Exhibit 10.3

 

S&W DRAFT
March 18, 2015

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT OF

 

RHODE ISLAND ENERGY PARTNERS, LLC

 

(A DELAWARE LIMITED LIABILITY COMPANY)

 

Dated as of April 8, 2015

 

 

 

 

Table of Contents

 

      Page         ARTICLE I DEFINITIONS 2         SECTION 1.01. Definitions 2  
    SECTION 1.02. Interpretation 11         ARTICLE II INTRODUCTORY PROVISIONS
11         SECTION 2.01. Name; Formation; Continuation; Filings 11       SECTION
2.02. Offices; Registered Office and Agent. 11       SECTION 2.03. Duration 11  
    SECTION 2.04. Limited Purpose and Authority. 12       SECTION 2.05. No State
Law Partnership; No Concerted Action. 12       SECTION 2.06. Lack of Authority
of Members 12       SECTION 2.07. No Personal Liability of Members 12        
ARTICLE III MEMBERSHIP UNITS; ADDITIONAL MEMBERS 12         SECTION 3.01.
Membership Units. 12       SECTION 3.02. Additional Members 13       ARTICLE IV
CAPITAL CONTRIBUTIONS 13       SECTION 4.01. Capital Contributions 13      
SECTION 4.02. Additional Capital Contributions. 14       SECTION 4.03.
Maintenance of Capital Accounts; No Right of Withdrawal; No Interest. 14      
SECTION 4.04. Advances and Loans. 15         ARTICLE V BOOKS AND RECORDS 15    
    SECTION 5.01. Books and Records 15       SECTION 5.02. Fiscal Year;
Accounting Method 15       SECTION 5.03. Bank Accounts 16       SECTION 5.04.
Company Information. 16         ARTICLE VI FEES; DISTRIBUTIONS 17        
SECTION 6.01. Fees Payable to Development 17       SECTION 6.02. Distributions
Generally 17       SECTION 6.03. Priority of Distributions Other than from
Proceeds of a Liquidation Event. 17       SECTION 6.04. Priority of
Distributions upon a Liquidation Event 17

 

i

 

 

SECTION 6.05. Tax Distributions 18       SECTION 6.06. Limitation on
Distributions 19       SECTION 6.07. Withheld Taxes 19         ARTICLE VII
MANAGEMENT 19         SECTION 7.01. General. 19       SECTION 7.02. The Board of
Managers. 20       SECTION 7.03. Officers. 22       SECTION 7.04.
Indemnification of Managers and Officers. 23       SECTION 7.05. Matters
Requiring Approval of the Board of Managers 23       SECTION 7.06. Matters
Requiring the Approval of the Members 25       SECTION 7.07. Managers and
Officers Insurance 26       SECTION 7.08. Signing Authority. 26       SECTION
7.09. Project Budgets. 26         ARTICLE VIII TAX MATTERS 27         SECTION
8.01. Partnership for Tax Purposes 27       SECTION 8.02. Capital Accounts,
Allocations and Other Tax Accounting Matters. 27       SECTION 8.03. Tax Returns
and Information. 29       SECTION 8.04. Tax Matters Partner and Elections 29    
  SECTION 8.05. Consistent Tax Treatment 30         ARTICLE IX TRANSFER OF
MEMBERSHIP UNITS; WITHDRAWALS 30         SECTION 9.01. Restrictions Applicable
to All Transfers by the Members. 30       SECTION 9.02. Permitted Transfers. 32
      SECTION 9.03. Right of First Refusal. 33       SECTION 9.04. Tag-Along
Rights. 34       SECTION 9.05. Drag-Along Rights. 35       SECTION 9.06. Right
of First Refusal on Development Project Opportunities and Development Buy-Out
Right. 35         ARTICLE X CERTAIN OBLIGATIONS OF THE COMPANY AND THE MEMBERS
37         SECTION 10.01. Other Businesses; Liability and Duties. 37      
SECTION 10.02. Insurance 39       SECTION 10.03. Investor Company Employee 39

 

ii

 

 

ARTICLE XI DISSOLUTION AND LIQUIDATION 39         SECTION 11.01. Dissolution 39
      SECTION 11.02. Winding Up. 40         ARTICLE XII MISCELLANEOUS 41        
SECTION 12.01. Injunctive Relief 41       SECTION 12.02. Notices 41      
SECTION 12.03. Successors and Assigns 41       SECTION 12.04. Governing Law;
Arbitration. 41       SECTION 12.05. Set-Off 42       SECTION 12.06. Entire
Agreement; Amendment 43       SECTION 12.07. No Waiver 43       SECTION 12.08.
Confidentiality 43       SECTION 12.09. Counterparts 44       SECTION 12.10.
Headings 44       SECTION 12.11. Further Assurances 44       SECTION 12.12.
Survival of Obligations 44       SECTION 12.13. No Third Party Beneficiaries 44

 

SCHEDULES AND EXHIBITS

 

Exhibit A Membership Units and Percentage Interests Exhibit B Addresses for
Notices Exhibit C Initial Project Budget

 

iii

 

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT OF

 

RHODE ISLAND ENERGY PARTNERS, LLC

 

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”)
of Rhode Island Energy Partners, LLC, a limited liability company organized
under the laws of Delaware (the “Company”), dated as of April 8, 2015 (the
“Effective Date”), is entered into by and between York Renewable Energy Partners
LLC, a limited liability company organized under the laws of Delaware
(“Investor”), and Blue Sphere Corporation, a corporation organized under the
laws of Nevada (“Development”).

 

WITNESSETH:

 

WHEREAS, the Company was formed on March [●], 2015, under the Delaware Limited
Liability Company Act (as amended from time to time, the “Act”), and Investor
was the original member thereof pursuant to a limited liability company
agreement of the Company dated as of March [●], 2015 (the “Original LLC
Agreement”);

 

WHEREAS, Orbit Energy Rhode Island, LLC, a Rhode Island limited liability
company (“Project LLC”), holds certain development rights and other assets,
including without limitation, certain permits, technology rights and contractual
rights necessary for the construction and operation of a high solids anaerobic
digestion and energy generation facility for the production of biogas and
electricity in Johnston, Rhode Island (the “Project”);

 

WHEREAS, Project LLC was organized by Orbit Energy, Inc., a North Carolina
corporation (“Seller”), and, pursuant to a certain Amended and Restated Orbit
Energy Rhode Island, LLC Purchase Agreement (including Exhibit A thereto) made
and entered into by Seller and Development as of January 7, 2015 (the “Orbit
Purchase Agreement”), Development purchased 100% of the limited liability
company interests of Project LLC (the “Interests”) from Seller, and Development
became the sole member of Project LLC on January 7, 2015;

 

WHEREAS, Development, prior to and during the period in which it was the sole
member of Project LLC, on behalf of Project LLC, procured and coordinated
contractual and governmental and permitting rights necessary for the development
and construction of the Project;

 

WHEREAS, Development, Project LLC, the Company and Seller have executed a
certain Orbit Energy Rhode Island, LLC Membership Interest Purchase Agreement
dated as of March [●], 2015 (“Project LLC Purchase Agreement”) pursuant to which
(i) the Company shall purchase from Seller, the Interests for $386,432 and on
the terms and conditions described therein, and (ii) Seller shall release the
Company, the Investor and Project LLC and their respective assets, including the
Project, from any liability for any of the obligations of Development under the
Orbit Purchase Agreement, and shall grant to Project LLC a perpetual,
royalty-free, nonexclusive license to use certain technology in the Project;

 

1

 

 

WHEREAS, the parties acknowledge and agree that (i) any automatic reversion of
the Interests from Development to Seller prior to the date hereof has been
deemed not to have occurred, and did not occur, and has been deemed, and is,
null and void, (ii) immediately prior to the closing under the Project LLC
Purchase Agreement, the Interests reverted to Seller, and Seller became the sole
member of Project LLC, and the Company purchased the Interests from Seller in
reliance on the representations, warranties and covenants of Seller set forth in
the Project LLC Purchase Agreement and the representations and warranties
regarding Project LLC, its assets and liabilities and the Project and the
covenants of Development set forth the Development and Indemnification Agreement
among the Company, Investor and Development dated the date hereof (the
“Development and Indemnification Agreement”), and (iii) in consideration of the
representations and warranties regarding Project LLC, its assets and liabilities
and the Project and the covenants of Development set forth in the Development
and Indemnification Agreement, the Company shall (1) pay to Development a cash
payment, subject to a holdback, equal to $[1,125,000] (the “Closing Payment”),
which sum shall include the Closing Development Fee (as defined herein), and (2)
issue to Development 2,275 Series B units of the Company (“Series B Units”),
such that the Investor will be a member of the Company holding 7,725 Series A
units (“Series A Units”) representing 77.25% of the limited liability company
interests of the Company, and Development will be admitted as a member of the
Company holding 2,275 Series B Units representing 22.75% of the limited
liability company interests of the Company in accordance with the terms of this
Agreement;

 

WHEREAS, Investor as the sole member of the Company, desires to amend the
Original LLC Agreement to establish two new classes of limited liability company
interests represented by Series A Units and Series B Units and admit Development
as a Member of the Company; and

 

WHEREAS, Investor and Development desire to enter into this Agreement to set
forth their respective rights and obligations as Members of the Company and to
provide for the management and affairs of the Company and for the conduct of the
business of the Company.

 

NOW, THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

ARTICLE I
DEFINITIONS

 

SECTION 1.01.         Definitions. As used in this Agreement, the following
terms shall have the following meanings.

 

“AAA” has the meaning set forth in Section 12.04(b).

 

“Acceptance Period” has the meaning set forth in Section 4.02(a).

 

“Accounting Period” means each calendar year, with the exception of (i) the year
ending December 31, 2015, which shall commence on the date hereof, and (ii) the
year in which a Liquidation Event occurs, which shall end on the date of
dissolution of the Company.

 

“Act” has the meaning set forth in the recitals.

 

2

 

 

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly Controlled by, Controlling or under common Control with, such Person.

 

“Agreement” has the meaning set forth in the preamble.

 

“Annual Accounts” has the meaning set forth in Section 5.04(a)(ii)(B).

 

“Applicable Law” means, for any Person, any domestic or foreign law, rule or
regulation, or judgment, decree, order, permit, license, certificate of
authority, order or governmental approval, in each case, of or by any
Governmental Authority, to which the Person or any of its business is subject.

 

“Beneficial Ownership” means direct or indirect beneficial ownership as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended. The term
“Beneficially Owned” has a correlative meaning.

 

“Board of Managers” has the meaning set forth in Section 7.01(a).

 

“Budgeted Investment” means an amount equal to $[19,139,932], the aggregate
amount actually required for completion of the Project in accordance with the
initial Project Budget, which is attached hereto as Exhibit C, less the
aggregate amount of any debt financing obtained by the Company or its
Subsidiaries in connection with the Project from any unrelated third party or
from a Member, including Investor or an Affiliate of Investor.

 

“Business” means the business of investing in and developing the Project, either
directly or indirectly, including through Project LLC or one or more
Subsidiaries, Affiliates, joint ventures or other third party arrangements.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks located in New York, New York generally are authorized or required by law
or regulation to close.

 

“Buy-Out Offer Notice” has the meaning set forth in Section 9.06(e).

 

“Capital Account” has the meaning set forth in Section 8.02(a).

 

“Capital Contribution” means, with respect to any Member, the amount of money
and the initial gross asset value of any property (other than money) contributed
to the capital of the Company by such Member. For the avoidance of doubt, any
amounts actually paid by Investor pursuant to the Investor Guaranteed
Obligations shall be deemed to have been contributed by Investor to the Company
and immediately thereafter used by the Company to satisfy the Company’s
obligations with respect to which Investor paid such amounts.

 

“Capital Return Distributions” means, with respect to any Member holding Series
A Units as of any date, any distributions made to such Member pursuant to
Section 6.03(b) or Section 6.04(b).

 

3

 

 

“Claim” means any claim, demand, assessment, judgment, order, decree, action,
cause of action, litigation, suit, investigation or other Proceeding.

 

“Closing Development Fee” has the meaning set forth in the definition of
Development Fee below.

 

“Code” means the United States Internal Revenue Code of 1986, as amended from
time to time.

 

“Company” has the meaning set forth in the preamble.

 

“Company Management” has the meaning set forth in Section 7.03(a).

 

“Confidential Information” has the meaning set forth in Section 12.08.

 

“Contribution Date” means, with respect to any Capital Contributions made by any
Member, the date on which such Capital Contributions are made to the Company.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of an entity, whether
through the ownership of securities, by contract or otherwise. The terms
“Controlled” and “Controlling” have correlative meanings.

 

“Development” has the meaning set forth in the preamble.

 

“Development Appraiser” has the meaning set forth in Section 9.06(e).

 

“Development Entities” has the meaning set forth in Section 10.01(a).

 

“Development Fee” means a fee payable by the Company to Development in an
aggregate amount equal to $1,687,500. The Development Fee is payable in three
(3) equal installments of $562,500 each as follows: (i) the first installment of
$562,500 shall be included in Closing Payment and paid on the closing of the
Development and Indemnification Agreement (the “Closing Development Fee”); (ii)
the second installment of $562,500 shall be paid on the date of “Mechanical
Completion” (as defined in the EPC Agreement); and (iii) the third installment
of $562,500 shall be paid on the “Commercial Operation Date” (as defined in the
EPC Agreement). The parties hereto agree and acknowledge that the installments
of the Development Fee shall be treated as “guaranteed payments” within the
meaning of Section 707(c) of the Code.

 

“Development and Indemnification Agreement” has the meaning set forth in the
recitals.

 

“Development Project Opportunity” has the meaning set forth in Section 9.06(a).

 

“Drag-Along Buyer” has the meaning set forth in Section 9.05(a).

 

“Drag-Along Member” has the meaning set forth in Section 9.05(a).

 

“Drag-Along Notice” has the meaning set forth in Section 9.05(a).

 

4

 

 

“EBITDA” means, with respect to any period, including an Accounting Period, the
earnings before interest, taxes, depreciation and amortization, calculated in
accordance with the methodology used to calculate “EBITDA” in the Project
Budgets consistently applied, with reasonable adjustments, reasonably agreed to
by Investor and Development, for prudent, reasonable business decisions made in
the ordinary course of business.

 

“Effective Date” has the meaning set forth in the preamble.

 

“Entropy” means Entropy Investment Management LLC, a limited liability company
organized under the laws of Delaware.

 

“EPC Agreement” means the executed Agreement for the Design, Construction and
Delivery of a Biogas Plant between Auspark LLC and Project LLC, dated _______,
as amended through the date hereof, with respect to the Project.

 

“Equity Contribution Election” has the meaning set forth in Section 4.04(a).

