Securities and Exchange Commission
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 3)
Energy Conversion Devices, Inc.
(Name of Issuer)
Common Stock, $0.01 par value
(Title of Class of Securities)
292659109
(CUSIP Number)
ChevronTexaco Corporation
(Name of Person Filing Statement)
Lydia I. Beebe
Corporate Secretary Terry M. Kee
ChevronTexaco Corporation Pillsbury Winthrop LLP
6001 Bollinger Canyon Road 50 Fremont Street
San Ramon, California 94583 San Francisco, California 94105
Telephone: (925) 842-1000 Telephone: (415) 983-1000
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications)
December 2, 2004
(Date of Event Which Requires Filing of this Statement)
-------------------------------------
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Section 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box.
[ ] Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 292659109
(1) Names of Reporting Persons............................. ChevronTexaco Corporation
I.R.S. Identification Nos. of above persons (entities only) ChevronTexaco Overseas Petroleum Inc.
Chevron Asiatic Limited
Texaco Inc.
TRMI Holdings Inc.
(2) Check the appropriate box if a member of a group (see
instructions).............................................. (a) [ ]
(b) [x]
(3) SEC use only...........................................
(4) Source of funds (see instructions)..................... OO
(5) Check if disclosure of legal proceedings is required
pursuant to Items 2(d) or 2(e) [ ]
(6) Citizenship or place of organization................... ChevronTexaco Corporation: Delaware
ChevronTexaco Overseas Petroleum Inc.: Delaware
Chevron Asiatic Limited: Delaware
Texaco Inc.: Delaware
TRMI Holdings Inc.: Delaware
Number of shares beneficially owned by each reporting person
with:
(7) Sole voting power................................. 4,376,633
(8) Shared voting power............................... 0
(9) Sole dispositive power............................ 4,376,633
(10) Shared dispositive power......................... 0
(11) Aggregate amount beneficially owned by each reporting
person..................................................... 4,376,633
(12) Check if the aggregate amount in Row (11) excludes
certain shares (see instructions) [ ]
(13) Percent of class represented by amount in Row (11).... 17.4 (based on the Schedule 14A filed by the Issuer
with the Securities and Exchange Commission on
October 20, 2004)
(14) Type of reporting person (see instructions)........... ChevronTexaco Corporation: CO
ChevronTexaco Overseas Petroleum Inc. : CO
Chevron Asiatic Limited: CO
Texaco Inc. : CO
TRMI Holdings Inc. : CO
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CUSIP No. 292659109
TRMI Holdings Inc. ("TRMI-H"), its parent corporations Texaco Inc.
("Texaco"), Chevron Asiatic Limited ("CAL"), ChevronTexaco Overseas Petroleum
Inc. ("CTOPI") and its ultimate parent company ChevronTexaco Corporation
("ChevronTexaco") (collectively, the "Corporations") hereby further amend and
supplement the Report on Schedule 13D originally filed by Texaco on June 12,
2000, and amended by Amendment No. 1 on November 7, 2000 and Amendment No. 2 on
September 20, 2001 (the "Schedule 13D") with respect to the common stock, par
value $0.01 per share (the "Common Stock"), of Energy Conversion Devices, Inc.
(the "Issuer"). In October 2001, Texaco became a wholly owned subsidiary of
ChevronTexaco pursuant to a merger transaction. Texaco, CAL, CTOPI and
ChevronTexaco are collectively referred to herein as the "Parent Corporations."
With respect to each contract, agreement or other document referred to
herein and filed with the Securities and Exchange Commission (the "Commission")
as an exhibit to this report, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
ITEM 2. IDENTITY AND BACKGROUND.
The response to Item 2 of the Schedule 13D is hereby amended and
supplemented as follows:
State of
Name Organization Principal Business Address
ChevronTexaco Delaware The description of ChevronTexaco's 6001 Bollinger Canyon Road
Corporation business included in its Annual Report San Ramon, California 94583
on 10-K filed with the Securities and
Exchange Commission on March 9, 2004 is
hereby incorporated by reference herein.
ChevronTexaco Delaware Holding company 6001 Bollinger Canyon Road
Overseas Petroleum San Ramon, California 94583
Inc.
Chevron Asiatic Delaware Holding company 6001 Bollinger Canyon Road
Limited San Ramon, California 94583
Texaco Inc. Delaware Holding company 6001 Bollinger Canyon Road
San Ramon, California 94583
6001 Bollinger Canyon Road
TRMI Holdings Inc. Delaware Holding company San Ramon, California 94583
Schedules I, II, III, IV and V which are attached hereto and
incorporated herein in their entirety by reference, set forth the name,
residence or business address, citizenship and certain employment information of
each of the executive officers and directors of each of the Corporations.
During the last five years, none of the Corporations and none of the
natural persons identified above (a) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The response to Item 3 of the Schedule 13D is hereby amended and
supplemented as follows:
The response to Item 4 below is hereby incorporated herein by
reference.
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CUSIP No. 292659109
ITEM 4. PURPOSE OF TRANSACTION.
The response to Item 4 of the Schedule 13D is hereby amended and
supplemented as follows:
On December 2, 2004 (the "Transaction Date"), TRMI-H and certain of its
affiliates entered into a series of agreements with the Issuer and certain of
its affiliates providing for the transactions described below.
Pursuant to an Option Agreement dated as of the Transaction Date among
the Issuer, Ovonic Battery Company, Inc. ("OBC") and TRMI-H, (the "Option
Agreement"), TRMI-H has granted to OBC an option (the "Option") to purchase all
or any portion of its shares of Common Stock at a price of $4.55 per share;
provided that the Option may not be exercised to purchase fewer than 250,000
shares of Common Stock. The Option may be exercised at any time prior to
November 1, 2005 (the "Termination Date") and is transferable by OBC in
accordance with the Option Agreement. TRMI-H has agreed that until the
Termination Date, it will not transfer any shares of Common Stock except
pursuant to the Option. In the event by the Termination Date (i) the Option is
not exercised, (ii) a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), to permit TRMI-H to make a public offering of
all shares of Common Stock it holds has not been declared effective by the
Commission and (iii) TRMI-H is otherwise unable to effect an immediate public
sale of such shares of Common Stock in full without violation of any applicable
law, the Stock Purchase Agreement dated as of May 1, 2000 between TRMI-H and the
Issuer (the "Stock Purchase Agreement") shall be of no further force or effect.
In the Option Agreement, TRMI-H has requested a Stock Registration (as such term
is defined in the Stock Purchase Agreement) to facilitate exercise of the Option
or sale of the Common Stock held by TRMI-H following the Termination Date and
TRMI-H has agreed that the Issuer may delay the filing of a registration
statement pursuant to such request until May 31, 2005. The Issuer has waived its
rights under Section 4.3(f) of the Stock Purchase Agreement with respect to any
public sale of such shares. The Option Agreement further provides that if OBC
exercises the Option in full on or before May 31, 2005 TRMI-H agrees not to
acquire the Issuer's Common Stock prior to January 1, 2008 without the prior
invitation of the Issuer. A copy of the Option Agreement is filed as Exhibit 4
to this Schedule 13D and is incorporated herein by reference.
Pursuant to a Transfer, Release and Indemnity Agreement (the "TRI
Agreement") dated as of the Transaction Date among the Issuer, ChevronTexaco
Technology Ventures LLC, a wholly owned affiliate of ChevronTexaco ("CTTV"), and
Texaco Ovonic Hydrogen Systems LLC ("TOHS"), CTTV agreed to transfer its
ownership interest in TOHS to the Issuer. CTTV paid the Issuer a restructuring
payment in the amount of approximately $4.7 million concurrent with such
transaction. Pursuant to the TRI Agreement, CTTV and the Issuer have terminated
that certain Limited Liability Company Agreement of Texaco Ovonic Hydrogen
Systems LLC dated as of October 31, 2000 between CTTV and the Issuer and certain
related agreements among CTTV, the Issuer and TOHS. Pursuant to the TRI
Agreement, the Issuer and TOHS, on the one hand, and CTTV, on the other, have
agreed to mutually release one another and certain related persons from
specified losses arising out of such parties' ownership, relationship,
participation or involvement in TOHS. The Issuer and TOHS have also agreed to
jointly and severally indemnify CTTV and certain related persons against
specified losses arising out of CTTV's ownership, relationship, participation or
involvement in TOHS and any misrepresentation, omission, nonfulfillment or
breach by the Issuer or TOHS of the TRI Agreement or specified related
agreements. A copy of the TRI Agreement is filed as Exhibit 5 to this Schedule
13D and is incorporated herein by reference.
The Issuer, OBC and CTTV have agreed to a number of amendments to the
terms of the COBASYS LLC ("COBASYS") joint venture pursuant to an Amended and
Restated Operating Agreement of COBASYS LLC dated as of the Transaction Date
among OBC, the Issuer and CTTV (the "COBASYS Agreement"). Among other things,
the amendments to the COBASYS Agreement (i) clarify the obligations of the
Issuer, OBC and CTTV to provide future funding to COBASYS and the terms under
which any such future funding will be provided, (ii) provide that CTTV will have
increased voting rights on the management committee of COBASYS with respect to
certain matters at any time it has provided certain funding on behalf of the
Issuer and OBC, (iii) grant CTTV a security interest in OBC's membership
interest to secure performance of OBC's obligations under the COBASYS Agreement
and (iv) provide that the capital accounts of CTTV and OBC will be equal as of
the Transaction Date. In addition, OBC has granted COBASYS a royalty-free,
worldwide, exclusive license to certain technology owned by the Issuer and OBC
related to nickel metal hydride batteries ("ECD/OBC Technology"), which grant
extends COBASYS's preexisting license rights in ECD/OBC Technology to a number
of new fields and limits the Issuer's and OBC's rights in ECD/OBC Technology to
other specifically identified fields, such exclusive license being subject to
all preexisting agreements the Issuer and OBC have with other entities regarding
ECD/OBC Technology. COBASYS has also granted to CTTV a security interest in all
of its general intangibles and substantially all of its intellectual
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CUSIP No. 292659109
property assets to secure OBC's performance of its obligations thereunder. A
copy of the COBASYS Agreement is filed as Exhibit 6 to this Schedule 13D and
incorporated herein by reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
The response to Item 5 is hereby amended and supplemented as follows:
(a) The aggregate number of shares of Common Stock of the Issuer
beneficially owned by TRMI-H is 4,376,633 shares. The shares of Common Stock of
the Issuer beneficially owned by TRMI-H represent approximately 17.4% of the
outstanding shares of the Issuer (based on the Schedule 14A filed by the Issuer
with the Securities and Exchange Commission on October 20, 2004).
None of the Parent Corporations owns any shares of the Issuer directly,
but each may be deemed to share beneficial ownership of all the shares of Common
Stock owned by TRMI-H by virtue of its direct or indirect ownership interest in
TRMI-H.
(b) Subject to its obligations under the Stock Purchase Agreement,
TRMI-H has the sole power to vote and dispose of the 4,376,633 shares of Common
Stock it directly owns.
Although TRMI-H has sole voting and dispositive rights, each of the
Parent Corporations may be deemed to share voting and dispositive power with
regard to such shares by virtue of its direct or indirect ownership interest in
TRMI-H.
(c) Recent Transactions: Not applicable.
(d) Rights with Respect to Dividends or Sales Proceeds: Not
applicable.
(e) Date of Cessation of Five Percent Beneficial Ownership: Not
applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
The response to Item 6 of the Schedule 13D is hereby amended and
supplemented as follows:
The description of the Option Agreement appearing above in Item 4 is
hereby incorporated by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The response to Item 7 of the Schedule 13D is hereby amended and
supplemented by adding the following exhibits:
Exhibit 4. Option Agreement dated as of December 2, 2004 among OBC, the
Issuer, and TRMI-H.
Exhibit 5. Transfer, Release and Indemnity Agreement dated as of
December 2, 2004 among the Issuer, CTTV and COBASYS.
Exhibit 6. Amended and Restated Operating Agreement of COBASYS LLC
dated as of December 2, 2004 between OBC and CTTV.
4
CUSIP No. 292659109
Signature
After reasonable inquiry and to the best of their knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Date: December 7, 2004
CHEVRONTEXACO CORPORATION
By: /s/ WALKER C. TAYLOR
--------------------
Name: Walker C. Taylor
Title: Assistant Secretary
CHEVRONTEXACO OVERSEAS PETROLEUM INC.
By: /s/ WALKER C. TAYLOR
--------------------
Name: Walker C. Taylor
Title: Assistant Secretary
CHEVRON ASIATIC LIMITED
By: /s/ WALKER C. TAYLOR
--------------------
Name: Walker C. Taylor
Title: Vice President and Secretary
TEXACO INC.
By: /s/ WALKER C. TAYLOR
--------------------
Name: Walker C. Taylor
Title: Assistant Secretary
TRMI HOLDINGS INC.
By: /s/ WALKER C. TAYLOR
--------------------
Name: Walker C. Taylor
Title: Vice President
5
CUSIP No. 292659109
Schedule I
The following table sets forth the name, residence or business address,
citizenship, present principal occupation or employment, and the name, principal
business and address of any corporation in which such employment is conducted,
of each executive officer and director of ChevronTexaco Corporation
("ChevronTexaco").
Employment Information
------------------------------------------------------------------------------
Name Citizenship Occupation Business Address Business of Employer
- ---------------- ------------- ------------------------ --------------------------- --------------------
S.H. Armacost U.S. Chairman, SRI 6001 Bollinger Canyon Road, Consulting
International San Ramon, California 94583
J.E. Bethancourt U.S. Executive Vice 6001 Bollinger Canyon Road, See Item 2
President, ChevronTexaco San Ramon, California 94583
R.E. Denham U.S. Partner, Munger, Tolles 6001 Bollinger Canyon Road, Law
& Olson, LLP San Ramon, California 94583
R.J. Eaton U.S. Former Chairman of the 6001 Bollinger Canyon Road, Not applicable
Board of Management of San Ramon, California 94583
DaimlerChrysler AG
S. Ginn U.S. Private Investor, Former 6001 Bollinger Canyon Road, Not applicable
Chairman of Vodafone San Ramon, California 94583
C.A. Hills U.S. Chairman and C.E.O. of 6001 Bollinger Canyon Road, Consulting
Hills & Company San Ramon, California 94583
International Consultants
C.A. James U.S. Vice President and 6001 Bollinger Canyon Road, See Item 2
General Counsel, San Ramon, California 94583
ChevronTexaco
F.G. Jenifer U.S. President, University of 6001 Bollinger Canyon Road, Education
Texas at Dallas San Ramon, California 94583
J.B. Johnston U.S. Chief Executive Officer, 6001 Bollinger Canyon Road, Consulting
Johnston & Associates San Ramon, California 94583
G.L. Kirkland U.S. Vice President, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
W.S.H. Laidlaw U.K. Executive Vice 6001 Bollinger Canyon Road, See Item 2
President, ChevronTexaco San Ramon, California 94583
S. Nunn U.S. Co-Chairman and Chief 6001 Bollinger Canyon Road, Charitable
Executive Officer of the San Ramon, California 94583 organization
Nuclear Threat Initiative
D.J. O'Reilly U.S. Chairman of the Board 6001 Bollinger Canyon Road, See Item 2
and Chief Executive San Ramon, California 94583
Officer of ChevronTexaco
P.J. Robertson U.K. Vice-Chairman of the 6001 Bollinger Canyon Road, See Item 2
Board of ChevronTexaco San Ramon, California 94583
C.R. Shoemate U.S. Retired Chairman, 6001 Bollinger Canyon Road, Food products
President and Chief San Ramon, California 94583
Executive Officer of
Bestfoods
C. Ware U.S. Senior Advisor to the 6001 Bollinger Canyon Road, Beverages
CEO of The Coca-Cola San Ramon, California 94583
Company
J.S. Watson U.S. Vice President and Chief 6001 Bollinger Canyon Road, See Item 2
Financial Officer, San Ramon, California 94583
ChevronTexaco
R.I. Wilcox U.S. Vice President of 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
P.A. Woertz U.S. Executive Vice 6001 Bollinger Canyon Road, See Item 2
President, ChevronTexaco San Ramon, California 94583
6
CUSIP No. 292659109
Schedule II
The following table sets forth the name, residence or business address,
citizenship, present principal occupation or employment, and the name, principal
business and address of any corporation in which such employment is conducted,
of each executive officer and director of ChevronTexaco Overseas Petroleum Inc.
("CTOPI").
Employment Information
------------------------------------------------------------------------------
Name Citizenship Occupation Business Address Business of Employer
- ---------------- ------------- ------------------------ --------------------------- --------------------
L.I. Beebe U.S. Corporate Secretary, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
G.L. Kirkland U.S. Vice President, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
D.M. Krattebol U.S. Vice President and 6001 Bollinger Canyon Road, See Item 2
Treasurer, ChevronTexaco San Ramon, California 94583
J.S. Watson U.S. Vice President and Chief 6001 Bollinger Canyon Road, See Item 2
Financial Officer, San Ramon, California 94583
ChevronTexaco
7
CUSIP No. 292659109
Schedule III
The following table sets forth the name, residence or business address,
citizenship, present principal occupation or employment, and the name, principal
business and address of any corporation in which such employment is conducted,
of each executive officer and director of Chevron Asiatic Limited ("CAL").
Employment Information
------------------------------------------------------------------------------
Name Citizenship Occupation Business Address Business of Employer
- ---------------- ------------- ------------------------ --------------------------- --------------------
L.I. Beebe U.S. Corporate Secretary 6001 Bollinger Canyon Road, See Item 2
San Ramon, California 94583
G.L. Kirkland U.S. Vice President, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
B.J. Koc U.S. Vice President, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco Overseas San Ramon, California 94583
Petroleum Inc.
E.B. Scott U.S. Vice President and 6001 Bollinger Canyon Road, See Item 2
General Counsel, San Ramon, California 94583
ChevronTexaco Overseas
Petroleum Inc.
J.S. Watson U.S. Vice President and Chief 6001 Bollinger Canyon Road, See Item 2
Financial Officer, San Ramon, California 94583
ChevronTexaco
8
CUSIP No. 292659109
Schedule IV
The following table sets forth the name, residence or business address,
citizenship, present principal occupation or employment, and the name, principal
business and address of any corporation in which such employment is conducted,
of each executive officer and director of Texaco Inc. ("Texaco").
Employment Information
------------------------------------------------------------------------------
Name Citizenship Occupation Business Address Business of Employer
- ---------------- ------------- ------------------------ --------------------------- --------------------
K.C. Schafer U.S. Manager, Subsidiary 6001 Bollinger Canyon Road, See Item 2
Governance, ChevronTexaco San Ramon, California 94583
F.G. Soler U.S. Subsidiary Governance 6001 Bollinger Canyon Road, See Item 2
Liaison, ChevronTexaco San Ramon, California 94583
W.C. Taylor U.S. Assistant Secretary, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
J.E. Bethancourt U.S. Executive Vice President, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
D.M. Krattebol U.S. Vice President and 6001 Bollinger Canyon Road, See Item 2
Treasurer, ChevronTexaco San Ramon, California 94583
9
CUSIP No. 292659109
Schedule V
The following table sets forth the name, residence or business address,
citizenship, present principal occupation or employment, and the name, principal
business and address of any corporation in which such employment is conducted,
of each executive officer and director of TRMI Holdings Inc. ("TRMI-H").
Employment Information
------------------------------------------------------------------------------
Name Citizenship Occupation Business Address Business of Employer
- ---------------- ------------- ------------------------ --------------------------- --------------------
K.C. Schafer U.S. Manager, Subsidiary 6001 Bollinger Canyon Road, See Item 2
Governance, ChevronTexaco San Ramon, California 94583
F.G. Soler U.S. Subsidiary Governance 6001 Bollinger Canyon Road, See Item 2
Liaison, ChevronTexaco San Ramon, California 94583
W.C. Taylor U.S. Assistant Secretary, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
H.B. Sheppard U.S. Assistant Treasurer, 6001 Bollinger Canyon Road, See Item 2
ChevronTexaco San Ramon, California 94583
10
EXHIBIT 4
THE OPTION IDENTIFIED HEREIN AND ANY SHARES ISSUABLE UPON EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER SUCH ACT, OR UNLESS TRMI HOLDINGS INC. ("TRMI-H") HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO TRMI-H AND ITS COUNSEL TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
OPTION AGREEMENT
This Option Agreement ("Agreement") is entered into by and among Ovonic
Battery Company, Inc. ("OBC"), Energy Conversion Devices, Inc. ("ECD") and TRMI
Holdings Inc. ("TRMI-H") as of December 2, 2004.
W I T N E S S E T H:
WHEREAS, TRMI-H is the owner of 4,376,633 shares (the "Shares") of the
outstanding common stock, par value $0.01 per share (the "Common Stock"), of ECD
under that certain Stock Purchase Agreement, dated May 1, 2000 (the "SPA")
between ECD and TRMI-H; and
WHEREAS, ECD, TRMI-H, ChevronTexaco Technology Ventures LLC, f/k/a
Texaco Energy Systems LLC, f/k/a Texaco Energy Systems Inc. ("CTTV"), OBC,
COBASYS LLC ("COBASYS") and Texaco Ovonic Hydrogen Systems LLC ("TOHS") are
parties to that certain Master Agreement dated as of December 2, 2004 (the
"Master Agreement"); and
WHEREAS, the execution and delivery of this Agreement by OBC, ECD and
TRMI-H is a condition precedent to the closing of the transactions contemplated
by the Master Agreement;
NOW THEREFORE, in consideration of the premises, OBC, ECD and TRMI-H
hereby agree as follows:
1. Grant of Option. In consideration of the contribution of
intellectual property and related market rights and amendments to the operating
agreement of COBASYS, TRMI-H hereby grants to OBC and its permitted assigns as
set forth in this Agreement, as optionee ("Optionee"), an irrevocable option
(the "Option") to purchase all, or any portion, of the Shares, at a purchase
price of per share (the "Exercise Price") equal to $4.55, and otherwise on the
terms and subject to the conditions set forth in this Agreement. The number of
shares of Common Stock subject to the Option and the Exercise Price shall be
subject to adjustment as provided in Section 10 below.
1
2. Term. The Option shall be exercisable from the date of this
Agreement until November 1, 2005 (the "Termination Date").
3. Exercise of Option. (a) In order to exercise all or any portion of
the Option, Optionee shall deliver to TRMI-H a Notice of Option Exercise and
Stock Purchase Agreement substantially in the form attached hereto as Exhibit A
(the "Notice of Option Exercise") which shall in no case be for an amount less
than 250,000 shares of Common Stock. The Notice of Option Exercise shall be
delivered to TRMI-H in accordance with Section 10(b) of this Agreement no fewer
than three (3) and no more than ten (10) business days prior to the Closing Date
(as such term is defined in the Notice of Option Exercise). Any sale of Common
Stock pursuant to the Option shall be subject to the terms and conditions of
this Agreement and the Notice of Option Exercise. The parties hereby agree that
in the event the Optionee that delivers the Notice of Option Exercise to TRMI-H
is not OBC or an affiliate of OBC, at the Closing (as such term is defined in
the Notice of Option Exercise) (i) TRMI-H will deliver to ECD the stock
certificate(s) representing the shares of Common Stock subject to the Option and
(ii) ECD will deliver to Optionee one or more newly issued stock certificates
representing the Common Stock sold pursuant to the Notice of Option Exercise.
