the Company on Capital
Contributions, on balances in a Member's Capital Account or on any other funds
distributed or distributable under this Agreement.
4.05 No Withdrawal. No Member shall without the written consent of all
remaining Members of the Company have any right to the withdrawal or reduction
of any part of his Capital Contribution.
4.06 Loans. Loans by a Member to the Company shall not be considered
Capital Contributions. The Company may not make loans to any Member or any
Affiliate of any Member.
4.07 Borrowings. Subject to Section 6.03, the Manager may arrange for
the Company to borrow funds and to pledge Company Property as security therefor.
ARTICLE V
Distributions and Allocations
5.01 Distribution of Cash Available for Distribution. Cash Available
for Distribution shall be determined by the unanimous consent of the Members and
the Manager, except that on or before April 15 of each year the Company shall
distribute to Nuvest an amount sufficient to allow Nuvest to make any Tax
Distribution that Nuvest may be required to make pursuant to the terms of
Nuvest's Operating Agreement. Any distribution of property shall be treated as a
distribution of cash in the amount of the fair market value of such property.
Except as otherwise provided herein, distributions shall be allocated between
the Members in accordance with their respective Unit ownership.
5.02 Allocation of Tax Items. All Tax Items shall be allocated between
the Members in accordance with their respective Unit ownership.
5.03 Regulatory Allocations. The following special allocations shall
be made for each Company taxable year in the following order:
(a) Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain (other than Minimum Gain attributable to Member Nonrecourse
Debt or net decreases in Minimum Gain attributable to transactions subject to
the exceptions contained in Reg. ss. 1.704-2(f)(2)-(5)) during any Company
taxable year, each Member shall be specially allocated items of Company income
and gain for such year equal to such Member's share of the net decrease in
Company Minimum Gain during that year. Each Member's share of the net decrease
in Company Minimum Gain shall be determined in accordance with Reg. ss.
1.704-2(g)(2). This Section 5.03(a) is intended to comply with the minimum gain
chargeback requirement in Reg. ss. 1.704-2(f) and shall be interpreted
consistently therewith.
(b) Member Nonrecourse Debt Minimum Gain Chargeback.
If there is a net decrease in Member Minimum Gain attributable to a Member
Nonrecourse Debt during any Company taxable year, each Member with a share of
such Member Minimum Gain attributable to a Member Nonrecourse Debt determined in
accordance with Reg. ss. 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years)
equal to such Member's share of the net decrease in Member Minimum Gain during
such year. Each Member's share of the net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt shall be determined in a manner
consistent with Reg. ss. 1.704-2(g)(2). This subsection is intended to comply
with the minimum gain chargeback requirement in Reg. ss. 1.704-2(i)(4)
pertaining to Member Nonrecourse Debt and shall be interpreted consistently
therewith.
(c) Gross Income Allocation. In the event any Member has a
Capital Account deficit at the end of any Company taxable year which is in
excess of the sum of (i) the amount such Member is obligated to restore, and
(ii) the amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Reg. ss. 1.704-2(g)(1), each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 5.03(c) shall be made only if and to the extent that any such Member
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Article V have been tentatively made as if this
Section 5.03(c) hereof and Section 5.03(d) were not in the Agreement.
(d) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
Reg. ss. 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided
that an allocation pursuant to this Section 5.03(d) shall be made only if and to
the extent that any such Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article V have been tentatively
made as if this Section 5.03(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable year or other periods shall be allocated among the Members in proportion
to their respective Capital Contributions.
(f) Member Loan Nonrecourse Deductions. Any Member Loan
Nonrecourse Deductions for any fiscal year or other period shall be allocated to
the Members who bear the risk of loss with respect to the loan to which such
Member Loan Nonrecourse Deductions are attributable in accordance with Reg. ss.
1.704-2(i).
(g) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company Property pursuant to Section 734(b) or
Section 743(b) of the Code is required, pursuant to Reg. ss.
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Member(s) in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such section of the
Regulations.
5.04 Curative Allocations. The allocations set forth in Section 5.03,
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other Tax Items pursuant
to this Article V. Therefore, notwithstanding any other provision of this
Article V (other than the Regulatory Allocations), the Manager shall make such
offsetting special allocations of Tax Items in whatever manner he determines
appropriate so that, after such offsetting allocations are made, each Member's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the Regulatory Allocations were not part
of the Agreement and all Tax Items were allocated pursuant to Section 5.03. In
exercising his discretion under this Section 5.04, the Manager shall take into
account future Regulatory Allocations under Sections 5.03(a) and (b) that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 5.03(e) and (f).
5.05. Special Allocation of Gain or Loss on Contributed Property. Under
Regulations prescribed by the Secretary of the Treasury pursuant to Section
704(c) of the Code, Tax Items with respect to property contributed to the
Company by a Member shall be shared among Members so as to take account of the
variation between the basis of the property to the Company and its fair market
value at the time of contribution. The Manager shall have the power to make such
elections, adopt such conventions, and allocate Tax Items as he deems
appropriate to comply with Section 704(c) of the Code and any Regulations
promulgated thereunder and to preserve, to the extent possible, uniformity of
the Members' interests in the profits and capital of the Company. Any Tax Items
allocated under this Section 5.05 shall not be debited or credited to Capital
Accounts to the extent that item is already taken into account (upon formation
or otherwise) in determining a Member's Capital Account.
5.06. Change or Transfer of Interests in Profits and Capital. Upon the
transfer of an interest in the profits and capital of the Company in accordance
with Article XI, Tax Items attributable to the transferred interest shall, for
federal income tax purposes, be allocated between the transferor and the
transferee of such interest based on the number of months that each such Person
was the owner of the interest, in a manner determined by the Manager to be
consistent with the requirements of Section 706 of the Code and Regulations or
rulings promulgated thereunder.
5.07. Deemed Income or Gain. If, and to the extent that, any Member is
deemed to recognize income or gain as a result of any transaction between the
Member and the Company pursuant to Sections 482, 483, 1272-1274, or 7872 of the
Code, or any similar provision now or hereafter in effect, any corresponding
resulting loss or deduction of the Company shall be allocated to the Member who
was allocated such income or gain.
5.08. Recapture Items. Any portion of any income or gain attributable
to the sale or other disposition of any depreciable Company Property required to
be recaptured as ordinary income shall, to the maximum extent possible in
accordance with Section 704 of the Code and the Regulations thereunder, be
allocated among the Members for tax purposes in the same ratio as the deductions
giving rise to such recapture were allocated. Any recapture of tax credit shall
be allocated among the Members in accordance with Reg. ss. 1.704-1(b)(4)(ii).
ARTICLE VI
Management and Operation of Business
6.01. Manager. Management of the Company shall be vested in a Manager.
Unless and until there has occurred an Event of Termination, the Manager shall
be R. Smith. Upon the occurrence of a Buy-Sell Event, the holder of a majority
of the Voting Rights shall, subject to the limitations imposed under Section
8.3(b) of the Member Agreement, be entitled to designate a new Manager at any
annual or special meeting called for that purpose.
6.02. Authority of Manager. The Manager may exercise all the powers of
the Company whether derived from law, the Articles of Organization, this
Agreement, or the Manager's Agreement, except such powers as are by statute, by
the Articles of Organization, by this Agreement, or by the Manager's Agreement
vested solely in the Members.