 

“Excess Thermal Energy Profits” means, with respect to any period of
calculation, an amount equal to the excess of Company revenues from the sale of
Excess Thermal Energy during such period over Company expenses allocable to the
production of such Excess Thermal Energy (as determined in good faith by the
Board of Managers). For purposes of this definition, “Excess Thermal Energy”
means waste heat energy generated by the Project that is not used in the
operation of the Project (which operation includes the warming of anaerobic
digester tanks) and which would otherwise be wasted.

 

“Fair Market Value” means, with respect to any Membership Units, a good faith
determination by the Board of Managers through a reasonable application of a
reasonable valuation method of the enterprise value of the Company as a going
concern (taking into account net worth, prospects, market conditions, comparable
public and private companies and comparable transactions). If any Member(s)
object(s) promptly in writing to such determination of the enterprise value of
the Company by the Board of Managers, such determination of fair market value
will be made by an investment bank (or other valuation expert) of national
standing appointed by the Company with the consent of the objecting Member(s)
(such consent not to be unreasonably withheld or delayed) by applying the
principles set forth herein, whose determination will be binding on the parties
and whose fees will be paid as follows: (i) split equally between the applicable
Member(s) and the Company if the expert’s determination of Fair Market Value is
equal to or between 90% and 110% of the Board of Managers’ determination of Fair
Market Value; (ii) entirely by such Member(s) if the expert’s determination of
Fair Market Value is lower than 90% of the Board of Managers’ determination of
Fair Market Value; or (iii) entirely by the Company if the expert’s
determination of Fair Market Value is greater than 110% of the Board of
Managers’ determination of Fair Market Value). Such determination shall be
conclusive and binding on all Persons. Any dispute with respect to the
appointment of such investment bank or other valuation expert will be determined
in accordance with Section 12.04.

 

“Family” of an individual includes: (i) the individual; (ii) the individual’s
spouse; (iii) any other natural Person who is part of such individual’s
immediate family; and (iv) any other natural Person who resides with such
individual.

 

5

 

 

“Feedstock Tipping Fee Excess Profits” means, with respect to any period of
calculation, an amount equal to the feedstock tipping fees received by the
Company during such period in excess of $25 per ton.

 

“Fully Exercising Member” has the meaning set forth in Section 4.02(a).

 

“Fiscal Year” means the fiscal year period ending December 31 of each year.

 

“GAAP” means generally accepted accounting principles in the United States, as
consistently applied through the relevant period.

 

“Governance Rights Successor” has the meaning set forth in Section 7.02(c).

 

“Governmental Authority” means any domestic or foreign governmental or
regulatory authority, agency, court, commission or other governmental or
regulatory entity (including any self-regulatory organization).

 

“Ground Lease” means that certain Amended and Restated Lease Agreement, dated as
of March __, 2015, by and between Shelby Realty, Inc., a Rhode Island
corporation, and [Orbit Energy Rhode Island LLC], a Rhode Island limited
liability company, as amended from time to time.

 

“Holder Notice” has the meaning set forth in Section 9.04(a).

 

“Indemnitee” has the meaning set forth in Section 7.04(a).

 

“Investor” has the meaning set forth in the preamble.

 

“Investor Alternate” has the meaning set forth in the Section 7.02(b).

 

“Investor Appraiser” has the meaning set forth in the Section 9.06(e).

 

“Investor Arranged Debt Financing” has the meaning set forth in Section 4.04(a).

 

“Investor Buy-Out” has the meaning set forth in the Section 9.06(d).

 

“Investor Entities” has the meaning set forth in Section 10.01(a).

 

“Investor Guaranteed Obligations” means the sum of (i) that portion of the
Investor Arranged Debt Financing, if any, that is guaranteed by Investor or any
of its Affiliates and (ii) the amount of Annual Base Rent (as defined in the
Ground Lease) that is guaranteed by Investor or any of its Affiliates pursuant
to that certain Guaranty of Lease entered into in connection with the Ground
Lease (in each case to the extent to which, and for the periods during which,
such guaranty obligations remain outstanding).

 

“Investor Guaranteed Obligations Return” means a rate of return equal to nine
percent (9%) per annum, compounded annually, with respect to the Investor
Guaranteed Obligations outstanding from time to time during the relevant
calculation period.

 

6

 

 

“Investor Managers” has the meaning set forth in Section 7.02(a)

 

“IRS” means the United States Internal Revenue Service.

 

“IRS Notice” has the meaning set forth in Section 8.02(g).

 

“LIBOR” means the rate per annum for dollar deposits for the three-month
interest period which appears on the Telerate Page 3750 (or such other successor
place) at approximately 11:00 a.m., London time, on the day that is two (2)
Business Days prior to the first day of such interest period.

 

“Liquidation Event” means any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.

 

“Management Accounting Policies” means the accounting policies and procedures
utilized by management in preparing the management reports referred to in
Section 5.04(a)(iii) and the Annual Accounts, applied on a consistent basis,
including for periods prior to the Effective Date.

 

“Manager” means any person hereafter elected to act and serving as a member of
the Board of Managers as provided in this Agreement but does not include any
person who has ceased to be a member of the Board of Managers.

 

“Members” means Development and Investor, and all other Persons who may be
admitted from time to time as a member of the Company pursuant to this
Agreement.

 

“Members’ Estimated Tax Liability” has the meaning set forth in Section 6.05.

 

“Membership Units” means, collectively, the Series A Units and Series B Units.

 

“New Units” has the meaning set forth in Section 4.02(a).

 

“Net Available Cash” shall mean, at any time, all cash of the Company less the
sum of amounts reserved for the Project Budget (as amended, modified and
supplemented and as approved in accordance with Section 7.08), or, as reasonably
determined by the Board of Managers after consultation with Company Management,
for payment of expenses, liabilities and obligations (whether fixed or
contingent) and for establishment of appropriate reserves for expenses,
liabilities and obligations that are reasonably likely to arise.

 

“Offered Interests” has the meaning set forth in Section 9.03(a).

 

“Offer Notice” has the meaning set forth in Section 9.03(a).

 

“Offer Period” has the meaning set forth in Section 9.03(b).

 

“Offeree” has the meaning set forth in Section 9.03(a).

 

“Offeror” has the meaning set forth in Section 9.03(a).

 

7

 

 

“Officers” has the meaning set forth in Section 7.03(b).

 

“Orbit Purchase Agreement” has the meaning set forth in the recitals.

 

“Original LLC Agreement” has the meaning set forth in the recitals.

 

“Other Officers” has the meaning set forth in Section 7.03(b).

 

“Ownership Threshold” has the meaning set forth in Section 7.02(a).

 

“Percentage Interest” means the percentage interest shown for each Member in
Exhibit A.

 

“Permitted Transfer” has the meaning set forth in Section 9.01(a).

 

“Permitted Transferee” means, with respect to a Member, one or more of its
Affiliates (or any of their respective members, stockholders, managers, officers
or directors); provided, however, that, in each case, no Person shall be a
Permitted Transferee (i) if the Transfer to such Person is made with the intent
that the Transferee will make a subsequent Transfer or that the transferor will
subsequently Transfer interests in such Transferee in order to avoid the
Transfer restrictions that would otherwise be applicable and (ii) unless such
Person agrees in writing with the Company at the time of such Transfer to
Transfer back to a Permitted Transferee the transferred Membership Units if such
Person ceases to be a Permitted Transferee.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership or other entity.

 

“Preemptive Rights Offer Notice” has the meaning set forth in Section 4.02(a).

 

“Proceeding” means any claim, counterclaim or other Claim at law or in equity or
by or before any Governmental Authority or other agency.

 

“Project” means the development, construction and operation of a high solids
anaerobic digestion and energy generation facility for the production of biogas
and electricity in Johnston, Rhode Island.

 

“Project Budget” has the meaning set forth in Section 7.08(a).

 

“Project LLC” has the meaning set forth in the recitals.

 

“Project LLC Purchase Agreement” has the meaning set forth in the recitals.

 

“Project Opportunity Offer Notice” has the meaning set forth in Section 9.06(a).

 

“Project Opportunity Offer Period” has the meaning set forth in Section 9.06(b).

 

“Project Opportunity Right of First Refusal” has the meaning set forth in
Section 9.06(a).

 

8

 

 

“Pro Rata Amount” means the product of (i) the total number of Membership Units
held by a Member exercising its tag-along rights under Section 9.04 and (ii) (A)
the number of Membership Units to be Transferred by Investor, divided by (B) the
total number of Membership Units held by Investor immediately prior to the
proposed Transfer.

 

“Related Party” means (i) with respect to a Person that is a natural person, (a)
each other member of such natural person’s Family; (b) any Person that is
directly or indirectly Controlled by any one or more members of such natural
person’s Family; (c) any Person in which such natural person or members of such
natural person’s Family hold (individually or in the aggregate) a Material
Interest (as defined below); and (d) any Person with respect to which one or
more members of such natural person’s Family serves as a director, manager,
officer, shareholder, partner, member, executor or trustee (or in a similar
capacity); and (ii) with respect to a Person other than a natural person, (a)
any Affiliate of a Person that serves as a director, officer, partner, executor
or trustee of such specified Person; (b) any Person that serves as a director,
manager, officer, shareholder, partner, member, executor or trustee of such
specified Person (or in a similar capacity); (c) any Person for which such
specified Person serves as a general partner, manager or trustee (or in a
similar capacity) or (d) any Person in whom such specified Person has a Material
Interest. For purposes of this definition, “Material Interest” means direct or
indirect beneficial ownership of voting securities or other voting interests
representing at least five percent (5%) of the outstanding voting power of a
Person or equity securities or other equity interests representing at least five
percent (5%) of the outstanding equity securities or equity interests in a
Person.

 

“Reply Notice” has the meaning set forth in Section 9.03(b).

 

“Reply Period” has the meaning set forth in Section 9.06(b).

 

“Return Percentage” means, for any Member holding Series A Units, a rate of
return equal to nine percent (9%) per annum, compounded annually, with respect
to (i) such holder’s Unrecovered Capital Contributions outstanding from time to
time during the relevant calculation period, and (ii) the amount of all Investor
Guaranteed Obligations outstanding from time to time during the relevant
calculation period.

 

“Safe Harbor Valuation Election” has the meaning set forth in Section 8.02(g).

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor
Federal statute thereto, and the rules and regulations of the SEC promulgated
thereunder.

 

“Series A Units” has the meaning set forth in the recitals.

 

“Series B Units” has the meaning set forth in the recitals.

 

“Subsidiary” means, for any Person (the “parent”) at any date, any other Person
(i) the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, (ii) of which securities or
other ownership interests representing more than fifty percent (50%) of the
equity or more than fifty percent (50%) of the ordinary voting power or, in the
case of a partnership, more than fifty percent (50%) of the general partnership
interest or economic interests are, as of such date, owned, Controlled or held,
or (iii) that is, as of such date, otherwise Controlled by the parent or one or
more Subsidiaries of the parent.

 

9

 

 

“Tag-Along Notice” has the meaning set forth in Section 9.04(a).

 

“Tag-Along Price” has the meaning set forth in Section 9.04(a).

 

“Tax” means any United States Federal, state, local or foreign tax or other
governmental charge, fee, levy or assessment of whatever kind or nature,
including all United States Federal, state, local or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, premium, recording, documentary,
transfer, back-up withholding, turnover, net asset, capital gains, value added,
estimated, ad valorem, payroll and employee withholding, stamp, customs,
occupation or similar taxes, and any social charges or contributions together
with any interest, additions, or penalties with respect to these Taxes and any
interest in respect of any additions or penalties.

 

“Tax Distribution” has the meaning set forth in Section 6.05.

 

“Tax Distribution Rate” has the meaning set forth in Section 6.05.

 

“Tax Matters Member” shall have the meaning set forth in Section 8.04.

 

“Tax Proceeding” shall have the meaning set forth in Section 8.03(c).

 

“Tax Return” shall have the meaning set forth in Section 8.03(a).

 

“Transfer” means, with respect to any Membership Unit (or other equity interest
in any Person), any direct or indirect sale, transfer, assignment, pledge,
hypothecation or other disposition of such Membership Unit (or such other equity
interest), including any disposition of the economic or other risks of ownership
through hedging transactions or derivatives involving such Membership Unit (or
such other equity interest).

 

“Transferee” has the meaning set forth in Section 9.01(a).

 

“Treasury Regulations” means the income tax regulations, including temporary
regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).

 

“Unpaid Investor Guaranteed Obligations Return” means, with respect to Investor
as of any date, the excess, if any, of (i) the accrued Investor Guaranteed
Obligations Return from the date on which the applicable Investor Guaranteed
Obligations were incurred through the date of calculation over (ii) the sum of
all amounts previously distributed to Investor pursuant to Section 6.04(a).

 

“Unpaid Return Percentage” means, with respect to any Member holding Series A
Units as of any date, the excess, if any, of (i) the accrued Return Percentage
with respect to such Series A Units, from the Effective Date through the date of
calculation over (ii) the sum of all amounts previously distributed to such
Member pursuant to Section 6.04(b).

 

10

 

 

“Unrecovered Capital Contribution” means, with respect to any Member holding
Series A Units as of any date, the excess, if any, of (i) the sum of the Capital
Contributions made by such Member with respect to such Series A Units as of such
date over (ii) the sum of the total amount of Capital Return Distributions made
with respect to such Member’s Series A Units prior to such date.

 

SECTION 1.02.         Interpretation. In this Agreement, unless the contrary
intention appears: (a) a reference to an Article, Section or Exhibit is a
reference to an Article or Section of, or Exhibit to, this Agreement, and
references to this Agreement include any recital in and Exhibit to, this
Agreement; (b) the Exhibits form an integral part of and are hereby incorporated
by reference into this Agreement; (c) headings and the Table of Contents are
inserted for convenience only and shall not affect the construction or
interpretation of this Agreement; (d) unless the context otherwise requires,
words importing the singular include the plural and vice versa, words importing
the masculine include the feminine and vice versa; (e) any agreement referred to
herein shall mean such agreement as amended, supplemented and modified as of the
date hereof, or thereafter, to the extent permitted by the applicable provisions
thereof and, if applicable, hereof, shall include all annexes, exhibits,
schedules and other documents or agreements attached thereto; (f) the words
“hereof,” “herein,” “hereinabove,” and words of similar meaning shall refer to
this Agreement as a whole and not to any particular Article, Section or
paragraph; and (g) the words “include,” “includes” and “including” are not
limiting.

 

ARTICLE II
INTRODUCTORY PROVISIONS

 

SECTION 2.01.         Name; Formation; Continuation; Filings. The name of the
Company shall be “Rhode Island Energy Partners, LLC”, and all Company business
shall be conducted in such name or such other names that comply with Applicable
Law as the Board of Managers may select from time to time.

 

SECTION 2.02.         Offices; Registered Office and Agent.