Unless the shares of Common Stock sold pursuant to the Notice of Option Exercise
are included in a registration statement that has been declared effective by the
Securities and Exchange Commission (the "Commission"), each such stock
certificate shall bear a legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT, OR UNLESS THE ISSUER AND TRMI HOLDINGS INC. ("TRMI-H") HAVE
EACH RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
EACH OF THE ISSUER AND TRMI-H AND THEIR RESPECTIVE COUNSEL TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) ECD agrees that in connection with any exercise of the Option by
any person other than OBC or an affiliate of OBC, it will grant such Optionee an
opportunity to ask questions and receive answers from ECD regarding the
business, properties, prospects and financial condition of ECD.
(c) To facilitate the exercise of the Option and/or the sale of any of
the Shares following the Termination Date, TRMI-H hereby requests a Stock
Registration (as such term is defined in the SPA) to permit the public sale of
the Shares from time to time following the effectiveness of the registration
statement, all as contemplated by Rule 415 of Regulation C promulgated by the
Commission. ECD hereby waives its rights under Section 4.3(f) of the SPA with
respect to any public sale of the Shares (including any sale pursuant to Rule
144 of the Commission). TRMI-H agrees that ECD may delay the filing of a
registration statement pursuant to the foregoing request until May 31, 2005.
TRMI-H further agrees that, to the extent permitted by the rules and regulations
of the Commission, the registration statement filed by
2
ECD pursuant to the foregoing request may include the Option as an additional
security registered thereunder and may register, or be amended to register, the
resale of the Shares by permitted assigns of the Option.
4. Agreement Not to Sell Common Stock. From the date of this Agreement
until the Termination Date, TRMI-H agrees that it shall not pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of Common Stock,
whether any such transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise, except pursuant to the Option.
5. Conditions to Option Exercise. Optionee's right to exercise the
Option shall be subject to the condition precedent that Optionee shall deliver
or cause to be delivered to TRMI-H:
(a) in the event Optionee is OBC or an affiliate of OBC, an
opinion dated the Closing Date to the effect that such exercise by
Optionee is lawful and results in a valid and binding obligation of
Optionee, enforceable in accordance with its terms, such opinion to be
(i) in substantially the form set forth in Exhibit B and (ii) issued by
Baker & McKenzie LLP or other counsel reasonably satisfactory to TRMI-H
and Optionee; and
(b) in the event Optionee is not OBC or an affiliate of OBC, a
duly executed Representation Certificate substantially in the form
attached hereto as Exhibit C dated the Closing Date.
6. Failure to Exercise Option in Full Prior to Termination Date. In the
event that, by the Termination Date:
(a) the Option shall not have been exercised in full for all
the Shares;
(b) a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), to permit TRMI-H to make a public
offering of all of the shares of Common Stock held by it has not been
declared effective by the Commission and/or is not then in effect; and
(c) TRMI-H is otherwise unable to effect an immediate public
sale of the Shares in full without violation of any applicable law;
then, in such event, the provisions of Part 4 of the SPA shall be of no
further force or effect.
3
7. Representations of ECD. ECD represents to TRMI-H:
(a) Organization. ECD is a corporation duly organized and
validly existing under the laws of the State of Delaware. ECD has the
full power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of this Agreement by
ECD, and the consummation of the transactions contemplated hereby, have
been duly authorized by all requisite action on the part of ECD.
(c) Enforceability. This Agreement constitutes the legal,
valid and binding obligation of ECD, enforceable against ECD in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
(d) No Conflicts. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
by ECD will violate, require a consent, or cause a default under any
agreement to which ECD is a party. No consent, approval or filing with
any Governmental Body is required to authorize the execution and
delivery of this Agreement by ECD or ECD's performance of the terms of
this Agreement.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of ECD, threatened,
against ECD that impedes or is likely to impede ECD's ability to
consummate the transactions contemplated by this Agreement.
8. Representations of OBC. OBC represents to TRMI-H:
(a) Organization. OBC is a corporation duly organized and
validly existing under the laws of the State of Delaware. OBC has the
full power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of this Agreement by
OBC, and the consummation of the transactions contemplated hereby, have
been duly authorized by all requisite action on the part of OBC.
(c) Enforceability. This Agreement constitutes the legal,
valid and binding obligation of OBC, enforceable against OBC in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
4
(d) No Conflicts. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
by OBC will violate, require a consent, or cause a default under any
agreement to which OBC is a party. No consent, approval or filing with
any Governmental Body is required to authorize the execution and
delivery of this Agreement by OBC or OBC's performance of the terms of
this Agreement.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of OBC, threatened,
against OBC that impedes or is likely to impede OBC's ability to
consummate the transactions contemplated by this Agreement.
9. Representations of TRMI-H. TRMI-H represents to ECD and OBC as
follows:
(a) Organization. TRMI-H is a corporation duly organized and
validly existing under the laws of the State of Delaware. TRMI-H has
the full power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of this Agreement by
TRMI-H and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite action on the part of
TRMI-H.
(c) Enforceability. This Agreement constitutes the legal,
valid and binding obligation of TRMI-H, enforceable against TRMI-H in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
(d) No Conflicts. Neither the execution nor delivery of this
Agreement nor the consummation of the transactions contemplated hereby
by TRMI-H will violate, require a consent, or cause a default under any
agreement to which TRMI-H is a party. No consent, approval or filing
with any Governmental Body is required to authorize the execution and
delivery of this Agreement by TRMI-H or TRMI-H's performance of the
terms of this Agreement.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of TRMI-H, threatened,
against TRMI-H that impedes or is likely to impede TRMI-H's ability to
consummate the transactions contemplated by this Agreement.
(f) Title to Shares. TRMI-H is the record owner and sole
beneficial owner of the Shares. TRMI-H holds the Shares free and clear
of any lien, pledge, security interest, option, right of first refusal
or other adverse claim (other than the Option, certain
5
restrictions on transfer and other obligations arising under the SPA
and restrictions on transfer of the Shares arising under the federal
and state securities laws).
10. Adjustment upon Changes in Capitalization, Merger or
Recapitalization.
(a) In the event of any change in the outstanding shares of
Common Stock by reason of a stock dividend, stock split, split-up,
merger, consolidation, recapitalization, combination, conversion,
exchange of shares, extraordinary or liquidating dividend or similar
transaction which would have the effect of diluting Optionee's rights
hereunder, the type and number of shares or securities purchasable upon
the exercise of the Option and the Exercise Price shall be adjusted
appropriately, and proper provision will be made in the agreements
governing such transaction, as shall fully preserve the economic
benefits provided hereunder to Optionee.
(b) Without limiting the foregoing, whenever the number of
shares of Common Stock purchasable upon exercise of the Option is
adjusted as provided in this Section 10, the Exercise Price shall be
adjusted by multiplying the Exercise Price by a fraction, the numerator
of which is equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which is equal to the
number of shares of Common Stock purchasable after the adjustment.
(c) In the event that ECD enters into an agreement (i) to
consolidate with or merge into any person and ECD will not be the
continuing or surviving corporation in such consolidation or merger,
(ii) to permit any person to consolidate with or merge into ECD and ECD
will not be the continuing or surviving corporation in such
consolidation or merger, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, then, and in each such
case, the agreement governing such transaction will make proper
provision so that the Option will, upon the consummation of such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or
other securities or property that Optionee would have received in
respect of the shares of Common Stock subject to the Option had the
Option been exercised immediately prior to such consolidation, merger,
sale or transfer or the record date therefor, as applicable, and will
make any other necessary adjustments. ECD shall take such steps in
connection with such consolidation, merger, liquidation or other such
transaction as may be reasonably necessary to assure that the
provisions hereof shall thereafter apply as nearly as possible to any
securities or property thereafter deliverable upon exercise of the
Option.
11. Miscellaneous.
(a) Further Assurances. Each party hereto at the reasonable
request of the other, shall execute and deliver, or shall cause to be
executed and delivered from time to time, such further certificates,
agreements or instruments of conveyance and transfer,
6
assumption, release and acquittance and shall take such other action as
the other party hereto may reasonably request to consummate or
implement the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, if requested by the Optionee
in connection with its exercise of the Option, TRMI-H shall deliver a
certificate to the Optionee, executed by a duly authorized officer,
confirming that the representations and warranties of TRMI-H set forth
in Section 9 of this Agreement are true and correct on and as of the
Closing Date (as such term is defined in the Notice of Option Exercise)
as though then made. Except as expressly provided in the preceding
sentence, TRMI-H shall not be obligated pursuant to this Agreement to
make any additional representations or warranties regarding the Shares,
the business of ECD or any other matter.
(b) Notices. Any notice, communication, request, instruction
or other document required or permitted hereunder shall be given in
writing and shall be deemed given as follows: (i) by personal delivery
when delivered personally, (ii) by overnight courier upon written
verification of receipt, (iii) by telecopy or facsimile transmission
when confirmed by telecopier or facsimile transmission, or (iv) by
certified or registered mail, return receipt requested, five (5) days
after deposit in the mail. All notices shall be delivered to the
address of the applicable party as set forth below:
ECD or OBC: Energy Conversion Devices Inc.
2956 Waterview Drive
Rochester Hills, Michigan 48309
Attention: Robert C. Stempel
Tel: (248) 293-0440
Fax: (248) 844-1214
TRMI-H: TRMI Holdings Inc.
6001 Bollinger Canyon Road, Building T
San Ramon, California 94583
Attention: Chief Corporate Counsel
Attention: Allen H. Uzell
Tel: (925) 842-1679
Fax: (925) 842-2056
Any party may, by written notice so delivered, change its address for
notice purposes hereunder.
(c) Choice of Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Delaware,
without giving effect to principles of conflicts of law.
(d) Entire Agreement; Amendment. This Agreement, the Master
Agreement and the other Master Transaction Agreements (as defined in
the Master Agreement)
7
constitute the entire understanding among the parties with respect to
the subject matter hereof and thereof, superseding all negotiations,
prior discussions, representations and prior agreements and
understandings relating to such subject matter. No amendment of this
Agreement shall be binding unless agreed to in writing by all parties
to this Agreement and, in the event the Optionee is not OBC or an
affiliate of OBC and such amendment would have an adverse effect on the
Optionee's rights under the Option, Optionee.
(e) Successors and Assigns; Assignments; Third Party
Beneficiaries. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, and, except as otherwise prohibited,
their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder may
be assigned by any party without the prior written consent of the other
parties; provided that OBC may transfer its rights, interests and
obligations as Optionee hereunder (for the avoidance of doubt,
excluding any other rights, interests and obligations of OBC hereunder)
without the prior written consent of TRMI-H, subject to the
restrictions identified in the legend appearing on the first page of
this Agreement. Nothing in this Agreement shall or is intended to
confer upon any other person or entity any benefits, rights or
remedies.
(f) Severability. If any provision herein is contrary to any
lawful statute, rule, regulation, proclamation or other lawful mandate
whatsoever, whether or not listed, this Agreement shall be construed as
modified to the extent necessary to conform with such legal strictures.
The provisions of this Agreement are severable to the extent the
partial invalidity of one or more provisions will not affect the
validity of the Agreement as a whole so long as the economic or legal
substance of the transactions contemplated hereby is not affected in
any materially adverse manner as to any party hereto.
(g) Waiver. Any party may (i) extend the time for the
performance of any of the obligations or other acts of any other party
hereto or (ii) waive compliance with any of the agreements of any other
party or with any conditions to its own obligations. Any agreement on
the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such
party. Except as otherwise expressly provided herein, no failure to
exercise, delay in exercising, or single or partial exercise of any
right, power or remedy by any party, and no course of dealing between
the parties, shall constitute a waiver of any such right, power or
remedy. No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(h) Expenses. Except as otherwise provided herein, all costs
and expenses, including without limitation, fees and disbursements of
counsel, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
8
(i) Counterparts. This Agreement may be executed in several
counterparts, and by different parties in separate counterparts, which
when taken together shall be deemed to constitute one and the same
instrument.
(j) Facsimile Signatures. This Agreement shall become
effective upon execution and delivery hereof by the parties hereto;
delivery of this Agreement may be made by facsimile to the parties with
original copies promptly to follow by overnight courier.
(k) Headings. The headings of the Sections, Schedules and
Exhibits of this Agreement are for guidance and convenience of
reference only and have no significance in the interpretation of this
Agreement or any Schedule or Exhibit hereto.
(l) Dispute Resolution. Any dispute, controversy or claim
relating to this Agreement shall be resolved exclusively in accordance
with the dispute resolution procedures set forth in Section 11(d) of
the Master Agreement.
(m) Status of Stock Purchase Agreement. The parties agree that
the provisions of the SPA shall continue in full force and effect from
and after the date of this Agreement; provided that (i) Section 4.3(f)
of the SPA has been partially waived by ECD as provided in Section 3(c)
of this Agreement and (ii) Part 4 of the SPA is subject to termination
as of the Termination Date under the circumstances described in Section
6(c) of this Agreement; provided further that, if the Option is
exercised in full on or before May 31, 2005, TRMI-H agrees that it
shall not, without the prior invitation of ECD, acquire ECD common
stock prior to January 1, 2008.
[SIGNATURE PAGE FOLLOWS]
9
EXECUTED on behalf of ECD, OBC, and TRMI-H as of the date
first above written.
ENERGY CONVERSION DEVICES, INC.
By: /s/ ROBERT C. STEMPEL
--------------------------------------
Robert C. Stempel
Chairman and Chief Executive Officer
OVONIC BATTERY COMPANY, INC.
By: /s/ ROBERT C. STEMPEL
--------------------------------------\
Robert C. Stempel
Chairman
TRMI HOLDINGS INC.
By: /s/ W.C. TAYLOR
--------------------------------------
W.C. Taylor
Vice President
[SIGNATURE PAGE TO OPTION AGREEMENT]
EXHIBIT A
FORM OF NOTICE OF OPTION EXERCISE AND STOCK PURCHASE AGREEMENT
[LETTERHEAD OF OPTIONEE]
[Date]
TRMI Holdings Inc.
6001 Bollinger Canyon Road, Building T
San Ramon, California 94583
Attention: Chief Corporate Counsel
Attention: Allen H. Uzell
Tel: (925) 842-1679
Fax: (925) 842-2056
Re: Notice of Option Exercise and Stock Purchase Agreement
This Notice of Option Exercise and Stock Purchase Agreement (this "Purchase
Agreement") is delivered pursuant to Section 3 of that certain Option Agreement
(the "Option Agreement") dated as of November __, 2004 among Ovonic Battery
Company, Inc. ("OBC"), Energy Conversion Devices, Inc. ("ECD") and TRMI Holdings
Inc. ("TRMI-H"). Capitalized terms used but not defined herein shall have the
respective meanings given them in the Option Agreement.
The undersigned Optionee hereby gives notice to TRMI-H that it elects to
exercise the Option and shall purchase [INSERT NUMBER OF SHARES] shares of
Common Stock subject to the Option (the "Securities") on [INSERT CLOSING DATE]
(the "Closing Date") on the terms and subject to the conditions set forth in the
Option Agreement and this Purchase Agreement.
The closing of the purchase and sale of the Securities (the "Closing") shall
take place at the offices of TRMI-H located at ____________________________ at
9:00 a.m. on the Closing Date.
In addition to any other deliveries required under the Option Agreement, at the
Closing, (a) Optionee shall deliver to TRMI-H the Exercise Price by wire
transfer of immediately available funds to TRMI-H's account number [number] at
[bank] (or such other account or accounts as TRMI-H shall have notified Optionee
in writing) and (b) TRMI-H shall deliver to Optionee the certificate or
certificates representing the Securities; provided that in the event Optionee is
not OBC or an affiliate of OBC, TRMI-H shall deliver such certificate or
certificates to ECD and ECD shall issue and deliver to Optionee a new stock
certificate in accordance with Section 3 of the Option Agreement.
Optionee acknowledges and agrees that the purchase and sale of the Securities
pursuant to the Option Agreement and this Purchase Agreement have not been and
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act") and that the Securities may not be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption from registration thereunder, and that in the absence of an effective
registration statement covering the Securities, or an available exemption from
registration under the Securities Act, the Securities must be held indefinitely.
Optionee further acknowledges that each certificate representing the Securities
shall be endorsed with a legend substantially in the form identified in Section
3 of the Option Agreement and agrees that it will comply with the transfer
restrictions set forth in such legend.(1)
IN WITNESS WHEREOF, OPTIONEE has executed this Notice of Option Exercise and
Stock Purchase Agreement as of the date first set forth above.
[NAME OF OPTIONEE]
By: ______________________________________
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(1) Paragraph to be included if the offer and sale of the Shares are not covered
by a registration statement that has been declared effective by the Commission.
EXHIBIT B
FORM OF OPINION OF COUNSEL TO OPTIONEE
[Baker & McKenzie LLP Letterhead]
_______________, 200_
Board of Directors
Energy Conversion Devices, Inc.
2956 Waterview Drive
Rochester Hills, Michigan 48309
Re: Exercise of Option Granted by TRMI Holdings Inc.
Ladies and Gentlemen:
Energy Conversion Devices, Inc. (the "Company"), Ovonic Battery
Company, Inc., a subsidiary of the Company ("OBC"), and TRMI Holdings Inc.
("TRMI-H") are parties to an Option Agreement dated as of December 2, 2004 (the
"Option Agreement") pursuant to which TRMI-H has granted OBC an option (the
"Option") to purchase 4,376,633 shares of the Company's Common Stock, par value
$.01 per share ("Common Stock").
We understand that OBC intends to exercise the Option as of the date of
this letter with respect to __________ shares of Common Stock. We further
understand that the aggregate exercise price payable in connection with OBC's
exercise of the Option is $_____________ in cash (the "Exercise Price").
In connection with the foregoing exercise of the Option, you have
requested our opinion that the payment of the Exercise Price upon the exercise
of the Option by OBC, if viewed as a stock purchase or redemption of Common
Stock by the Company, would not constitute an unlawful stock purchase or
redemption for which the directors of the Company would have personal liability
under the Delaware General Corporation Law (the "DGCL").
SUMMARY OF APPLICABLE PROVISIONS OF THE DGCL
Under Section 170 of the DGCL, the directors of a Delaware corporation
are permitted to declare and pay dividends only out of the corporation's
"surplus" or, if there is no surplus, then out of the net profits of the
corporation for the current and preceding fiscal year. Section 154 of the DGCL
defines "surplus" to mean the excess of the "net assets" of a corporation over
its "capital." "Net assets" is defined for this purpose to mean the amount by
which a corporation's total assets exceed its total liabilities. Capital and
surplus are disregarded in the calculation of net assets. For a corporation that
has authorized shares with a stated par value, the "capital" of the corporation
is in most cases equal to the aggregate par value of the corporation's issued
and outstanding shares.
The DGCL permits a corporation to purchase or redeem its own shares as
long as the purchase or redemption does not occur when the corporation's capital
is impaired and the transaction would not result in any impairment of capital. A
purchase or redemption is deemed to impair a corporation's capital if the value
of the consideration paid in the transaction exceeds the amount of the
corporation's surplus.
Under Section 174 of the DGCL, the directors of a Delaware corporation
may in certain cases incur personal liability with respect to violation of the
provisions of the DGCL prohibiting unlawful dividends, stock purchases and
redemptions.
OPTION EXERCISE TRANSACTION
Although the Option is exercisable for shares of the Company's Common
Stock, the Option was granted to and is being exercised by OBC. Accordingly, it
may be argued that the provisions of the DGCL relating to stock purchases and
redemptions are not applicable to the exercise of the Option. Because OBC is a
91.7 percent-owned subsidiary of the Company, however, you have requested that
our opinion that the transaction, if viewed as a purchase or redemption of
Common Stock by the Company, would be lawful under the provisions of the DGCL
discussed above.
ASSUMPTIONS
We have been provided with a schedule prepared by Grant Thornton LLP,
the Company's independent auditors, indicating that the Company's surplus as of
[end of preceding fiscal quarter] was $_____ million, calculated in accordance
with the DGCL based on the Company's [un]audited consolidated financial
statements as of that date prepared in accordance with generally accepted
accounting principles. A copy of the schedule is attached to this letter. We
have assumed that the information set forth in the attached schedule is accurate
and complete in all respects.
We have also received a certificate, executed on behalf the Company by
its Chief Financial Officer, stating, among other matters, that based on the
amount of the Company's
current total assets and total liabilities and the number of shares of the
Company's Common Stock currently outstanding, the Company's surplus on the date
of this letter is not less than $___________. A copy of the certificate is
attached to this letter. We have assumed that the information set forth in the
attached certificate is accurate and complete in all respects.
OPINION
Based on the foregoing, we are of the opinion that the exercise of the
Option and payment of the Exercise Price, if viewed as a purchase or redemption
of Common Stock by the Company, would not constitute an unlawful stock purchase
or redemption for which the directors of the Company would have personal
liability pursuant to the DGCL.
QUALIFICATIONS AND LIMITATIONS
In reaching our opinion set forth in this letter, we have relied only
upon our examination of the foregoing schedules and certificates and we have
made no independent verification of the financial calculations, valuations or
other factual matters set forth in such documents.
Our opinion set forth in this letter is limited to the DGCL referred to
in this letter and we express no opinion with respect to the effect or
application of any other laws, including the possible effect or application of
laws relating to bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer or other similar laws or judicial doctrines.
Our opinion set forth in this letter is limited to the application of
the specific provisions of the DGCL referred to in this letter to the Company
and we have not been requested to, and do not, express any opinion with respect
to any matters relating to OBC or with respect to the compliance by the
Company's directors with their fiduciary duties in connection with the
authorization of the Option Agreement, any related agreement or any of the
transactions contemplated thereby. Further, we have not been requested to, and
do not, express any opinion with respect to any agreement or transaction between
the Company, ChevronTexaco Corporation and their respective affiliates other
than our opinion with respect to the Option Agreement as set forth in this
letter.
This letter is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated. The Company is
authorized to provide a copy of this letter to TRMI-H in connection with the
exercise of the Option, but TRMI-H and its affiliates are not authorized to rely
on this letter for any purpose. Without our prior written approval, this letter
may not be relied upon by any person or entity other than you, quoted in whole
or in part or otherwise referred to in any report or document, furnished to any
other person or entity (other than as expressly permitted pursuant to the
preceding sentence) or relied upon for any purpose other than in connection with
consummating the transactions described herein.