6.03. Restrictions on Manager. Notwithstanding any other provision
hereof, unless and until there shall have occurred an Event of Default, the
Manager shall not have the authority to cause the Company to do or commit to do
any of the following acts, without the prior unanimous written consent of the
specific act by the Members; however, upon the occurrence of an Event of
Default, the Manager shall have the authority to cause the Company to do or
commit to do such acts upon the Majority Vote of the Members:
(a) Borrow money in excess of the amounts set forth in the
Business Plan;
(b) Sell any assets of the Company (or assets, in related
transactions) having a fair market value over $500,000;
(c) Enter into any contract involving an anticipated total
expenditure of over $100,000;
(d) Do any act which would make it impossible to carry on the
ordinary business of the Company;
(e) Compromise any claim over $50,000;
(f) Admit a Person as a Member;
(g) Knowingly perform any act that would subject a Member to
personal liability;
(h) Amend the Articles of Organization;
(i) Approve any Business Plan of the Company;
(j) Increase the compensation of any officer of the Company
above the amount set forth in the Business Plan; or
(k) Enter the Company into new business ventures, alliances or
teaming agreements.
6.04. Outside Activities. The Members and Manager and their respective
Affiliates have business interests and engage in business activities in addition
to those relating to the Company. No provision of this Agreement shall be deemed
to prohibit the Members, the Manager or their respective Affiliates from
conducting such businesses and activities, provided they are not in direct
competition with the Company. Neither the Company nor any Member shall have any
rights by virtue of this Agreement or the relationship contemplated herein in
any non-competing business ventures of any other Member or the Affiliates of
such Member.
6.05. Limitation on Liability of Manager. No Person serving as Manager
shall be liable to the Company for monetary damages for breach of fiduciary duty
as a Manager; provided, however, that nothing contained herein shall eliminate
or limit the liability of such Person (i) for any breach of the Manager's duty
of loyalty to the Company, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law and, (iii) for
any transaction from which the Manager derived an improper personal benefit.
ARTICLE VII
Rights and Obligations of the Members
7.01 Limitation of Liability. Anything herein to the contrary
notwithstanding, except as otherwise expressly agreed in writing, a Member shall
not be personally liable for any debts, liabilities, or obligations of the
Company, whether to the Company, to any of the other Members, or to creditors of
the Company, beyond the Capital Account of the Member, together with the
Member's share of the assets and undistributed profits of the Company.
7.02 Voting Rights. Action requiring a vote of the Members may be taken
upon a Majority Vote of the Members. Each Unit shall entitle the holder thereof
to one (1) vote.
7.03 Indemnification.
(a) To the maximum extent permitted by law, the Company shall
indemnify and hold harmless the Manager, all Members, their respective
Affiliates, and the employees and agents of the Company (each, an "Indemnitee")
from and against any and all losses, claims, demands, costs, damages,
liabilities, joint and several, expenses of any nature (including attorneys'
fees and disbursements), judgments, fines, settlements, penalties and other
expenses actually and reasonably incurred by the Indemnitee in connection with
any and all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, by reason of the fact that
the Indemnitee is or was a Manager or Member of the Company or is or was an
employee or agent of the Company, including Affiliates of the foregoing, arising
out of or incidental to the business of the Company, provided, (i) the
Indemnitee's conduct did not constitute willful misconduct or recklessness, (ii)
the action is not based on breach of this Agreement, (iii) the Indemnitee acted
in good faith and in a manner he or it reasonably believed to be in, or not
opposed to, the best interests of the Company and within the scope of such
Indemnitee's authority and (iv) with respect to a criminal action or proceeding,
the Indemnitee had no reasonable cause to believe its conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, in
and of itself, create a presumption or otherwise constitute evidence that the
Indemnitee acted in a manner contrary to that specified above.
(b) Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 7.03 may, from time
to time, be advanced by the Company prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified as
authorized in this Section 7.03.
(c) Indemnification provided by this Section 7.03 shall be in
addition to any other rights to which the Indemnitee may be entitled under any
agreement, vote of the Members, as a matter of law or equity, or otherwise, and
shall inure to the benefit of the successors, assignees, heirs, personal
representatives and administrators of the Indemnitee.
(d) The Company may purchase and maintain insurance, at the
Company's expense, on behalf of any Indemnities against any liability that may
be asserted against or expense that may be incurred by an Indemnitee in
connection with the activities of the Company regardless of whether the Company
would have the power to indemnify such Indemnitee against such liability under
the provisions of this Agreement.
ARTICLE VIII
Books, Records, and Accounting
8.01 Books and Records. Appropriate books and records with respect to
the Company's business shall at all times be kept at the principal office of the
Company or at such other places as agreed to by the Members. Any records
maintained by the Company in the regular course of its business may be kept on,
or be in the form of, magnetic tape, photographs or any other information
storage device, provided that the records so kept are convertible into clearly
legible written form within a reasonable period of time. Each Member shall have
the right upon demand and at such Member's own expense to inspect and copy any
of the Company's books and records and obtain such other information regarding
the affairs of the Company.
8.02 Accounting. The books of the Company for regulatory and financial
reporting purposes shall be maintained on cash basis of accounting. The Company
books for purposes of maintaining and determining Capital Accounts shall be
maintained in accordance with the provisions of this Agreement, Section 704 of
the Code and, to the extent not inconsistent therewith, the principles described
above for financial reporting and regulatory purposes. Comparisons of budgeted
income and expenses to actual income and expenses of the Company shall be on the
accrual basis of accounting.
8.03 Fiscal Year. The fiscal year of the Company shall be the
calendar year, unless otherwise determined by the Manager.
ARTICLE IX
Tax Matters
9.01 Taxable year. The taxable year of the Company shall be the
calendar year, unless otherwise determined by the Manager.
9.02 Tax Controversies. The "Tax Matters Partner" (as defined in
Section 6231(a)(7) of the Code) shall be determined by a Majority Vote of the
Members, and shall be authorized and required to represent the Company, at the
Company's expense, in connection with all examinations of the Company's affairs
by tax authorities, including resulting administrative and judicial proceedings.
Each Member agrees to cooperate with the Tax Matters Partner, and to do or
refrain from doing any or all things reasonably required by the Tax Matters
Partner to conduct such proceedings.
9.03 Taxation as a Partnership. No election shall be made by the
Company or any Member for the Company to be excluded from the application of any
provision of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state tax laws.
ARTICLE X
Transfer of Interests in the
Profits and Capital of the Company
10.01. Transfer.
(a) The term "transfer," when used in this Article X with
respect to an interest in the profits and capital of the Company, shall be
deemed to refer to a transaction by which the Member assigns all or a portion of
its interest to another Person, or by which the holder of an interest assigns
the interest to another Person as assignee, and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, transfer by will or
intestate succession, exchange, or any other disposition.
(b) No interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article X.
Any transfer or purported transfer of any interest not made in accordance with
this Article X shall be null and void. Should a Member attempt to transfer its
interest in contravention of this Article XI, then (i) such an alleged assignee
shall have no right to require any information or account of the Company's
transactions or to inspect the Company's books and records, tax return
information, or any other information, documents, or other data associated with
the Company; and (ii) the Company and the other Members (A) shall be entitled to
treat such assigning Member as the absolute owner thereof in all respects, and
(B) shall incur no liability for distributions or for allocations of income,
gain, loss, deduction or credit, or for transmittal of reports and notices
required to be given to such Member.