 

(a)          The Company’s initial principal office shall be located at c/o of
Investor, 767 Fifth Avenue, 17th Floor, New York, New York 10153. The Company
may locate its principal office at any other place or places as the Board of
Managers may from time to time deem necessary or advisable.

 

(b)          The name of the registered agent of the Company shall be
Corporation Service Company, and the address of the registered office shall be
c/o Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.

 

SECTION 2.03.         Duration. The Company shall continue in existence until a
Certificate of Cancellation is filed with the Secretary of State of the State of
Delaware as provided in the Act, unless the Company is earlier dissolved in
accordance with the provisions of this Agreement.

 

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SECTION 2.04.         Limited Purpose and Authority.

 

(a)          The purpose of the Company shall be to engage in the Business and
other activities related thereto or to engage in any other act or activity that
is permitted by Applicable Law that has been duly authorized by the Board of
Managers.

 

(b)          Subject to the terms, conditions and limitations of this Agreement,
the Company shall have the power and authority to do all such other acts and
things as may be necessary, desirable, expedient, convenient for, or incidental
to the furtherance and accomplishment of the foregoing purpose.

 

SECTION 2.05.         No State Law Partnership; No Concerted Action.

 

(a)          Notwithstanding the provisions of Article VIII, the Members intend
that the Company shall not be a partnership (including a general partnership or
a limited partnership) or joint venture and that no Member shall be a partner or
joint venturer of any other Member with respect to the business of the Company
for any purposes other than United States Federal, state and local Tax purposes,
and this Agreement shall not be construed to suggest otherwise.

 

(b)          Each Member hereby acknowledges and agrees that, except as
expressly provided herein, in performing its obligations or exercising its
rights hereunder, it is acting independently and is not acting in concert with,
on behalf of, as agent for, or as joint venturer or partner of, any other
Member. Other than in respect of the Company, nothing contained in this
Agreement shall be construed as creating a corporation, association, joint stock
company, business trust, organized group of persons, whether incorporated or
not, among or involving any Member or its Affiliates, and nothing in this
Agreement shall be construed as creating or requiring any continuing
relationship or commitment as between such parties other than as specifically
set forth herein. Nothing contained in this Agreement shall be construed as
creating any fiduciary relationship of any nature between any Member and any
other Member.

 

SECTION 2.06.         Lack of Authority of Members. Except as expressly set
forth herein, the Members shall not have the authority or power to act for or on
behalf of the Company, to do any act that would be binding on the Company, or to
incur any expenditures, debts, liabilities or obligations on behalf of the
Company.

 

SECTION 2.07.         No Personal Liability of Members. Except as provided in
the Act, the debts, obligations and liabilities of the Company, whether arising
in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member shall be obligated personally for any
such debt, obligation or liability of the Company solely by reason of being a
Member of the Company.

 

ARTICLE III
MEMBERSHIP UNITS; ADDITIONAL MEMBERS

 

SECTION 3.01.         Membership Units.

 

(a)          Each Member shall have a limited liability company interest in the
Company. The limited liability company interests in the Company shall be divided
into Series A limited liability company interests represented by Series A Units
and Series B limited liability company interests represented by Series B Units.
Exhibit A hereto sets forth the type and number of Membership Unit owned by each
Member as well as such Member’s Percentage Interest as of the Effective Date.
The Membership Units shall not be evidenced by certificates.

 

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(b)          As of the Effective Date and upon the closings of the transactions
contemplated by the Project LLC Purchase Agreement and the Development and
Indemnification Agreement, as partial consideration under the Development and
Indemnification Agreement, the Company hereby issues to Development 2,275 Series
B Units and admits Development as a Member of the Company which issuance and
admission is approved by Investor.

 

(c)          Except in accordance with Section 4.02, the Board of Managers shall
have no right to establish or issue new or additional series of limited
liability company interests or units without the written consent of the Members
in accordance with Section 7.06 and amendment of this Agreement to provide for
such designation or issuance.

 

(d)          The Membership Units and Percentage Interests of the Members shall
be adjusted from time to time to reflect (i) the issuance of additional
Membership Units in accordance with Section 4.02, (ii) the Transfer by a Member
of its Membership Units in accordance with Article IX, (iii) the admission of a
new Member in accordance with Section 3.02 and (iv) such other events as
otherwise may give rise to a change in the Members’ ownership of their
respective Membership Units under this Agreement. Upon any change in a Member’s
Membership Units or Percentage Interest, the Board of Managers shall amend
Exhibit A to properly reflect such change, and the Board of Managers shall
deliver a copy of Exhibit A, as so amended, to each Member.

 

SECTION 3.02.         Additional Members. After the Effective Date, a Person may
be admitted to the Company as a Member subject to the restrictions on Transfers
of Membership Units in Article IX and the restrictions on issuances of new
limited liability company interests in the Company in Section 4.02, Section 7.05
and Section 7.06.

 

ARTICLE IV
CAPITAL CONTRIBUTIONS

 

SECTION 4.01.         Capital Contributions. As of the Effective Date, Investor
has contributed to the Company the amounts set forth on the ledger of Investor’s
Capital Account. Following the Effective Date, Investor shall, from time to
time, make additional Capital Contributions to the Company, including upon an
Equity Contribution Election (as defined herein), at such times and in such
amounts as may be determined by the Board of Managers, and in accordance with
the Project Budget and the terms and conditions of this Agreement, to fund the
development and construction of the Project; provided that Investor shall not be
obligated to make additional Capital Contributions to the Company in an
aggregate amount that exceeds the Budgeted Investment. The timing of the Capital
Contributions will be based on the development schedule for the Project and the
Board of Managers will determine, and report to Investor, the timing and amount
of the Capital Contributions to be made by Investor. Investor shall be provided
at least ten (10) Business Days’ notice prior to the due date of a Capital
Contribution, which notice shall be delivered at least ten (10) Business Days
prior to the relevant milestone date set forth in the Project Budget, unless
otherwise determined by the Board of Managers and agreed to by Investor. Company
Management will report the development schedule of the Project to the Board of
Managers on a monthly basis. In no event shall Development or any holder of
Series B Units be required make Capital Contributions to the Company. Except as
otherwise specifically provided in this Agreement, no Capital Contributions by
Investor will be in exchange for additional Series A Units.

 

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SECTION 4.02.         Additional Capital Contributions.

 

(a)          At any time after the Effective Date, and provided that the Board
of Managers determines in good faith that equity capital in addition to the
Budgeted Investment is needed by the Company and is in the best interests of the
Project, the Board of Managers shall, in good faith, determine the amount of
additional capital needed, the use therefor, the then enterprise value of the
Company (taking into account net worth, prospects, market conditions, comparable
public and private companies and comparable transactions), and the number of
additional Series A Units to be offered and sold by the Company (“New Units”),
and the purchase price per New Unit. The Company shall give written notice (the
“Preemptive Rights Offer Notice”) to each Member, stating the amount of
additional capital to be raised, the use therefor, the then enterprise value of
the Company, the number of New Units offered and the purchase price per New
Unit. By written notice to the Company within thirty (30) Business Days after
the Preemptive Rights Offer Notice is given (“Acceptance Period”), each Member
may elect to purchase, at the price and on the terms specified in the Preemptive
Rights Offer Notice, up to that portion of New Units which equals such Member’s
Percentage Interest in the Company. At the expiration of the Acceptance Period,
the Company shall promptly notify, in writing, each Member that elects to
purchase all the New Units available to such Member (“Fully Exercising Member”)
of any other Member’s failure to do likewise. During the ten (10) day period
commencing after the Company has given such notice, each Fully Exercising Member
may, by giving written notice to the Company, elect to purchase, in addition to
the number of New Units specified above, up to all of the New Units not
subscribed for by any other Members. The closing of any purchase pursuant to
this Section 4.02 shall occur within sixty (60) days of the date the Preemptive
Rights Offer Notice is given. The provisions of this Section 4.02(a) may be
waived by the vote or written consent of the Members representing a majority of
the Series A Units and the Members representing a majority of the Series B
Units.

 

(b)          If the Members do not subscribe for all of the New Units, subject
to Section 7.06, the Company may offer and sell additional limited liability
company interests in order to raise the additional capital to any Person on such
terms and conditions as the Board of Managers may determine.

 

SECTION 4.03.         Maintenance of Capital Accounts; No Right of Withdrawal;
No Interest.

 

(a)          Separate Capital Accounts shall be maintained for each Member
pursuant to Section 8.02.

 

(b)          Except as otherwise provided herein, no interest shall be paid to
any Member in respect of its Capital Account balance.

 

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(c)          In the event all or any portion of a Membership Unit is transferred
in accordance with the terms of this Agreement, the Transferee shall succeed to
the Capital Account of the transferor to the extent it relates to the portion of
the Membership Unit so Transferred.

 

(d)          An Unrecovered Capital Contribution shall not be a liability of the
Company or any Member, and no Member shall be required to contribute or to lend
any cash or assets to the Company to enable the Company to return any Member’s
Unrecovered Capital Contribution.

 

SECTION 4.04.         Advances and Loans.

 

(a)          If the Company does not have sufficient cash to pay its
obligations, the Board of Managers shall use reasonable efforts to procure
funding from an outside lender which is not an Affiliate of any of the Members;
provided, that if such financing cannot be obtained on terms satisfactory to the
Board of Managers, Investor shall, at the request of the Board of Managers,
arrange for up to $9,639,932 in principal amount of debt financing (“Investor
Arranged Debt Financing”), as and when needed by the Company as determined in
good faith by the Board of Managers, provided, however, such financing shall not
take the form of a loan directly from Investor. At any time following such a
request by the Board of Managers to Investor, Investor may elect (“Equity
Contribution Election”) by a written notice to the Board of Managers and the
other Members, to make additional capital contributions to the Company pursuant
and subject to Section 4.01.

 

(b)          Any Member may, at the request of the Board of Managers, advance
additional funds in excess of the funds described in Section 4.04(a) above as
and when needed. An advance described in this Section 4.04(b) shall constitute a
loan from the participating Member(s) to the Company, shall bear interest at a
market interest rate from the date of the advance until the date of payment, and
shall otherwise be on market terms for similar loans to similar businesses from
institutional lenders, and shall not be a Capital Contribution.

 

ARTICLE V
BOOKS AND RECORDS

 

SECTION 5.01.         Books and Records. The Board of Managers shall cause to be
performed all general and administrative services on behalf of the Company in
order to assure that complete and accurate books and records of the Company are
maintained at such place designated by the Board of Managers showing the names,
addresses and respective Membership Units and Percentage Interests of the
relevant Members, all receipts and expenditures, assets and liabilities, profits
and losses, and all other records necessary for recording the Company’s
respective business and affairs.

 

SECTION 5.02.         Fiscal Year; Accounting Method. The fiscal year of the
Company for financial reporting purposes shall be the Fiscal Year. The taxable
year of the Company shall also be the Fiscal Year unless the Company is required
by Section 706 of the Code to use a different taxable year. The Company shall
report its income for Tax purposes on the accrual method of accounting, shall
report all activities of the Company as trade or business activities and shall
treat its investments in power generation facility companies (or in their assets
in the case such companies are treated as disregarded entities for United States
Federal income Tax purposes) as capital assets within the meaning of Section
1221(a) of the Code, or as “property used in the trade or business” within the
meaning of Section 1231(b) of the Code, as applicable, and in each case, unless
and until the Company obtains an opinion of counsel knowledgeable in United
States Federal income Tax matters stating that other treatment should be
considered to be more appropriate.

 

15

 

 

SECTION 5.03.         Bank Accounts. All funds of the Company will be deposited
in its name in an account or accounts maintained with such bank or banks
selected by the Company. The funds of the Company shall not be commingled with
the funds of any Member. Checks will be drawn upon the Company account or
accounts only for the purposes of the Company and shall be signed by one or more
authorized Officers of the Company.

 

SECTION 5.04.         Company Information.

 

(a)          The Company agrees to deliver to each Member:

 

(i)          within forty-five (45) days after the end of the fiscal quarters of
each Fiscal Year, unaudited quarterly consolidated and consolidating financial
statements of the Company and its consolidated Subsidiaries prepared in
accordance with the Management Accounting Policies;

 

(ii)         within seventy-five (75) days after the end of each Fiscal Year,
(A) audited annual financial statements of the Company and its consolidated
Subsidiaries prepared in accordance with GAAP and (B) unaudited annual financial
statements of the Company and its consolidated Subsidiaries prepared in
accordance with the Management Accounting Policies and including a calculation
of EBITDA and the cumulative EBITDA since the Effective Date (the financial
statements referred to in this clause (ii), the “Annual Accounts”);

 

(iii)        within ten (10) days after the end of each calendar month during
the period the Project remains under development or construction, management
reports for that month and for the year to date compared against the Project
Budget and, if applicable, against the same period for the prior calendar month
and year; and

 

(iv)        with reasonable promptness, such other data and information as from
time to time may be reasonably requested by such Member;

 

provided that all Members (other than Investor) shall execute, prior to
disclosing any Confidential Information of the Company to such Member’s equity
holders, a non-disclosure agreement with such equity holders, in form and
substance reasonably satisfactory to the Company and Investor that provides for
the protection of Confidential Information that is at least as protective as the
requirements set forth in Section 12.08 hereto.

 

(b)          The Company shall afford, and shall cause its Subsidiaries and its
and their respective officers, directors, managers, employees, auditors, counsel
and agents to afford, Investor and all other Members reasonable access during
regular business hours to the Company’s and its Subsidiaries’ respective
officers, directors, managers, employees, auditors, counsel and agents and to
all of the Company’s respective properties, books and records, and shall furnish
(including the right to copy) all Members (and their respective employees and
agents) with all financial, operating and other data and information as each may
reasonably request.

 

16

 

 

(c)          Company Management shall direct the preparation of the Annual
Accounts and shall use its reasonable best efforts to deliver the Annual
Accounts to the Board of Managers within sixty (60) days after the end of each
Fiscal Year.

 

ARTICLE VI
FEES; DISTRIBUTIONS

 

SECTION 6.01.         Fees Payable to Development. The Company shall pay to
Development the Development Fee in three installments as set forth in the
definition of the Development Fee hereunder.

 

SECTION 6.02.         Distributions Generally. Subject to the Act and this
Agreement, and the provisions of any other agreement to which the Company may be
bound, the Board of Managers shall be entitled to determine the amounts and
timing of payment of any distributions to Members, provided that, other than Tax
Distributions, the Company shall make distributions in respect of any Fiscal
Year only after the approval of the Annual Accounts for such year by the Board
of Managers. All distributions will be made from, and will be limited to, Net
Available Cash.

 

SECTION 6.03.         Priority of Distributions Other than from Proceeds of a
Liquidation Event.