Very truly yours,
BAKER & McKENZIE LLP
CHIDMS1/439663.5
EXHIBIT C
FORM OF REPRESENTATION CERTIFICATE
REPRESENTATION CERTIFICATE
This Representation Certificate is delivered in connection with the
exercise of the Option pursuant to that certain Option Agreement among Ovonic
Battery Company, Inc. ("OBC"), Energy Conversion Devices, Inc., a Delaware
corporation ("ECD"), and TRMI Holdings Inc., a Delaware corporation ("TRMI-H"),
dated as of November __, 2004 (the "Option Agreement") and that certain Notice
of Option Exercise and Stock Purchase Agreement dated as of ____________
delivered to TRMI-H by Optionee (the "Purchase Agreement"). Capitalized terms
used but not defined in this Representation Certificate shall have the
respective meanings given them in the Option Agreement.
The undersigned hereby represents and warrants to TRMI-H as follows:
1. Authorization; Binding Obligation. Optionee has full power and
authority to exercise the Option and to enter into the Purchase Agreement and
the Purchase Agreement when executed and delivered , will constitute a valid and
legally binding obligation of Optionee.
2. Purchase Entirely for Own Account. The Common Stock to be received
by Optionee upon exercise of the Option (the "Securities") will be acquired for
investment for Optionee's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and Optionee has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
Securities Act. By executing this Representation Certificate, Optionee further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities to the
extent the same would violate the Securities Act.(2)
3. Receipt of Information. Optionee believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Securities. Optionee further represents that it has had an
opportunity to ask questions and receive answers from ECD regarding the
business, properties, prospects and financial condition of ECD.
4. Investment Experience. Optionee acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the Securities, and
has such knowledge and
- ------------------------
(2) To be included if the sale of the Shares has not been registered under the
Securities Act.
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities. If other than an
individual, Optionee also represents it has not been organized for the purpose
of acquiring the Securities.
5. Accredited Investor. Optionee is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act, as presently in
effect.
6. Restricted Securities. Optionee understands that the Securities it
is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from TRMI-H in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold only in certain limited circumstances
without registration under the Securities Act. Optionee represents that it is
familiar with Rule 144 under the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.(3)
7. Non-U.S. Optionees. If Optionee is not a United States person,
Optionee hereby represents that he or she has satisfied himself or herself as to
the full observance of the laws of his or her jurisdiction in connection with
any invitation to purchase the Option or the Securities or any use of the Option
Agreement, including (i) the legal requirements within his or her jurisdiction
for the purchase of the Securities, (ii) any foreign exchange restrictions
applicable to such purchase, (iii) any governmental or other consents that may
need to be obtained, and (iv) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, sale, or transfer of the
Securities and further represents that Optionee's subscription and payment for,
and his or her continued beneficial ownership of the Securities, will not
violate any applicable securities or other laws of his or her jurisdiction.
[NAME OF OPTIONEE]
By: _________________________________
Name:
Title:
- --------------------------
(3) To be included if the sale of the Shares has not been registered under the
Securities Act.
EXHIBIT 5
TRANSFER, RELEASE AND INDEMNITY AGREEMENT
This Transfer, Release and Indemnity Agreement ("Agreement") is entered
into by and among Energy Conversion Devices, Inc. (the "Transferee" or "ECD"),
ChevronTexaco Technology Ventures LLC, f/k/a Texaco Energy Systems LLC, f/k/a
Texaco Energy Systems Inc. (the "Transferor" or "CTTV"), and Texaco Ovonic
Hydrogen Systems LLC (the "Company"), as of December 2, 2004.
W I T N E S S E T H:
WHEREAS, ECD and CTTV each own 50% of the equity of the Company, and
are parties to the Limited Liability Company Agreement of Texaco Ovonic Hydrogen
Systems LLC, dated as of October 31, 2000 (the "LLC Agreement"; terms used
herein but not defined have the meaning set forth in the LLC Agreement); and
WHEREAS, since the formation of the Company, CTTV and its predecessors
in interest have satisfied in full all accrued obligations to ECD or the Company
to provide funding to the Company, with CTTV and its predecessors having
contributed to date property and cash valued at $62,398,000 to the capital of
the Company, including $36 million paid to ECD for certain ECD technology which
was then contributed to the Company pursuant to an Assignment Agreement dated
October 31, 2000, and also including a payment of $4,675,000 made concurrently
with the execution of this Agreement to facilitate the transactions contemplated
hereby by providing a means to help defray expected costs associated with the
restructuring of the Company (the "Restructuring Payment"); and
WHEREAS, ECD and CTTV have determined that it is in their mutual
interest to restructure the ownership of the Company, so that it will continue
as a limited liability company but under the sole ownership of ECD, and to
terminate the existing Limited Liability Agreement of the Company dated October
31, 2000; and
WHEREAS, CTTV desires to transfer its interest in the Company to ECD,
and be relieved of and indemnified against any continuing obligations to ECD,
its affiliates, or the Company with respect to the Company's funding, business
or operations, and to be relieved of any restrictions on the scope of future
investments, business or operations of CTTV or its affiliates (except as
expressly provided herein or in the Transaction Agreements referenced in Section
2 below); and
WHEREAS, ECD and the Company desire that ECD shall accept the transfer
of CTTV's interest in the Company, pursuant to the terms hereof, and relieve
CTTV of any continuing obligations to ECD, its affiliates, or the Company with
respect to the Company's funding, business or operations, including any
restrictions of the scope of future investments, business or operations of CTTV
or its affiliates (except as expressly provided herein or in the Transaction
Agreements referenced in Section 2 below); and
1
WHEREAS, as a result of the transfer and other transactions to be
accomplished hereby and by the termination of the LLC Agreement, ECD will
continue as the sole member of the Company and CTTV shall be released and
indemnified from any obligation or liability associated with the Company or its
business.
NOW THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, ECD, the Company and CTTV hereby agree as follows:
1. Transfer of Interest; Payment of Restructuring Payment.
(a) CTTV hereby grants, sells, conveys, assigns and delivers to ECD,
and ECD accepts, all of CTTV's Interest in the Company. As a result thereof, and
of the other transactions to be accomplished hereby and by the termination of
the LLC Agreement, ECD shall be the sole member of the Company and CTTV shall be
relieved of all obligations and liabilities with respect to such Interest, the
Company and its business.
(b) Upon execution of this Agreement, CTTV shall deliver to ECD the
Restructuring Payment, in the form of a cashier's check or wire transfer in
immediately available funds.
2. Transaction Agreements. In connection with this Agreement and the
transactions contemplated herein, the following agreements are being executed
concurrently (collectively, the "Transaction Agreements"):
(a) A Termination Agreement of the Confidentiality Agreement
dated October 31, 2000, between the ECD, CTTV and the Company;
(b) A Termination Agreement of the Limited Liability Company
Agreement dated October 31, 2000, between ECD and CTTV;
(c) An Amendment and Restatement of the Technology License
Agreement dated October 31, 2000, by and among ECD, CTTV and
the Company;
(d) A Termination Agreement of the TESI Service Agreement
dated October 31, 2000, between CTTV and the Company;
(e) A Termination Agreement of the Trade Name License
Agreement dated October 31, 2000, between Texaco Inc. and the
Company;
(f) Resignations of CTTV's representatives to the Management
Committee;
(g) A Vehicle Termination Agreement pursuant to which CTTV and
ECD agree to destroy a vehicle developed pursuant to Section
4.4 of an agreement dated January 20, 2002 between ECD and
CTTV; and
2
(h) A Vehicle Indemnification and Release Agreement pursuant
to which TOHS assumes all liabilities and obligations
associated with or arising from a different vehicle owned and
modified by it and TOHS and ECD grant a general release and
indemnification in favor of CTTV with respect thereto.
3. Representations of CTTV. CTTV represents to ECD and the Company as
follows:
(a) Organization. CTTV is a limited liability company duly
organized and validly existing under the laws of the State of Delaware.
CTTV has the full power and authority to execute, deliver and perform
its obligations under this Agreement and the Transactions Agreements to
which it is a party.
(b) Authority. The execution and delivery of this Agreement by
CTTV and the Transaction Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, have
been duly authorized by all requisite action on the part of CTTV.
(c) Enforceability. This Agreement and the Transaction
Agreements to which CTTV is a party, constitute the legal, valid and
binding obligation of CTTV, enforceable against CTTV in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and to the principles of equity (whether enforcement
is sought in a proceeding in equity or at law).
(d) No Conflicts. Neither the execution nor delivery of this
Agreement or the Transaction Agreements, nor the consummation of the
transactions contemplated hereby or thereby by CTTV will violate,
require a consent (other than the consent of ECD or the Company, which
ECD and the Company hereby grant), or cause a default under any
agreement to which CTTV is a party. Assuming the veracity of the
representations and warranties of ECD contained in this Agreement and
the Transaction Agreements, no consent, approval or filing with any
Governmental Body is required to authorize the execution and delivery
of this Agreement by CTTV or the Transaction Agreements to which it is
a party, or CTTV's performance of the terms of this Agreement or such
Transaction Agreements.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of CTTV, threatened,
against CTTV that impedes or is likely to impede CTTV's ability to
consummate the transactions contemplated by this Agreement or the
Transaction Agreements to which it is a party.
(f) Title. CTTV represents and warrants that, except as set
forth in the LLC Agreement, its Interest in the Company is free and
clear of all Liens.
3
4. Representations of ECD. ECD represents and warrants to CTTV and the
Company as follows:
(a) Organization. ECD is a corporation duly organized and
validly existing under the laws of the State of Delaware. ECD has the
full power and authority to execute, deliver and perform its
obligations under this Agreement and the Transaction Agreements to
which it is a party.
(b) Authority. The execution and delivery of this Agreement by
ECD and the Transaction Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, have
been duly authorized by all requisite action on the part of ECD.
(c) Enforceability. This Agreement and the Transaction
Agreements to which ECD is a party, constitute the legal, valid and
binding obligation of ECD, enforceable against ECD in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and to the principles of equity (whether enforcement
is sought in a proceeding in equity or at law).
(d) No Conflicts. Neither the execution nor delivery of this
Agreement or the Transaction Agreements, nor the consummation of the
transactions contemplated hereby or thereby by ECD will violate,
require a consent, or cause a default under any agreement to which ECD
is a party. Assuming the veracity of the representations and warranties
of CTTV contained in this Agreement and the Transaction Agreements, no
consent, approval or filing with any Governmental Body is required to
authorize the execution and delivery of this Agreement by ECD or
Transaction Agreements to which it is a party, or ECD's performance of
the terms of this Agreement or such Transaction Agreements.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of ECD, threatened,
against ECD that impedes or is likely to impede ECD's ability to
consummate the transactions contemplated by this Agreement or the
Transaction Agreements to which it is a party.
(f) Investment Intent. ECD is a member of the Company and
desires to increase its investment interest in the Company. ECD is
acquiring CTTV's Interest for investment purposes only, and not with a
view to the resale or distribution thereof.
(g) Accredited Investor. ECD is an "Accredited Investor"
within the meaning of the Securities Act of 1933, and is a
sophisticated investor with full access to information about the
Company, capable of fending for itself, and has received no information
about the Company from CTTV and is in no way looking to or relying on
CTTV for any such information.
4
5. Representations of the Company. The Company represents to CTTV and
ECD that it is duly organized and in good standing as a Delaware limited
liability company, has all necessary authority to enter into this Agreement and
the Transaction Agreements to which it is a party, and such agreements
constitute legal, valid and binding obligations of the Company enforceable in
accordance with their terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and to the principles of equity (whether enforcement is sought in a
proceeding in equity or at law).
6. Mutual Releases.
(a) ECD and Company Release. ECD and Company hereby unconditionally and
irrevocably compromise, settle and fully release and forever discharge CTTV, its
Affiliates (including without limitation ChevronTexaco Corporation and any
entity in which ChevronTexaco Corporation owns directly or indirectly ten
percent (10%) or more of the shares entitled to vote at a general election of
directors), and their respective shareholders, members, partners, directors,
managers, officers, employees, consultants and agents (collectively the "CTTV
Parties"), from any and all damages, losses, deficiencies, liabilities, taxes,
obligations, penalties, judgments, settlements, claims (including, without
limitation, patent infringement claims), demands, payments, fines, interests,
costs and expenses (including, without limitation, the costs and expenses of any
and all Proceedings and demands, assessments, judgments, settlements and
compromises relating thereto and the costs and expenses of attorneys',
accountants', consultants' and other professionals' fees and expenses incurred
in the investigation or defense thereof or the enforcement of rights hereunder),
including consequential damages and punitive damages (collectively, "Losses"),
which any of them now has, in the past had or in the future may have against the
CTTV Parties or any of them, whether known or unknown, asserted or unasserted,
that directly or indirectly in any way relate to, are based upon, or arise out
of CTTV's interest, relationship, participation or involvement with the Company
or its business, including without limitation, any further rights, liabilities,
obligations or claims under the LLC Agreement or the Associated Agreements
(including those intended to survive termination thereof and any contribution
obligations under the LLC Agreement); provided the foregoing shall not release
CTTV from any agreements or obligations, or any liability to ECD for failure to
perform the same, of CTTV expressly set forth in this Agreement or the
Transaction Agreements.
(b) CTTV Release. CTTV hereby unconditionally and irrevocably
compromises, settles and fully releases and forever discharges ECD, its
Affiliates, and their respective shareholders, members, partners, directors,
managers, officers, employees, consultants and agents (collectively the "ECD
Parties"), from any and all Losses, which it now has, in the past had or in the
future may have against the ECD Parties or any of them, whether known or
unknown, asserted or unasserted, that directly or indirectly in any way relate
to, are based upon, or arise out of ECD's interest, relationship, participation
or involvement with the Company or its business, including without limitation
any further rights, liabilities, obligations or claims under the LLC Agreement
or the Associated Agreements (including those intended to survive termination
thereof and any contribution obligations under the LLC Agreement); provided the
5
foregoing shall not release ECD or the Company from any agreements or
obligations, or any liability to CTTV for failure to perform the same, of ECD or
the Company expressly set forth in this Agreement or the Transaction Agreements
(including without limitation Section 7 of this Agreement).
(c) The foregoing releases are expressly intended to apply
notwithstanding any act or omission by CTTV Parties or the ECD Parties,
including any negligent acts or omissions by the same.
7. Transferee and Company Indemnification. As an essential
consideration for CTTV's agreement to consummate the transactions contemplated
hereby and in the Transaction Agreements, and notwithstanding anything contained
in Section 6(b) to the contrary, ECD and the Company hereby agree to jointly and
severally defend, protect, indemnify and hold harmless each CTTV Party, from and
against any and all Losses arising from any and all Proceedings in which a CTTV
Party may be involved, or threatened to be involved, as a party or otherwise,
arising out of, resulting from, or relating or incidental to (a) the Company or
its business, or such CTTV Party's interest, relationship, participation or
involvement therein, including without limitation any acts or omissions of such
CTTV Party as a member or manager of the Company and any obligations or
liabilities under the LLC Agreement and the Associated Agreements and (b) any
misrepresentation, omission, nonfulfillment or breach by ECD or the Company of
any covenant, representation or warranty set forth in this Agreement or any
Transaction Agreement. The indemnification granted above (i) shall not be deemed
exclusive of, and shall not limit, any other rights or remedies to which any
CTTV Party may be entitled or which may otherwise be available to any CTTV Party
at law or in equity, (ii) shall inure to the benefit of the heirs, successors,
assigns and administrators of the CTTV Parties and (iii) shall remain and be in
full force and effect even if any such Loss directly or indirectly results from,
arises out of, or relates to or is asserted to have resulted from, arisen out
of, or related to, in whole or in part, one or more negligent acts or omissions
(or other concepts of liability or fault) of the CTTV Parties. Any indemnified
party shall provide reasonable cooperation in connection with the defense by ECD
and the Company of any indemnified Loss.
8. Miscellaneous.
(a) Further Assurances. Each party hereto at the reasonable
request of the other, shall execute and deliver, or shall cause to be
executed and delivered from time to time, such further certificates,
agreements or instruments of conveyance and transfer, assumption,
release and acquittance and shall take such other action as the other
party hereto may reasonably request to consummate or implement the
transactions contemplated by this Agreement.
6
(b) Notices. Any notice, communication, request, instruction
or other document required or permitted hereunder shall be given in
writing and shall be deemed given as follows: (i) by personal delivery
when delivered personally, (ii) by overnight courier upon written
verification of receipt, (iii) by telecopy or facsimile transmission
when confirmed by telecopier or facsimile transmission, or (iv) by
certified or registered mail, return receipt requested, five (5) days
after deposit in the mail. All notices shall be delivered to the
address of Transferee, Transferor or the Company as set forth below:
SELLER: ChevronTexaco Technology Ventures LLC
3901 Briar Park, Room 612
Houston, Texas 77042
Attention: Gregory M. Vesey
Tel: (713) 954-6197
Fax: (713) 954-6016
BUYER: Energy Conversion Devices Inc.
2956 Waterview Drive
Rochester Hills, Michigan 48309
Attention: Stanford R. Ovshinsky
Tel: (248) 293-0440
Fax: (248) 844-1214
COMPANY: Texaco Ovonic Hydrogen Systems LLC
c/o Energy Conversion Devices Inc.
2956 Waterview Drive
Rochester Hills, Michigan 48309
Attention: Stanford R. Ovshinsky
Tel: (248) 293-0440
Fax: (248) 844-1214
Any party may, by written notice so delivered, change its address for
notice purposes hereunder.
(c) Choice of Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Texas,
without giving effect to principles of conflicts of law.
(d) Dispute Resolution.
(i) The parties shall attempt within thirty (30) days after the
date (the "Issue Date") an issue is presented to it in good
faith to resolve any dispute, controversy or claim related to
this Agreement, including any dispute over the breach,
interpretation, or validity, but not the termination, of this
Agreement.
7
(ii) If the parties cannot so resolve any such dispute referred in
clause (i) above within such thirty (30) day period, the
parties agree to attempt in good faith to settle any such
dispute over the breach, interpretation or validity of this
Agreement, as well as a dispute over the termination of this
Agreement (all of which such possible disputes are hereinafter
collectively referred to as the "Dispute"), by submitting the
Dispute to mediation in Houston, Texas, under the Commercial
Mediation Rules of the American Arbitration Association
("AAA"), within sixty (60) days after the Issue Date and may
use any mediator in Houston, Texas upon which they mutually
agree. If the parties have been unable to mutually agree upon
a mediator within seventy five (75) days after the Issue Date,
the case shall be referred to arbitration in accordance with
the following paragraph. The cost of the mediator will be
split equally between ECD and the Company, on the one hand,
and CTTV, on the other hand, unless they agree otherwise.
(iii) IF THE PARTIES ARE UNSUCCESSFUL IN THEIR GOOD FAITH ATTEMPT TO
MEDIATE THE DISPUTE OR SELECT A MUTUALLY AGREED UPON MEDIATOR,
THE DISPUTE SHALL BE SUBMITTED TO, AND SETTLED BY, BINDING
ARBITRATION IN HOUSTON, TEXAS. THE PARTIES SHALL, WITHIN
TWENTY (20) DAYS AFTER THE FORMAL CONCLUSION OF THE MEDIATION
(OR 75 DAYS AFTER FAILURE TO SELECT A MUTUALLY AGREED UPON
MEDIATOR) BUT NOT LATER THAN ONE HUNDRED TWENTY (120) DAYS
AFTER THE ISSUE DATE, SELECT A MUTUALLY AGREED UPON SINGLE
ARBITRATOR AND MAY UTILIZE ANY FORMAT AND RULES FOR THE
BINDING ARBITRATION UPON WHICH THEY MAY MUTUALLY AGREE. IF THE
PARTIES ARE UNABLE TO SO AGREE, THE DISPUTE SHALL BE SUBMITTED
TO A SINGLE ARBITRATOR IN HOUSTON, TEXAS, UNDER THE COMMERCIAL
ARBITRATION RULES OF THE AAA, WHICH PROCEEDINGS SHALL BE
CONDUCTED IN ENGLISH. SHOULD THE PARTIES BE UNABLE TO AGREE ON
A CHOICE OF ARBITRATOR WITHIN THIRTY (30) DAYS FROM THE DATE
OF THE AFORESAID SUBMISSION TO ARBITRATION, THE AAA SHALL
FURNISH TO EACH PARTY A LIST OF THREE NAMES AND THE SELLER AND
THE BUYER SHALL EACH STRIKE ONE NAME, THEREBY NOMINATING THE
REMAINING PERSON AS THE ARBITRATOR. IF MORE THAN ONE NAME
REMAINS, THE AAA WILL CHOOSE AN ARBITRATOR FROM THE LIST OF
REMAINING NAMES. IN NO EVENT IS THE ARBITRATOR AUTHORIZED OR
EMPOWERED TO AWARD PUNITIVE OR CONSEQUENTIAL DAMAGES OR
DAMAGES IN EXCESS OF ACTUAL DIRECT DAMAGES. THE ARBITRATION
AWARD SHALL BE IN ENGLISH AND IN WRITING AND SHALL SPECIFY THE
FACTUAL AND LEGAL BASIS FOR THE AWARD. JUDGMENT UPON ANY AWARD
RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT WITH
JURISDICTION. THE PREVAILING PARTY SHALL BE ENTITLED TO
REASONABLE ATTORNEYS' FEES IN ANY COURT PROCEEDING
8
RELATING TO THE ENFORCEMENT OR COLLECTION OF ANY AWARD OR
JUDGMENT RENDERED BY THE ARBITRATOR UNDER THIS AGREEMENT.
(iv) Notwithstanding any of the foregoing, any party may request
injunctive relief and/or equitable relief from the arbitrators
or the court in order to protect the rights or property of
such party pending the resolution of the dispute as provided
hereunder.
(e) Entire Agreement; Amendment. This Agreement constitutes
the entire understanding between the parties with respect to the
subject matter hereof, superseding all negotiations, prior discussions,
representations and prior agreements and understandings relating to
such subject matter. No amendment of this Agreement shall be binding
unless mutually agreed to in writing.
(f) Successors and Assigns; Assignments; No Third Party
Beneficiaries. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, and, except as otherwise prohibited,
their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder may
be assigned by any party without the prior written consent of the other
parties. Nothing in this Agreement shall or is intended to confer upon
any other person or entity any benefits, rights or remedies except for
the benefits, rights and remedies of the CTTV Parties and the ECD
Parties in Sections 6 and 7. Nothing in this Agreement shall constitute
recognition by any party of any claims of any third party.
(g) Severability. If any provision herein is contrary to any
lawful statute, rule, regulation, proclamation or other lawful mandate
whatsoever, whether or not listed, this Agreement shall be construed as
modified to the extent necessary to conform with such legal strictures.
The provisions of this Agreement are severable to the extent the
partial invalidity of one or more provisions will not affect the
validity of the Agreement as a whole so long as the economic or legal
substance of the transactions contemplated hereby is not affected in
any materially adverse manner as to any party hereto.