(c) A transferee of an interest in the profits and capital
transferred in accordance with this Article XI shall not become a Substitute
Member unless and until admitted as a Substitute Member pursuant to Article XII.
Any such transferee who does not become a Substitute Member shall have no right
to vote or otherwise participate in the Company's affairs as a Member thereof,
but instead shall be a Record Holder only for the purpose of receiving the share
of profits or other compensation by way of income and the return of
contributions to which the transferring Member would otherwise be entitled at
the time said transferring Member would be entitled to receive the same.
10.02. Transfer of Interests by a Member.
(a) No interests in the profits and capital may be transferred
by a Member unless the following conditions are first satisfied:
(i) The assigning Member and his transferee has (A)
delivered to the Company a duly executed and acknowledged counterpart of the
instrument of assignment and such instrument evidences the written acceptance by
the transferee of all of the terms and provisions of this Agreement and
represents that such assignment was made in accordance with all applicable laws
and regulations; and (B) executed and delivered to the Company such other
instruments as the Manager may reasonably deem necessary or desirable to effect
the assignment; and
(ii) The Company has received an opinion from counsel for
the assigning Member, in form and substance satisfactory to the Manager, that
such transfer; (A) would not materially adversely affect the classification of
the Company as a partnership for federal and (as applicable) state income tax
purposes; and (B) would not violate applicable federal and state securities laws
or rules and regulations of the Securities and Exchange Commission, any state
securities commission or any other governmental authority with jurisdiction over
the transfer.
(b) Without the consent of the Manager, no transfer of an
interest in the profits and capital of the Company may be made if such transfer,
when added to the total of all other transfers within the preceding 12 months,
would result in the Company being considered to have terminated within the
meaning of Section 708(b)(1)(B) of the Code.
(c) In no event shall any interest be transferred to a minor
(except in trust pursuant to the Uniform Transfers to Minors Act) or any
incompetent (except in trust).
ARTICLE XI
Admission of Substitute and Additional Members
11.01. Admission of Substitute Members.
(a) Upon a transfer of an interest in the profits and capital
of the Company by a Member in accordance with Article X (but not otherwise), the
transferor shall have the power to give the transferee the right to apply to
become a Substitute Member with respect to the interest acquired, subject to the
conditions of and in the manner permitted under this Agreement. No transferee of
an interest shall become a Substitute Member with respect to the transferred
interest (whether or not such transferee is then a Member or Substitute Member
with respect to other previously acquired interests) unless and until all of the
following conditions are satisfied:
(i) The instrument of assignment sets forth the intentions of
the assignor that the transferee succeed to the assignor's interest as a
Substitute Member in his place;
(ii) The assignor and transferee shall have fulfilled all
other requirements of this Agreement;
(iii) The transferee shall have paid all reasonable legal fees
and filing costs incurred by the Company in connection with his substitution as
a Member; and
(iv) The Members shall have unanimously approved such
substitution in writing, which approval may be granted or withheld by each
Member in its sole and absolute discretion and may be arbitrarily withheld, and
the books and records of the Company have been modified to reflect the
admission; provided, in the event Public Service Company of Oklahoma ("PSO")
shall become a member of the Company, no such approval shall be required with
respect to any transfer by PSO to its parent corporation, Central and South West
Corporation, or any direct or indirect subsidiary of such parent corporation.
(b) The admission of a transferee as a Substitute Member with
respect to a transferred interest shall become effective on the date the Members
give their unanimous written consent to the admission and the books and records
of the Company have been modified to reflect such admission. Any Member who
transfers all of his interest in the profits and capital shall cease to be a
Member of the Company upon a transfer of such interest in accordance with
Article X and the execution of a counterpart of this Agreement by the transferee
and shall have no further rights as a Member in or with respect to the Company
(whether or not the transferee of such former Member is admitted to he Company
as a Substitute Member).
ARTICLE XII
Dissolution and Liquidation
12.01 Dissolution and Liquidation. The Company shall be dissolved and
its affairs shall be wound up upon the occurrence of any of the following: (i)
the term of the Company stated in the Articles of Organization expires; (ii) if,
upon the occurrence of an Event of Dissociation, the remaining Members fail to
continue the Company pursuant to Section 12.02; or (iii) all Members vote to
dissolve the Company.
12.02 Events of Dissociation. Upon the death, incapacity, resignation,
expulsion, bankruptcy or dissolution of a Member, or the occurrence of any other
event which terminates the continued membership of a Member in the Company (any
such Member shall be referred to herein as a "Dissociated Member" and any of
such events shall be referred to herein as an "Event of Dissociation"), the
Company shall dissolve and its affairs shall be wound up; provided, however, it
is agreed that without the consent of all other Members, no Member may
voluntarily resign from the Company. The Company shall thereafter conduct only
activities necessary to wind up its affairs, unless there is at least one (1)
remaining Member and within sixty (60) days after the occurrence of an Event of
Dissociation, all the remaining Members unanimously agree to continue the
Company. If any election to continue the Company is made, then, except as
otherwise provided in the Member Agreement or the Manager's Agreement:
(a) The remaining Members may elect, within thirty (30) days
of the decision to continue the Company, to purchase the Dissociated Member's
interest in the profits and capital of the Company upon such terms and
conditions as the remaining Members and the Dissociated Member or the legal
representative of the Dissociated Member, may agree. In the event the remaining
Members and the Dissociated Member (or such legal representative) do not agree
upon terms and conditions for a purchase of such interest of the Dissociated
Member,the remaining Members shall have an option (to be exercised within sixty
(60) days after the occurrence of the Event of Dissociation, by giving notice to
the Dissociated Member (or such legal representative) to purchase the interest
for a cash purchase price determined by the value of the Capital Account of the
Dissociated Member, as of the end of the calendar month preceding the occurrence
of the Event of Dissociation, adjusted as if all Company Property were sold at
fair market value, and all liabilities of the Company were paid and the Company
was liquidated in accordance with the provisions of Section 12.03.
(b) The Company shall continue until the expiration of the
term for which it was formed or until the occurrence of another Event of
Dissociation, in which event any remaining Members shall again elect whether to
continue the Company pursuant to this Section 12.02.
12.03 Method of Winding Up. Upon dissolution of the Company pursuant to
Section 12.01, the Company shall immediately commence to liquidate and wind up
its affairs. The Members shall continue to share profits and losses during the
period of liquidation and winding up in the same proportion as before
commencement of winding up and dissolution. Unless the Manager shall determine
otherwise, all distributions will be made in cash, and none of the Company
Property will be distributed in kind to the Members. The proceeds from the
liquidation and winding up shall be applied in the following order of priority:
(a) To creditors (other than the Manager), including Members
who are creditors, to the extent permitted by law, in satisfaction of
liabilities of the Company other than liabilities to Members on account of their
Capital Contributions or on account of a Member's withdrawal from the Company or
pursuant to a withdrawal of capital; and
(b) To the Manager, the balance of all sums due pursuant to
the terms and provisions of the Manager's Agreement, except as otherwise
provided pursuant to Section 5.5 of the Manager's Agreement; and
(c) To each Member the amount of his Capital Account balance,
and if the remaining proceeds are insufficient to allow each Member to receive
the full amount in his Capital Account, to the Members pro rata according to
their respective Capital Account balances; and
(d) The balance, if any, to the Members in proportion to their
respective Unit ownership.