 

Subject to Section 6.04 (which shall apply instead of this Section 6.03 with
respect to proceeds of a Liquidation Event), the Company shall make
distributions in cash to the Members in the following order of priority:

 

(a)          first, the amount of any Feedstock Tipping Fee Excess Profits shall
be distributed 20% to Investor and 80% to Development;

 

(b)          second, the amount of any Excess Thermal Energy Profits shall be
distributed 50% to Investor and 50% to Development; and

 

(c)          third, all other distributions shall be made to the Members in
proportion to their respective Percentage Interests.

 

SECTION 6.04.         Priority of Distributions upon a Liquidation Event.
Subject to Section 11.02, proceeds received by the Company in connection with
any Liquidation Event shall be distributed to the Members in the following order
of priority:

 

(a)          first, 100% to Investor until the Unpaid Investor Guaranteed
Obligations Return is reduced to zero;

 

17

 

 

(b)          second, 100% to the Members holding Series A Units, in proportion
to their respective Unpaid Return Percentages, until their Unpaid Return
Percentages are reduced to zero;

 

(c)          third, 100% to the Members holding Series A Units, in proportion to
their respective Unrecovered Capital Contributions, until their Unrecovered
Capital Contributions are reduced to zero; and

 

(d)          fourth, to the Members in proportion to their respective Percentage
Interests.

 

SECTION 6.05.         Tax Distributions. In the event that the cumulative amount
of distributions made to the Members pursuant to Section 6.03 hereof for any
Fiscal Year of the Company is less than the cumulative amount of distributions
that would have been made pursuant to this Section 6.05 at any time during such
Fiscal Year, then the Board of Managers shall, to the extent of Available Net
Cash, make a distribution (a “Tax Distribution”) to the Members entitled thereto
not later than the date specified below, in an amount sufficient to cause the
cumulative amount of distributions made to the Members pursuant to Section 6.03
and this Section 6.05 with respect to such Fiscal Year to equal the following
amounts as of the end of the calendar month preceding each of the following
specified dates: (1) prior to the tenth day of April in an amount equal to 1/4
of the Members’ Estimated Tax Liability as of March 31; (2) prior to the tenth
day of June in an amount equal to 1/2 of the Members’ Estimated Tax Liability as
of May 31; (3) prior to the tenth day of September in an amount equal to 3/4 of
the Members’ Estimated Tax Liability as of August 31; and (4) prior to the tenth
day of January of the following Fiscal Year of the Company in an amount equal to
the Members’ Estimated Tax Liability as of December 31 of the immediately
preceding Fiscal Year of the Company. For purposes of this Section 6.05, the
“Members’ Estimated Tax Liability” means the product of (i) the taxable income
of the Company, determined without regard to any income, gain, loss or deduction
attributable any “built-in gain” within the meaning of (and the elimination of
any book-tax disparity related thereto pursuant to) Section 704(c) of the Code,
for the then current Fiscal Year of the Company (except that the January
distribution shall be for the prior Fiscal Year), as projected from time to time
in good faith by the Board of Managers, multiplied by (ii) the Tax Distribution
Rate, which amount shall be distributed among the Members pro rata in proportion
to their respective estimated approximate allocable shares of such taxable
income for such Fiscal Year, as so projected; provided, however, that the Tax
Distribution payable to the Members for a Fiscal Year of the Company (or portion
thereof) shall be reduced to reflect net losses and deductions (i.e., the excess
of losses and deductions over income and gains) and credits allocated by the
Company to the Members generally for United States Federal income Tax purposes
in any and all earlier periods (except to the extent previously applied to
reduce a Tax Distribution or to the extent the carryforward period for such
losses or credits has expired). For purposes of this Section 6.05, the “Tax
Distribution Rate” shall initially mean such percentage as may be approved by
the Board of Managers from time to time as the approximate highest current
marginal combined United States Federal and state income Tax rate applicable to
an individual resident in the State of New York, taking into account the
character of the income (such as ordinary income or capital gains) as reasonably
determined by the Board of Managers (determined after giving effect to the
deduction (if allowable) of state income Taxes for United States Federal income
Tax purposes). All amounts distributed to Members pursuant to this Section 6.05
shall be advances of amounts otherwise distributable to Members under the
provisions of Sections 6.03 and 6.04 hereof. Notwithstanding the foregoing, no
Tax Distributions shall be made in connection with a Liquidation Event or with
respect to any proceeds realized by the Company upon any transaction (other than
in the ordinary course of business of the Company) at the time of or in
connection with such Liquidation Event.

 

18

 

 

SECTION 6.06.         Limitation on Distributions. Notwithstanding any
provisions herein to the contrary, the Company shall not make a distribution to
any Member if such distribution would violate the Act.

 

SECTION 6.07.         Withheld Taxes. Any amount that the Company is required to
withhold and deposit with any Governmental Authority with respect to any United
States Federal, state or local Tax liability of a Member shall be treated as an
amount distributed to such Member and shall reduce, dollar for dollar, any
distribution that would otherwise be made to such Member pursuant to Section
6.03 or Section 6.04 for that or any subsequent period. Any amounts withheld
with respect to any payment or allocation by the Company to the Members prior to
the date that such Member would otherwise have received the distribution of such
amounts, shall be treated as a loan by the Company to such Member, which loan
shall be subject to interest at a rate equal to LIBOR plus two percent (2%).

 

ARTICLE VII
MANAGEMENT

 

SECTION 7.01.         General.

 

(a)          Except as expressly required by this Agreement and by non-waivable
provisions of Applicable Law where approval by a Member is mandated, (i) the
powers of the Company shall be exercised by or under the authority of, and the
business and affairs of the Company shall be managed under the direction of, a
board of managers (the “Board of Managers”) and (ii) the Board of Managers may
make all decisions and take all actions for the Company not otherwise provided
for in this Agreement. Unless otherwise specified herein, any decision or action
by the Board of Managers shall be determined by the affirmative vote of a
majority in number of the Managers. The Managers shall be the managers of the
Company within the meaning of Section 18-101(10) of the Act. The Board of
Managers must act as a board, and no individual Manager, as such, shall have any
authority to bind or act for, or assume any obligation or responsibility on
behalf of, the Company unless expressly authorized to do so by action taken by
the Board of Managers in accordance with this Agreement.

 

(b)          For situations where this Agreement or non-waivable provisions of
Applicable Law require approval of the Members, the Members shall vote as a
single class. Unless otherwise specified herein, any decision or action by the
Members shall be determined by the vote of Members holding a majority of the
Membership Units. With respect to all other situations, the Members shall not be
entitled to vote on or consent to or approve or disapprove actions or decisions
regarding the Company.

 

19

 

 

SECTION 7.02.          The Board of Managers.

 

(a)          The Board of Managers shall be composed of three (3) Managers. As
long as Investor and its Affiliates own, in the aggregate, a number of
Membership Units not less than 50% of the Membership Units of the Company,
adjusting for unit splits, unit dividends or distributions or other similar
cashless transactions affecting the number of Membership Units outstanding (the
“Ownership Threshold”), Investor shall have the right to appoint a majority of
the Managers on the Board of Managers (the “Investor Managers”). As long as
Development and its Affiliates own, in the aggregate, not less than 50% of the
Membership Units Beneficially Owned by Development as of the Effective Date
(adjusting for unit splits, unit dividends or distributions or other similar
cashless transactions affecting the number of Membership Units outstanding),
Development shall have the right to appoint one (1) Manager (the “Development
Manager”). Upon Investor and its Affiliates in the aggregate ceasing to hold
Membership Units greater than or equal to the Ownership Threshold, Investor
shall immediately cause the Investor Managers to resign from the Board of
Managers, and the number of Managers on the Board of Managers will be allocated
between the Members in proportion to the number of Membership Units held by each
Member; provided, that such event shall not otherwise affect the rights of
Development to appoint a Manager as provided in this Section 7.02(a). Each of
the Members will then have the right to appoint the number of Managers allocated
to it. Upon Development and its Affiliates ceasing to own, in the aggregate, at
least 50% of the Membership Units Beneficially Owned by Development as of the
Effective Date, Development shall immediately cause the Development Manager to
resign from the Board of Managers, and the number of Managers on the Board of
Managers will be allocated between the Members in proportion to the number of
Membership Units held by each Member; provided, that such event shall not
otherwise affect the rights of Investor to appoint two Managers as provided in
this Section 7.02(a). Each of the Members will then have the right to appoint
the number of Managers allocated to it. The names of the initial Managers are as
follows:

 

Type of Nominee Name     Investor Manager [Wyatt Wachtel]     Investor Manager
[David March]     Development Manager [Shlomi Palas]

 

(b)          Investor shall have the right, so long as it has the right to
appoint one or more Managers pursuant to Section 7.02(a), to appoint an
alternate Manager (the “Investor Alternate”) to attend meetings in lieu of any
Manager designated by it, which such Investor Alternate may be another Investor
Manager. Each such alternate shall be considered an Investor Manager for
purposes of this Article VII, but only in substitution for such designated
Investor Manager.

 

(c)          If Investor Transfers to another Person Membership Units in
accordance with this Agreement, Investor shall be entitled, in its sole
discretion, to Transfer, in whole or in part, its rights under this Article VII
(including, without limitation, the right to appoint Managers and alternate
Managers and the right to approve certain matters pursuant to Section 7.05), to
such Transferee (the “Governance Rights Successor”). The Governance Rights
Successor shall be the sole person entitled to exercise Investor’s rights under
this Article VII and shall otherwise succeed to the rights of Investor under
this Article VII to further Transfer such rights. No new Member shall have any
right to appoint a Manager except as specifically set forth herein.

 

20

 

 

(i)          Investor shall have the exclusive right to remove, with or without
cause, any Investor Manager (and any Manager otherwise allocated to it under
Section 7.02(a)) or Investor Alternate and to fill any vacancy created by the
death, disability, removal or resignation of any Investor Manager or Investor
Alternate (or any such Manager otherwise allocated to it under Section 7.02(a)).

 

(ii)         Development shall have the exclusive right to remove, with or
without cause, the Development Manager (and any Manager otherwise allocated to
it under Section 7.02(a)) and to fill any vacancy created by the death,
disability, removal or resignation of the Development Manager (or any such
Manager otherwise allocated to it under Section 7.02(a)).

 

(d)          The Board of Managers shall meet on a regular basis and, in any
event, not less than four (4) times per year at times to be determined by the
Board of Managers for the purpose of transacting any business. In addition, any
Manager may call a special meeting of the Board of Managers for any matter that
the Manager determines in good faith is appropriate for consideration thereat.
Meetings of the Board of Managers may be held at the principal office of the
Company or at such reasonable time and place as shall be designated in the
notice of such meeting. Each Manager shall be given at least two (2) weeks’
notice of any regular meeting of the Board of Managers and at least three (3)
Business Days’ notice of any special meeting of the Board of Managers; provided
that each notice of a meeting of the Board of Managers to an Investor Manager
shall be delivered by electronic mail to such Investor Manager to the e-mail
address specified by such Investor Manager to the Company from time to time and,
provided further that (i) attendance at such meeting shall be deemed a waiver of
such notice (unless a specific objection regarding inadequate notice is raised)
and (ii) notice to any Manager may be waived in writing by such Manager at any
time. Each of the Managers shall make reasonable concessions and accommodations
to reschedule or postpone meetings of the Board of Managers such that all
Managers may attend either in person or by telephone or similar communication
equipment.

 

(e)          Subject to the delivery of proper notification of a meeting (or
waiver of such notice), attendance by a majority of the Managers in office at
any time shall constitute a quorum for purposes of holding such meeting;
provided, however, that approval of any action shall be in accordance with
Section 7.01(a). Any Manager may be present at any meeting in person or by means
of telephone or similar communication equipment by means of which each person
participating in the meeting can hear and speak to each other.

 

(f)          Any action required or permitted to be taken at any meeting of the
Board of Managers may be taken without a meeting if a majority of the Managers
consent to such action in writing; provided, that each other Manager shall
receive prompt notice of such consent.

 

(g)          A Manager may participate in any meeting telephonically or by any
other means by which he or she can be heard and can hear the other Managers. For
the purposes of establishing a quorum and taking any action at the meeting, the
Managers participating pursuant to this Section 7.02(g) shall be deemed present
in person at the meeting, and the place of the meeting shall be the place of
origination of the conference telephone conversation or other comparable
communication technique.

 

21

 

 

(h)          From time to time, the Board of Managers may establish one or more
committees with such composition, responsibilities and powers as the Board of
Managers may determine. Committees shall meet at such times as they or the Board
of Managers direct. At least one (1) Manager appointed by Investor and at least
one (1) Manager appointed by Development shall have the right (but not the
obligation) to be on such committees. The decisions of any committee shall be
subject to the ultimate approval of the Board of Managers.

 

(i)          No Manager shall be compensated by the Company for services
rendered in his or her capacity as a Manager (including as a member of any
committee of the Board of Managers); provided, however, that the Company shall
pay or reimburse reasonable expenses incurred by the Managers invited by the
Board of Managers for attending any meeting of the Board of Managers and
committees thereof or traveling to the Company’s offices and facilities for
oversight purposes and for any fees or expenses incurred by the Managers or the
Members on behalf of the Company in connection with the management of the
Company.

 

(j)          Each Manager shall hold office until his or her successor shall
have been appointed and qualified or until his or her earlier resignation,
removal, death or disability.

 

SECTION 7.03.         Officers.

 

(a)          The Board of Managers may, from time to time, designate one or more
Persons (which may include a management or services company) to manage the
day-to-day business operations and affairs of the Company and its Subsidiaries
and to supervise the Other Officers of the Company and its Subsidiaries, subject
to the direction, supervision and control of the Board of Managers (such Person
or Persons, “Company Management”). Company Management shall have such other
powers and perform such other duties as usually pertain to executive officers
and as from time to time may be assigned to them by the Board of Managers.
Company Management may, from time to time, delegate its powers and authority to
such officers, employees and other agents of the Company and its Subsidiaries as
it shall deem appropriate.

 

(b)          The Board of Managers may, from time to time, designate one or more
persons to be officers of the Company and its Subsidiaries other than Company
Management (the “Other Officers” and, together with Company Management, the
“Officers”). The Other Officers so designated shall have such authority and
perform such duties as the Board of Managers may, from time to time, delegate to
them.

 

(c)          The services of Company Management and any Officer shall be at the
expense of the Company.

 

(d)          Each Officer shall serve until the earlier of his or her death,
disability, resignation, removal or termination by the Board of Managers. Any
vacancy occurring in the office of any Officer may be filled by the Board of
Managers.

 

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(e)          Company Management and the Other Officers shall, solely in his or
her respective capacity as an officer of the Company, owe the Company the same
fiduciary and other duties and obligations as an officer holding an equivalent
position in a Delaware corporation owes to such corporation.

 

SECTION 7.04.         Indemnification of Managers and Officers.