(h) Waiver. Any party may (i) extend the time for the
performance of any of the obligations or other acts of any other party
hereto or (ii) waive compliance with any of the agreements of any other
party or with any conditions to its own obligations. Any agreement on
the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such
party. Except as otherwise expressly provided herein, no failure to
exercise, delay in exercising, or single or partial exercise of any
right, power or remedy by any party, and no course of dealing between
the parties, shall constitute a waiver of any such right, power or
remedy. No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9
(i) Expenses. All costs and expenses, including without
limitation, fees and disbursements of counsel, incurred in connection
with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
(j) Counterparts. This Agreement may be executed in several
counterparts, and by different parties in separate counterparts, which
when taken together shall be deemed to constitute one and the same
instrument.
(k) Facsimile Signatures. This Agreement shall become
effective upon execution and delivery hereof by the parties hereto;
delivery of this Agreement may be made by facsimile to the parties with
original copies promptly to follow by overnight courier.
(l) Headings. The headings of the Sections, Schedules and
Exhibits of this Agreement are for guidance and convenience of
reference only and have no significance in the interpretation of this
Agreement or any Schedule or Exhibit hereto.
(m) Books and Records. For a period of five years after the
Effective Date or such longer period as may be prescribed by law, ECD
and the Company will preserve and retain the books and records of the
Company and make such books and records available at the then current
administrative headquarters of the Company to CTTV and its officers,
employees, agents and representatives, upon reasonable notice and at
reasonable times, it being understood that CTTV shall be entitled to
make copies of any such books and records as shall be reasonably
necessary.
[SIGNATURE PAGE FOLLOWS]
10
EXECUTED on behalf of Transferor, Transferee and the Company as of the
date first above written.
TRANSFEROR:
CHEVRONTEXACO TECHNOLOGY VENTURES LLC
By: /s/ GREGORY M. VESEY
-----------------------------------------------
Gregory M. Vesey
President
TRANSFEREE:
ENERGY CONVERSION DEVICES, INC.
By: /s/ GREGORY C. STEMPEL
-----------------------------------------------
Robert C. Stempel
Chairman
COMPANY:
TEXACO OVONIC HYDROGEN SYSTEMS LLC
By: ENERGY CONVERSION DEVICES, INC.,
a member and the sole member after the
transactions contemplated hereby
By: /s/ ROBERT C. STEMPEL
---------------------------------------
Robert C. Stempel
Chairman
By: CHEVRONTEXACO TECHNOLOGY VENTURES LLC,
a member
By: /s/ GREGORY M. VESEY
---------------------------------------
Gregory M. Vesey
President
[SIGNATURE PAGE TO TRANSFER, RELEASE AND INDEMNITY AGREEMENT]
Exhibit 6
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
AMENDED AND RESTATED OPERATING AGREEMENT
OF
COBASYS LLC
Dated as of December 2, 2004
By and Between
ChevronTexaco Technology Ventures, LLC
And
Ovonic Battery Company, Inc.
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
TABLE OF CONTENTS
ARTICLE 1 SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION......................................................1
Section 1.1 Subject Matter.............................................................................1
Section 1.2 Definitions................................................................................1
Section 1.3 Other Definitions.........................................................................11
Section 1.4 Rules of Construction.....................................................................12
ARTICLE 2 CONTINUATION AND OPERATIONS...............................................................................13
Section 2.1 Company...................................................................................13
Section 2.2 Place of Business.........................................................................13
Section 2.3 Purpose...................................................................................13
Section 2.4 Operations................................................................................13
Section 2.5 Reduced Funding...........................................................................14
Section 2.6 Valuation Procedures......................................................................14
Section 2.7 Deadlock..................................................................................15
ARTICLE 3 CAPITAL STRUCTURE.........................................................................................18
Section 3.1 Members' Capital Contributions and Percentage Interests...................................18
Section 3.2 Funding Alternatives......................................................................19
Section 3.3 Additional Capital Contributions..........................................................19
Section 3.4 Payment of Capital Contributions..........................................................19
Section 3.5 Option to Purchase Preferred Interest.....................................................20
Section 3.6 Member Loans; Preferred Interests.........................................................20
Section 3.7 Capital Accounts..........................................................................22
Section 3.8 Capital Account Adjustments...............................................................22
Section 3.9 Return of Capital.........................................................................23
ARTICLE 4 ALLOCATIONS AND DISTRIBUTIONS.............................................................................24
Section 4.1 Distributions.............................................................................24
Section 4.2 Profits, Losses and Distributive Shares of Tax Items......................................24
Section 4.3 Compliance with Code......................................................................28
Section 4.4 Allocations upon Disposition of Interest..................................................28
Section 4.5 Tax Matters...............................................................................28
ARTICLE 5 MANAGEMENT................................................................................................30
Section 5.1 Management of the Business of the Company.................................................30
Section 5.2 The Management Committee..................................................................30
Section 5.3 Power and Authority of the Management Committee...........................................31
Section 5.4 Matters Requiring Unanimous Vote of the Management Committee..............................33
Section 5.5 Meetings of Management Committee/Conduct of Business......................................35
- i -
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
Section 5.6 Remuneration of Management Committee......................................................36
Section 5.7 Officers of the Company; President........................................................36
Section 5.8 Authority and Duties of Officers; Standing Delegation of Authority........................36
ARTICLE 6 INDEMNIFICATION...........................................................................................36
Section 6.1 Exculpation...............................................................................36
Section 6.2 Indemnification...........................................................................36
Section 6.3 Liability for Debts of the Company; Limited Liability.....................................37
Section 6.4 Company Expenses..........................................................................38
ARTICLE 7 TRANSFER OF INTERESTS.....................................................................................38
Section 7.1 Restrictions on Transfer..................................................................38
Section 7.2 Change of Control.........................................................................40
Section 7.3 Waiver of Partition.......................................................................41
Section 7.4 Covenant Not to Withdraw or Dissolve......................................................41
Section 7.5 Substituted Members.......................................................................41
Section 7.6 Deliveries................................................................................42
Section 7.7 Approvals.................................................................................42
Section 7.8 Liquidated Damages........................................................................42
ARTICLE 8 DEFAULT...................................................................................................42
Section 8.1 Default...................................................................................42
Section 8.2 Options of Nondefaulting Member...........................................................44
Section 8.3 No Limitation or Right of Set-Off.........................................................45
Section 8.4 Security Interest.........................................................................45
ARTICLE 9 DISSOLUTION...............................................................................................48
Section 9.1 Dissolution...............................................................................48
Section 9.2 Winding Up................................................................................48
Section 9.3 Distributions upon Liquidation............................................................49
Section 9.4 Claims of the Members.....................................................................49
Section 9.5 Rights and Obligations of Members.........................................................50
ARTICLE 10 FINANCIAL MATTERS........................................................................................50
Section 10.1 Books and Records.........................................................................50
Section 10.2 Financial Reports.........................................................................50
Section 10.3 Company Funds.............................................................................50
ARTICLE 11 MISCELLANEOUS............................................................................................51
Section 11.1 Notices...................................................................................51
Section 11.2 Modification..............................................................................52
Section 11.3 Governing Law.............................................................................52
- ii -
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
Section 11.4 Assignment, Binding Effect................................................................52
Section 11.5 No Third Party Rights.....................................................................52
Section 11.6 Counterparts..............................................................................52
Section 11.7 Invalidity................................................................................52
Section 11.8 Entire Agreement..........................................................................52
Section 11.9 Expenses..................................................................................53
Section 11.10 Waiver....................................................................................53
Section 11.11 Dispute Resolution........................................................................53
Section 11.12 Disclosure................................................................................53
Section 11.13 Non-Compete...............................................................................53
Section 11.14 Further Assurances........................................................................55
Section 11.15 Press Releases............................................................................55
Section 11.16 CTTV Non-Assertion........................................................................55
Section 11.17 ECD/OBC Non-Assertion.....................................................................55
- iii -
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
EXHIBITS
--------
A. Budget Protocol
B. Dispute Resolution Procedure
C. Reduced Funding Guidelines
- iv -
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
AMENDED AND RESTATED OPERATING AGREEMENT
AMENDED AND RESTATED OPERATING AGREEMENT ("Agreement"), dated and
effective December 2 2004, by and between ChevronTexaco Technology Ventures LLC,
successor to Texaco Energy Systems Inc. ("CTTV"), a Delaware limited liability
company, having an office at 1111 Bagby, Houston, Texas 77002, and Ovonic
Battery Company, Inc. ("OBC"), a Delaware corporation, having an office at 1707
Northwood, Troy, Michigan 48084.
WHEREAS, CTTV and OBC are parties to that certain Amended and Restated
Operating Agreement of Texaco Ovonic Battery Systems LLC dated as of July 17,
2001 (the "Prior Operating Agreement");
WHEREAS, CTTV and OBC desire to amend and restate the Prior Operating
Agreement as set forth herein;
WHEREAS, concurrent with the execution of this Agreement, OBC has
granted the Company (as hereinafter defined) a royalty-free, worldwide,
exclusive license to certain technology owned by ECD (as hereinafter defined)
and OBC related to nickel metal hydride batteries ("ECD/OBC Technology"), which
grant extends the Company's preexisting license rights in ECD/OBC Technology to
a number of new fields and limits ECD's and OBC's rights in ECD/OBC Technology
to other specifically identified fields, such exclusive license being subject to
all preexisting agreements ECD and OBC have with other entities regarding
ECD/OBC Technology; and
WHEREAS, concurrent with the execution of this Agreement, the Company
has granted to CTTV a security interest in all of its general intangibles and
substantially all of its intellectual property assets to secure OBC's
performance of its obligations hereunder;
NOW, THEREFORE, in consideration of the covenants and agreements set
forth in this Agreement, the parties agree as follows:
ARTICLE 1
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Subject Matter. This Agreement sets forth the terms
and conditions upon which the parties shall operate the Company.
Section 1.2 Definitions. For purposes of this Agreement,
including the Exhibits hereto, except as otherwise expressly provided or unless
the context otherwise requires, the terms defined in this Section 1.2 shall have
the meanings herein assigned to them and the capitalized terms defined elsewhere
in this Agreement, by inclusion in quotation marks and parentheses, shall have
the meanings so ascribed to them.
"Acceptable Transferee" means a Person proposed by the Selling
Member in accordance with Section 7.1(c) and either accepted or not
objected to by the Offeree
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Member within the time period set forth in such Section.
"Adjusted Capital Account" means, with respect to any Member,
such Member's Capital Account as of the end of any relevant date after
giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which
such Member is deemed to be obligated to restore pursuant to
Treasury Regulations Sections 1.704-1(b)(2)(ii)(c),
1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in that Member's Adjusted Capital
Account.
"Administrator" means the director of the Michigan Department
of Consumer and Industry Services, or such other person or agency as
shall be provided for in the Michigan Act for the filing of articles of
organization and other documents relating to the organization and
continuation of limited liability companies in Michigan.
"Affiliate" means with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person. For
the purposes of this definition, "control" means the ownership,
directly or indirectly, of more than 50% of the Voting Securities, of
such Person; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Annual Budget" means the budget for operating expenses and
capital expenditures of the Company for any Fiscal Year prepared in
accordance with the Budget Protocol.
"Annual Operating Plan" means the detailed written description
of the Company's Objectives for a Fiscal Year and the actions the
Company intends to take in furtherance of such Objectives.
"Approved Annual Budget" means an Annual Budget approved by
the Management Committee or the Members in accordance with this
Agreement.
"Articles" means the Articles of Organization of the Company,
as amended or amended and restated from time to time, filed in the
office of the Administrator in accordance with the Michigan Act.
"Associated Agreements" means the Technology Agreement, the
Confidentiality Agreement and the Articles.
"Available Funds" means Company cash on hand, as of the date
of computation, including (without limitation) cash derived from any
one or more of the following sources: (i) the Capital Contributions of
the Members made pursuant to the terms of this Agreement, (ii) the
proceeds of any Disposition of all or any portion of the assets of the
Company,
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
including any insurance proceeds, (iii) any distributions (including
liquidating distributions) received from any Person in which the
Company holds an interest, and (iv) all Company operating income.
"Bankruptcy" means (i) the filing of any petition or the
commencement of any suit or proceeding by an individual or entity
pursuant to Bankruptcy Law seeking an order for relief, liquidation,
reorganization or protection from creditors, (ii) the entry of an order
for relief against an individual or entity pursuant to Bankruptcy Law
or (iii) the appointment of a receiver, trustee or custodian for a
substantial portion of the individual's or entity's assets or property,
provided such order for relief, liquidation, reorganization or
protection from creditors is not dismissed within sixty (60) days after
such appointment of a receiver, trustee or custodian.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors.
"Battery Business" means the research, development,
manufacturing, marketing and servicing of COBASYS Licensed Products and
Ovonic Materials for use in COBASYS Licensed Products (as such terms
are defined in the Technology Agreement).
"Beneficial Ownership" shall have the meaning set forth in
Regulation 13D under the Exchange Act, and derivative terms such as
"Beneficially Own" shall be given corresponding meanings.
"Book Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except (i) the initial
Book Value of any asset contributed by a Member to the Company shall be
the fair market value of such asset, as determined by the Management
Committee; (ii) the Book Value of all Company assets shall be adjusted
in the event of a revaluation as provided in Section 3.8(d) as
determined by the Management Committee; (iii) the Book Value of any
Company asset distributed to any Member shall be the fair market value
of such asset on the date of distribution as determined by the
Management Committee; and (iv) such Book Value shall be adjusted by the
Depreciation taken into account with respect to such asset for purposes
of computing Profits and Losses.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in the State of New York are permitted or
required to close.
"Buyout Closing" means the consummation of any purchase and
sale of a Member's Interest pursuant to Section 2.7.
"Capital Contribution" means, with respect to any Member, the
amount of capital contributed by such Member to the Company in
accordance with Article 3 of this Agreement.
"Change of Control" means the occurrence of any of the
following at any time after the date hereof:
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AMENDED AND RESTATED OPERATING AGREEMENT
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(i) in the case of the OBC Member, (A) any Person or
"Group" (within the meaning of Regulation 13D under the
Exchange Act) of Persons shall have become the Beneficial
Owner, directly or indirectly, of more than Fifty Percent
(50%) of the then outstanding Voting Securities of ECD or OBC,
or (B) the Board of Directors of ECD shall approve the sale of
all or substantially all the assets of ECD to any third party
or third parties in a transaction or a series of related
transactions; and
(ii) in the case of a ChevronTexaco Member, (A) any
Person or "Group" (within the meaning of Regulation 13D under
the Exchange Act) of Persons shall have become the Beneficial
Owner of more than Fifty Percent (50%) of the then outstanding
Voting Securities of ChevronTexaco Corporation, or (B) the
Board of Directors of ChevronTexaco Corporation shall approve
the sale of all or substantially all the assets of
ChevronTexaco Corporation to any third party or third parties
in a transaction or a series of related transactions.
"ChevronTexaco Group Entity" means, at any time, ChevronTexaco
Corporation and each Subsidiary of ChevronTexaco Corporation of which
ChevronTexaco Corporation, directly or indirectly through Subsidiaries,
Beneficially Owns 100% of the outstanding Voting Securities (other than
nominee shares) at such time.
"ChevronTexaco Member" means any Member that is a
ChevronTexaco Group Entity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means (i) any and all Interest in the Company
owned by OBC, whether now or hereafter acquired, as such Interest is
defined in this Agreement (the "Pledged Interest"), (ii) all
certificates and instruments, if any, representing or evidencing the
Pledged Interest, (iii) any and all rights, powers, remedies and
privileges of OBC under this Agreement, (iv) any and all rights,
powers, remedies and privileges of OBC as a member of the Company,
including all voting, management and other rights under this Agreement
and applicable law, (v) all of OBC's rights to receive its share of
profits, income, capital distributions and surplus from the Company,
whether in the form of cash, properties or other assets, and whether
upon a sale or refinancing of any of the Company's assets, in the
ordinary course of business, upon dissolution and liquidation or
otherwise, (vi) any and all proceeds and products of any of the
foregoing, whether now held and existing or hereafter acquired or
arising, including any and all cash, securities, instruments and other
property from time to time paid, payable or otherwise distributed in
respect of or in exchange for any or all of the foregoing
(collectively, the "Proceeds") and (vii) all of OBC's right, title and
interest in general intangibles, whether now owned or hereafter
acquired (including, without limitation all patents, patent
applications and any unpatented developments and inventions and all
rights corresponding thereto throughout the world, including without
limitation all patents and patent applications; all trademarks, service
marks, logos, trade names, trade dress, and all United States, state
and/or foreign applications for registration and registrations thereof,
and all property of OBC necessary to produce any products sold under
any of the above; all copyrights and copyrighted works and all
derivative works,
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
modifications and improvements thereof, and all United States and/or
foreign applications for registration and registrations thereof; all
computer software programs and all modifications, improvements and
derivative works thereof, all personal property, including but not
limited to source codes, object codes or similar information, which is
necessary to the practical utilization of such programs and all
tangible property of OBC embodying or incorporating any such programs;
all trade secrets, proprietary information, customer lists,
instructional materials, working drawings, manufacturing techniques,
process. technology documentation, and product formulations; and all
renewals, modifications, amendments, re-issues, divisions,
continuations in whole or part, and extensions of any such Collateral),
which general intangibles are owned by OBC or which OBC has a right to
use or OBC is permitted to use and which the Company has a right to use
or is permitted to use. "Proceeds" shall include (x) any options,
warrants, membership interests, other securities or other property
issued or delivered by the issuer of or obligor on any Collateral as a
dividend or distribution in connection with any reclassification,
increase or reduction of capital issued or delivered in connection with
any merger or other reorganization and (y) any property received upon
the liquidation or dissolution of any issuer of or obligor on any
Collateral or upon or in respect of any distribution of capital.
"Company" means COBASYS LLC, a limited liability company
formed under the Michigan Act.
"Company Technology Assets" means all technology owned by the
Company including, Foreground Technology, OBC Licensed Technology,
Texaco Technology and/or Texaco Improvement Technology whether acquired
by the Company through assignment, transfer, license and /or sublicense
as of the time of any calculation of Default Purchase Price, Fair
Market Value or Distributions upon Liquidation.
"Confidentiality Agreement" means the Confidentiality
Agreement dated as of July 17, 2001 among CTTV, OBC and the Company.
"Default Purchase Price" means:
(i) 80% of the Fair Market Value of the Company,
(ii) minus the Fair Market Value of the Company
Technology Assets, if any, to be transferred to Defaulting
Member pursuant to Section 4.2 of the Technology Agreement,
(iii) multiplied by the Defaulting Member's
Percentage Interest, multiplied by the percentage of the
Defaulting Member's Interest that the Default Purchaser wishes
to purchase;
(iv) plus, if the Defaulting Member has a Preferred
Interest, the Preferred Interest Amount with respect to the
Preferred Interest held by such Member;
provided that the Default Purchase Price shall in no case be less than
zero.
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
"Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such year or other
period, except that if the Book Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such
year or other period (as a result of property contributions or
adjustments to such values), Depreciation shall be adjusted as
necessary so as to be an amount which bears the same ratio to such
beginning Book Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other
period bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other
cost recovery deduction for such year or other period is zero,
Depreciation for such year or other period shall be determined with
reference to such beginning Book Value using any reasonable method
selected by the Management Committee.
"Disbursement and Commitment Schedule" means a schedule of
required disbursements and commitments for expenditures for a calendar
quarter approved by the Management Committee.
"Disposition", "Disposing", "Dispose" or "Disposed" means,
with respect to any asset (including Members' Interests or any portion
thereof), a sale, assignment, transfer, conveyance, gift, exchange or
other disposition of such asset.
"Distributable Cash Flow" means any Available Funds after (i)
paying the ordinary and necessary expenses of the Company, (ii) paying
any debts or liabilities of the Company to the extent required under
any agreement with any lender or creditor (including any Member, but
not including any amounts payable in respect of the Preferred
Interest(s) outstanding, if any) and (iii) establishing reserves to
meet current or reasonably expected obligations of the Company as the
Management Committee determines in its sole discretion.
"ECD" means Energy Conversion Devices, Inc., a Delaware
corporation.
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, as of any determination time, (i)
with respect to the Company as a whole, the price at which a willing
seller under no compulsion to sell would sell, and a willing buyer
under no compulsion to purchase would purchase, 100% of the Interests
in the Company, but before giving effect to any transfer of Company
Technology Assets pursuant to Section 4.2 of the Technology Agreement
(subject to all indebtedness, liabilities and other obligations of the
Company outstanding at such time; provided that for such purposes the
aggregate Preferred Interest Amount(s) shall be treated as indebtedness
of the Company), and (ii) with respect to any individual asset, the
price at which a willing seller under no compulsion to sell would sell,
and a willing buyer under no compulsion to purchase would purchase,
such asset (or the relevant portions of such rights). Any determination
of Fair Market Value under this Agreement shall be made as set forth in
Section 2.6.
"Fiscal Year" means (i) the period of time commencing as of
July 1, 2004 and
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
ending on December 31, 2004, in the case of the current Fiscal Year of
the Company, and (ii) any subsequent calendar year.
"GAAP" means generally accepted accounting principles in the
United States, consistently applied.
"Governmental Body" means a government organization,
subdivision, agency or authority thereof, whether foreign or domestic.
"Independent Director" means an independent director within
the meaning of Nasdaq Marketplace Rule 4200, and any successor rule.
"Interest" means the rights of a Member in the Company (which
shall be considered intangible personal property for all purposes)
consisting of (i) such Member's interest in profits, losses,
allocations and distributions as set forth in this Agreement, (ii) such
Member's right to vote or grant or withhold consents with respect to
Company matters as provided herein or in the Michigan Act, and (iii)
such Member's other rights and privileges as provided herein or by the
Michigan Act.
"Laws" means all applicable statutes, laws, rules,
regulations, orders, ordinances, judgments and decrees of any
Governmental Body, including the common or civil law of any
Governmental Body.
"Lien" shall mean any lien, encumbrance, security interest,
charge, mortgage, option, pledge or restriction on transfer of any
nature whatsoever.
"Losses" shall mean any and all damages, losses, deficiencies,
liabilities, taxes, obligations, penalties, judgments, settlements,
claims, payments, fines, interest, costs and expenses (including,
without limitation, the costs and expenses of any and all Proceedings
and demands, assessments, judgments, settlements and compromises
relating thereto and the costs and expenses of attorneys',
accountants', consultants' and other professionals' fees and expenses
incurred in the investigation or defense thereof or the enforcement of
rights hereunder), but excluding consequential damages and punitive
damages (other than such damages awarded to any third party against an
Indemnitee).