12.04 Filing Articles of Dissolution. Upon the completion of the
distribution of Company Property as provided in Section 12.03, Articles of
Dissolution shall be filed as required by the Act, and each member agrees to
take whatever action may be advisable or proper to carry out the provisions of
this Section.
12.05 Return of Capital. The return of Capital Contributions shall be
made solely from Company Property.
ARTICLE XIII
Amendment of Agreement; Meetings
13.01 Amendments. Unless and until there shall have occurred a Buy-Sell
Event, all amendments to this Agreement shall require the unanimous consent of
the Members. Upon the occurrence of a Buy-Sell Event, all amendments to this
Agreement may be effected by a Majority Vote of the Members, subject to the
provisions of Section 13.02.
13.02 Limitations on Amendments. Notwithstanding any other provision of
this Agreement, no amendment to this Agreement may without the unanimous
approval of all Members (i) enlarge the obligations of any Member under this
Agreement or (ii) amend Section 13.01 or this Section 13.02.
13.03 Meetings. Meetings may be called by any Member, by providing at
least five (5) business days prior notice of the time, place and purpose of the
meeting to all Members. The holder of a majority of the Voting Rights,
represented in person or by proxy, shall constitute a quorum at a meeting of
Members.
13.04 Action Without a Meeting. Any action that may be taken by any
vote of all or any part of the Members may be taken without a meeting if a
consent to such action is signed by Members holding not less than the minimum
number of Voting Rights that would be necessary to authorize or take such action
at a meeting at which all Members entitled to vote thereon were present and
voted. Prompt notice of the taking of any action without a meeting shall be
given to those Members who have not consented in writing.
ARTICLE XIV
General Provisions
14.01 Notices. Any notice, demand, request or report required or
permitted to be given or made to a Member under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class mail to the Member. Any notice, payment, or report to be given or
sent to a Member hereunder shall be deemed conclusively to have been given or
sent, upon mailing of such notice, payment, or report to the address shown on
the records of the Company, regardless of any claim of any Person who may have
an interest by reason of an assignment or otherwise.
14.02 Captions. All article and section captions in this Agreement are
for convenience only. They shall not be deemed part of this Agreement and in no
way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
14.03 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
14.04 Further Action. The parties to this Agreement shall execute and
deliver all documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
14.04 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assignees.
14.06 Integration. Subject to the references to the Member Agreement,
the Manager's Agreement, and Nuvest's Operating Agreement, this Agreement
constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings
pertaining thereto. In the event of a conflict between this Agreement and the
Member Agreement, the Manager's Agreement, or Nuvest's Operating Agreement, such
other agreements shall be controlling.
14.07 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
14.08 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute an agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto, independently of the
signature of any other party.
14.09 Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Oklahoma, without regard to its
principles of conflict of laws.
14.10 Invalidity of Provisions. If any provision of this Agreement is
or becomes invalid, illegal, or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
14.11 Conveyances. All of the assets of the Company shall be held in
the name of the Company. Any deed, bill of sale, mortgage, lease, contract of
sale or other instrument purporting to convey or encumber the interest of the
Company of all or any portion of the assets of the Company shall be sufficient
when signed by a Manager.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ______ day of ______________, 199 .
MEMBERS:
NUVEST, L.L.C.
By:___________________________
Title:________________________
NSS NUMANCO, INC.
By:___________________________
Title:________________________
NONCOMPETITION AGREEMENT
THIS AGREEMENT is made as of the _____ day of _____________, 19 , by
and between ________________________ (the "Departing Member"), and Nuvest,
L.L.C., an Oklahoma limited liability company("Nuvest"), NSS Numanco, Inc., a
Pennsylvania corporation, and Numanco, L.L.C., an Oklahoma limited liability
company (collectively, the "Company").
In consideration of the mutual covenants and agreements herein
contained, the parties hereby agree as follows:
WITNESSETH:
1. Recitals.
The Departing Member has been a Member of Nuvest and is
experienced in the business, management and operations of the Company.
Pursuant to that certain Member Agreement by and among the
Departing Member, the Company and others, the Departing Member sold all of its
interest in Nuvest for a Purchase Price (as defined in the Member Agreement)
that included compensation for the Departing Member's proportionate share of the
good will of the Company.
Recognizing the Departing Member's unique position in the
Company and the detriment to the Company were the Departing Member to directly
or indirectly compete with the Company, and in consideration for the mutual
covenants contained in the Member Agreement, the Departing Member has agreed to
refrain from directly or indirectly competing with the Company under the terms
and conditions contained herein.
Definitions. The following terms, when used in this
Agreement, shall have the meanings ascribed to them:
"Affiliate" shall mean (i) any Person that directly or
indirectly controls or is controlled by or is under common control with the
specified Person, (ii) any Person that is an executive officer of, general
partner in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an executive officer,
general partner or trustee, or with respect to which the specified Person serves
in a similar capacity, and (iii) any Person that, directly or indirectly, is the
beneficial owner of 10% or more of any class of equity securities of the
specified Person or of which the specified Person is directly or indirectly the
owner of 10% or more of any class of equity securities.
"Person" shall mean any individual, partnership, corporation,
joint venture, trust, business trust, cooperative or association, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits.
3. Term. The term of this Agreement (the "Noncompetition Period") shall
commence on the date hereof and shall continue for a period of three (3) years.
4. Covenant Not to Compete. The Departing Member covenants that during
the Noncompetition Period he shall not, either directly or indirectly, within
the State of Oklahoma, the State of Pennsylvania, or within any state or foreign
country in which the Company or any of its Affiliates maintains an office or
conducts business, enter into, engage in, be employed by or consult with any
business in competition with the business of the Company or any of its
Affiliates.
5. Nonsolicitation of Customers. The Departing Member covenants that
during the Noncompetition Period he shall not, either directly or indirectly,
within the State of Oklahoma, the State of Pennsylvania, or within any state or
foreign country in which the Company or any of its Affiliates maintains an
office or conducts business, solicit customers of the Company or any of its
Affiliates, or in any way discourage such customers from doing business with the
Company or any of its Affiliates.
6. Nonsolicitation of Employees. The Departing Member covenants that
during the Noncompetition Period he shall refrain from soliciting and shall not,
either directly or indirectly, solicit any employee of the Company or any of its
Affiliates to leave the service of his or her employer.
7. Scope of Obligations. The Departing Member's conduct shall be
prohibited by Sections 4, 5 and 6 hereof regardless of how it is carried out,
whether as an officer, director, stockholder, agent, employee or salesman for
any Person; provided, however, the foregoing restrictions shall not apply to the
ownership by the Departing Member of not more than two percent (2%) of the
outstanding securities of any company whose stock is traded on a national
securities exchange or is quoted on NASDAQ.
8. Equitable Relief. The Departing Member acknowledges that the
obligations to be observed by him are of a special and unique character, which
gives them a peculiar value, and the failure by him to observe such obligations
cannot be reasonably or adequately compensated in damages in an action at law;
and that a breach by him of any of the provisions contained in this Agreement
will cause the Company and its Affiliates irreparable injury and damage. The
Departing Member further acknowledges that he possesses unique skills,
knowledge, and ability and that competition by him in violation of this
Agreement or any other breach of the provisions of this Agreement would be
extremely detrimental to The Company and its Affiliates. The Departing Member
therefore agrees that the Company shall be entitled, in addition to any other
remedies it may have under this Agreement or otherwise, to injunctive and other
equitable relief to prevent or curtail any breach of this Agreement by him.