 

(a)          The Company shall indemnify and hold harmless, to the fullest
extent permitted by Applicable Law, any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether brought by or on behalf of the Company by reason of the fact that such
person is or was a Member, Manager or an Officer of the Company (each, an
“Indemnitee”), against reasonable and documented expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding; provided,
however, no Indemnitee shall be entitled to indemnification under this Section
7.04(a) if his, her or its actions were in bad faith, were not done with the
reasonable belief that such actions were in the best interests of the Company or
were a criminal act.

 

(b)          The Company shall pay or reimburse reasonable and documented
expenses (including reasonable attorneys’ fees) incurred by an Indemnitee in
defending a civil, criminal, administrative or investigative action, suit or
proceeding brought by a party (other than a direct action by the Company)
against the Indemnitee in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such Indemnitee
to repay such amount if it shall ultimately be determined that such Indemnitee
is not entitled to be indemnified by the Company as authorized in this Section
7.04.

 

(c)          Notwithstanding any other provision of this Section 7.04, the
Company shall pay or reimburse reasonable and documented expenses (including
reasonable attorneys’ fees) incurred by an Indemnitee in connection with such
Indemnitee’s appearance as a witness or other participant on behalf of the
Company in a proceeding involving or affecting the Company at a time when the
Indemnitee is not a named defendant or respondent in the proceeding.

 

(d)          The right of indemnification and reimbursement provided in this
Section 7.04 shall be in addition to any rights to which an Indemnitee may
otherwise be entitled and shall inure to the benefit of the executors,
administrators, personal representatives, successors or assigns of each
Indemnitee.

 

(e)          The rights to indemnification and reimbursement provided for in
this Section 7.04 may be satisfied only out of the assets of the Company, and
none of the Members shall be personally liable for any claim for indemnification
or reimbursement under this Section 7.04.

 

SECTION 7.05.         Matters Requiring Approval of the Board of Managers. In
addition to any other approval specifically required hereunder, the prior
approval of the Board of Managers shall be required before the Company or any of
its Subsidiaries may take, or commit to take, any of the following actions
following the Effective Date:

 

(a)          the issuance of any limited liability company interests;

 

23

 

 

(b)          the admission of any additional or substitute Member;

 

(c)          the adoption of any Project Budget (other than the initial Project
Budget attached hereto) and any amendment or modification thereto and approval
of the Annual Accounts;

 

(d)          the entrance into any (i) power purchase agreement, (ii) agreement
for the purchase or sale of the Project, or (iii) material agreement outside of
the normal course of business;

 

(e)          any capital expenditure deviating materially from the projection
for such expenditure set forth in the Project Budget (approved in accordance
with Section 7.08);

 

(f)          any merger, consolidation, reorganization, recapitalization or
similar business combination involving the Company or any Subsidiary or the
creation of any Subsidiary;

 

(g)          the payment of any distribution, other than Tax Distributions
pursuant to Section 6.05;

 

(h)          the determination of significant regulatory issues or litigation,
including, without limitation, any decision to initiate, forego or settle any
material litigation or arbitration, or the entering into discussions, or
negotiations, with any Governmental Authority in connection with any
investigation, proceedings or threatened investigation or proceedings, or any
material inquiry;

 

(i)           any bankruptcy, suspension of payments, assignment to creditors or
any similar event or action of the Company or any of its Subsidiaries;

 

(j)           any liquidation, dissolution or winding up of the Company, or the
sale of any of its Subsidiaries, or the sale of substantially all of the assets
of the Company or any Subsidiary;

 

(k)          the appointment and/or removal of independent auditors or any
material change in accounting policies and principles or internal control
procedures;

 

(l)           the retention of any investment bank or similar financial advisor
on behalf of the Company or any Subsidiaries;

 

(m)         the incurrence, assumption or guarantee of any debt, or the
incurrence of any liens in respect of any debt of the Company;

 

(n)          any Related Party transaction; provided that any action or decision
relating to a contract or other arrangement between Development or one of its
Affiliates and the Company or any of its Subsidiaries will be made on behalf of
the Company solely by Investor, including, but not limited to, whether to enter
into such contract or other arrangement or to exercise rights under such
contract or other arrangement;

 

(o)          the creation of an equity incentive, profit sharing or bonus pool
compensation plan and any distributions thereunder;

 

24

 

 

(p)          the hiring or engagement of any new employee with compensation
above $50,000 or consultant and the entering into of any employment agreement
with a term exceeding one (1) year;

 

(q)          any action with respect to Tax matters (other than those assigned
to the Tax Matters Member hereunder) as may from time to time be required or
advisable under the Treasury Regulations or other provisions of Applicable Law,
including without limitation the making and filing of any Tax returns or
elections for United States Federal, state, local and foreign Tax purposes;

 

(r)          any material change in the nature of the Business;

 

(s)          any transaction or agreement between the Company’s Officers,
Managers or Members (excluding Investor) or any Related Party of the foregoing,
on one hand, and the Company or any of its Affiliates (excluding the Company’s
Officers and Managers and the Members), on the other hand;

 

(t)          any action that would, or could reasonably be expected to, have
material adverse Tax consequences for any Member or any Affiliate of any Member
or material adverse regulatory consequences for any Member or any Affiliate of
any member;

 

(u)          any action that would, or could reasonably be expected to, have an
adverse effect on the reputation of Investor or its Affiliates; and

 

(v)         any action reasonably related to, or any agreement to or commitment
to, or causing any Subsidiary to agree or commit to, do any of the actions set
forth in clauses (a) through (u) above.

 

SECTION 7.06.         Matters Requiring the Approval of the Members. The prior
approval of the Members holding a majority of the then outstanding Series A
Units and the Members holding a majority of the then outstanding Series B Units
shall be required before the Company or any of its Subsidiaries may take or
commit to take any of the following actions:

 

(a)          except as otherwise specifically authorized in this Agreement, any
transaction between the Company or any Subsidiary, on the one hand, and Investor
and any Affiliate of Investor or Entropy or any Affiliate of Entropy, on the
other hand, on terms which are less favorable to the Company or its Subsidiary
than terms generally available to similarly situated businesses for similar
transactions in similar markets;

 

(b)          any issuance of any Membership Units at a price less than Fair
Market Value; and

 

(c)          any deviation from the Project Budget if such deviation is the
direct result of a transaction which is on terms which are less favorable to the
Company or its Subsidiary than terms generally available to similarly situated
businesses for similar transactions in similar markets.

 

25

 

 

SECTION 7.07.         Managers and Officers Insurance. The Company shall
maintain directors’ and officers’ liability insurance on terms that are
customary for the nature, scope and size of the Company’s and its Subsidiaries’
businesses.

 

SECTION 7.08.         Signing Authority.

 

(a)          The Company shall adhere to the York Renewable Energy Partners and
Affiliates Policy for Signature Authority (as may be amended from time to time)
(the “Signature Policy”).

 

(b)          The York Signatories and the Entropy Principals (each as defined in
the Signature Policy) are authorized and directed, in the name of and on behalf
of the Company, but solely to the extent permitted by the terms of the Signature
Policy, to execute and deliver any and all agreements, instruments, contracts,
certificates and any other documents that create a binding obligation upon the
Company, provided such obligation is permitted by, or has been properly approved
in accordance with, this Agreement.

 

(c)          The York Signatories and Entropy Principals are authorized and
directed, in the name of and on behalf of each of the Company’s direct and
indirect subsidiaries (each, a “Project SPV”), but solely to the extent
permitted by the terms of the Signature Policy, to execute and deliver any and
all agreements, instruments, contracts, certificates and any other documents
that create a binding obligation upon a Project SPV, provided such obligation is
permitted by, or has been properly approved in accordance with, the terms of the
Project SPV’s Limited Liability Company Agreement.

 

SECTION 7.09.         Project Budgets.

 

(a)          Company Management shall deliver to the Board of Managers a budget
for the Project, which shall include capital expenditures, cash flow, projected
EBITDA and other financial projections (setting forth in detail the assumptions
therefor) for the Project for the period from initial development through
completion and/or sale by the Company (“Project Budget”). The initial Project
Budget is attached hereto as Exhibit C. Any subsequent Project Budget shall be
delivered to the Board of Managers at least thirty (30) days prior to the end of
the then-current Fiscal Year.

 

(b)          After receipt of any Project Budget (except for the initial Project
Budget), the Board of Managers shall have ten (10) days to review it. The Board
of Managers shall deliver notice to Company Management on or prior to the tenth
(10th) day after receipt of any Project Budget specifying in reasonable detail
all disputed items and the basis therefor and the amount of any proposed
adjustments. No later than five (5) days after receiving the proposed
adjustments to any Project Budget from the Board of Managers, Company Management
shall propose a revised Project Budget to the Board of Managers, which shall
take into account the proposed adjustments received from the Board of Managers.
Any revised Project Budget shall be subject to the approval of the Board of
Managers, and, if applicable, in accordance with Section 7.06. If after the
receipt of any revised Project Budget, the Board of Managers has additional
disputed amounts and proposed adjustments to such Project Budget, the Board of
Managers and Company Management shall work in good faith to resolve any such
disputed amounts and proposed adjustments.

 

26

 

 

ARTICLE VIII
TAX MATTERS

 

SECTION 8.01.         Partnership for Tax Purposes. The Company will be
classified as a partnership for U.S. Federal income Tax and applicable state and
local income Tax purposes, effective from the Effective Date, and neither the
Company nor any Member shall take any action or position that is inconsistent
with such classification. The Subsidiaries wholly owned by the Company will be
treated as disregarded entities for U.S. Federal income Tax and applicable state
and local income Tax purposes.

 

SECTION 8.02.         Capital Accounts, Allocations and Other Tax Accounting
Matters.

 

(a)          Capital Accounts. The Company shall maintain, for U.S. Federal,
state and local income Tax purposes, capital accounts (each, a “Capital
Account”) for the Members in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv), including, without limitation, the “minimum gain chargeback”
provisions of Treasury Regulation Section 1.704-2(f) and the “qualified income
offset” provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d).

 

(b)          Allocations of Items of Income, Gain, Deduction and Loss. All items
of income, gain, deduction and loss of the Company as determined for United
States Federal income Tax purposes shall be allocated among the Members, and
shall be credited or debited to their respective Capital Accounts in accordance
with Treasury Regulation Section 1.704-1(b)(2)(iv), so as to ensure to the
maximum extent possible that such allocations satisfy the economic effect
equivalence test of Treasury Regulation Section 1.704-1(b)(2)(ii)(i). In
accordance therewith, all items that can have economic effect shall be allocated
in such a manner that the balance of each Member’s Capital Account at the end of
any taxable year of the Company (increased by the sum of (i) such Member’s
“share of partnership minimum gain” as defined in Treasury Regulation Section
1.704-2(g)(1) plus (ii) such Member’s “share of partner nonrecourse debt minimum
gain” as defined in Treasury Regulation Section 1.704-2(i)(5)) would be positive
in the amount of cash that such Member would receive if the Company sold all of
its assets for an amount of cash equal to the book value (as determined pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(g)) of such assets (reduced,
but not below zero, by the amount of nonrecourse debt to which property is
subject) and all of the cash of the Company remaining after payment of all
liabilities (other than nonrecourse liabilities) of the Company were distributed
in liquidation of the Company immediately following the end of such taxable year
pursuant to Article VI hereof. All items of income, gain, deduction and loss
that cannot have economic effect (including nonrecourse deductions) shall be
allocated in accordance with each Member’s interest in the Company (i.e., the
“partner’s interest in the partnership” within the meaning of Section 704(b) of
the Code and the Treasury Regulations thereunder) which, unless otherwise
required by Section 704(b) of the Code and the Treasury Regulations thereunder,
shall be in proportion to the Members’ respective Percentage Interests.

 

(c)          Relationship Between Book and Tax Allocations. Items of income,
gain, deduction and loss for purposes of determining the Members’ Capital
Accounts (that is, for “book purposes”) shall be determined using the same
methods of accounting used by the Company in determining such items for United
States Federal income Tax purposes. All items of income, gain, deduction, loss
or credit for Tax purposes shall be determined in accordance with the Code and,
except to the extent otherwise required by the Code, shall be allocated to and
among the Members in the same percentages in which the Members share in
corresponding book items allocated to their Capital Accounts.

 

27

 

 

(d)          Certain Allocations with Respect to Contributed Property. In
accordance with Section 704(c) of the Code and the Treasury Regulations
thereunder, items of depreciation, amortization, gain, loss and deduction with
respect to any property contributed to the capital of the Company shall, solely
for Tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for United
States Federal income Tax purposes and its initial book value, such allocation
to be made by the Board of Managers in accordance with any permissible method
under applicable Treasury Regulations.

 

(e)          Tax Elections. Any elections or other decisions relating to
allocations of income, gain, deduction, loss or credit hereunder or any other
Tax elections (including elections under Section 754 of the Code) that must be
made at the Company level (as opposed to by the Members) shall be made (or not
made) by the Board of Managers in its sole discretion.

 

(f)          Membership Units Held During Portion of Taxable Year. For purposes
of determining the income, gain, loss, deduction or credit, or any other items
allocable to any period, such items shall be determined on a daily, monthly or
other basis as determined by the Board of Managers using any permissible method
under Section 706 of the Code and the Treasury Regulations thereunder.

 

(g)          Safe Harbor Valuation Election. Notwithstanding any provision of
this Agreement to the contrary, the Board of Managers, without the consent of
any Member, is hereby authorized to elect, on behalf of the Company and each of
the Members, to make the “safe harbor election” (the “Safe Harbor Valuation
Election”) described in IRS Notice 2005-43 (the “IRS Notice”) pursuant to which
each “safe harbor partnership interest” (as defined in the IRS Notice) that is
issued by the Company to a service provider (including, without limitation, any
Person that is an indirect member of the Company) while the election is in
effect, in connection with services provided to the Company or any Affiliate of
the Company, will be treated as having a value equal to the “liquidation value”
of such interest as determined in the manner described in the IRS Notice. The
Board of Managers is directed to make the Safe Harbor Valuation Election after
the revenue procedure proposed in the Notice is issued in final form, and may,
in its discretion, make such an election or a similar election if such revenue
procedure (or guidance of a similar nature) is ultimately issued by the IRS in
modified form. The Safe Harbor Valuation Election will be binding on the Company
and each Member (including any Person to whom any Membership Unit is Transferred
in connection with the performance of services) with respect to each issuance of
such a “safe harbor partnership interest” while such election is in effect. The
Company and each Member (including any service provider receiving any Membership
Unit in connection with the performance of services) agree to comply with any
reasonable request of the Board of Managers that, in the Board of Managers’ good
faith judgment, is necessary to comply with the requirements of the Safe Harbor
Valuation Election described in the proposed revenue procedure, as incorporated
in the anticipated revenue procedure or other guidance issued in final form,
with respect to all Membership Units that are issued in connection with the
performance of services while such election remains in effect. Such Safe Harbor
Valuation Election will remain in effect until terminated in accordance with the
rules set forth in the anticipated IRS guidance described in the IRS Notice as
ultimately issued. The Board of Managers is further authorized, in its
discretion and without the consent of any Member, to revoke a Safe Harbor
Valuation Election previously made on behalf of the Company and each of its
Members; provided that such revocation may be made only with the written consent
of each Member providing services to the Company with respect to whom such
revocation would result in an inclusion in such Member’s income in connection
with the issuance of an Company Interest to such Member, or in other adverse Tax
consequences to such Member.         