"Management Committee" means the committee comprised of the
individuals designated as representatives by the Members pursuant to
Section 5.2 hereof and all other individuals who may from time to time
be duly elected or appointed to serve as representatives on the
Management Committee in accordance with the provisions hereof, in each
case so long as such individual shall continue in office in accordance
with the terms hereof.
"Material Adverse Effect" means an event or non-event which
can reasonably be expected to result in a material adverse effect on
the business, assets, properties, condition (financial or otherwise),
results of operations, prospects or customer or supplier relationships
of the Company within the agreed scope of the Company's business. For
purposes of the foregoing sentence, an event or non-event shall be
deemed to have such a
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AMENDED AND RESTATED OPERATING AGREEMENT
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material adverse effect if (but only if) it has a reasonably estimable
present value in excess of the greater of (i) ten percent (10%) of the
Company's fair market value as a going concern, estimated in good faith
(without any requirement of any determination pursuant to Section 2.6
of this Agreement) (provided that the aggregate Preferred Interest
Amount(s) shall be treated as indebtedness of the Company in any such
estimate of fair market value) or (ii) ten percent (10%) of the
Company's gross revenues or assets as reported on the Company's most
recent financial statements.
"Maturity Date" means the date that is the tenth (10th)
anniversary from the date that CTTV makes its first Capital
Contribution in respect of its Preferred Interest.
"Members" means CTTV, OBC and such other Persons who are
admitted as Members pursuant to this Agreement.
"Member Nonrecourse Debt" means any nonrecourse debt of the
Company for which any Member bears the economic risk of loss.
"Member Nonrecourse Debt Minimum Gain" means, for each Member,
the amount of Minimum Gain for the Fiscal Year or other period
attributable to such Member's "partner nonrecourse debt," determined in
accordance with Treasury Regulations Section 1.704-2(i)(2).
"Michigan Act" means the Michigan Limited Liability Company
Act, P.A. 1993, No. 23, as amended from time to time.
"Minimum Gain" means, with respect to all nonrecourse
liabilities of the Company, the minimum amount of gain that would be
realized by the Company if the Company Disposed of the Company property
subject to such liability in full satisfaction thereof computed in
accordance with Treasury Regulations Section 1.704-2(d).
"Minimum Gain Share" means, for each Member, such Member's
share of Minimum Gain for the Fiscal Year (after taking into account
any decrease in Minimum Gain for such year), such share to be
determined under Treasury Regulations Section 1.704-2(g).
"Nonrecourse Deductions" means, for each Fiscal Year or other
period, an amount of Company deductions that are characterized as
"nonrecourse deductions" under Treasury Regulations Section 1.704-2(c).
"Objectives" means business objectives (each of which shall
include a scheduled completion date) by which the Company's performance
will be measured, as shall be included in Annual Operating Plans or as
otherwise approved by the Management Committee from time to time.
"OBC Group Entity" means, at any time, Energy Conversion
Devices, Inc. ("ECD") and each Subsidiary of ECD (including OBC) of
which ECD, directly or indirectly through Subsidiaries, Beneficially
Owns 100% (or, with respect to OBC, at least 91%) of the
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
outstanding Voting Securities (other than nominee shares) at such time.
"OBC Member" means any Member that is an OBC Group Entity.
"Percentage Interest" means, for each Member as of the date
hereof, the percentage set forth opposite such Member's name in Section
3.1(b), as such may be adjusted from time to time pursuant to the
provisions of this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company,
trust, estate, unincorporated organization or Governmental Body.
"Preferred Adjusted Capital" means, with respect to the
Preferred Interest(s) outstanding, if any, the Capital Contribution
made in exchange for or on account of such interest, reduced by the
amount of all Distributions made in respect of such Preferred Interest
(or portion thereof) under Section 4.1(b)(ii).
"Preferred Capital Contribution" means, with respect to the
Preferred Interest, the Capital Contribution made in consideration of
such Interest pursuant to the terms hereof.
"Preferred Interest" means an Interest in the Company issued
pursuant to Section 3.2 and having the terms set forth herein.
"Preferred Interest Amount" means the amount of any
outstanding Preferred Interest, together with all accrued and unpaid
distributions thereon (determined as if the Company had sufficient
Profits for all periods to enable distributions under Section 4.1(b) to
be made in full with respect to the Preferred Return and Preferred
Adjusted Capital).
"Preferred Member" means any Member that is the Holder of a
Preferred Interest.
"Preferred Return" means as of a given date, with respect to
the Preferred Interest(s) outstanding, if any, the amount accruing
daily for each fiscal year from and after the date of the first
issuance of such Preferred Interest, at the rate per annum equal to the
Prime Rate plus 2.0% (subject to adjustment pursuant to Section
3.6(b)(ii)), compounded monthly, on (a) the Preferred Adjusted Capital
of such interest (or portion thereof) and (b) Unpaid Preferred Return
on such interest (or portion thereof) as of such date.
"Prime Rate" means the corporate base rate per annum in effect
as published by Citibank, N.A. from time to time for domestic unsecured
commercial loans.
"Prior Operating Agreement" means that certain Amended and
Restated Operating Agreement of Texaco Ovonic Battery Systems LLC
(f/k/a GM Ovonic L.L.C.) dated as of July 17, 2001 by and between CTTV
and OBC, as originally executed.
"Proceeding" means any action, claim, suit, arbitration,
subpoena, discovery request, proceeding or investigation by or before
any court or grand jury, any Governmental Body or arbitration tribunal.
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
"Profits" and "Losses" means, for purposes of Article 4, an
amount equal to the Company's taxable income or loss for each Fiscal
Year or other period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following
adjustments:
(i) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall
be added to such taxable income or loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this
definition, shall be subtracted from such taxable income or
loss;
(iii) Gain or loss resulting from any Disposition of
Company property with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the Book Value of the property Disposed of,
notwithstanding that the adjusted tax basis of such property
differs from such Book Value;
(iv) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year or other period, computed in
accordance with the definition of "Depreciation" herein; and
(v) Notwithstanding any other provision of this
definition, any items which are specifically allocated
pursuant to Section 4.2(c) shall not be taken into account in
computing Profits or Losses.
"Subsidiary" means, with respect to any Person, any other
Person of which a majority of the Voting Securities are at the time
directly or indirectly owned by such Person.
"Technology Agreement" means the Amended and Restated
Intellectual Property License Agreement dated as of the date hereof
among OBC, CTTV and the Company.
"Transfer" means any sale, transfer, exchange, assignment or
other disposition, by operation of law or otherwise.
"Treasury Regulations" means the Treasury Regulations
promulgated under the Code, as from time to time in effect.
"Unallocated Preferred Return" means with respect to the
Preferred Interest(s), if any, outstanding as of the determination
date, an amount equal to the excess, if any, of (i) the Preferred
Return accruing on such interest(s) (or portion thereof) for all
periods over
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AMENDED AND RESTATED OPERATING AGREEMENT
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(ii) the cumulative allocations made under Section 4.2(a)(ii) on such
interest(s) (or portion thereof) for all periods.
"Unanimous Approval" means a unanimous vote approving an action by
the Members then entitled to vote with respect to such action.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect in the State of Michigan from time to time.
"Unpaid Preferred Return" means with respect to the Preferred
Interest(s), if any, outstanding as of the determination date, an amount
equal to the excess, if any, of (i) the cumulative allocations made in
respect of such interest (or portion thereof) under Section 4.2(a)(ii) for
all periods, over (ii) the aggregate amount of prior distributions made in
respect of such interest (or portion thereof) by the Company under Section
4.1(b)(i) for all periods.
"Voting Securities" means any Person's securities or other ownership
interests which have ordinary voting power under ordinary circumstances
for the election of directors (or the equivalent) of such Person.
Section 1.3 Other Definitions. The following terms have the meanings
ascribed to them in the Sections noted:
"Accepting Member" 2.7
"Agreement" Opening Paragraph
"Appraisers" 2.6
"Authorized Person" 6.1
"Capital Account" 3.7
"Change Price" 7.2
"Changed Member" 7.2
"Common Adjusted Capital Account 4.2(b)(i)
"Deadlock" 2.7
"Deadlock Event" 2.7
"Deadlock Notice" 2.7
"Deadlock Price" 2.7
"Default" 8.1
"Default Purchase" 8.2
"Default Purchaser" 8.2
"Defaulting Member" 8.1
"Designated Valuation" 2.7
"Dissolution Event" 9.1
"Effective Time" Article 12
"Electing Member" 2.7
"Event of Default" 8.1(c)
"First Appraiser" 2.6
"IB Firm" 2.6
"Indemnitee" 6.2
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
"Liquidation Event" 3.6(b)(iv)
"Loan Account" 3.6
"Nondefaulting Member" 8.1
"Offeree Member" 7.1(c)
"Offeree Member's Acceptance Notice" 7.1(c)
"Offeree Member Response Date" 7.1(c)
"Original Funding Amount" 3.1(a)
"Preferred Entitlement Commitment" 4.2(c)(xi)
"Pro Rata Allocation" 4.2(c)(xi)
"Regulatory Allocations" 4.2(a)
"Remaining Funding Commitment" 3.1(a)
"Sale Materials" 7.1(c)
"Second Appraiser" 2.6
"Secretary" 5.5(b)
"Selling Member" 7.1(c)
"Selling Member's Offer Notice" 7.1(c)
"September Number" 3.1(a)
"Tax Matters Member" 4.5(a)
"Tax Return" 4.5(b)
"Third Appraiser" 2.6
"Traditional Method" 4.2(d)(ii)
"Unchanged Member" 7.2
Section 1.4 Rules of Construction. For purposes of this Agreement,
including the Exhibits hereto:
(a) General. Unless the context otherwise requires, (i) "or" is not
exclusive; (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP; (iii) words in the singular
include the plural and words in the plural include the singular; (iv)
words in the masculine include the feminine and words in the feminine
include the masculine; (v) any date specified for any action that is not a
Business Day shall be deemed to be the first Business Day after such date;
(vi) the words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation"; (vii) the words "hereof,"
"herein" and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement; and (vii) a reference to a Party includes its successors and
assigns.
(b) Articles, Parts and Sections. References in this Agreement to
Articles; Parts, Sections or other subdivisions are unless otherwise
specified, to corresponding Articles, Parts, Sections or other
subdivisions of this Agreement. Neither the captions to Articles, Parts,
Sections or other subdivisions of this Agreement or the section headings
of this Section 1.4, nor any Table of Contents shall be deemed to be a
part of this Agreement or this Section 1.4.
(c) Exhibits and Schedules. The Exhibits and Schedules to this
Agreement form part of this Agreement and shall have the same force and
effect as if set out in the body of this Agreement. References to this
Agreement include the attachments thereto and
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
all Exhibits and Schedules incorporated therein. All references in this
Agreement to Exhibits and Schedules refer to Exhibits and Schedules to
this Agreement, unless expressly provided otherwise.
(d) Other Agreements. References herein to any agreement or other
instrument shall, unless the context otherwise requires (or the definition
thereof otherwise specifies), be deemed references to such agreement or
other instrument as it may from time to time be changed, amended or
extended.
(e) Certain Terms. The words "best efforts" shall mean the use of
reasonable best efforts conducted in good faith in a commercially
reasonable manner. Whenever any Person is permitted or required to make a
decision or act in its "sole discretion" or "discretion" or under a grant
of similar authority or latitude, such Person shall be entitled to
consider only such interest and factors as it desires, including its own
interest, and shall not be subject to any other or different standard
imposed by the relevant agreement or by relevant provisions of law or in
equity or otherwise. Whenever any Person is permitted or required to make
a decision or act in its "good faith," such Person shall act under such
standard and shall not be subject to any other or different standard
imposed by the relevant agreement or by relevant provisions of law or in
equity or otherwise.
ARTICLE 2
CONTINUATION AND OPERATIONS
Section 2.1 Company. Subject to the terms and conditions of this
Agreement, the Members shall continue and jointly operate the Company, a limited
liability company organized pursuant to the Michigan Act, which shall engage in
the business described herein.
Section 2.2 Place of Business. The principal place of business of the
Company shall be in Troy, Michigan or such other place as the Management
Committee may from time to time determine. The registered office of the Company
in the State of Michigan shall be 601 Abbott Road, East Lansing, Michigan 48823
and the registered agent for service of process on the Company shall be
CSC-Lawyers Incorporating Service (Company), whose business address is the same
as the Company's registered office (or such other registered office and
registered agent as the Management Committee may from time to time select).
Section 2.3 Purpose. The business and purposes of the Company shall be (i)
to carry on the Battery Business and (ii) to engage in such other business
activities that may be undertaken by a limited liability company under the
Michigan Act as the Members may from time to time determine by Unanimous
Approval.
Section 2.4 Operations. The Company shall operate in accordance with an
Annual Operating Plan and Annual Budget as described in and adopted pursuant to
the provisions of Exhibit A and Section 5.4(a) and Disbursement and Commitment
Schedules approved in accordance with Section 2.4(a) and Section 5.4(a).
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AMENDED AND RESTATED OPERATING AGREEMENT
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(a) Quarterly Reviews. Insofar as practicable, meetings of the
Management Committee shall be held on dates that correspond to the
completion dates for Objectives and in any event no less often than once
every calendar quarter. At such meetings, the Management Committee will
review progress to date and determine whether any Objectives that were
scheduled to be completed since its last meeting have been satisfied, and
determine whether to approve a Disbursement and Commitment Schedule for
the next succeeding calendar quarter.
(b) Review of Objectives. For each Objective, the President shall
promptly notify the Management Committee as to whether such Objective has
been satisfied prior to its scheduled completion date as soon as the
President has such information and in any event no later than 30 days
following the scheduled completion date for such Objective. If, within 10
Business Days following receipt of such notification (or, if no such
notification is given, within 10 Business Days following the applicable
scheduled completion date), the Management Committee shall not have
determined that the Company has met such Objective, the President shall,
by no later than 45 days following the scheduled completion date for such
Objective, submit to the Management Committee for approval a written
recovery plan, including any proposed revisions to such Objective. The
Management Committee shall review such plan and the President shall
consult with the Management Committee as requested.
Section 2.5 Reduced Funding. The Company shall use diligent efforts to
minimize costs and expenditures, and all funding for the Company, including
funding approved pursuant to the then-current Disbursement and Commitment
Schedule, shall be subject to the Reduced Funding Guidelines set forth on
Exhibit C effective immediately upon the earlier of (i) the date on which the
Management Committee determines that the Company has not met such Objective, or
(ii) the expiration of the applicable period for making such determination under
Section 2.4(b) above. If (x) the Management Committee shall not have approved a
recovery plan within 28 days after its submission or (y) the President shall not
have submitted a recovery plan pursuant to Section 2.4(b) within 30 days
following the scheduled completion date for such Objective, the Members shall
follow the deadlock procedures set forth in Section 2.7 and reduced funding for
the Company shall continue as provided in this Section until such time as the
deadlock is resolved or a Buyout Closing occurs, which ever is earlier.
Section 2.6 Valuation Procedures. Any determination of Fair Market Value
under this Agreement shall be made as follows:
(a) The Members will first seek to agree on such Fair Market Value.
(b) If the Members cannot agree on the Fair Market Value within 30
days of an event giving rise to the need to determine Fair Market Value,
OBC will promptly select an independent investment banking firm (an "IB
Firm") of recognized international standing (the "First Appraiser") and
CTTV will select an IB Firm (the "Second Appraiser" and, together with the
First Appraiser, the "Appraisers") to determine the Fair Market Value. The
fees and expenses of each Appraiser will be borne by each of the Members
that have retained such Appraiser.
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AMENDED AND RESTATED OPERATING AGREEMENT
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(c) Within 45 days of the date of selection of the Appraisers, each
of the First Appraiser and the Second Appraiser will determine the Fair
Market Value and will notify the Members of such determination (specifying
the Fair Market Value as determined by such Appraiser and setting forth,
in reasonable detail, the basis for such determination). If the Fair
Market Value as determined by one Appraiser is not more than 110% of the
Fair Market Value as determined by the other Appraiser, the Fair Market
Value will be the average of the two amounts. In all other cases, the
Appraisers will jointly select a third IB Firm (the "Third Appraiser").
The fees and expenses of the Third Appraiser will be borne by the Members
equally.
(d) The Third Appraiser will, within 45 days of its retention,
determine its view of the Fair Market Value, and the Fair Market Value
will thereupon be the average of (i) the Fair Market Value as determined
by the Third Appraiser and (ii) whichever of the Fair Market Values as
determined by the First Appraiser and the Second Appraiser is closer to
the Fair Market Value as determined by the Third Appraiser; provided that
if Fair Market Values as determined by the First Appraiser and the Second
Appraiser differ by the same amount from the Third Appraiser's
determination of Fair Market Value, the Fair Market Value will be as
determined by the Third Appraiser. The determination of Fair Market Value
in accordance with this Section 2.6 will be final, binding and conclusive
upon the Members.
(e) Each Member will share with the other Member any written
communication it has with the Third Appraiser and will not communicate
other than in writing with the Third Appraiser without giving the other
Member an opportunity to be present at any such communication.
(f) The aggregate Preferred Interest Amount(s) shall be treated as
indebtedness of the Company in any determination of Fair Market Value
under this Agreement.
Section 2.7 Deadlock.
(a) If at any time there is an inability of the Members to agree,
despite good faith efforts to reach agreement, on a course of action in
respect of any material matter and such inability persists for at least 30
days after such inability first arises and if any Member reasonably
believes that such inability to agree has had or is reasonably expected to
result in a Material Adverse Effect (a "Deadlock Event"), then either
Member may request that such Deadlock Event be immediately submitted for
resolution to the Chairman of ECD and the President of CTTV (or such other
senior executive of CTTV or its Affiliates as CTTV may designate). Such
request shall be in writing and shall be accompanied by the requesting
Member's statement of the matter and its position with respect thereto.
The other Member shall have the right to submit to such officers its own
statement of the matter and its position with respect thereto.
(b) If such matter is not resolved within thirty (30) days of the
submission of such matter to such officers, then:
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AMENDED AND RESTATED OPERATING AGREEMENT
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(i) no action will be taken with respect to such matter and
the status quo shall be maintained in respect thereof, and
(ii) either Member (the "Electing Member") who is not a
Defaulting Member may declare a deadlock (a "Deadlock") by
delivering a written notice (a "Deadlock Notice") to the other
Member at any time for a period of sixty (60) days beginning at the
end of such 30-day period stating that a Deadlock has occurred and
specifying the valuation of the Company (as to which the aggregate
Preferred Interest Amount(s) shall be treated as a liability of the
Company) (the "Designated Valuation") based on which the Electing
Member (or any Affiliate of the Electing Member designated by it)
agrees that it will either purchase for cash all of the other
Member's (the "Accepting Member") Interest or sell for cash all of
the Electing Member's Interest to the Accepting Member (or any
Affiliate of the Accepting Member designated by it); provided that
if the Members are unable to agree whether such persistent inability
to agree has had or will have a Material Adverse Effect, such
question shall be determined in the affirmative pursuant to Section
11.11 before any purchase of a Member's Interest may occur pursuant
to this Section 2.7. If the Accepting Member has reasonable grounds
for insecurity regarding the ability of the Electing Member to pay
the Deadlock Price (as hereinafter defined) pursuant to any Deadlock
Notice delivered by the Electing Member, the Accepting Member may
demand Adequate Assurance of Performance from the Electing Member.
"Adequate Assurance of Performance" shall mean evidence
demonstrating to the reasonable satisfaction of the Member making
such demand that the other Member has sufficient funds available to
it to allow it to pay in cash the Deadlock Price when due in
accordance with the applicable Deadlock Notice. In the event the
Electing Member shall fail to deliver Adequate Assurance of
Performance within thirty (30) days of any such demand, such
Deadlock Notice delivered by the Electing Member shall be deemed to
be void and of no further force or effect. In the event more than
one Deadlock Notice shall be delivered with respect to any Deadlock,
the Deadlock Notice specifying the higher Deadlock Price shall
control and any other Deadlock Notice shall be disregarded (unless
the Deadlock Notice specifying the higher Deadlock Price shall be
deemed void pursuant to the preceding sentence, in which case such
other Deadlock Notice shall not be disregarded).
(c) The Accepting Member shall have forty-five (45) days from the
receipt of the Deadlock Notice to notify the Electing Member in writing of
the Accepting Member's decision to either purchase the Electing Member's
Interest or sell the Accepting Member's Interest, in each case for the
applicable Deadlock Price (the "Election Notice"). If the Accepting Member
does not deliver an Election Notice within such forty-five (45) days, it
shall be obligated to sell its Interest to the Electing Member at the
applicable Deadlock Price. In the event the Accepting Member shall elect
to purchase the Electing Member's Interest pursuant to the first sentence
of this Section 2.7(c), and the Electing Member has reasonable grounds for
insecurity regarding the ability of the Accepting Member to pay the
Deadlock Price, the Electing Member may demand Adequate Assurance of
Performance from the Accepting Member. In the event the Accepting Member
shall fail to deliver
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
Adequate Assurance of Performance within thirty (30) days of any such
demand, such election to purchase shall be deemed to be an election to
sell and the Accepting Member shall be obligated to sell its Interest
pursuant to such Deadlock Notice at the applicable Deadlock Price. If the
selling Member is the holder of a Preferred Interest, the purchasing
Member shall be obligated to pay the Deadlock Price plus the Preferred
Interest Amount with respect to the Selling Member. In the event of any
purchase and sale pursuant to this Section 2.7, the Deadlock Price shall
be payable in cash.
(d) "Deadlock Price" means a price equal to (i) the Designated
Valuation multiplied by (ii) the Percentage Interest of the selling
Member; provided that in the event the Accepting Member delivers an
Election Notice in which it agrees to sell its Interest pursuant to
Section 2.7(c), at the Accepting Member's option, such Election Notice may
include an irrevocable election that the Deadlock Price shall instead mean
a price equal to (i) Fair Market Value of the Company (calculated in
accordance with Section 2.6) multiplied by (ii) the Percentage Interest of
the selling Member. If such an election is made, within thirty (30) days
after such determination of the Deadlock Price, the Electing Member may by
written notice to the Accepting Member elect to (x) purchase the Accepting
Member's Interest at such Deadlock Price (any such notice, a "FMV
Confirmation") or (y) irrevocably withdraw its Deadlock Notice with
respect to the applicable Deadlock Event.
(e) Within thirty (30) days after identification of the purchasing
Member pursuant to subsection (c) above (or, if applicable, the date the
Electing Member delivers a FMV Confirmation), the selling Member shall
deliver its Interest, free and clear of all Liens (other than any Lien
created under any financing to which the Company is a party and any Lien
granted to the other Member pursuant to this Agreement), together with
duly executed written instruments of transfer with respect thereto, in
form and substance reasonably satisfactory to the purchasing Member or its
designee, against payment of the applicable Deadlock Price (plus the
selling Member's Preferred Interest Amount, if applicable).