9. Severability. In case any one or more of the provisions of this
Agreement shall be invalid, illegal, or unenforceable in any respect, such
provision(s) shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to this Agreement to the extent possible, and
in any event the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
10. Integration. This Agreement contains the entire agreement between
the parties regarding the subject matter hereof and supersedes all prior
agreements and undertakings, whether oral or written. No promises, covenants, or
representations of any character or nature other than those expressly stated
herein have been made to induce either party to enter into this Agreement.
11. Waiver. The waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be construed as a waiver of any
subsequent breach of the same provision or of any other provision of this
Agreement.
12. Notice. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted, if transmitted by telecopy or similar electronic transmission
method; the day after it is sent, if sent by recognized expedited delivery
service; and five days after it is sent, if mailed, first class mail, postage
prepaid. In each case notice shall be sent to:
If to the Company:
If to the
Departing Member:
or to such other address as such party shall have specified by notice in writing
to the other parties.
13. Captions. The captions to the paragraphs of this Agreement are for
convenience only and shall not be considered or referred to in resolving
questions of interpretation.
14. Governing Law. The validity, construction, interpretation, and
enforcement of, and the remedies under, this Agreement shall be governed in
accordance with the laws of the State of Pennsylvania, except that any choice of
law provision of Pennsylvania law shall not apply if the law of a state or
jurisdiction other than Pennsylvania would apply thereby.
15. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors or permitted assigns.
16. Amendments. This Agreement may be amended, terminated, or
superseded only by an agreement in writing between the parties hereto.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one and the same Agreement.
18. Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
19. Attorneys Fees. If any action is commenced to enforce any provision
of this Agreement, the prevailing party shall be entitled to attorneys fees and
costs of the action.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the date and year first above written and to be effective as
hereinabove provided.
"Company"
Nuvest, L.L.C.
By:
Title:
NSS Numanco, Inc.
By:
Title:
Numanco, L.L.C.
By:
Title:
"Departing Member"
MANAGER'S AGREEMENT
This Manager's Agreement is made effective the ____ day of _______,
1997, by and between Numanco, L.L.C., an Oklahoma limited liability company,
("Numanco") and Nuvest, L.L.C., an Oklahoma limited liability company ("Nuvest")
(collectively referred to as the "Numanco Companies"), and Richard H. Smith (the
"Manager").
In consideration of the mutual promises, covenants, and agreements
hereinafter set forth, the parties hereto agree as follows:
RECITALS.
As used herein, "Numanco Companies" means, collectively, NSS Numanco
Inc., a Pennsylvania corporation, Nuvest, and Numanco, and each direct or
indirect subsidiary of each such company; individually, each such entity shall
be referred to as a "Numanco Company."
The Numanco Companies are engaged in the temporary personnel business.
Manager has knowledge and experience which would be most beneficial to
the Numanco Companies' business.
The Numanco Companies and Manager are willing to enter into a
consulting relationship and management agreement on the terms and conditions
herein set forth.
Section 1. DESIGNATION AS MANAGER.
The Numanco Companies hereby designate the Manager as manager of the
Numanco Companies, and the Manager hereby agrees to serve as consultant and
manager of the Numanco Companies upon the terms and conditions, and for the
compensation hereinafter set forth.
Section 2. TERM.
Unless extended by mutual agreement of the parties, this Agreement
shall terminate on December 31, 1999. Manager promises to perform the duties of
Manager, as set forth in Section 3 hereof, until the end of such term.
Section 3. DUTIES AND RESPONSIBILITIES OF MANAGER.
Manager is engaged to advise and consult the Numanco Companies, and
shall be responsible for causing the following activities to be accomplished:
3.1 Intent. Manager shall carry out the duties and responsibilities as
defined in the Operating Agreements of the Numanco Companies, as may be amended
("Operating Agreements"), by and between the members of such companies. As use
herein, the term "Members" shall have the meaning ascribed to such term as set
forth in that certain Amended and Restated Member Agreement of even date
herewith, hereinafter the "Member Agreement"). Consistent with the standards
described in this Section 3.1, the Manager shall cause each Numanco Company to
comply with its covenants, representations, and warranties, as set forth in the
Member Agreement. Manager shall devote such time to Company and its business
affairs as shall be reasonably required for its welfare and success. However,
nothing herein contained shall be construed to require the Manager to devote his
full time to the business of the Numanco Companies. Nothing herein contained
shall be construed to prohibit the Manager from engaging in other business
ventures exclusively for his own account so long as other business ventures are
dissimilar in nature to the business venture of this Company and he is
satisfactorily accomplishing his obligations as set forth herein.
3.2 Staffing; Consultants. Manager shall consult with the Numanco
Companies with regard to the hiring, engagement, and employment of its employees
and the augmentation staff of the Numanco Companies and other professional
consultants to be used by the Company from time to time.
3.3 Supervision of Customer Contracts. Manager shall coordinate and
oversee the performance of the staff augmentation contracts with the Numanco
Companies' customers. In this regard, the Manager shall report on the status of
these contracts regularly and the quality of the services being rendered by the
Numanco Companies.
3.4 Records; Reports. Manager shall cause the Numanco Companies to make
and keep books, records, and accounts, which, in reasonable detail, accurately
and fairly reflect the transactions and operations, and devise and maintain a
system of internal accounting control sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with the Numanco
Companies general or specific authorization; and (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles or any other criteria applicable to
such statements, and to maintain accountability for assets.
3.5 Financial Information. The Manager shall cause the following
reports to be made available to the Numanco Companies' Members:
A. As soon as practicable after the end of each fiscal year,
and in any event within 120 days thereafter, a balance sheet for each of the
Numanco Companies as of the end of such fiscal year, and a statement of income
and a statement of changes in financial position of the company for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures of the previous fiscal year,
all in reasonable detail including all supporting schedules and comments.
B. As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year for each of the
Numanco Companies, and in any event within 45 days thereafter, a balance sheet
for each company as of the end of each such quarterly period, and a statement of
income and a statement of changes and financial condition of each company and
its subsidiaries (if any) for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles,
setting forth in each case comparisons to the Business Plan (as hereinafter
defined) and the corresponding period to the previous fiscal year, all in
reasonable detail and signed, subject to changes resulting from year-end audit
adjustments, by the principal financial officer of each company.
C. As soon as available after the end of each month, and
in any event within thirty (30) days thereafter:
(1) a balance sheet for each of the Numanco Companies
as of the end of such month, and a statement of income and changes in financial
position for the month and for the current fiscal year to date, both prepared in
accordance with generally accepted accounting principles setting forth in each
case comparisons to the Business Plan and the corresponding periods of the
previous fiscal year;
(2) a pro forma cash flow statement of anticipated
cash flow for the next succeeding 90 day period for each of the Numanco
Companies prepared on a consolidated basis setting forth, in each case,
comparisons to the Business Plan, as herein defined, and the corresponding
periods of the previous fiscal year, all in reasonable detail and signed,
subject to changes resulting from year-end audit adjustments, by Manager and
accompanied by a statement explaining any material differences between budgeted
and actual results;
(3) a report on each of the Numanco Companies'
operations, describing significant events or circumstances affecting operations
and containing such other matters as are requested by the Members or the lenders
of any Numanco Company;
D. Upon request by a Member, a certificate executed by the
Manager stating that none of the Numanco Companies, is in default under its
Articles of Organization or Operating Agreement, this Agreement, any promissory
note, the Member Agreement, or any other material agreement to which it is a
party or to which it or any of its properties is subject.