 

28

 

 

SECTION 8.03.         Tax Returns and Information.

 

(a)          The Board of Managers shall cause to be prepared by an independent
nationally recognized accounting firm approved by Investor at the expense of the
Company and shall timely file or cause to be filed all required and necessary
Tax or information returns and all other filings for the Company (“Tax
Returns”), prepared in accordance with Applicable Law.

 

(b)          The Board of Managers shall cause, at the expense of the Company,
to be provided to each Member, no later than sixty (60) days after the end of
the Company’s taxable year, a good faith estimate of the amounts to be shown on
the Tax Return of the Company (and any direct or indirect Subsidiary of the
Company to the extent such information is reasonably required by such Member (or
by a holder of a direct or indirect interest therein) in order to properly
comply with its Tax filing requirements) and shall cause to be provided to each
Member all other information as may be reasonably requested by such Member in
order to enable such Member (or the holder of a direct or indirect interest
therein) to comply with its Tax obligations, including, without limitation,
copies of notices from Tax authorities and other Tax-related information
received by the Company.

 

(c)          The Board of Managers shall promptly notify each of the Members of
any pending or threatened audit, examination, contest, litigation or other
proceedings by or against any Tax authority (a “Tax Proceeding”) in respect of
the Company or any of its Subsidiaries and shall provide each of the Members
with timely and reasonably detailed accounts of developments in each such Tax
Proceeding. At their election and at their own cost and expense, each of the
Members shall be entitled to participate in such Tax Proceeding.

 

SECTION 8.04.         Tax Matters Partner and Elections. All of the Members
hereby specifically agree and consent that Investor may, on behalf of the
Company, at any time, and without further notice to or consent from any Member,
subject to the provisions of this Article VIII, act as the tax matters partner
within the meaning of Section 6231(a)(7) of the Code (the “Tax Matters Member”)
for U.S. Federal income, state or local Tax purposes and exercise any authority
permitted to a tax matters partner under such Code section and the accompanying
Treasury Regulations, and take whatever steps Investor, in its reasonable
discretion, deems necessary or desirable to perfect such designation, including
filing any forms and documents with the IRS.

 

29

 

 

SECTION 8.05.         Consistent Tax Treatment. The Members are aware of the
income Tax consequences of the allocations made by this Agreement and the
provisions of the Code and Treasury Regulations that are incorporated herein by
reference thereto and hereby agree to be bound by and utilize those allocations
as reflected on the information returns of the Company in reporting their shares
of Company income, gain, deduction, loss and credits for United States Federal
and applicable state and local income Tax purposes. Each Member agrees to report
its distributive share of Company items of income, gain, loss, deduction and
credit on its separate return in a manner consistent with the reporting of such
items to it by the Company.

 

ARTICLE IX
TRANSFER OF MEMBERSHIP UNITS; WITHDRAWALS

 

SECTION 9.01.         Restrictions Applicable to All Transfers by the Members.

 

(a)          Each Member agrees with each other Member and the Company that such
Member shall not Transfer to any Person (a “Transferee”) all or any portion of
its Membership Units except as hereinafter expressly permitted in this Article
IX (each such permitted Transfer, a “Permitted Transfer”). Any purported
Transfer of Membership Units other than a Permitted Transfer shall be null and
void.

 

(b)          No Member shall Transfer any of its Membership Units at any time if
such action would:

 

(i)          constitute a violation of any Applicable Laws of any jurisdiction
or a breach of the conditions to any exemption from registration of securities
under any Applicable Laws;

 

(ii)         affect the Company’s existence or qualification as a limited
liability company under the Act or any other Applicable Law that is or might be
applicable to the Company;

 

(iii)        jeopardize the classification of the Company as a partnership for
United States Federal income Tax purposes; provided that this Section
9.01(b)(iii) shall not apply to the purchase of all of the other Members’
Membership Units by Investor or the Company pursuant to Section 9.03 or the
purchase of all of Investor’s and Investor’s Affiliates’ Membership Units by
Development pursuant to Section 9.06;

 

(iv)        cause the Project to become wholly or partly a “tax-exempt use
property” within the meaning of Section 168(h) of the Code or increase the share
of the Project that is already tax-exempt use property;

 

(v)         cause the Company to terminate as a partnership under Section 708(b)
of the Code unless the non-transferring Members have been indemnified for any
adverse Tax effects;

 

(vi)        subject the Company or any of its Subsidiaries to utility regulation
to which it is not already subject; or

 

30

 

 

(vii)       violate any change in control or anti-assignment restrictions in any
loan agreements, power purchase agreements or other contracts or agreements that
are material to the Business.

 

(c)          Each Transferee of Membership Units shall execute and deliver a
counterpart of this Agreement. Each such Transferee of Membership Units shall
thereafter be deemed to be a Member hereunder and shall have the benefit of, and
be subject to, all of the rights, obligations and limitations with respect to
such Transferred Membership Units (including the restrictions on Transfers set
forth in this Article IX) to the same extent as the Transferring Member under
this Agreement; provided, that in the event of a Transfer by a Member to an
Affiliate, such Member shall not be relieved of its obligations hereunder.

 

(d)          Any Transfer of Membership Units hereunder shall not release the
Transferring Member from any liability or obligation it may have hereunder with
respect to liabilities and obligations incurred prior to the date of such
Transfer or with respect to Membership Units that it continues to own after the
date of such Transfer.

 

(e)          The Company hereby irrevocably elects that each interest in the
Company shall constitute a “security” within the meaning of Article 8 of the
Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect
from time to time in the States of Delaware and New York.

 

(f)          Each Transferee of Membership Units by executing and delivering a
counterpart of this Agreement in accordance with Section 9.01(c) shall be deemed
to have made the following representations and warranties as a Member as of the
date of such execution and delivery.

 

(i)          EACH MEMBER HEREBY REPRESENTS AND WARRANTS TO THE COMPANY THAT: (i)
THE MEMBERSHIP UNIT OF THE MEMBER IS BEING ACQUIRED FOR INVESTMENT PURPOSES ONLY
FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO OR IN CONNECTION WITH ANY
DISTRIBUTION, OFFER, RESALE, OR OTHER DISPOSITION NOT IN COMPLIANCE WITH THE
SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE
SECURITIES LAWS; (ii) THE MEMBER IS AWARE THAT IT MUST BEAR THE ECONOMIC RISK OF
ITS INVESTMENT IN THE COMPANY FOR AN INDEFINITE PERIOD OF TIME BECAUSE
MEMBERSHIP UNITS IN THE COMPANY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND, THEREFORE, CANNOT BE
SOLD UNLESS THE MEMBERSHIP UNITS ARE SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS; AND (iii) THE MEMBER IS
AWARE THAT THIS AGREEMENT PROVIDES SUBSTANTIAL RESTRICTIONS ON THE ABILITY OF A
MEMBER TO SELL, TRANSFER, ASSIGN, MORTGAGE, HYPOTHECATE OR OTHERWISE ENCUMBER
ITS MEMBERSHIP UNITS.

 

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(ii)         Each Member hereby further represents and warrants to the Company
and each other Member that (i) if such Member is a corporation, it is duly
organized, validly existing, and in good standing under the laws of its state of
incorporation and is duly qualified and in good standing as a foreign
corporation in the jurisdiction of its principal place of business (if not
incorporated therein); (ii) if such Member is a limited liability company, it is
duly organized, validly existing, and (if applicable) in good standing under the
law of the state of its organization and is duly qualified and (if applicable)
in good standing as a foreign limited liability company in the jurisdiction of
its principal place of business (if not organized therein); (iii) if such Member
is an individual, such Member is of legal age to execute this Agreement and is
legally competent to do so, (iv) if such Member is a partnership, trust, or
other entity, it is duly formed, validly existing, and (if applicable) in good
standing under the law of the state of its formation, and if required by law is
duly qualified to do business and (if applicable) in good standing in the
jurisdiction of its principal place of business (if not formed therein); (v)
such Member has full corporate, limited liability company, partnership, trust,
or other applicable power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and all necessary actions by the
shareholders, members, partners, beneficiaries, directors, managers, trustees,
officers or other Persons necessary for the due authorization, execution,
delivery and performance of this Agreement by that Member have been duly taken;
(vi) such Member has duly executed and delivered this Agreement, (vii) this
Agreement constitutes a valid and binding agreement, enforceable against such
Member in accordance with its terms; and (viii) such Member’s authorization,
execution, delivery, and performance of this Agreement do not conflict with any
other agreement or arrangement to which such Member is a party or by which it is
bound. Each Member has made all filings with, given any notification to, and
obtained any authorization from any Governmental Authority that may be necessary
to execute and deliver this Agreement and perform its obligations under this
Agreement.

 

SECTION 9.02.         Permitted Transfers.

 

(a)          Subject to the provisions of this Article IX, no Member (other than
Investor) may Transfer any portion of its Membership Units at any time without
the prior written consent of Investor, which consent shall not be unreasonably
withheld.

 

(b)          All Members shall otherwise comply with Section 9.01 and the
following terms and conditions:

 

(i)          such Member and its Transferee must execute, acknowledge, and
deliver to the Company such instruments of Transfer and assignment with respect
to such Transfer as are in form and substance reasonably satisfactory to the
Company, including the execution of this Agreement;

 

(ii)         such Member must provide the Company with the notification required
by Section 6050K(c)(1) of the Code; and

 

(iii)        if requested by the Board of Managers, such Member must deliver to
the Company an opinion of reputable counsel that such Transfer will not cause
the Company to be treated as a publicly traded partnership for United States
Federal income Tax purposes or would otherwise jeopardize the treatment of the
Company as a partnership for United States Federal income Tax purposes (or such
other opinion as reasonably requested by the Board of Managers).

 

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(c)          In the event the conditions set forth in Section 9.02(a) or (b) are
not satisfied in connection with any Transfer subject thereto, the Company shall
not recognize the attempted purchaser, assignee, or Transferee for any purpose
whatsoever, such Transfer shall be null and void, the Member attempting such
Transfer shall have breached this Agreement, and the Company and the other
Members shall have all remedies available for breach of contract. A Transferee
shall automatically be admitted as a Member of the Company with respect to the
Transferred Membership Units upon consummation of the Transfer in compliance
with this Article IX.

 

SECTION 9.03.         Right of First Refusal.

 

(a)          If any Member, other than Investor, holding a greater than one
percent (1%) Percentage Interest in the Company proposes to Transfer any
Membership Units (the “Offeror”) (other than a Member exercising its tag-along
right under Section 9.04 or a Transfer by a Member to a Permitted Transferee),
such Member shall deliver to the Company and Investor (each, an “Offeree”) a
notice of such proposal (an “Offer Notice”), which Offer Notice shall (i)
specify the series and number of Membership Units, and the Percentage Interest
represented thereby, proposed to be sold (the “Offered Interests”) and the
applicable purchase price, and material terms of the proposed sale, and (ii)
offer Investor first and the Company second the option to acquire all or a
portion of such Offered Interests upon the same terms and subject to the same
conditions as set forth in the Offer Notice.

 

(b)          For a period of fifteen (15) Business Days (the “Offer Period”)
following the Offerees’ receipt of such notice, the Offerees shall have the
option, exercisable upon delivery of a reply notice (a “Reply Notice”) to the
Offeror, to require the Offeror to Transfer to the Offeree the Offered Interests
at the price per Membership Unit specified in the Offer Notice, it being
understood that the Company shall have the right to deliver a Reply Notice only
as and to the extent that Investor shall have first declined to exercise its
rights under this Section 9.03 in respect of all of the Offered Interests.

 

(c)          In the event an Offeree or Offerees make a timely election pursuant
to Section 9.03(b) to acquire all of the Offered Interests, as soon as
reasonably practical, but in any event not more than fifteen (15) Business Days
following the deadline for Reply Notices, the Offeror and the Offeree(s) shall
close the Transfer of the specified Membership Units. Upon such closing, the
Offerees shall deliver to the Offeror in immediately available funds the
purchase price specified in the Offer Notice, and the Offeror shall deliver to
each such Offeree a duly executed instrument of assignment, representing the
Membership Units to be Transferred.

 

(d)          In the event no Offeree makes a timely election pursuant to Section
9.03(b) to acquire all and not less than all of the Offered Interests, for a
period of ninety (90) days following the expiration of the Offer Period, the
Offeror shall be entitled, without further obligation to the Offerees (other
than those making an election pursuant to Section 9.04), to Transfer the Offered
Interests to a third party on terms and conditions substantially the same as
those in the Offer Notice and at a price per Membership Unit not less than the
price specified in the Offer Notice (with the fair market value of any non-cash
consideration determined in accordance with the procedure set forth in the
definition of Fair Market Value).

 

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SECTION 9.04.         Tag-Along Rights.

 

(a)          If Investor proposes to Transfer Membership Units to any Person
(other than a Transfer to a Permitted Transferee in accordance with Section
9.02(b)), Investor shall deliver to the Company and all other Members a written
notice of such proposed sale (a “Tag-Along Notice”), specifying the series and
number of Membership Units it intends to sell, such other Member’s Pro Rata
Amount of such Membership Units, the purchase price per Membership Unit (the
“Tag-Along Price”) and any other material terms and conditions of the proposed
sale. Each of the other Members shall have the right to participate in the
proposed sale by Transferring at the same price and on the other terms and
conditions specified in the Tag-Along Notice, any portion of its Pro Rata Amount
of the Membership Units in such sale by delivering a written notice (the “Holder
Notice”) during the thirty (30)-day period after the date of delivery of the
Tag-Along Notice. Upon the expiration of such thirty (30)-day period, Investor
may consummate such proposed sale, selling the number of Membership Units
indicated in the Tag-Along Notice (less the aggregate number of Membership Units
that each of the other Members has indicated an intent to sell in such
transaction by delivery to Investor of the Holder Notice) along with the
Membership Units with respect to which each of the other Members has indicated
an intent to sell in such transaction by delivery of the Holder Notice, at any
time up to ninety (90) days after delivery of the Tag-Along Notice.

 

(b)          If the Membership Units proposed to be Transferred by Investor and
the other Members as indicated on the Holder Notices exceeds the number of
Membership Units to be acquired by the proposed Transferee, then each of
Investor and the other Members shall Transfer a pro rata portion (based on their
respective Percentage Interests as a percentage of the aggregate Percentage
Interest of all Members selling Membership Units immediately prior to such
Transfer) of such number of Membership Units that the proposed Transferee is
willing to acquire.