(f) Notwithstanding any other provision of this Agreement, no
transfer of the selling Member's Interest shall occur pursuant to this
Section 2.7 unless and until any and all necessary consents and approvals
have been obtained from any Governmental Body with authority with respect
thereto, including any required approvals under the HSR Act. The Members
agree to cooperate and to cause their Affiliates to cooperate in the
preparation and filing of any and all reports or other submissions
required in connection with obtaining such consents and approvals.
(g) Notwithstanding any other provision of this Agreement, in no
event shall a Deadlock Event be deemed to result from the refusal of
either party or any of its Affiliates to agree or consent to any
amendment, modification or waiver of or under this Agreement or any other
agreement between the parties or their respective Affiliates.
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
ARTICLE 3
CAPITAL STRUCTURE
Section 3.1 Members' Capital Contributions and Percentage Interests.
(a) CTTV and OBC shall use reasonable efforts to assist the Company
in securing funding for its operations from sources other than CTTV and
OBC. If despite such efforts the Company is unable to obtain such funding
on terms acceptable to the Members, subject to Section 3.2, CTTV and OBC
shall be responsible for making Capital Contributions, as are required to
fund the Company's operations in accordance with the applicable Approved
Annual Budgets, but only to the extent such funding requirements exceed
cash available from the Company's operations. The parties acknowledge that
(a) in Section 3.1(a) of the Prior Operating Agreement, CTTV agreed to
contribute a fixed amount of cash in order to fund the Company's
operations during the Limited Production Phase (as such term is defined in
the Prior Operating Agreement) (the "Original Funding Commitment") and (b)
as of September 30, 2004, the aggregate amount of cash so contributed to
the Company by CTTV was $143,585,000 (the "September Number"). The parties
agree that CTTV will contribute an amount equal to the Remaining Funding
Commitment (as hereinafter defined) on substantially the same terms as
prior contributions by CTTV pursuant to the Original Funding Commitment.
The term "Remaining Funding Commitment" shall mean an amount equal to (x)
$160,000,000 minus (y) the September Number minus (z) the amount of any
contributions made by CTTV pursuant to the Original Funding Commitment
between September 30, 2004 and the date of this Agreement. At all times
after such time as CTTV shall have satisfied the Remaining Funding
Commitment, CTTV and OBC shall fund the costs and expenses necessary in
proportion to their respective Percentage Interests. The Members'
obligations to make Capital Contributions are subject to Section 3.2. The
Members acknowledge that the initial Book Value of the intellectual
property and know how contributed by OBC pursuant to the Technology
Agreement as in effect on July 17, 2001, was, as set forth in such
agreement, equal to $160,000,000 plus the difference between CTTV's
Capital Account and OBC's Capital Account as of July 17, 2001 and that,
taking into account all Capital Account adjustments made as of the date of
this Agreement, such Book Value has been included in the balance of OBC's
Capital Account.
(b) Percentage Interests. The Percentage Interests assigned to the
Members in consideration of their Capital Contributions heretofore made
and CTTV's agreement to contribute an additional amount equal to the
Remaining Funding Commitment are as follows:
Member Percentage Interest
------ -------------------
CTTV 50%
OBC 50%
The Management Committee shall amend the foregoing table of Members and
Percentage
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
Interests from time to time as necessary to reflect any admission of
additional or substituted Members, in each case as permitted herein, and
to reflect any adjustment of the Members' Percentage Interests upon
conversion of Preferred Interests. Except as otherwise required by the
foregoing sentence, no adjustment to the Capital Account of a Member in
accordance with Section 3.8 shall affect the Percentage Interest of such
Member.
Section 3.2 Funding Alternatives. In the event the Members shall agree
that any Capital Contribution shall be made, by the approval of a Disbursement
and Commitment Schedule, from the date CTTV shall have contributed an amount
equal to the Remaining Funding Commitment until January 1, 2008 and ECD and OBC
fail to fund their share of such Capital Contribution, CTTV may at its option
purchase a Preferred Interest in the Company in an amount equal to the Capital
Contribution that OBC and ECD failed to fund. Any purchase of Preferred Interest
by CTTV may, at its option, also include CTTV's share of such Capital
Contribution. In no event shall CTTV be obligated to purchase any Preferred
Interests pursuant to this Section 3.2 after December 31, 2007. At all times on
or after January 1, 2008, in the event the Members shall agree that any Capital
Contribution shall be made, each Member shall use diligent efforts to meet its
funding obligations in cash from its own corporate resources and ECD shall use
diligent efforts to cause OBC to meet its funding requirements in cash from
ECD's corporate resources. If (a) OBC and ECD reasonably determine that, despite
such efforts, OBC will not be able to fund in cash its share of the funding
required, and (b) CTTV shall so request in writing, OBC and ECD shall diligently
explore other reasonable sources of OBC's share of such funding, including
equity or debt financing of OBC or ECD from independent third parties. ECD shall
be deemed to have made a reasonable determination for purposes of the foregoing
sentence in the event ECD shall have delivered to CTTV a written description of
such determination setting forth in reasonable detail the basis therefor and
signed by each director of ECD that is an Independent Director. Neither OBC nor
CTTV shall be responsible for making any Capital Contributions otherwise
required pursuant to Section 3.1(a) that are funded with Preferred Interests
purchased by CTTV pursuant to this Section 3.2. In no event shall OBC purchase
or otherwise acquire any Preferred Interest (except as contemplated by Section
3.5). Prior to January 1, 2008, OBC shall not be deemed to be in default of its
obligations under this Agreement based on its failure to make its share of
Capital Contributions as contemplated by this Section 3.2. At all times on or
after January 1, 2008, OBC shall not be deemed to be in default of its
obligations under this Agreement provided ECD's Independent Directors have made
a reasonable determination of OBC's inability to meet its funding obligations
and shall have delivered to CTTV a written description of such determination as
contemplated by this Section 3.2.
Section 3.3 Additional Capital Contributions. Subject to Section 3.2, in
the event that the Members shall agree that Capital Contributions in addition to
the Capital Contributions provided for in Section 3.1 shall be made, each Member
shall contribute to the capital of the Company an amount calculated by
multiplying such Member's Percentage Interest by the aggregate amount of
additional Capital Contributions so determined by the Members.
Section 3.4 Payment of Capital Contributions. The Management Committee
shall issue or cause to be issued a written request to each Member for payment
of any Capital Contributions to be made in accordance with Section 3.3 at such
times and in such amounts as the Members shall agree, provided that the due date
for any such Contributions shall be not less than 10 Business
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
Days following the date of such request. All Capital Contributions received by
the Company after the date specified in such written request shall be
accompanied by interest on such overdue amounts, which interest shall be payable
to the Company and shall accrue from and after such specified date until paid at
an annual rate equal to 2% over the Prime Rate.
Section 3.5 Option to Purchase Preferred Interest.
(a) CTTV hereby grants to OBC the right to purchase from CTTV (the
"Option"), at any time during the period from and including January 1,
2008 until the date that is thirty (30) days prior to the Maturity Date of
the Preferred Interest, up to an aggregate of one-half (-1/2) of CTTV's
outstanding Preferred Interest. The purchase price with respect to any
portion of such outstanding Preferred Interest (a "Portion") shall be the
sum of (i) an amount equal to CTTV's Preferred Capital Contribution with
respect to the Portion, plus (ii) the "Option Premium" (as hereinafter
defined), less (iii) an amount equal to the sum of any Preferred Return
previously paid with respect to such Portion. The Option Premium shall be
an amount determined by crediting the Preferred Capital Contribution with
respect to such Portion with a return calculated in the same manner as
simple interest at the rate of ten percent (10%) per annum calculated on
the basis of a 365-day year. The purchase price shall be paid at closing
in immediately available funds.
(b) If OBC purchases a Preferred Interest from CTTV, OBC shall
succeed to a ratable portion of the Preferred Adjusted Capital, Preferred
Return, Unpaid Preferred Return, and Unallocated Preferred Return in
respect of such transferred portion of the Preferred Interest. In
accordance with the terms of Section 4.1(a) hereof, any distributions on
the Preferred Interests held by CTTV and OBC shall be made ratably in
accordance with the respective Preferred Interest Amounts of OBC and CTTV,
respectively. For the avoidance of doubt, as provided in Section 4.1(b),
if the Company makes a distribution exceeding the amount of the Unpaid
Preferred Return with respect to the Preferred Interest of OBC and CTTV,
then the balance of any such distribution shall be ratably applied to the
reduction of the Preferred Adjusted Capital of OBC and CTTV in accordance
with their respective Preferred Interest Amounts, until the Preferred
Adjusted Capital of each such Member has been reduced to zero and as a
result all Preferred Interests have been redeemed.
(c) Notwithstanding any provision herein to the contrary, no
acquisition by OBC of a Preferred Interest pursuant to the exercise of the
Option by OBC shall (i) entitle OBC or any transferee to any additional
votes under Section 5.2(c) by virtue of its ownership of a Preferred
Interest, whether previously owned by CTTV or otherwise, or (ii) divest
CTTV of such votes.
(d) No Member shall make any Capital Contributions to the Company
except pursuant to this Article 3. No Member shall be entitled to payment
by the Company of interest on its Capital Contributions.
Section 3.6 Member Loans; Preferred Interests.
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
(a) With the prior approval of the other Member, a Member may lend
to the Company funds needed by the Company for working capital purposes
(which shall not include amounts due under Sections 3.1, 3.2 and 3.3). An
account shall be established and maintained for such lending Member
separate from such Member's Capital Account, such account being herein
referred to as such Member's "Loan Account." Any Loan made by a Member to
the Company shall be credited to such Member's Loan Account. Interest on
any Loan made by a Member to the Company shall accrue on the unpaid
balance thereof at the Prime Rate and shall be repaid by the Company prior
to any distributions to the Members pursuant to Section 4.1. A credit
balance in the Loan Account of a Member shall constitute a liability of
the Company and shall not constitute a part of such Member's Capital
Account.
(b) Preferred Interests.
(i) Preferred Interest. The original amount of a Preferred
Interest shall equal the amount of the Capital Contribution made in
consideration of such Preferred Interest pursuant to Section 3.2 of
the Agreement.
(ii) Mandatory Redemption. The Preferred Interest shall be
redeemed by the Company on the Maturity Date at a redemption price
equal to the Member's Preferred Interest Amount as of the Maturity
Date. If the Company shall fail to redeem the Preferred Interest as
required in this Section 3.6(b)(ii), then, not in limitation of any
rights available to the Preferred Member in law or equity, the rate
used to calculate the Preferred Return for all purposes of this
Agreement shall thereafter be the Prime Rate plus 4%. For the
avoidance of doubt, such increase in the rate used to calculate the
Preferred Return shall be prospective and shall not be applied
retroactively with respect to periods prior to the Maturity Date.
(iii) Preferred Interest Distributions. The Preferred Interest
holder is entitled to receive distributions in respect of such
interest as provided in Articles 4 and 9 of this Agreement.
(iv) Rank. Without the prior written consent of all holders of
Preferred Interests, the Company shall not issue any class or series
of Interest in the Company that is senior to the Preferred Interest
with respect to distribution rights or rights upon liquidation,
dissolution or winding up of the affairs of the Company, whether
voluntary or involuntary, sale of substantially all of the Company's
assets or sale of the Company (each, a "Liquidation Event").
(v) Liquidation Preference. As provided in Section 9.3(c),
upon the occurrence of a Liquidation Event, each holder of a
Preferred Interest shall be entitled to receive, before any assets
are distributed to the Members, an amount equal to the Preferred
Interest Amount with respect to such holder.
(vi) Conversion.
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
(A) Optional Conversion. Upon the Company's
failure to redeem the Preferred Interest on the Maturity
Date, the holder of a Preferred Interest shall have the
right to convert its Preferred Interest Amount into
additional Interest in the Company, based on the Fair
Market Value on the date of such conversion. Upon the
occurrence and during the continuance of any Default by
OBC hereunder, CTTV shall have the right to convert its
Preferred Interest Amount into additional Interest in
the Company, based on the Fair Market Value on the date
of such conversion.
(B) Adjustment to Percentage Interests. In the
event of any conversion of Preferred Interests pursuant
to this Section 3.6(b)(vi), the Percentage Interests of
the Members shall be adjusted accordingly in accordance
with Section 3.1(b).
(vii) Prohibition on Distributions. As provided in Section
4.1, at any time while any Preferred Interest shall be outstanding,
the Company shall not make any distributions other than
distributions on the Preferred Interest pursuant to Section 4.1(b).
Section 3.7 Capital Accounts. The Company shall maintain a separate
capital account ("Capital Account") for each Member, which shall be maintained
and adjusted as described in Section 3.8.
Section 3.8 Capital Account Adjustments.
(a) Notwithstanding any provision in this Agreement to the contrary,
each Member's Capital Account shall be maintained and adjusted in
accordance with the Code and the Treasury Regulations thereunder,
including without limitation (i) the adjustments permitted or required by
Code Section 704(b) and (ii) the adjustments required to maintain Capital
Accounts in accordance with the "substantial economic effect test" set
forth in the Treasury Regulations under Code Section 704(b).
(b) A Member's Capital Account shall be increased by (i) the amount
of cash and the initial Book Value of any property contributed by such
Member to the Company, (ii) such Member's allocable share of Profits,
income and gain and (iii) the amount of any Company liabilities that are
expressly assumed by such Member or that are secured by any Company
property distributed to such Member.
(c) A Member's Capital Account shall be decreased by (1) the amount
of cash and the Book Value of any Company property distributed to such
Member pursuant to any provision of this Agreement, (2) such Member's
allocable share of Losses, deductions and other losses and (3) the amount
of any liabilities of such Member that are expressly assumed by the
Company or that are secured by any property contributed by such Member to
the Company.
(d) Upon the occurrence of certain events described in Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) (including, for the avoidance of
doubt, in connection with the
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
liquidation of the Company), the Management Committee shall increase or
decrease the Capital Accounts of the Members to reflect a revaluation of
Company property on the Company's books and any unrealized gain or loss
shall be allocated in accordance with Article 4; provided that no such
adjustment shall be required if the Management Committee unanimously
determines that such adjustment would be de minimis or would otherwise
have no effect on the distributions (including liquidating distributions)
to which each Member is entitled hereunder.
(e) The Capital Account of each Member shall be determined after
giving effect to all transactions which have been effected prior to the
time when such determination is made giving rise to the allocation of
Profits and Losses and to all contributions and distributions theretofore
made. Any Person who acquires an Interest directly from a Member, or whose
Percentage Interest shall be increased by means of a Disposition to it of
all or part of the Interest of another Member, shall have a Capital
Account which includes all or part of the Capital Account balance of the
Interest so acquired or Disposed of.
(f) Any fees, salary or similar compensation payable to a Member
pursuant to this Agreement shall be deemed a guaranteed payment for
federal income tax purposes and not a distribution to such Member for such
purposes. Such payments to a Member shall not reduce the Capital Account
of such Member, except to the extent of its distributive share of any
Losses or other downward capital adjustment resulting from such payment.
(g) No Member with a deficit balance in its Capital Account shall
have any obligation to the Company or any other Member to restore such
deficit balance. In addition, no venturer or partner in any Member shall
have any liability to the Company or any other Member for any deficit
balance in such venturer's or partner's Capital Account in the Member in
which it is a partner or venturer. Furthermore, a deficit Capital Account
balance of a Member (or a deficit Capital Account of a venturer or partner
in a Member) shall not be deemed to be a Company asset or Company
property.
(h) In the event of the conversion of a Preferred Interest pursuant
to Section 3.6, Capital Accounts shall be adjusted and maintained to
reflect such conversion in accordance with Proposed Treasury Regulations
under Sections 704, 721, and 761 of the Code addressing partnership
noncompensatory options (the "NCO Regulations") or such other reasonable
method established by the Management Committee consistent with the
Members' economic agreement; provided, that the NCO Regulations shall be
applied (pursuant to their terms) from and after their adoption in
temporary or final form.
Section 3.9 Return of Capital. Except to the extent permitted in Article 9
upon a dissolution of the Company, no Member shall have the right to demand a
return of such Member's Capital Contribution (or the balance of such Member's
Capital Account). Further, except as provided in Article 4, no Member shall have
the right (i) to demand and receive any distribution from the Company in any
form other than cash or (ii) to bring an action of partition against the Company
or its property. The Management Committee shall have no personal liability for
the repayment of the capital contributed by Members.
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ARTICLE 4
ALLOCATIONS AND DISTRIBUTIONS
Section 4.1 Distributions. Except as provided in Article 9 upon
dissolution of the Company, Distributable Cash Flow shall be distributed at such
time and in such amounts as the Management Committee may determine as follows
(provided, that the Company shall be required to make distributions under
Section 4.1(b) no less frequently than the last Business Day of each year, to
the extent of Distributable Cash Flow computed as of such time):
(a) first, if the Company shall have outstanding any debt
owing to its Members, then to such Members in repayment of such debt;
(b) second, if the Company shall have outstanding any
Preferred Interest, then to the Preferred Member(s) in payment of (i)
first, the Unpaid Preferred Return, and (ii) then, the Preferred
Adjusted Capital; in each case, to the extent such amount(s) are
outstanding at the time of the distribution and to each such Member pro
rata in accordance with such amounts; and
(c) then, to the Members, pro rata, in accordance with their
respective Percentage Interests, determined as of the date of such
distribution.
Notwithstanding anything to the contrary in this Agreement, no distribution may
be made to a Member that would create or increase an Adjusted Capital Account
Deficit with respect to such Member.
Section 4.2 Profits, Losses and Distributive Shares of Tax Items.
(a) Profits. Except as provided in Section 4.2(c), Profits for
any Fiscal Year or other period will be allocated to the Members as
follows:
(i) first, to the Preferred Member(s), if any, in
proportion to their Preferred Interest Amounts, until the
cumulative allocations of Profits to such Member(s) under this
Section 4.2(a)(i) for all periods equals the cumulative
allocations of Losses made under Section 4.2(b)(ii) for all
periods;
(ii) second, to the Preferred Member(s), if any, in
proportion to the Unallocated Preferred Return(s) of such
Member(s), until the cumulative allocations of Profits in
respect of the Preferred Interest held by each such Member
under this Section 4.2(a)(ii) for all periods equals the
cumulative Preferred Returns in respect of such interest for
all periods;
(iii) then, to the Members in accordance with their
Percentage Interests.
(b) Losses. Except as provided in Section 4.2(c), Losses for
any Fiscal Year or other period will be allocated to the Members as
follows:
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AMENDED AND RESTATED OPERATING AGREEMENT
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(i) First, to the Members in proportion to their
respective Common Adjusted Capital Accounts, until such time
that the Adjusted Capital Account of the Preferred Member(s),
if any, has been reduced to an amount equal to such Member(s)'
Preferred Adjusted Capital plus Unpaid Preferred Return
(solely for the purposes of this Section 4.2(b)(i), each
Member's "Common Adjusted Capital Account" shall equal such
Member's Adjusted Capital Account less the Preferred Adjusted
Capital and Unpaid Preferred Return, if any, attributable to
such Member);
(ii) Second, to the Preferred Member(s) if any, in
proportion to their positive Adjusted Capital Account
balances, until the Adjusted Capital Account of each such
Member has been reduced to zero;
(iii) And third, to the Members in accordance with
their respective Percentage Interests.
(c) Special Allocations. Except as otherwise provided in this
Agreement, the following special allocations will be made in the
following order and priority:
(i) Company Minimum Gain Chargeback. Notwithstanding
any other provision of this Section, if there is a net
decrease in Minimum Gain during any taxable year or other
period for which allocations are made, the Members will be
specially allocated items of Company income and gain for that
period (and, if necessary, subsequent periods). The amount
allocated to each Member under this Section shall be an amount
equal to the total net decrease in the Member's Minimum Gain
Share at the end of the immediately preceding taxable year.
The items to be allocated will be determined in accordance
with Treasury Regulations Section 1.704-2(g)(2). This Section
4.2(c)(i) is intended to comply with the "partnership minimum
gain chargeback" requirements of the Treasury Regulations and
the exceptions thereto and will be interpreted consistently
therewith.
(ii) Member Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any other provision of this Section (other
than Section 4.2(c)(i) which shall be applied first), if there
is a net decrease in Member Nonrecourse Debt Minimum Gain
during any taxable year or other period for which allocations
are made, any Member with a share of such Member Nonrecourse
Debt Minimum Gain attributable to any Member Nonrecourse Debt
(determined under Treasury Regulations Section 1.704-2(i)(5))
as of the beginning of the year shall be specially allocated
items of Company income and gain for that period (and, if
necessary, subsequent periods) in proportion to the portion of
such Member's share of the net decrease in the Member
Nonrecourse Debt Minimum Gain with respect to such Member
Nonrecourse Debt that is allocable to the Disposition of
Company property subject to such Member Nonrecourse Debt. The
items to be so allocated shall be determined in accordance
with Treasury Regulations Section 1.704-2(g). This Section is
intended to comply with the "partner minimum gain chargeback"
requirements of the Treasury Regulations and the exceptions
thereto and shall be interpreted-consistently therewith.
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AMENDED AND RESTATED OPERATING AGREEMENT
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(iii) Qualified Income Offset. A Member who
unexpectedly receives any adjustment, allocation or
distribution described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be specially
allocated items of Company income and gain in an amount and
manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit of
the Member as quickly as possible.
(iv) Nonrecourse Deductions. Nonrecourse Deductions
for any taxable year or other period for which allocations are
made will be allocated among the Members in proportion to
their respective Percentage Interests in the Company.
(v) Member Nonrecourse Deductions. Notwithstanding
anything to the contrary in this Agreement, any Member
Nonrecourse Deductions for any taxable year or other period
for which allocations are made will be allocated to the Member
who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which the Member Nonrecourse Deductions
are attributable in accordance with Treasury Regulations
Section 1.704-2(i).
(vi) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Company asset
under Code Sections 734(b) is required to be taken into
account in determining capital accounts under Treasury
Regulations Section 1.704-1(b)(2)(iv)(m), the amount of the
adjustment to the capital accounts will be treated as an item
of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis), and the gain
or loss will be specially allocated to the Members in a manner
consistent with the manner in which their capital accounts are
required to be adjusted under Treasury Regulations Section
1.704-1(b)(2)(iv)(m).
(vii) Depreciation Recapture. In the event there is
any recapture of Depreciation, the allocation of gain or
income attributable to such recapture shall be shared by the
Members in the same proportion as the deduction for such
Depreciation was shared.
(viii) Reallocation. To the extent Losses allocated
to a Member would cause the Member to have an Adjusted Capital
Account Deficit at the end of any Fiscal Year, the Losses will
be allocated to the other Member. If any Member receives an
allocation of Losses otherwise allocable to the other Member
in accordance with this Section, such Member shall be
allocated Profits in subsequent Fiscal Years necessary to
reverse the effect of such allocation of Losses. Such
allocation of Profits (if any) shall be made before any
allocations under Section 4.2(a) but after any other
allocations under Section 4.2(c).