E. Promptly following receipt thereof, any letters furnished
to any one of the Numanco Companies by its independent public accountants which
comment on the accounting practices of the company.
F. Promptly (but in any event within five days) after the
discovery of any material adverse event or circumstance affecting any one of the
Numanco Companies including, but not limited to, the filing of any material
litigation against a Numanco Company and the discovery that such company is not,
or with the passage of time will not be, in compliance with any provision of
this Agreement, any promissory note, the Member Agreement, or any other material
agreement of the company, a notice specifying the nature and period of existence
thereof, and the actions the company has taken and/or proposes to take with
respect thereto. The Manager shall cause to be furnished to the Members with
monthly reports updating and describing any developments relating to matters
described under this subparagraph and will promptly notify its Members of any
material developments or changes relating thereto.
G. Promptly following the preparation thereof, copies of the
minutes of proceedings (or consents) of the Manager and Members, together with
all written materials given to the Manager.
H. With reasonable promptness, such other information and data
with respect to each of the Numanco Companies as any Member may from time to
time reasonably request.
3.6 Business Plan. As used herein, the term "Business Plan" shall mean
the operating plan of the Numanco Companies, which shall include a description
of lines of business, targeted gross margins, targeted fixed operating costs,
and a pro forma cash flow budget, profit and loss statement, and balance sheet,
as same may be amended from time to time pursuant to this Section 3.6. The
Business Plan may be revised from time to time in accordance with the following:
A. At least annually, or more often as the Manager or any
Member may request, the Manager or Member shall furnish a copy of any proposed
revisions to the Manager and the Members at least 30 days prior to the beginning
of its proposed implementation. The proposed amendment to the Business Plan
shall become effective if approved by all the Members and the Manager.
B. For all purposes of this Agreement, the term "Business
Plan" shall mean the Business Plan most recently amended pursuant to Section
3.6A until further amended.
3.7 Financial Reports For Affiliates. In addition to the above, as soon
as available at the end of each month, Manager shall cause to be provided to the
Members and lenders of each of the Numanco Companies, financial statements of
all affiliates, corporations, venturers, partnerships, limited liability
companies, or other enterprises in which such Numanco Company may have an
interest.
3.8 Property and Liability Insurance. The Manager shall cause each of
the Numanco Companies to insure all of its assets. The Numanco Companies will
cause to be kept insured all of the their assets which are of insurable
character, and which are customarily insured by companies engaged in the same or
similar businesses by financially sound and reputable insurers against loss or
damage by fire, explosion or other hazards customarily insured against by such
comparable companies with extended coverage in amounts sufficient to prevent the
Numanco Companies from becoming a co-insurer, except for normal deductibles, but
not, in any event, less than eighty percent (80) of the insurable value of the
property. The Numanco Companies will maintain, with financially sound and
reputable insurers, such insurance against hazards and risks and liabilities to
persons and property as are customarily insured against by companies engaged in
the same or similar businesses. The amount of liability insurance shall be at
least $1,000,000 for property damage and $1,000,000 for personal injury
regardless of the number of persons injured. The Numanco Companies will promptly
notify its lenders of any change in insurance coverage. The Numanco Companies
shall promptly cause all policies of insurance obtained by it in accordance with
its obligations hereunder to provide that they may not be cancelled unless the
insurance carrier gives the lenders (or, if the insurer requires, a designated
representative of lenders) at least thirty (30) days prior written notice
thereof.
3.9 Use of Proceeds. The Manager shall determine that all proceeds
loaned to the Numanco Companies shall be used in accordance with the Business
Plan.
3.10 Preservation of company Existence and Business. The Manager shall
cause the Numanco Companies to preserve intact the present business
organization, rights and privileges and present goodwill and, to the best of its
ability, relationships existing with other parties and will at all times cause
to be done all things necessary to maintain, preserve, and renew its existence
and will observe and conform with all valid requirements of all governmental
authorities relating to the conduct of the business of the Numanco Companies,
the failure of which would have a material adverse effect on the Numanco
Companies. Each of the Numanco Companies will maintain and keep in force all
material licenses, permits and agreements necessary to the conduct of its
businesses.
3.11 Maintenance of Properties. The Numanco Companies will maintain and
keep their properties, real and personal, in good repair, working order, and
condition, and from time to time make all necessary or desirable repairs,
renewals, and replacements, so that its business may be properly and
advantageously conducted at all times.
3.12 Taxes and Other Obligations. The Manager shall cause the Numanco
Companies to pay and discharge all taxes, assessments, interest and installments
on debts and governmental charges against it or against any of its properties,
upon the respective dates when due, except to the extent that (i) such taxes,
assessments, interest, installments, and governmental charges are contested in
good faith and by appropriate proceedings in such manner as not to cause any
materially adverse effect on its financial condition or loss of any right of
redemption from any sale, and (ii) the Company shall have set aside on its books
reserves (segregated to the extent required by generally accepted accounting
principles) adequate with respect to such liabilities.
3.13 Monitor Business Plan. The Manager shall monitor the condition of
the Company and provide prompt notice to the Members of any materially and
adverse deviation from the Business Plan.
3.14 Manager's Powers. Unless otherwise limited by the Articles of
Organization of the Company or Section 3.15 hereof, the Manager shall have the
power and authority in connection with the operation of the business of this
Company to do the following:
A. To sell, exchange, trade, transfer or otherwise dispose of
any or all of the Company's assets;
B. To lease office space, equipment and other property; and to
negotiate a renewal or extended terms in such leases that may extend the
termination date thereof beyond the date of termination of Company;
C. To hire, employ, retain or otherwise secure employees,
temporary personnel, accountants, attorneys and other independent contractors or
personnel necessary to carry out the purposes of this Company upon such terms as
the Manager may determine; to charge the compensation of such employees,
temporary personnel, accountants, attorneys, and other agents and any other
expenses against the assets or income of the Company;
D. To enter into a contract or contracts for the furtherance
of the Company's business upon such terms and conditions as may be determined
by the Manager;
E. To borrow money for Company's purposes from such lenders
and upon such terms as the Manager may determine and to pledge, mortgage, grant
security interests or otherwise encumber all or any part of the properties of
this Company as security for any such loans;
F. To obtain replacements of any loans with or without liens
and/or security interests on the properties of this Company and to prepay in
whole or in part, refinance, recast, increase, modify, consolidate, or extend
any mortgages or security documents affecting the Company's assets, or any
portion thereof; and
G. To open bank accounts for the Company and to designate,
from time to time, signatories authorized to draw funds on such accounts.
H. To designate, appoint, replace, and/or terminate, from time
to time, officers of the Company, and to define the authority and duties for
each such postion.