 

(c)          Each Member exercising its rights under this Section 9.04 shall
execute and deliver such instruments of conveyance and transfer, including any
sales or indemnification agreements, and take such actions as may reasonably be
requested to consummate the proposed sale of the Membership Units on the same
terms and conditions as Investor; provided, however, that in no event shall a
Member be held liable for any breach of any other Member in respect of its
representations, warranties or obligations, and the aggregate amount of
liability for each Member in connection with such Transfer shall in no event
exceed the gross proceeds for its Transferred Membership Units; provided,
further, that if the Transfer giving rise to the rights under this Section 9.04
consists of at least 50% of Investor’s Membership Units, then each other Member
shall be afforded the same protections provided under Section 9.05(c) with
respect to such Member’s exercise of its rights under this Section 9.04.

 

(d)          The aggregate purchase price to be paid to a selling Member for
Membership Units under this Section 9.04 will be determined by the principal
outside accountants to the Company and will equal the aggregate amount that
would be distributed to such selling Member pursuant to Section 6.04 if all of
the Company’s assets and liabilities had been sold at an aggregate purchase
price equal to the product of (i) the Tag-Along Price multiplied by (ii) the
number of issued and outstanding Membership Units as of the date of the
Tag-Along Notice.

 

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SECTION 9.05.         Drag-Along Rights.

 

(a)          If Investor proposes to Transfer all of the Membership Units owned
by it and its Affiliates, to any Person other than a Permitted Transferee (the
“Drag-Along Buyer”), Investor will deliver a written notice not later than
twenty (20) Business Days prior to the proposed date of consummation of such
proposed sale (a “Drag-Along Notice”) to each Member other than Investor and any
Affiliate of Investor (each, a “Drag-Along Member”), stating that Investor
wishes to exercise its right under this Section 9.05 with respect to such
Transfer, and setting forth the name and address of the Drag-Along Buyer, a
description of the transaction, the proposed amount and form of the
consideration, and all other material terms and conditions offered by the
Drag-Along Buyer.

 

(b)          Upon delivery of a Drag-Along Notice, each Drag-Along Member shall
be required to Transfer all of its Membership Units to the Drag-Along Buyer,
upon the same terms and conditions (including as to price (subject to Section
9.05(e)), time of payment and form of consideration) as agreed by Investor and
the Drag-Along Buyer.

 

(c)          Each Member agrees to take all reasonable actions necessary or
desirable, consistent with actions taken by Investor, to carry out the purpose
of this Section 9.05 and execute all documents reasonably requested by Investor
to effect the Transfer to the Drag-Along Buyer; provided that no Member shall be
required to make representations and warranties in connection with a Transfer to
a Drag-Along Buyer other than customary representations and warranties, on a
several and not joint basis, regarding (i) the power and authority of that
Member to engage in the Transfer, (ii) the existence of any material violations
as a result of such Transfer under any material agreement to which such Member
is a party, (iii) the absence of any consents or approvals (other than those
which have been obtained), and (iv) that the Member has good and marketable
title to its Membership Units, free and clear of all liabilities, liens and
encumbrances. If the other Members have any indemnification obligations in
connection with such Transfer, the terms and conditions of each such Member’s
indemnification obligation shall be several and shall not exceed the net
proceeds to such Member in connection with such Transfer. Each Member agrees to
pay its pro rata share of the expenses incurred in connection with a Transfer
pursuant to this Section 9.05.

 

(d)          If any Drag-Along Member fails to Transfer to the Drag-Along Buyer
its Membership Units to be sold pursuant to this Section 9.05, each Member
agrees that the Company may cause such Membership Units to be Transferred to the
Drag-Along Buyer on the Company’s books in consideration of the purchase price.

 

(e)          The proceeds of any sale pursuant to this Section 9.05 shall be
distributed in accordance with Section 6.04.

 

SECTION 9.06.         Right of First Refusal on Development Project
Opportunities and Development Buy-Out Right.

 

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(a)          If during the period commencing on the Effective Date and ending on
the fifth anniversary of the Effective Date, Development or any of its Related
Parties proposes to sell any equity or assets relating to or in connection with
the development, construction or operation by Development or such Related
Parties of an energy generation facility to a third party (a “Development
Project Opportunity”), Development or the applicable Related Party shall deliver
to Entropy a written notice of such Development Project Opportunity (a “Project
Opportunity Offer Notice”), which Project Opportunity Offer Notice shall (i)
specify the applicable purchase price and material terms of the proposed sale
and shall include a description of the equity and assets to be sold, and such
financial, regulatory, Tax and other information material to an investor in
order to make an investment determination with respect to the Development
Project Opportunity, and (ii) offer Entropy (which for purposes of Section
9.06(a)-(c), shall include Investor and the Related Parties of Entropy and
Investor) the option to acquire all or a portion of such Development Project
Opportunity (“Project Opportunity Right of First Refusal”).

 

(b)          For a period of twenty (20) Business Days (the “Project Opportunity
Offer Period”) following Entropy’s receipt of a Project Opportunity Offer
Notice, Entropy shall have the option, exercisable upon delivery of a written
reply notice (“Reply Notice”) to Development, to require Development to grant to
Entropy a sixty (60) day exclusive right for Entropy to perform due diligence,
negotiate definitive agreements to acquire and consummate the acquisition of,
the equity or the assets relating to the Development Project Opportunity, on
such terms as may be agreed to by the parties following good faith negotiations.
For the avoidance of doubt, the exercise by Entropy of the Project Opportunity
Right of First Refusal relating to a Development Project Opportunity shall not
obligate Entropy to acquire the assets or equity relating to such Development
Project Opportunity, which obligation shall arise only upon the execution and
delivery by Entropy of a definitive acquisition or similar agreement with
respect to such equity or assets.

 

(c)          If Entropy fails to make a timely election pursuant to Section
9.06(b) with respect to any Development Project Opportunity, Development shall
be free, without further obligation to Entropy for a period of 180 days
following the expiration of the applicable Project Opportunity Offer Period, to
sell or otherwise deal with the equity or the assets relating to such
Development Project Opportunity to a third party on terms not materially more
favorable to such third party than those contained in the Project Opportunity
Offer Notice. If Development fails to consummate such proposed sale or other
transaction within such 180-day period, then any proposed sale or transaction
relating to such Development Project Opportunity shall again become subject to
the right of first refusal obligations and procedures set forth in Section
9.06(a)-(c).

 

(d)          At any time on one occasion after the first anniversary date of the
“Commercial Operation Date” (as defined in the EPC Agreement), Development shall
have the right to acquire all the Membership Units held by Investor and its
Affiliates (such acquisition, an “Investor Buy-Out”), on terms customary for
similar transactions and acceptable to Investor, for a cash purchase price equal
to the product of (i) the appraised value of the Company (as determined in
accordance with Section 9.06(e)), multiplied by (ii) the Percentage Interest of
Investor and its Affiliates on the closing date of such acquisition.

 

36

 

 

(e)          To exercise the Investor Buy-Out right, Development shall deliver
to Investor a written binding irrevocable offer (“Buy-Out Offer Notice”) to
acquire all the Membership Units held by Investor and its Affiliates in the
Investor Buy-Out. Promptly upon receipt of the Buy-Out Offer Notice, promptly,
Investor shall select an appraiser (the “Investor Appraiser”), and Development
shall select an appraiser (the “Development Appraiser”). Investor and
Development shall each notify the other in writing of the name and contact
information of its respective appraiser. The Investor Appraiser and the
Development Appraiser shall promptly select a third appraiser, who shall be an
independent seasoned appraiser experienced in the appraisal of the business
engaged in by Project LLC and the Company in the geographic markets in which
they operate. The third appraiser shall determine the fair market value of the
Company, through a reasonable application of a reasonable valuation method of
the enterprise value of the Company as a going concern (taking into account net
worth, prospects, market conditions, comparable public and private companies and
comparable transactions), which determination shall be binding. The Company
shall cooperate with the third appraiser and provide it with such information
about its business and operations and the business and operations of Project LLC
as may be reasonably requested by the third appraiser and reasonably required to
perform the appraisal. The closing of the Investor Buy-Out shall take place
within forty-five (45) days after the determination of the fair market value of
the Company by the third appraiser.

 

(f)          Notwithstanding anything to the contrary set forth herein,
Development shall have no right to effect the Investor Buy-Out at any time after
Investor has delivered a Tag-Along Notice in accordance with Section 9.04(a) or
a Drag-Along Notice in accordance with Section 9.05(a).

 

(g)          As long as Development and its Related Parties have presented, in
the aggregate, to Entropy at least two Development Project Opportunities in
accordance with Section 9.06(a)-(c) during each calendar year (beginning with
calendar year 2015), the purchase price to be paid by Development for the
Membership Units of Investor and its Affiliates pursuant to Section 9.06(d)
shall be reduced such that it will be equal to the product of (i) the appraised
value of the Company (as determined in accordance with Section 9.06(e)),
multiplied by (ii) the Percentage Interest of Investor and its Affiliates on the
closing date of such acquisition, multiplied by (iii) 0.9. If Development and
its Related Parties fail to present at least two such Development Project
Opportunities during any calendar year as described in the immediately preceding
sentence, then (x) such 10% discount on the purchase price to be paid by
Development for the Membership Units of Investor and its Affiliates pursuant to
Section 9.06(d) shall no longer be applicable, and (y) Investor shall no longer
be entitled to a right of first refusal with respect to Project Development
Opportunities pursuant to Section 9.06(a)-(c).

 

ARTICLE X
CERTAIN OBLIGATIONS OF THE COMPANY AND THE MEMBERS

 

SECTION 10.01.         Other Businesses; Liability and Duties.

 

(a)          Except as otherwise expressly provided herein, each of Investor,
the Investor Managers and the Investor Alternate, and their respective
Affiliates, on the one hand (together, the “Investor Entities”) and Development,
the Development Manager, and their respective Affiliates, on the other hand
(together, the “Development Entities”), may engage in or possess an interest in
any other business venture of any nature or description, on its own account, or
in partnership with, or as an employee, officer, director, trustee, manager,
stockholder, member or beneficiary of any other Person.

 

37

 

 

(b)          Without limiting the generality of the foregoing, each of the
Investor Entities and Development Entities may invest in, or provide services
to, any Person that directly or indirectly competes with the Company or any of
its Subsidiaries, and none of the Investor Entities or Development Entities will
have any obligation to present any business opportunity to the Company or any of
its Subsidiaries, even if the opportunity is one that the Company or any
Subsidiary of the Company might reasonably be deemed to have pursued or had the
ability or desire to pursue if granted the opportunity to do so, and the
Investor Entities and Development Entities shall not be liable to the Company or
any Subsidiary of the Company or any Member for breach of any fiduciary or other
duty, as a Member, Manager, alternate Manager or otherwise, solely by reason of
the fact that Investor, Development or any of the other Investor Entities or
Development Entities pursues or acquires such business opportunity, directs such
business opportunity to another Person or fails to present such business
opportunity, or information regarding such business opportunity, to the Company
or any Subsidiary of the Company. The Company renounces any interest or
expectancy of the Company in, or being offered to participate in any such
opportunity.

 

(c)          Each Member (for itself and on behalf of the Company) hereby, to
the fullest extent permitted by Applicable Law but subject to Section 10.01(d)
and (e):

 

(i)          confirms that Investor and Development have no duty to any other
Member or to the Company or any Subsidiary of the Company as a result of this
Agreement other than specific covenants and agreements set forth in this
Agreement;

 

(ii)         acknowledges and agrees that (A) in the event of any conflict of
interest between the Company and any Investor Entity or Development Entity that
may from time to time arise, such Investor Entity or Development Entity may act
in its best interest and (B) no such Investor Entity or Development Entity shall
be obligated to (1) reveal to the Company or any Subsidiary of the Company
confidential information belonging to or relating to the business of such Person
or (2) recommend or take any action in its capacity as a Member, Manager or
alternate Manager thereof, as the case may be, that prefers the interest of the
Company or any Subsidiary of the Company over the interest of such Person; and

 

(iii)        waives any claim or cause of action against each Investor Entity
and Development Entity and any officer, employee, agent or Affiliate thereof,
that may from time to time arise in respect of a breach by any such Person of
any duty or obligation disclaimed under clauses (i) and (ii) of this Section
10.01(c).

 

(d)          Investor, for itself and on behalf of the other Investor Entities,
and Development, for itself and on behalf of the other Development Entities,
each agrees that the waivers, acknowledgments and agreements set forth in
Section 10.01(c)(iii) shall not apply to any alleged claim or cause of action
against any Investor Entity or Development Entity, as the case may be, or any of
their respective employees, officers, directors, agents or authorized
representatives based upon the breach or non-performance by an Investor Entity
or Development Entity of this Agreement or by any Investor Entity or Development
Entity of any other agreement to which the Company and such Investor Entity or
Development Entity is a party.

 

38

 

 

(e)          The provisions of this Section 10.01, to the extent that they
restrict the duties and liabilities of a Member, Manager or alternate Manager
otherwise existing at law or in equity, are agreed by the Members to replace
such duties and liabilities of such Member, Manager or alternate Manager that
might otherwise exist but for this Agreement.

 

(f)           The Company, any Subsidiary of the Company and the Members shall
have no rights by virtue of this Agreement in and to any other business ventures
or the income or profits derived therefrom, and the pursuit of any such venture
held or engaged by any Investor Entity or Development Entity.

 

(g)          Nothing contained in this Agreement shall be construed as creating
any fiduciary relationship of any nature between any Member and any other
Member.

 

(h)          Notwithstanding anything in this Agreement to the contrary
(including without limitation the provisions of Section 10.01(a)-(g)), the
provisions of this Section 10.1 are subject to Investor’s right of first refusal
with respect to Project Development Opportunities.

 

SECTION 10.02.         Insurance. The Company shall maintain or cause to be
maintained, with financially sound and reputable insurers, key person insurance,
public liability insurance, property damage insurance, business interruption
insurance and casualty insurance as may customarily be carried or maintained
under similar circumstances by Persons engaged in similar businesses as the
Company and its Subsidiaries.

 

SECTION 10.03.         Investor Company Employee. For the avoidance of doubt,
Investor shall have the right, but not the obligation, to employ a person at the
Company on commercially reasonable terms or have such employee visit the Company
at reasonable times and with reasonable notice to oversee the business and
operations of the Company. Such employee shall be given full access to the
Company’s books and records and its personnel. The reasonable travel expenses of
such employee shall be paid for by the Company.

 

ARTICLE XI
DISSOLUTION AND LIQUIDATION

 

SECTION 11.01.         Dissolution. The Company shall be dissolved and its
affairs wound up:

 

(a)          at any time there are no Members of the Company unless the business
of the Company is continued without dissolution in a manner permitted by the
Act;

 

(b)          upon the occurrence of a Liquidation Event; or

 

(c)          upon the entry of a decree of judicial dissolution of the Company
pursuant to Section 18-802 of the Act.