(ix) Curative Allocations. The allocations set forth
in Sections 4.2(c)(i) through (vii) (the "Regulatory
Allocations") are intended to comply with certain requirements
of Treasury Regulations Section 1.704-1(b) and 1.704-2.
Accordingly, the Management Committee is authorized to further
allocate Profits, Losses, and other items among the Members so
as to prevent the Regulatory
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
Allocations from distorting the manner in which Company
distributions would be divided among the Members under
Sections 4.1 and 9.3 but for application of the Regulatory
Allocations; taking into account whether Regulatory
Allocations in subsequent periods may offset Regulatory
Allocations made in the current and prior periods. In general,
the reallocation will be accomplished by specially allocating
other Profits, Losses and items of income, gain, loss and
deduction, to the extent they exist, among the Members so that
the net amount of the Regulatory Allocations and the special
allocations to each Member is zero. The Management Committee
will have discretion to accomplish this result in any
reasonable manner that is consistent with Code Section 704 and
the related Treasury Regulations.
(x) Guaranteed Payment. If any amount distributable
to a Member under Articles 4 or 9 hereof is required to be
treated as a "guaranteed payment" within the meaning of
Section 707(c) of the Code, the deduction for such guaranteed
payment shall be allocated among the Members so that the net
Profits or Losses recognized by each Member from the Company,
taking into account such guaranteed payment and the Member's
allocable share of Company Profits and Losses, is equal to the
net Profits and Losses that such Members would have recognized
if such guaranteed payment were treated instead as a
distribution of Company Profits and such Company Profits had
been allocated in accordance with Article 4 hereof.
(xi) Extraordinary Gain/Loss Allocations. Profit or
Loss from the sale of the Company's assets (other than in the
ordinary course of business), the revaluation of the Company's
assets as provided for in Section 3.8(d), and all Profits and
Losses (and if necessary, items of income, gain, loss, and
deduction) arising in the taxable year(s) in which the
liquidation and winding up of the Company occurs, shall be
allocated among the Members in amounts sufficient to place the
Members' relative Capital Account balances, as nearly as
possible, in the same proportion as their respective
Percentage Interests (the "Pro Rata Allocation"); provided,
that (i) to the extent possible, such allocations shall first
be made among the Members in a manner such that each Preferred
Member's Capital Account balance is increased, if necessary,
to an amount equal to the sum of the Preferred Adjusted
Capital, the Unpaid Preferred Return, and the Unallocated
Preferred Return amounts, if any, with respect to such Member
(together, the "Preferred Entitlement Amount"), and (ii) after
performing the allocations required in the foregoing clause
(i), the Pro Rata Allocation shall be performed by
disregarding the Preferred Entitlement Amount(s), if any,
reflected in the Preferred Member(s)' Capital Account(s).
(d) Federal Income Tax Allocations.
(i) Except as provided in the following clause (ii)
or as required by the Code or Treasury Regulations, all items
of income, gain, loss, deduction, credit, and any other items
of the Company shall be allocated among the Members for
federal and state income tax purposes in the same manner as
such items are allocated for purposes of allocating Profits
and Losses.
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AMENDED AND RESTATED OPERATING AGREEMENT
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(ii) In accordance with Code Section 704(c) and the
related Treasury Regulations, income, gain, loss and deduction
with respect to any property contributed to the capital of the
Company, solely for tax purposes, will be allocated among the
Members using the "Traditional Method" as set forth in Treas.
Reg. Section 1.704-3(b), unless otherwise determined by the
Management Committee, acting unanimously. If the Book Value of
any Company asset is adjusted, subsequent allocations of
income, gain, loss and deduction with respect to that asset
will take account of any variation between the adjusted basis
of the asset for federal income tax purposes and its Book
Value in the same manner as under Code Section 704(c) and the
related Treasury Regulations. Allocations under this Section
are solely for purposes of federal, state and local taxes and
will not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Profits,
Losses or other items or distributions under any provision of
this Agreement.
(e) Member Acknowledgment. The Members agree to be bound by
the provisions of this Section in reporting their shares of Company
income and loss for federal and state income tax purposes.
Section 4.3 Compliance with Code. The foregoing provisions of this
Article relating to the allocation of Profits, Losses and other items for
federal income tax purposes are intended to comply with Treasury Regulations
Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a
manner consistent with such Treasury Regulations. The Management Committee will
have the discretion to allocate items of income, gain, loss and deduction among
the Members to ensure that this Article complies with such Treasury Regulations.
Section 4.4 Allocations upon Disposition of Interest. Profits or Losses
attributable to any Interest which has been Disposed of shall be allocated (i)
to the transferor for the days prior to and including the date of the
Disposition; and (ii) to the transferee for the days subsequent to the date of
the Disposition.
Section 4.5 Tax Matters.
(a) Tax Matters Member. The tax matters partner for purposes
of Section 6231 of the Code (the "Tax Matters Member") shall be CTTV.
The Tax Matters Member is specifically directed and authorized to take
whatever steps such Member, in its discretion, deems necessary or
desirable to perfect such designation, including filing any forms or
documents with the Internal Revenue Service and taking such other
action as may from time to time be required. The Tax Matters Member
shall not be liable to the Company or the other Members for any act or
omission taken or suffered by it in its capacity as Tax Matters Member
in good faith and in the belief that such act or omission is in
accordance with the directions of the Members; provided that such act
or omission is not in willful violation of this Agreement and does not
constitute fraud or a willful violation of applicable Laws.
(b) Tax Returns. After consultation and the consent of the
other Member and subject to Section 5.3 hereof, at the expense of the
Company, the Tax Matters Member
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AMENDED AND RESTATED OPERATING AGREEMENT
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shall cause to be prepared and timely filed all tax returns (including
amended returns) required to be filed by the Company. The Tax Matters
Member shall maintain or cause to be maintained the Capital Accounts of
the Members as described in Section 3.7. On or prior to the August 15
following the end of each Fiscal Year of the Company, the Tax Matters
Member shall provide to the other Member for its review a draft Form
1065 of the Company and related Schedules K-1 of the Members for such
Fiscal Year. At least twenty (20) days prior to filing any Company tax
return, including any information returns, estimated returns and any
other statement, report or form, with respect to United States federal
income taxes, or any state or local income tax returns for
jurisdictions in which the Company is treated as a partnership (each, a
"Tax Return"), the Tax Matters Member shall provide a copy of such Tax
Return to the other Member for its review. The Members agree not to
take any position in their respective tax returns that is inconsistent
with the Tax Returns filed by the Company. The Members intend that the
Company shall be classified as a partnership for federal income tax
purposes under Treasury Regulations Section 301.7701-3.
(c) Tax Elections. After consultation and consent of the other
Member (which consent shall not be unreasonably withheld) and subject
to Section 5.3, the Tax Matters Member shall make any tax elections the
Members agree to be appropriate to utilize the alternate test for
economic effect contained in Treasury Regulation Section
1.704-1(b)(2)(ii)(d) provided that the Company shall make (or continue
in effect) the following elections (and any comparable state or local
elections) effective from the Company's first taxable year:
(i) to amortize start-up expenditures, if any, over a
60-month period in accordance with Section 195 of the Code;
(ii) to amortize Company organizational expenses, if
any, over a 60-month period in accordance with Section 709(b)
of the Code;
(iii) To elect the most accelerated method of
depreciation and amortization for any Company asset acquired
by the Company;
(iv) To elect under Section 6231(a)(1)(B)(ii) of the
Code not to have clause (i) of Section 6231(a)(1)(B) of the
Code apply, it being agreed that the Company will be audited
at the Company level.
(v) In addition, notwithstanding Section 5.3, upon
written request by any Member to the Tax Matters Member for a
Section 754 election under the Code, the Members agree that
the Tax Matters Member shall make such election.
(d) Audits. Subject to Section 5.3, all matters relating to
all Tax Returns filed by the Company, including tax audits and related
matters and controversies, shall be conducted, at the expense of the
Company, by the Tax Matters Member after consultation and consent of
the other Member (which consent shall not be unreasonably withheld).
The Tax Matters Member will keep the other Member and the Management
Committee fully advised of all actions taken and proposed to be taken
by it in its capacity as Tax Matters
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
Member. The Tax Matters Member shall give prompt notice to the other
Member of any audit or examination of the Company's books and records
to be conducted by any taxing authority or other governmental Person.
In the event any such examination results in a proposed adjustment, the
Tax Matters Member may after consultation with and the consent of the
other Member (which consent shall not be unreasonably withheld), settle
or compromise any issue arising from such examination or audit. In the
event of any audit or administrative or judicial proceeding that
involves an issue that may have a material adverse impact on a Member,
such Member may, at its option and at the expense of the Company,
assume control of all or such portion of such audit or proceeding.
(e) Survival. The provisions of this Section 4.5 shall survive
the dissolution of the Company or the termination of any Member's
Interest and shall remain binding on all Members for a period of time
necessary to resolve with the applicable federal, state, local or
foreign taxing authorities all matters (including any litigation)
regarding federal, state or local taxation, as the case may be, of the
Company or any Member with respect to the Company.
ARTICLE 5
MANAGEMENT
Section 5.1 Management of the Business of the Company. The Members
shall manage the business of the Company, and shall have all powers and rights
necessary, appropriate or advisable to effectuate and carry out the purposes and
business of the Company. The Members may appoint, employ or otherwise contract
with any Persons for the transaction of the business of the Company or the
performance of services for or on behalf of the Company, and the Members may
delegate to any such Person (who, if an individual, may be designated an officer
of the Company) such authority to act on behalf of the Company as the Members
may from time to time deem appropriate. No single Member, solely by reason of
its status as such, shall (i) transact any business on behalf of the Company or
(ii) possess any authority or power to sign for or bind the Company.
Section 5.2 The Management Committee.
(a) Purpose. Pursuant to Section 5.1, and subject to the
delegation of rights and powers as provided for herein, the Members
shall manage the business of the Company by and through their
respective representatives on the Management Committee, which
representatives shall constitute agents of the appointing Member and
shall not constitute managers of the Company within the meaning of the
Michigan Act.
(b) Composition. Each Member shall be represented at
Management Committee meetings by individuals designated by them to
serve as representatives on the Management Committee. The Management
Committee shall be comprised of four (4) representatives, with two
representatives to be designated by each Member. Each representative
shall be an employee of the appointing Member or one of its Affiliates
and shall serve for an indefinite term at the pleasure of the
appointing Member. Any
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AMENDED AND RESTATED OPERATING AGREEMENT
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appointment or replacement (with or without cause) of a representative
by a Member shall be effective upon notice of such appointment or
replacement given to the Company and the other Member. Upon the death,
resignation or removal of any representative, the appointing Member
shall promptly appoint a successor.
(c) Voting. Any approval, vote, or consent of the Members
under this Agreement shall be taken at a meeting of the Management
Committee or by written consent, in each case pursuant to this Section
5.2(c) and Section 5.5. Each Member shall be entitled to one vote,
which may be exercised by either Management Committee representative
appointed by such Member. If both such representatives are present at a
meeting, such Member shall appoint one such representative to exercise
such Member's vote. Except to the extent expressly otherwise provided
herein, each Member, when exercising any voting right hereunder or
under the Michigan Act or determining to grant or withhold its consent
to any matter involving the Company, may exercise such rights or make
such determinations as it in its sole discretion deems appropriate, and
each of the representatives on the Management Committee shall have the
right to act in the interests and at the discretion of the Member that
appointed such representative. Any reference in this Agreement to the
approval, vote, or consent of the Management Committee shall mean the
approval, vote, or consent of the Members in accordance with this
Agreement. Notwithstanding the foregoing, if at any time CTTV shall be
a Preferred Member, CTTV shall have two votes. Notwithstanding any
provision herein to the contrary, the acquisition of CTTV's Preferred
Interest pursuant to the exercise of the Option by OBC under Section
3.5 shall not entitle OBC or any transferee to any additional votes
under this Section 5.2(c) by virtue of its ownership of a Preferred
Interest, whether previously owned by CTTV or otherwise.
Section 5.3 Power and Authority of the Management Committee. Except as
otherwise provided herein, or as may otherwise be required by the Michigan Act,
all approvals and other actions by the Members shall be taken by majority vote
of the Members taken at a meeting of the Management Committee or by written
consent, in each case pursuant to Sections 5.2(c) and 5.5. Matters requiring the
approval of the Management Committee shall include but not be limited to any of
the following to the extent not incorporated in an Annual Budget, Annual
Operating Plan or Disbursement and Commitment Schedule approved pursuant to
Section 5.4(a):
(a) Acquisition by purchase, lease, or otherwise of any real
or personal property which may be necessary, convenient, or incidental
to the Battery Business;
(b) Operation, maintenance, improvement, construction,
ownership, grant of options with respect to, sale, conveyance,
assignment, and lease of any real or personal property necessary,
convenient, or incidental to the Battery Business;
(c) Execution of any and all agreements, contracts, documents,
certification, and instruments necessary or convenient in connection
with the management, maintenance, and operation of the Company's assets
and business, or in connection with management of the Company's
affairs;
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AMENDED AND RESTATED OPERATING AGREEMENT
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(d) Contracting on behalf of the Company for the services of
independent contractors, and delegation to such Persons the duty to
manage or supervise any of the assets or operations of the Company;
(e) Deleted;
(f) Assessment, collection, and receipt of any rents, issues
and profits or income from any assets, or any part or parts thereof,
and the disbursement of Company funds for Company purposes to those
Persons entitled to receive same;
(g) Payment of all taxes, license fees, or assessments of
whatever kind or nature, imposed upon or against the Company or its
assets, and for such purposes to file such returns and do all other
such acts or things as may be deemed necessary and advisable by the
Company;
(h) Establishment, maintenance, and supervision of deposits of
any monies or securities of the Company in accounts with federally
insured banking institutions, or other institutions, as may be selected
by the Management Committee, provided that such accounts are in the
name of the Company;
(i) Initiation, defense, settlement and compromise of lawsuits
(subject to Section 5.4(d)(viii)) or other judicial or administrative
proceedings brought by or against the Company or the Members in
connection with activities arising out of, connected with, or
incidental to this Agreement and/or the business of the Company;
(j) Execution for and on behalf of the Company of all such
applications for permits and licenses as the Management Committee deems
necessary and advisable with respect to the Company's assets and
business, and execution, filing and recordation of all such
subdivisions, parcels, or similar maps covering or relating to the
Company's assets or business;
(k) Performance of all ministerial acts and duties relating to
the payment of all indebtedness, taxes, and assessments due or to
become due with regard to the Company's assets or business, and the
delivery and receipt of notices, reports, and other communications
arising out of or in connection with the ownership, indebtedness, or
maintenance of the Company's assets or business;
(l) Negotiation of and entry into leases for space necessary
for the Company's assets or business on terms consistent with the then
applicable Annual Operating Plan;
(m) Approval of operating expenditures in excess of those in
an approved Disbursement and Commitment Schedule or an Approved Annual
Budget;
(n) Establishment, appointment and removal of the Company
officers, subject to Section 5.7;
(o) Deleted;
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AMENDED AND RESTATED OPERATING AGREEMENT
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(p) Establishment of bidding procedures for procurement of
goods and services; and
(q) Deleted;
(r) Any amendment of any Associated Agreement to which the
Company is a party;
(s) A change of the name of the Company;
(t) Engaging in a business other than the Battery Business;
(u) Any borrowing, leasing or other financings by the Company,
or the creation of security interests, liens or mortgages in or on any
property or assets of the Company;
(v) Making any loan, advance or other extensions of credit;
(w) Decisions as to the giving of any guarantee or indemnity
to secure the liabilities or obligations of any other Person;
(x) The engagement of counsel and others in connection with
the prosecution, defense, settlement and compromise of lawsuits or
other judicial or administrative proceedings initiated by the Company
or brought against the Company or the Members in connection with
activities arising out of, connected with, or incidental to this
Agreement and/or the business of the Company;
(y) Deleted.
(z) Decisions with respect to any derivative activities to
which the Company may be a party;
(aa) Deleted.
(bb) The voting of all stocks or other equity or debt
interests the Company may own in other entities, or the giving of
consents or approvals with respect to such interests.
Section 5.4 Matters Requiring Unanimous Vote of the Management
Committee. Approval of the following matters shall require the Unanimous
Approval of the Management Committee taken at a meeting of the Management
Committee or by written consent, in each case pursuant to Sections 5.2(c) and
5.5:
(a) Approval of the Annual Budgets, Annual Operating Plans and
Disbursement and Commitment Schedules;
(b) Determination as to whether the Company has satisfied the
Objectives, approval of a recovery plan with respect to any Objectives
that are not satisfied and any modifications of Objectives;
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
(c) Appointment and removal of the President of the Company,
including entry into, and any amendment to or termination or extension
of the term of, any employment agreement with any President of the
Company;
(d) any of the following not incorporated in an Annual Budget,
Annual Operating Plan or Disbursement and Commitment Schedule approved
pursuant to Section 5.4(a):
(i) Any lease, sale, exchange, conveyance or other
transfer or disposition of all, or substantially all, of the
assets of the Company;
(ii) Payment of distributions to the Members except
in connection with the dissolution and winding up of the
Company and except as required under Section 4.1(b);
(iii) Any merger, conversion or consolidation of or
involving the Company;
(iv) The assignment of any Company property in trust
for the benefit of creditors, or the making or filing, or
acquiescence in the making or filing by any other Person, of a
petition or other action requesting the reorganization or
liquidation of the Company under the Bankruptcy Law;
(v) The issuance of any additional Interests (other
than Preferred Interests) or, except as otherwise provided in
Article 7 in connection with the transfer of an Interest, the
admission of additional or substituted Members;
(vi) Entering into any contract with a Member or an
Affiliate of a Member having a value in excess of $100,000,
including determining the fair market value of in-kind Capital
Contributions by the Members;
(vii) Licensing, sale or other disposition of any
material item of intellectual property; and
(viii) Initiation and settlement (but not including
the prosecution or defense) of lawsuits or other proceedings
relating to intellectual property. Notwithstanding the
foregoing, if at any time while CTTV is a Preferred Member,
the Management Committee fails to agree on a plan or proposal
submitted by CTTV to the Management Committee for settlement
of such lawsuit or proceeding, then CTTV shall have the right
to declare an impasse. In the event CTTV declares an impasse,
OBC shall have the option of either accepting CTTV's plan or
proposal for settlement or requiring that COBASYS continue the
prosecution or defense of such lawsuit or proceeding, in which
case OBC shall be required to reimburse COBASYS on a quarterly
basis for one-half of all of the costs of such prosecution or
defense, including all legal fees, expert fees, internal
COBASYS manpower costs, time and materials and all
disbursements to third-party service or materials providers,
incurred after such impasse is declared; and
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(e) Requiring Capital Contributions from the Members other
than as contemplated by Sections 3.1 and 3.2.
Notwithstanding the above, if CTTV is a Preferred Member at any time after
January 1, 2010, the matters set forth in Sections 5.4(b) and (c) shall be
determined by majority vote of the Members in accordance with Section 5.3.
Section 5.5 Meetings of Management Committee/Conduct of Business.
(a) The Management Committee shall meet at least once during
each calendar quarter subject to more frequent meetings upon approval
of the Management Committee. Notice of and an agenda for all Management
Committee meetings shall be provided to all Management Committee
representatives by the Secretary at least ten (10) Business Days prior
to the date of such meetings. Special meetings of the Management
Committee may be called at the direction of any Member upon no less
than five (5) Business Days notice to the other Member.
(b) Except as otherwise provided herein, the Management
Committee shall conduct its meetings in accordance with such rules as
it may from time to time establish and shall keep minutes of its
meetings and issue resolutions evidencing the actions taken by it. A
secretary elected by the Management Committee (the "Secretary") shall
keep the minutes of all such meetings.
(c) Unless otherwise agreed, all meetings of the Management
Committee shall be held at the principal offices of the Company or by
conference telephone or similar means of communication by which all
representatives can participate in the meeting.
(d) Any action required or permitted to be taken by the
Members, either at a meeting or otherwise, may be taken without a
meeting if each of the Members' representatives on the Management
Committee consents thereto in writing and the writing or writing are
filed with the minutes of proceedings of the Management Committee.
(e) The Members may, by Unanimous Approval, delegate such of
their powers and authority to one or more representatives serving on,
or a subcommittee or subcommittees of, the Management Committee, the
officers of the Company, or such other Person or Persons as the Members
may deem advisable.
(f) At all meetings of the Management Committee,
representatives of a majority of the voting power of the Members
present in person or by proxy and entitled to vote thereat shall
constitute a quorum for the transaction of business. In the absence of
a quorum, a majority of the Management Committee so present or
represented and entitled to vote may adjourn the meeting from time to
time and from place to place, without further notice, other than by
oral announcement at the meeting, until a quorum is obtained. At any
such adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as
originally called.
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Section 5.6 Remuneration of Management Committee. The Management
Committee representatives shall receive no compensation from the Company for
performing services in their capacity as such representatives. Each of the
Members shall be responsible for the payment of the salaries, benefits,
retirement allowances and travel and lodging expenses for its Management
Committee representatives.
Section 5.7 Officers of the Company; President. The officers of the
Company (other than the President) shall be nominated by the President and
appointed by the Management Committee in accordance with Section 5.3.
Section 5.8 Authority and Duties of Officers; Standing Delegation of
Authority. The officers of the Company shall have such authority and shall
perform such duties as may be determined by the Members. Pursuant to this
Article 5, the Members hereby authorize the President to take any of the
following actions identified in Sections 5.3(a), (b), (c), (d), (f), (g), (h),
(j) and (p) and to delegate such authority to one or more officers, employees
and agents of the Company; provided that in each case (i) such action is not
inconsistent with an Annual Budget, Annual Operating Plan or Disbursement and
Commitment Schedule approved pursuant to Section 5.4(a), (ii) the President
shall promptly report each such action to the Management Committee and (iii) if
CTTV is a Preferred Member at any time after January 1, 2010, CTTV may revoke
such any and all such delegations.
ARTICLE 6
INDEMNIFICATION
Section 6.1 Exculpation. To the fullest extent permitted by the
Michigan Act, no Member, Affiliate of a Member, representative of either Member
on the Management Committee, officer of the Company or other Person to whom the
Management Committee has delegated its authority to act on behalf of the Company
("Authorized Person") shall have any liability to the Company or the Members for
any Losses incurred as a result of any act or omission of such Member,
representative, officer or Authorized Person if (i) such Member, representative,
officer or Authorized Person acted in good faith and (ii) the conduct of such
Member, representative, officer or Authorized Person did not constitute actual
fraud, gross negligence or willful misconduct; provided that nothing contained
herein shall protect any Member against any liability to the Company or the
other Members for failure to perform the obligations of such Member expressly
set forth in this Agreement or the Associated Agreements.
Section 6.2 Indemnification.