3.15 Restrictions on Authority of Manager. Without the written consent
of all of the Members, the Manager shall not have the authority to: (a) borrow
money in excess of amounts set forth in the Business Plan; (b) sell any asset of
the Company (or assets, in related transactions) having a fair market value in
excess of Five Hundred Thousand Dollars ($500,000.00); (c) enter into any
contract involving an anticipated total commitment or expenditure of over One
Hundred Thousand Dollars ($100,000.00); (d) do any act which would make it
impossible to carry on the ordinary business of the Company; (e) compromise any
claim against the Company over Fifty Thousand Dollars ($50,000.00); (f) admit a
person as a Member; (g) knowingly perform any act that would subject a Member to
personal liability; (h) amend the Articles of Organization; (i) approve any
Business Plan for the Company; (j) increase the compensation of Monika (as
defined in the Member Agreement) or any other officer above the level set forth
in the Business Plan; or (k) enter the Company into new business ventures,
alliances or teaming agreements.
3.16 Other Duties. Manager shall perform such other duties and
activities as the Members and Manager may agree in the future.
Section 4. MANAGER'S FEES; REIMBURSEMENT OF EXPENSES.
4.1 Fees and Compensation. Company agrees to pay to the Manager an
hourly fee of $300.00, such fee to be paid within ten (10) days of the
submission of Manager's statement. Such fee, when combined with the fees of the
Manager from all Numanco affiliates, shall not exceed $20,833.00 per month.
4.2 Reimbursement of Expenses. Company agrees to reimburse the ordinary
and necessary expenses incurred by Manager in the performance of Managers'
duties and responsibilities hereunder. An itemization of such reimbursed
expenses shall be provided to each of the Members, along with the other monthly
financial reports as prepared by the Manager.
4.3 Indemnification.
A. To the maximum extent permitted by law, the Numanco
Companies shall indemnify and hold harmless the Manager and his affiliates
(each, an "Indemnitee") from and against any and all losses, claims, demands,
costs, damages, liabilities, joint and several, expenses of any nature
(including attorneys' fees and disbursements), judgments, fines, settlements,
penalties and other expenses actually and reasonably incurred by the Indemnitee
in connection with any and all claims, demands, actions, suits, or proceedings,
civil, criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, by reason of
the fact that the Indemnitee is or was a Manager of the Numanco Companies or is
or was an agent of the Numanco Companies, including affiliates of the foregoing,
arising out of or incidental to the business of the Numanco Companies, provided,
(i) the Indemnitee's conduct did not constitute willful misconduct or
recklessness, (ii) the action is not based on breach of this Agreement, (iii)
the Indemnitee acted in good faith and in a manner he or it reasonably believed
to be in, or not opposed to, the best interests of the Numanco Companies and
within the scope of such Indemnitee's authority and (iv) with respect to a
criminal action or proceeding, the Indemnitee had no reasonable cause to believe
its conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere, or
its equivalent, shall not, in and of itself, create a presumption or otherwise
constitute evidence that the Indemnitee acted in a manner contrary to that
specified above.
B. Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 4.3 may, from time to
time, be advanced by the Numanco Companies prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Numanco
Companies of an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified as authorized in this Section 4.3.
C. Indemnification provided by this Section 4.3 shall be in
addition to any other rights to which the Indemnitee may be entitled under any
agreement, vote of the Members, as a matter of law or equity, or otherwise, and
shall inure to the benefit of the successors, assignees, heirs, personal
representatives and administrators of the Indemnitee.
Section 5. EVENTS OF TERMINATION; REMEDIES.
5.1 Events of Termination. Each of the following events shall be an
"Event of Termination":
A. Death or disability of Manager. For the purposes
of this Agreement, "disability" shall mean any physical or mental condition
which would keep Richard H. Smith from performing his duties as Manager for a
continuous period of six months.
B. If this Agreement is extended beyond 12/31/99, the
voluntary resignation of Manager upon six (6) months' prior written notice.
C. If any one of the following events shall occur:
(1) PSO shall fail to agree to guarantee the
lines of credit necessary to supply the sources of funds budgeted in the most
recently approved Business Plan (to the extent the same cannot be supplied out
of current operations); or
(2) PSO shall fail to approve a proposed
amendment to the most recently approved Business Plan, if such proposed
amendment would require PSO to guarantee a line of credit necessary to supply
the sources of funds budgeted in such proposed amendment (to the extent the same
cannot be supplied out of current operations), so long as (i) such proposed
amendment is consistent with the lines of business described in the most
recently approved Business Plan, and (ii) there has not been a material adverse
change in any such lines of business or in any of the other assumptions
underlying such Business Plan; or
(3) All of the following shall occur:
(i) both of the current
representatives of PSO (or the representatives of any affiliate of PSO) who are
assigned the primary responsibility for monitoring PSO's investment in the
Numanco Companies and are serving as the principal contact between PSO and the
Manager cease, for any reason, to serve in such capacity;
(ii) the person or persons appointed
by PSO to replace such representatives, after serving in such capacity for a
period of at least 90 days, are, despite the good faith efforts of such
replacements and the Manager, unsatisfactory to the Manager; and
(iii) the person or persons
appointed by PSO, at the request of the Manager, to replace the persons
described in (ii), after serving in such capacity for a period of at least 90
days, are, despite the good faith efforts of such replacements and the Manager,
unsatisfactory to the Manager; provided, this Section 5.1C(3) shall not apply if
the person or persons appointed by PSO to replace the persons described in (ii)
is one or both of the current representatives of PSO (or its affiliate)
described in (i).
D. The Numanco Companies may elect to terminate this
Agreement upon the following conditions:
(1) Any Numanco Company shall default in the
payment when due of any principal or interest on any Indebtedness, as defined in
the Member Agreement between the Members, or shall default under or fail to
perform or observe any material term, covenant or agreement contained in any
material agreement, document or instrument to which it is a party or to which it
or its assets is bound, including any obligation for borrowed money or for the
purchase price of property, and such default or failure to perform shall
continue and remain unwaived by the obligee for more than 15 days or any
applicable period of grace therein specified, whichever is longer, except where
the Company is in good faith and through appropriate proceedings contesting such
default or failure to perform.
(2) Any covenant, representation or warranty
made herein or in connection with the transactions contemplated in this
Agreement or in the Member Agreement shall be breached or shall prove to have
been false or incorrect on the date as of which made resulting in a material
adverse effect on the Company and such false or incorrect representation or
warranty shall not have been remedied within fifteen (15) days after written
notice thereof shall have been given to the Company.
(3) Any Numanco Company shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts as they become due, or an order for relief is entered against
the Company under any bankruptcy laws or the Company shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, dissolution or similar relief under any present or future statute,
law or regulation, or shall file an answer admitting the material allegations of
a petition filed against the Company in any such proceeding, or shall seek or
consent to the acquiesce in the appointment of any trustee, receiver or
liquidator of the Company of all or any substantial part of the properties of
the Company.
(4) Manager shall, subject to the right to
cure set forth in Section 5.2 hereof:
(i) make an assignment for the
benefit of his creditors or file for the protection under the bankruptcy laws or
become the subject of an involuntary petition under such laws;
(ii) breach his duty of loyalty to
the Company or any obligation under this Agreement; or
(iii) enter into any transaction
from which Manager derived an improper personal benefit to the detriment of a
Numanco Company.
E. The Members unanimously elect to sell the Numanco
Companies (including a sale of substantially all of the assets of such
companies) to a third party.
F. PSO, in its capacity as a Member, fails to renew
and extend this Management Agreement with Richard H. Smith, or any extension
thereof.