 

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SECTION 11.02.         Winding Up.

 

(a)          Upon dissolution pursuant to Section 11.01, the Board of Managers,
or in the case of dissolution pursuant to Section 11.01(a), Investor, shall
appoint a liquidator. The liquidator will proceed as promptly as practicable to
wind up the affairs of the Company and make final distributions as provided in
this Section 11.02. The liquidator may sell (which may include sales to
Members), and will use commercially reasonable efforts to obtain the best
possible price for, any or all of the Company property. In no event, without the
approval of the Members representing at least eighty percent (80%) of the
Membership Units, will a sale to a Member be for less than fair market value.
Any assets of the Company not sold by the liquidator will be deemed sold for
their fair market value. The appointment of any one or more liquidating trustees
may be revoked, or a successor or additional liquidating trustee(s) may be
appointed, by the Board of Managers.

 

(b)          Upon a Liquidation Event, all of the Company’s assets, or the
proceeds therefrom, shall be distributed in the following order of priority:

 

(i)          first, to creditors of the Company, including any Member in its
capacity as a creditor, to the extent otherwise permitted by Applicable Law, in
satisfaction of debts, liabilities and obligations of the Company;

 

(ii)         second, to the payment of the expenses of liquidation;

 

(iii)        third, for the setting up of any reserves that the Board of
Managers, Investor or the liquidating trustee(s), as the case may be, may deem
reasonably necessary for any contingent, conditional or unmatured claims and
obligations of the Company, including but not limited to any unpaid amounts due
and payable by the Company pursuant to the indemnity provisions set forth in
this Agreement, provided such amount has been agreed upon by the parties to this
Agreement or determined by a court or arbitration panel of competent
jurisdiction or otherwise finally determined; and

 

(iv)        fourth, to the Members as provided in Section 6.04.

 

(c)          Any amount set up as a reserve pursuant to Section 11.02(b)(iii)
that is subsequently released shall be distributed to the Members in accordance
with clause (iv) of Section 11.02(b).

 

(d)          At no time during the term of the Company or upon dissolution or
liquidation of the Company shall a Member with a deficit balance in its Capital
Account have any obligation to the Company or to the other Members to restore
such deficit balance, except as may be required by Applicable Law or in respect
of any deficit balance resulting from a distribution made in contravention of
this Agreement.

 

40

 

 

ARTICLE XII
MISCELLANEOUS

 

SECTION 12.01.         Injunctive Relief. It is hereby agreed and acknowledged
that it will be difficult to measure in money the damages that would be suffered
if the parties hereto failed to comply with any of the obligations herein
imposed on them (and that every such obligation is material) and that in the
event of any such failure, an aggrieved Person will be irreparably damaged and
will not have an adequate remedy at law. Any such Person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations (in addition to remedies at law or damages), and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law.

 

SECTION 12.02.         Notices. All notices, requests, consents, agreements or
other communications under this Agreement must be in writing to be effective and
will take effect (or be deemed to have been given or delivered, as the case may
be): (a) on the Business Day sent, when delivered by hand, by electronic mail
(with read receipt confirmation) or facsimile transmission (with confirmation)
during normal business hours of the recipient, (b) on the Business Day following
the Business Day of sending, if delivered by internationally recognized
overnight courier, in each case, to such party at its address (or number) set
forth on Exhibit B or such other address (or number) as the party may specify by
notice.

 

SECTION 12.03.         Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Members and the Company, and their
respective successors and Permitted Transferees. This Agreement is personal to
the Members and the Company, and neither any Member nor the Company may assign
or Transfer (except to Permitted Transferees) the rights accruing hereunder, and
(except as aforesaid or as permitted by this Agreement) performance of any
duties by any Member or the Company not be delegated or assumed by any other
Person without the prior written consent of the other Members and the Company.
For purposes of this Agreement, any references to a Member shall be deemed to
include such Member’s Permitted Transferees. Assignments or delegations made in
violation of this Section 12.03 shall be null and void. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto (or their respective successors and permitted assigns) or any
indemnified party under Section 7.04, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.

 

SECTION 12.04.         Governing Law; Arbitration.

 

(a)          This Agreement and all matters arising out of or relating to this
Agreement shall be governed by and construed in accordance with the internal
Laws of the State of Delaware without regard to any otherwise applicable
conflicts-of-laws principles.

 

41

 

 

(b)          Any controversy or claim by or between the parties related in any
way to this Agreement shall be settled by binding arbitration administered by
the American Arbitration Association (the “AAA”) in accordance with its
Commercial Arbitration Rules; provided that nothing herein shall require
arbitration of any claim or charge which, by Law, cannot be the subject of a
compulsory arbitration agreement. Any arbitration proceeding brought under this
Agreement shall be conducted in New York City by a single arbitrator appointed
by agreement of the parties within thirty (30) days of receipt by respondent of
the demand for arbitration, or in default thereof by the AAA. Each of Investor,
on behalf of itself and its Affiliates, and Development, on behalf of itself and
its respective Permitted Transferees, Related Parties, Affiliates and
Subsidiaries, agrees to be bound by this arbitration clause provided that it has
either (i) signed this Agreement or an agreement that incorporates this
Agreement by reference or (ii) signed any other agreement to be bound by or
cause any of its respective Permitted Transferees, Related Parties, Affiliates
or Subsidiaries to be bound by this arbitration clause. The arbitrator, in
rendering an award in any arbitration conducted pursuant to this provision,
shall issue a reasoned award stating the findings of fact and conclusions of law
on which it is based, and the arbitrator shall be required to follow the Law of
the state designated by the parties herein. Any judgment or enforcement of any
award, including an award providing for interim or permanent injunctive relief,
rendered by the arbitrator may be entered, enforced or appealed from in any
court having jurisdiction thereof. Any arbitration proceedings, decision or
award rendered hereunder, and the validity, effect and interpretation of this
arbitration provision, shall be governed by the Federal Arbitration Act, 9
U.S.C.§ 1 et seq. In any arbitration proceedings under this Agreement, each
party shall pay all of its own legal fees, including counsel fees, but AAA
filing fees and arbitrator compensation shall be paid pursuant to the AAA
Employment Arbitration Rules, unless otherwise provided by Law for a prevailing
party. The parties agree that, notwithstanding the foregoing, prior to the
appointment of the arbitrator, nothing herein shall prevent any party from
seeking preliminary or temporary injunctive relief against any other party in
the United States Federal or state courts of New York, County of New York. For
the avoidance of doubt, any actions for permanent relief or monetary damages
shall be settled by arbitration.

 

SECTION 12.05.         Set-Off. Amounts owed under this Agreement or the
Development and Indemnification Agreement or the Project LLC Purchase Agreement
to any Member or to any Transferee or assignee thereof by any other Member or
Affiliate of any other Member shall be subject to set-off or recoupment to the
extent necessary to satisfy any unsatisfied indemnification obligations under
this Agreement, the Development and Indemnification Agreement or the Project LLC
Purchase Agreement, upon written notice to the Member against whose assets the
right of set-off is being made. The exercise of such right of set-off by
Investor in good faith, whether or not ultimately determined to be justified,
will not constitute a default under this Agreement, the Development and
Indemnification Agreement, the Project LLC Purchase Agreement or the Orbit
Purchase Agreement. Amounts owed to the Company or any Subsidiary of the Company
by any Member or any Affiliate of any Member shall be subject to set-off or
recoupment to the extent necessary to satisfy any such unsatisfied obligations
upon written notice to the Member against whose assets the right of set-off is
being made. The exercise of such right of set-off by the Company in good faith,
whether or not ultimately determined to be justified, will not constitute a
default under this Agreement. Not in limitation of the foregoing, pursuant to
the Project LLC Purchase Agreement and the Orbit Purchase Agreement, Development
has certain obligations to make certain payments and pay certain fees and
expenses to counterparties to such agreements, including without limitation, the
development fee, the seller participation fee, an extension fee, the management
fee and other fees and expenses described in such agreements, and if Development
fails to perform its obligations under the Project LLC Purchase Agreement or the
Orbit Purchase Agreement, and the Company or its Subsidiary deems it necessary
or advisable for their respective businesses or otherwise, to pay all or a
portion of such fees or to perform any of the obligations of Development under
the Project LLC Purchase Agreement or the Orbit Purchase Agreement, then any
such amounts paid by the Company and/or its Subsidiary shall be subject to
set-off or recoupment to the extent necessary to satisfy any such unsatisfied
obligations upon written notice to Development.

 

42

 

 

SECTION 12.06.         Entire Agreement; Amendment. This Agreement (including
the exhibits hereto) contains the entire agreement among the parties hereto with
respect to the transactions contemplated herein, supersede all prior written
agreements and negotiations and oral understandings, if any, and this Agreement
(including exhibits hereto) may be amended or waived only upon the vote or
written consent of the Members holding at least a majority of the Membership
Units, voting together as a single class, provided, that any amendment of this
Agreement that may be reasonably interpreted as adversely affecting the rights
or obligations of Development shall require the consent of Development and,
provided, further, at any time Investor ceases to own a majority of the
aggregate Membership Units of the Company, any amendment that may be reasonably
interpreted as adversely affecting the rights of Investor shall require the
consent of Investor. The Board of Managers shall send each Member a copy of any
amendment adopted pursuant to this Section 12.06.

 

SECTION 12.07.         No Waiver. No failure to exercise and no delay in
exercising any right, power or privilege of a Member shall operate as a waiver
or as a consent to the modification of the terms hereof unless given by that
Member in writing.

 

SECTION 12.08.         Confidentiality. Each Member shall use reasonable efforts
to keep, and shall ensure that its officers and employees use reasonable efforts
to keep, from and after the Effective Date through a period of one (1) year from
the date such Member no longer owns any Membership Units, unless otherwise
agreed to by the Members, confidential and shall not use except on behalf of the
Company all information (“Confidential Information”) acquired from the Company
or its Subsidiaries or from the other Members or their Affiliates pursuant to
this Agreement or otherwise, including the contents of this Agreement and the
identity of the Members, except that the foregoing restriction shall not apply
to any information that (a) is or hereafter becomes generally available to the
public other than by reason of any default with respect to a confidentiality
obligation under this Agreement; (b) was already known to the recipient; (c) is
disclosed to the recipient by a third party who, to the recipient’s knowledge,
is not in default of any confidentiality obligation to the disclosing party
hereunder; (d) was developed by or on behalf of the receiving Member without
reliance on confidential information received hereunder; (e) is disclosed by any
Member to its auditors, attorneys, financial advisors, consultants and other
advisors, provided, that any such auditors and attorneys have been informed of
the confidential nature of such information, and any such financial advisors,
consultants and other advisors have signed a confidentiality agreement agreeing
to treat such information as confidential; and provided further that such
disclosure does not thereby permit disclosure by such Member to others; (f) is
disclosed to any partners of, investors in or advisors or consultants to any
such Member or to any prospective partner to such Member or any Affiliate of any
such Member or such prospective partner or such prospective partner’s advisors
or consultants; provided that information disclosed pursuant to this clause (f)
shall only include summary financial information, historical financial results,
a description of the Business and a description of this Agreement and the
Development and Indemnification Agreement; (g) to any bona fide purchaser or
prospective purchaser of Membership Units provided that such purchaser or
prospective purchaser has signed a customary confidentiality and /or
non-disclosure agreement pursuant to which the Company is a beneficiary of the
confidentiality provisions therein; (h) is disclosed to a regulatory authority
to the extent that disclosure is, in the party’s good faith judgment, required
or appropriate; provided, that such party requests confidential treatment for
any information so disclosed or (i) is otherwise required to be disclosed in
compliance with Applicable Laws or regulations or order by a court or other
regulatory body having competent jurisdiction. Each Member further agrees not to
use any Confidential Information obtained by such Member in connection with a
specific transaction being considered by the Company for any purpose other than
in consideration of such transaction.

 

43

 

 

SECTION 12.09.         Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

SECTION 12.10.         Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.

 

SECTION 12.11.         Further Assurances. From time to time, at the reasonable
request of any party hereto and without further consideration, each other party
hereto shall execute and deliver such additional documents and take all such
further action as may be necessary or appropriate to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement or to carry out the terms of this Agreement.

 

SECTION 12.12.         Survival of Obligations. The obligations of the parties
hereto under Section 7.04, Section 10.01, Section 12.01, Section 12.04, Section
12.05 and Section 12.08 of this Agreement shall survive any expiration,
termination or cancellation of this Agreement.

 

SECTION 12.13.         No Third Party Beneficiaries. Nothing in this Agreement
shall be construed as giving any Person, other than the parties hereto, their
successors and permitted assigns, any right, remedy or claim under or in respect
of this Agreement or any provision hereof, except that (i) any Person who is
entitled to indemnification pursuant to Section 7.04 and is not party to this
Agreement shall be a third party beneficiary of this Agreement to the extent
required for purposes of such Section 7.04 and (ii) Entropy shall be a third
party beneficiary of this Agreement to the extent required for the purposes of
Article VII and Section 9.06.

 

[Remainder of Page Intentionally Left Blank]

 

44

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

  

  Rhode Island Energy Partners, LLC       By: York Renewable Energy Partners
LLC, its Sole Member               By:         Name:       Title:

 

Signature Page to Amended and Restated Limited Liability Company Agreement

 

 

 

 

  York Renewable Energy Partners LLC       By:       Name:     Title:

 

Signature Page to Amended and Restated Limited Liability Company Agreement

 

 

 

 

  Blue Sphere Corporation       By:       Name:     Title:

 

Signature Page to Amended and Restated Limited Liability Company Agreement

 

 

 

 

EXHIBIT A

MEMBERSHIP UNITS AND PERCENTAGE INTERESTS

 

Member   Series and Number of
Membership Units   Percentage Interest               York Renewable Energy
Partners, LLC   7,725 Series A Units   77.25 %             Blue Sphere
Corporation   2,275 Series B Units   22.75 %

 

A-1

 

 

EXHIBIT B

ADDRESSES FOR NOTICE

 

if to the Company or Investor:

 

c/o York Capital Management

767 Fifth Avenue, 17th Floor, New York, New York 10153

Tel 212-710-6567

Fax 646-514-9321

Attention: General Counsel

Email: mmauro@yorkcapital.com

 

if to Development:

 

Blue Sphere Corporation
301 McCullough Drive, 4th Floor
Charlotte, NC 28262
Attn: Shlomi Palas

 

with copies to:

 

Orit Marom-Albeck, Adv.
4 Berkowitz St. Level 8 (Museum Tower)
Tel-Aviv , Israel, 6423806
Tel: +972-3-7778333
Fax: +972-3-7778444
e-mail: oritma@shibolet.com

 

B-1

 

 

EXHIBIT C

INITIAL PROJECT BUDGET

 

C-1