G. If (a) the FMV Net Worth (as defined in the Member
Agreement) falls to zero or below, (b) the Members and the Manager fail to reach
agreement on a new or revised Business Plan within thirty (30) days after PSO
has made a request for same, (c) PSO provides notice to Monika that it desires
to invoke the provisions of Section 7.1 of the Member Agreement, (d) Monika
declines to purchase PSO's Interest pursuant to Section 8.4(a) of the Member
Agreement, and (e) PSO provides notice to Monika that it intends to purchase
Monika's Interest pursuant to Section 8.4(a) of the Member Agreement.
H. If Monika dies, becomes disabled (such that she
cannot perform her duties as a Member for a period of six continuous months), or
files for protection under the bankruptcy laws, or with respect to any Numanco
Company, there occurs any other event that, under the laws of the State of
Oklahoma, would result in the dissolution of the Numanco Company (other than the
event described in Section 7.10 of the Member Agreement); provided, none of the
foregoing events described in this Section 5.1H relating to Monika shall result
in a termination of this Agreement as long as Richard Smith acquires or succeeds
to all of Monika's interest in Nuvest and Smith either (i) acquires or succeeds
to all of Monika's interest in Nuvest and becomes a Substitute Member of Nuvest
in accordance with the Nuvest Operating Agreement, or (ii) becomes trustee of a
trust that acquires or succeeds to all of Monika's interest in Nuvest and, in
his capacity as such trustee, becomes a Substitute Member of Nuvest (provided,
it is agreed that if for any reason Smith ceases to serve as the trustee of such
trust, the interest in Nuvest held by the trust shall automatically covert to an
economic interest having no voting rights), or (iii) acquires or succeeds to all
of Monika's interest in Nuvest through any combination of (i) or (ii).
I. If PSO involuntarily withdraws from Nuvest as a
result of requirements imposed by regulatory authorities having jurisdiction
over PSO.
5.2 Curative Action. Upon written notice from a Numanco Company or a
Member alleging that an event described in Section 5.1 D.4 has occurred which
may lead to an Event of Termination, Manager shall have 30 days from the receipt
thereof to cure such event or otherwise take such action as may be necessary to
correct such action. If the Manager successfully cures or corrects such event,
then there shall be no Event of Termination.
5.3 Remedies. In the event there is an Event of Termination (which is
not cured or rectified pursuant to Section 5.2 above), then this Agreement shall
be terminated upon the occurrence of such event or at the end of the curative
period, if any, relating to such event. Provided, however, if the Event of
Termination also constitutes a Buy-Sell Event as set forth in the Members'
Agreement, and pursuant to the rights set forth therein Monika (as defined in
the Member Agreement) elects to buy all of the Member's Interest (as defined in
the Member Agreement) of PSO or its successor, then this Management Agreement
shall continue as though no Event of Termination has occurred until such time as
Monika's right to purchase PSO's Interest lapses because of Monika's failure,
for whatever reason (as long as the reason is not due to any breach of duty by
PSO), to purchase PSO's Interest on the closing date described in Section 8.5(b)
of the Member Agreement and in accordance with the other terms described in
Sections 8.5 and 8.6 of the Member Agreement.
5.4 Limitation of Manager's Liability. Although Manager has the duty
and authority "to cause" various activities to occur during his consulting with
the Numanco Companies, the parties agree that Manager shall use reasonable
efforts to accomplish these tasks and his various duties, but he is not
guaranteeing any activity or the performance of the Numanco Companies. The
Manager shall not be liable to the Numanco Companies for monetary damages for
breach of fiduciary duty as a Manager; provided, however, that nothing contained
herein shall eliminate or limit the liability of the Manager (i) for any breach
of the Manager's duty of loyalty to the Numanco Companies, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law and, (iii) for any transaction from which the Manager
derived an improper personal benefit.
5.5 Payment of Deferred Fee. The parties acknowledge and agree that
Manager has heretofore performed services for the benefit of the Numanco
Companies and their affiliates which entitle the Manager to a fee of $250,000
(in addition to the fees provided for in Section 4.1). However, the parties
agree that the Numanco Companies may use their financial resources as working
capital for the growth of the Numanco Companies and defer the payment of the
$250,000 payable to the Manager under this Section 5.5 until such time as there
shall have occurred a Buy-Sell Event that results in (i) the sale by Monika
Smith of her Interest (as defined in the Member Agreement) to PSO, or (ii) the
sale of any one of the Numanco Companies to any Person (as defined in the Member
Agreement), in which event the Numanco Companies shall pay the $250,000 to
Richard H. Smith, his heirs, successors or assigns, on the date of the closing
of the sale described in (i) or (ii) above; provided, the Manager agrees that
the Numanco Companies' obligation to pay the $250,000 under this Section 5.5
shall be subordinated to all indebtedness owed by the Numanco Companies to any
Person; and provided further, if the proceeds received by Monika Smith pursuant
to a sale described in (i) is less than the aggregate balance of the capital
account (including undistributed earnings) in the Numanco Companies as of the
date of the closing of the sale (the "Capital Account Balance") of Monika Smith,
or, in the case of a sale pursuant to (ii), if the sale proceeds are less than
the aggregate of the Capital Account Balances of the Members, the $250,000
payment to Manager under this Section 5.5 shall be reduced pari passu. By way of
illustration, if the Members' proceeds from a sale pursuant to (ii) equal only
60% of the aggregate of their Capital Account Balances, the Manager shall
receive only 60% of the $250,000 payment. In addition to any right of set off
the Numanco Companies may have by law, in the event the sale under (i) or (ii)
above results from one of the Buy-Sell Events described in Section 7.7 of the
Member Agreement, the Company, in making the payment to the Manager under this
Section 5.5, shall have the right to deduct the actual compensatory damages, if
any, the Company may have incurred as a result of any breach by the Manager of
any of his obligations described in Section 5.4 of this Agreement.
5.6 Sale; Balance of Manager's Fees. If this Agreement should be
terminated pursant to Section 5.lI hereof, and Monika Smith's share of the net
proceeds from any sale of the Numanco Companies that occurs pursuant to Section
8.4(f) of the Member Agreement is less than the compensation that would have
been payable to the Manager under this Agreement for the remainder of the term,
then the Manager shall be paid at the closing of the sale, $20,833/month for
every month from the date of termination of this Agreement through and inclusive
of the month of December, 1999.
Section 6. MISCELLANEOUS.
6.1 Governing Law. The validity, construction and enforcement of, and
the remedies under this Agreement, shall be governed in accordance with the laws
of Oklahoma, except any choice of law provision of Oklahoma law shall not apply
if the law of a state or jurisdiction other than Oklahoma would apply thereby.
6.2 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives,
successors and permitted assigns. No party may assign its, his or her
obligations hereunder without the prior written consent of all other parties.
6.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
6.4 Attorney's Fees. If any action is brought to enforce, or to
construe or determine the validity of, any term or provision of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees and costs
of the action.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"NUMANCO"
NUMANCO, L.L.C.,
An Oklahoma limited liability company
BY: NSS NUMANCO, INC.,
A Pennsylvania corporation, Member
By:
Monika Smith, Vice President
BY: NUVEST, L.L.C.,
An Oklahoma limited liability company, Member
"NUVEST"
NUVEST, L.L.C.,
An Oklahoma limited liability company
By: PUBLIC SERVICE COMPANY OF
OKLAHOMA, Member
By:
Title:
By:
Monika Smith, Member
"MANAGER"
Richard H. Smith