(a) Indemnification. To the fullest extent permitted by the
Michigan Act, the Company shall defend, protect, indemnify and hold
harmless each Member, Affiliate of a Member, Management Committee
representative, officer of the Company and Authorized Person (each
individually, an "Indemnitee") from and against any and all Losses
arising from any and all Proceedings in which an Indemnitee may be
involved, or threatened to be involved, as a party or otherwise,
arising out of or incidental to the business of the Company (excluding
in the case of a Member, Losses for loss of profit or return on any
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Indemnitee's direct or indirect investment in the Company), if (i) the
Indemnitee acted in good faith and in a manner such Indemnitee
reasonably believed to be in, or not opposed to, the interests of the
Company, and, with respect to any criminal proceeding, had no reason to
believe the conduct in question was unlawful and (ii) the Indemnitee's
conduct did not constitute actual fraud, gross negligence or willful
misconduct.
(b) Rights of Indemnitee. The Company will periodically
reimburse each Indemnitee for all Losses (including fees and expenses
of counsel) indemnified pursuant to Section 6.2(a) as such Losses are
incurred in connection with investigating, preparing, pursuing or
defending any Proceeding; provided that such Indemnitee shall promptly
repay to the Company the amount of any such reimbursed expenses paid to
it if it shall be judicially determined by judgment or order not
subject to further appeal or discretionary review that such Indemnitee
is not entitled to be indemnified by the Company in connection with
such matter. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 6.2 shall not be deemed
exclusive of, and shall not limit, any other rights or remedies to
which any Indemnitee may be entitled or which may otherwise be
available to any Indemnitee at law or in equity, (ii) shall continue as
to a Person notwithstanding that such Person has ceased to be an
Indemnitee, and (iii) shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee. Subject to
the foregoing sentence, the provisions of this Section 6.2 are solely
for the benefit of the Indemnitees and shall not be deemed to create
any rights for the benefit of any other Persons. Each Indemnitee shall
have a claim against the property and assets of the Company for payment
of any indemnity amounts from time to time due hereunder, which amounts
shall be paid or properly reserved for prior to the making of
distributions by the Company to Members.
(c) Further Indemnification. The Company may, to the extent
authorized from time to time by Unanimous Approval, grant rights to
indemnification and to advancement of expenses to any employee or agent
of the Company to the fullest extent of the provisions of this Section
6.2 with respect to the indemnification and advancement of expenses of
Members and officers of the Company.
Section 6.3 Liability for Debts of the Company; Limited Liability.
(a) Except as otherwise provided in the Michigan 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.
(b) Except as provided by applicable Laws, a Member, in its
capacity as such, shall have no liability to the Company or to any
other Member in excess of payments required to be made by such Member
under this Agreement.
(c) The provisions of this Agreement are intended solely to
benefit the Members and, to the fullest extent permitted by applicable
Laws, shall not be construed as conferring any benefit upon any
creditor of the Company (and no such creditor shall be a
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third-party beneficiary of this Agreement), and no Member shall have
any duty or obligation to any creditor of the Company to make any
contributions or payments to the Company.
Section 6.4 Company Expenses. The Company shall indemnify, hold
harmless, and pay all expenses, costs, or liabilities of any Member who for the
benefit of the Company and with the prior approval of the Management Committee
makes any deposit, acquires any option, or makes any other similar payment or
assumes any obligation in connection with any property proposed to be acquired
by the Company and who suffers any financial loss as the result of such action.
ARTICLE 7
TRANSFER OF INTERESTS
Section 7.1 Restrictions on Transfer.
(a) Each of OBC and CTTV agrees and acknowledges that the
identity of the other is an essential element of this Agreement and
accordingly the parties agree as follows:
(i) Except as expressly permitted by this Article 7,
no Member may at any time Transfer all or any part of any of
such Member's Interest without the express written consent of
the other Member, which consent may be granted or withheld by
any such Member in its full and absolute discretion. Nothing
in this Article 7 shall be construed to permit any Member at
any time to, and no Member shall, create or suffer to exist
any Lien upon, in, or in respect of all or any part of any of
such Member's Interest without the express written consent of
the other Member, which consent may be granted or withheld by
any such Member in its full and absolute discretion; provided
that OBC shall be permitted at any time to grant to CTTV a
Lien upon its Interest. Any offer or purported Transfer of a
Member's Interest in violation of the terms of this Agreement
shall be void.
(ii) Each Member hereby agrees that if such Member
ceases to be an OBC Group Entity or a ChevronTexaco Group
Entity, as the case may be, but no Change of Control shall
have otherwise occurred with respect to such Member, the
Interest held by such Member first shall be transferred to
another OBC Group Entity or ChevronTexaco Group Entity, as the
case may be, and such Interest shall continue to be subject to
(i) this Section 7.1(a)(ii), and (ii) Section 7.1(c) (when, as
and if it is applicable).
(b) Upon giving 30 days notice to the other Member, any OBC
Member may Transfer all or any part of its Interest to an OBC Group
Entity, and any ChevronTexaco Member may Transfer all or any part of
its Interest to a ChevronTexaco Group Entity, provided that the
transferee of such Interest shall be bound by the terms of Section
7.1(a)(ii) above, when, as and if it becomes applicable to such
transferee. After giving effect to any such permitted transfer of an
Interest, any obligation of the transferring Member hereunder
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shall be a joint and several obligation of the transferring Member and
such transferee, notwithstanding the fact that the transferring Member
may no longer continue to have any Interest.
(c) A ChevronTexaco Member may Transfer all or any part of its
Interest to a Person that is not a ChevronTexaco Group Entity, and an
OBC Member may Transfer all or any part of its Interest to a Person
that is not an OBC Group Entity, provided that such Transfer is made in
compliance with the procedures set forth in this Section 7.1(c).
(i) A Member intending to Transfer its Interest (the
"Selling Member") shall deliver a notice to the Other Member
(the "Offeree Member") which shall (x) state such intent, and
(y) set forth a list of proposed Acceptable Transferees,
together with such information regarding each Person on such
list as may be reasonably required to determine whether such
Person is an Acceptable Transferee.
(ii) The Offeree Member shall, within 30 days after
receipt of such notice, deliver to the Selling Member a
written response to such list, setting forth its position with
respect to the acceptability of the Persons named therein,
which shall be determined by such Offeree Member in its sole
discretion exercised in good faith, for any reason other than
for the purpose of frustrating all Transfers. The procedure
set forth in this subsection (ii) may be repeated by the
Selling Member as often as may be reasonably required for the
Selling Member's marketing of the Selling Member's Interest.
(iii) The Selling Member shall have a period of no
more than 270 days after the Acceptable Transferees have
either been accepted or not objected to, to execute and
deliver a definitive agreement with any Acceptable Transferee
committing the Selling Member to sell and such Acceptable
Transferee to purchase the Selling Member's Interest, and to
complete such sale (subject to reasonable extension if
required to satisfy the condition set forth in Section 7.7).
If the Selling Member fails to complete such sale within such
period, the Selling Member must again invoke the offer
procedure set forth in this Section 7.1(c) in order to
Transfer its Interest pursuant to this Section 7.1(c). From
time to time, the Selling Member will furnish to the Offeree
Member such information respecting Selling Member's marketing
of the Selling Member's Interest as the Offeree Member
reasonably requests for any purpose reasonably related to
Offeree Member's exercise of its rights under Section
7.1(c)(iv).
(iv) Prior to consummating a proposed sale of the
Interest of the Selling Member to any Acceptable Transferee
pursuant to Section 7.1(c)(v), the Selling Member shall
deliver a second notice (the "Selling Member's Offer Notice")
to the Offeree Member which shall (x) state the intention of
the Selling Member to sell its Interest, (y) describe the
material terms and conditions of the proposed sale to the
Acceptable Transferee (including the proposed purchase price
and structure), together with any letter of intent or
definitive agreement relating to such proposed sale if
executed as of such date ("Sale Materials") and (z) offer to
sell such Interest to such Offeree Member on the same terms
and conditions as proposed to sell such
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Interest to the Acceptable Transferee; provided, however, that
the Offeree Member may substitute cash of equal value in the
event that the Acceptable Transferee offers consideration of a
type that is not readily available to the Offeree Member. If
the Offeree Member desires to purchase the Interest so
offered, it shall, within 10 days of the receipt by the
Offeree Member of the Selling Member's Offer Notice ("Offeree
Member Response Date"), deliver a notice (the "Offeree
Member's Acceptance Notice") to the Selling Member. The
Offeree Member's Acceptance Notice shall set forth an
irrevocable commitment by the Offeree Member to purchase the
Interest so offered on the terms and conditions set forth in
the Sale Materials and in Section 7.7.
(v) If the Offeree Member so delivers the Offeree
Member's Acceptance Notice, the closing of such purchase shall
take place within 30 days after delivery of the Offeree
Member's Acceptance Notice, subject to reasonable extension if
required to satisfy the conditions set forth in Section 7.7.
If the Offeree Member either notifies the Selling Member in
writing that it has elected not to purchase the Interest of
the Selling Member or fails to provide the Offeree Member's
Acceptance Notice on or prior to the Offeree Member Response
Date, the Selling Member shall be free to consummate its
proposed sale to the Acceptable Transferee on the terms and
conditions set forth in the Sale Materials and in Section 7.7.
(d) Notwithstanding anything to the contrary contained herein,
unless all of the Members shall consent, no Member may Transfer all or
any portion of its Interest if such Transfer, when added to the total
of all other Dispositions of Interests within the preceding twelve (12)
months, would result in the Company being considered to have terminated
within the meaning of Code Section 708.
Section 7.2 Change of Control.
(a) Each of OBC and CTTV agrees and acknowledges that the
identity of the other (and the identity of any entity possessing
control over the other) is an essential element of this Agreement and
accordingly the parties agree as follows: In the event of a Change of
Control of any Member (the "Changed Member"), the Changed Member shall,
following such Change of Control, promptly notify the other Member (the
"Unchanged Member") of such event, setting forth the date and
circumstances of the Change of Control and the identity of the Person
that has acquired control of the Changed Member. If the Changed Member
fails to give such notice, the Unchanged Member may give such notice.
Promptly after delivery of any such notice, or after otherwise
ascertaining that such Change of Control has occurred, the Members
shall cause the Fair Market Value of the Company to be determined in
accordance with the procedures set forth in Section 2.6.
(b) Within 30 days following the determination of Fair Market
Value of the Company, the Unchanged Member may provide a notice to the
Changed Member indicating its desire to acquire the Interest of the
Changed Member for the Change Price (plus the Preferred Interest Amount
with respect to such Member, if applicable), and setting forth the date
on which such Unchanged Member intends to acquire such Interest
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pursuant to this Section 7.2(b), which date shall be as soon as
practicable after delivery of the notice pursuant to this Section
7.2(b). If the Unchanged Member provides such notice, it shall have the
right to acquire all but not less than all of the Interest of the
Changed Member, subject to the provisions of Section 7.7, for the
Change Price. As used in this Agreement, the term "Change Price" means,
with respect to any Member's Interest, (x) the Fair Market Value of the
Company multiplied by (y) such Member's Percentage Interest. If the
selling Member is the holder of a Preferred Interest, the purchasing
Member shall be obligated to pay the Change Price plus the Preferred
Interest Amount of the selling Member.
Section 7.3 Waiver of Partition.
(a) All Company assets, whether real, personal or mixed,
tangible or intangible, shall be owned by the Company as an entity. All
the Company assets shall be recorded as the property of the Company on
its books and records, irrespective of the name in which legal title to
such Company assets is held.
(b) The assets, property and cash contributed to the Company,
as well as all other property and assets acquired by the Company, shall
be owned by the Company. No Member shall, either directly or
indirectly, take any action to require partition, and notwithstanding
any provisions of applicable Laws to the contrary, each Member (and
each of its legal representatives, successors, or assigns) hereby
irrevocably waives any and all rights it may have to maintain any
action for partition or to compel any sale with respect to its
Interest, or with respect to any assets or properties of the Company,
except as expressly provided in this Agreement, until the termination
of this Agreement.
Section 7.4 Covenant Not to Withdraw or Dissolve. Notwithstanding any
provision of the Michigan Act, except as expressly provided above, each Member
hereby covenants and agrees that the Members have entered into this Agreement
based on their mutual expectation that both Members will continue as Members and
carry out the duties and obligations undertaken by them hereunder and that,
except as otherwise expressly required or permitted hereby, each Member hereby
covenants and agrees not to (i) take any action to file a certificate of
dissolution or its equivalent with respect to itself; (ii) take any action that
would cause a Bankruptcy of such Member; (iii) withdraw or attempt to withdraw
funds or assets from the Company, except as otherwise expressly permitted by the
Michigan Act; (iv) exercise any power under the Michigan Act to dissolve the
Company; (v) Transfer all or any portion of its Interest, except as expressly
provided herein; or (vi) demand a return of such Member's contributions or
profits (or a bond or other security for the return of such contributions of
profits), in each case without Unanimous Approval.
Section 7.5 Substituted Members. Any transferee acquiring the Interest
of a Member as permitted under this Agreement shall be deemed admitted as a
substituted Member with respect to the Interest transferred concurrently with
the effectiveness of the Transfer without any further vote or approval of any
Member, provided such transferee shall have executed and delivered to the other
Member a counterpart of this Agreement and such other documents or agreements as
shall be reasonably requested by such other Member to confirm such transferee's
admission as a Member and its agreement to be bound by and assume the
obligations of the transferor in accordance with the terms of this Agreement and
any Associated Agreement under which such transferor has any
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rights or obligations. The transferor shall not be relieved of any obligation or
liability hereunder arising prior to the consummation of such Transfer but shall
be relieved of all future obligations with respect to the Interest so
Transferred. No purported Transfer of any Interest, or any portion thereof or
interest therein, in violation of the terms of this Agreement (including any
Transfer occurring by operation of law) shall vest the purported transferee with
any rights, powers or privileges hereunder, and no such purported transferee
shall be deemed for any purposes as a Member hereunder or have any right to vote
or consent with respect to Company matters, to maintain any action for an
accounting or to exercise any other rights of a Member hereunder or under the
Michigan Act.
Section 7.6 Deliveries. Upon the consummation of any purchase and sale
pursuant to this Article 7, the transferring Member shall deliver the Interest
of the transferring Member, free and clear of all Liens (other than any Lien
created under any financing to which the Company is a party), together with duly
executed written instruments of transfer with respect thereto, in form and
substance reasonably satisfactory to the purchaser of such Interests, against
(x) delivery of the cash portion of the applicable price for such Interest by
wire transfer, in immediately available funds, to the account of the
transferring Member designated for such purpose, and (y) delivery of any other
consideration as may be provided for such purchase and sale.
Section 7.7 Approvals. Notwithstanding any other provision of this
Agreement, no Transfer of an Interest pursuant to this Article 7 shall occur
unless and until any and all necessary consents and approvals have been obtained
from any Governmental Body with authority with respect thereto, including any
required approvals under the HSR Act. The Members agree to cooperate and to
cause their Affiliates to cooperate in the preparation and filing of any and all
reports or other submissions required in connection with obtaining such consents
and approvals.
Section 7.8 Liquidated Damages. OBC and CTTV agree that if either OBC
or CTTV shall Transfer its Interest in the Company in violation of such party's
agreements in Sections 2.7, 7.1, 7.2, or 7.4 or of OBC's agreement in Section
8.4(c), then such transferring party shall immediately pay to the
non-transferring party, as liquidated damages, an amount equal to one-third of
CTTV's Capital Contributions measured as of the date of such Transfer (for
example, as of September 30, 2004, such liquidated damages amount would be
one-third of $143,585,000, or approximately $47,861,667). The parties agree that
in any such event, the actual damages to the non-transferring party will be
difficult or impossible to measure and that such amount represents the parties'
reasonable estimate as of the date of this Agreement of such damages and that
this Section 7.8 is intended to compensate such non-transferring party for such
damages and not as a penalty.
ARTICLE 8
DEFAULT
Section 8.1 Default.
(a) Default. If any of the following events occur:
(i) the Bankruptcy of a Member; or
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(ii) any part of the Interest of a Member is seized by a creditor of
such Member, and the same is not released from seizure or bonded out
within thirty (30) days from the date of notice of seizure; or
(iii) a Member fails to (x) provide any Capital Contribution
required under Article 3 within ten (10) days after the due date thereof,
(y) provide any other funding required by this Agreement within ten (10)
days after the due date thereof, or (z) perform any material obligation
imposed upon such Member under any agreement relating to borrowed money to
which the Company is a party which results in a default by, or
acceleration of indebtedness of, the Company thereunder, and such failure
continues unremedied for ten (10) days after the occurrence of such
failure; or
(iv) a Member (y) fails to perform any material provision or
obligation imposed on such Member in this Agreement other than those
described in Section 8.1(a)(iii); or (z) attempts to transfer any of its
Interest in the Company except as permitted under Article 7, and in each
such case such failure continues unremedied for thirty (30) days after
receipt of notice from the other Member, or
(v) a Member fails to perform any material provision or obligation
imposed on such Member in the Technology Agreement and such failure
continues unremedied for ten (10) days after receipt of notice from the
other Member;
then a "Default" shall be deemed to have occurred with respect to such Member,
who shall be referred to as the "Defaulting Member," and the other Member shall
be referred to as a "Nondefaulting Member". Subsequent to the occurrence of a
Default, the Defaulting Member shall continue to be a Member and shall continue
to be obligated to make all Capital Contributions as provided in Article 3.
(b) Continuation of the Company. If an event described in Section 8.1(a)
occurs, it is the intent of the Members that the Company shall continue to exist
and operate without interruption, dissolution or termination, and without
impairing or reducing in any manner the Company's rights and obligations to
third parties unless the Nondefaulting Member elects to dissolve the Company
pursuant to Section 8.2(a).
(c) Suspension and Assignment of Distributions. Notwithstanding anything
in this Agreement to the contrary, effective upon the occurrence of an event
which, but for the expiration of any applicable grace period, would constitute a
Default with respect to a Member ("Event of Default"), no distribution shall be
made by the Company to such Member until such Event of Default has been cured
and the Nondefaulting Member has been reimbursed for all direct costs and
expenses incurred as a result of the Event of Default. Effective upon the
expiration of such grace period, the Defaulting Member assigns to the
Nondefaulting Member its right to receive any and all distributions from the
Company to which it would otherwise be entitled under this Agreement or the
Michigan Act (including any distributions suspended during the grace period in
accordance with the preceding sentence) until such time as the Nondefaulting
Member has been reimbursed in full for all such costs and expenses.
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Section 8.2 Options of Nondefaulting Member. If a Default occurs and is
continuing then the Nondefaulting Member shall have the right, in its sole and
absolute discretion, to:
(a) dissolve the Company in accordance with Article 9;
(b) expel the Defaulting Member from the Company by giving written
notice specifying the expulsion date and purchasing, designating another
Person to purchase or causing the Company to purchase the Interest of the
Defaulting Member as of the expulsion date in such percentage as the
Nondefaulting Member shall determine (the Nondefaulting Member, such other
Person or the Company, as the case may be, the "Default Purchaser"), at
the Default Purchase Price, less all costs and expenses incurred or
reasonably anticipated to be incurred by the Default Purchaser as a result
of the Default (a "Default Purchase"). At the Default Purchaser's
election, payment to the Defaulting Member may take the form of a ten (10)
year note from the Default Purchaser secured by the Interest purchased and
payable in equal annual installments of principal plus interest at the
Prime Rate. In the event the Default Purchaser incurs costs or expenses in
respect of the Defaulting Member's default in addition to those which were
previously deducted from the Default Purchase Price, any such note shall
be reduced by an amount equal to such additional costs or expenses, or the
Default Purchaser may offset such amount against any other sums owed by
the Default Purchaser to the Defaulting Member;
(c) Cure the default and cause the cost thereof to be charged
against a special loan account established for the Nondefaulting Member
until the entire cost thereof plus interest on the unpaid balance at an
annual rate equal to 2% over the Prime Rate shall have been paid or
reimbursed to the Nondefaulting Member from any subsequent distributions
made pursuant to this Agreement to which the Defaulting Member would
otherwise have been entitled, which amounts shall be paid first as
interest and then principal, until the loan is paid in full;
(d) Cure the Default and credit the Nondefaulting Member's Capital
Account with an amount equal to the sum of the costs of such cure and all
other costs and expenses incurred by the Nondefaulting Member as a result
of the Default and cause the Percentage Interests of the Members to be
adjusted to reflect the additional Interest in the Company of the
Nondefaulting Member as a result of such credit based on the Fair Market
Value of the Company as of the date of such cure; provided, however, that
any such cure by the Nondefaulting Member shall not affect the liability
of the Defaulting Member for any other obligations to the Company or the
Nondefaulting Member, whether attributable to periods prior to or
following such cure. The Nondefaulting Member's additional Interest shall
be equal to the percentage calculated by dividing the amount of the cure
by the Fair Market Value of the Company. Correspondingly, the Defaulting
Member's Interest shall be reduced by such percentage; or
(e) exercise any and all rights of a secured creditor under the
Uniform Commercial Code with respect to the Collateral.
Following the occurrence and during the continuance of a Default, the Defaulting
Member (and its Management Committee representatives) shall have no vote on any
matter before the Management
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Committee, other than those matters set forth in Section 5.4(a), Section
5.4(d)(i) through (viii), and Section 5.4(e).
Section 8.3 No Limitation or Right of Set-Off. Each Member agrees that the
obligation to make payment to the Company as provided in this Agreement is a
covenant of each Member to the other Member and any Default entitles the
Nondefaulting Member to take the actions set forth in Section 8.2 which shall be
in addition to, and not in substitution for, any other rights or remedies which
the Nondefaulting Member may have at law or equity or pursuant to the other
provisions of this Agreement or any Associated Agreement. Any Member which
becomes a Defaulting Member undertakes that, in respect of any exercise by the
Nondefaulting Member of any rights under or the application of any of the
provisions of Section 8.2, such Defaulting Member shall not raise by way of set
off, or invoke as a defense or assert as a claim, whether in law or equity, any
failure by any other Member to pay amounts due and owing under this Agreement or
any alleged or unliquidated claim that such Defaulting Member may have against
the Company or any Member, whether such claim arises under this Agreement or
otherwise. Such Defaulting Member further undertakes not to raise by way of
defense, whether in law or in equity, that the nature or the amount of the
remedies granted to the Nondefaulting Member is unreasonable or excessive.
Section 8.4 Security Interest.
(a) Grant of Security Interest by OBC. All of OBC's obligations
under this Agreement (including without limitation OBC's obligations under
Sections 2.7, 3.2, 3.4, 7.1, 7.2, and 7.4) shall be secured by, and OBC
hereby grants to CTTV, a first priority security interest in all right,
title, claim and interest of OBC in and to the Collateral. OBC hereby
authorizes CTTV, its counsel and its representatives, at any time and from
time to time, to file financing statements and amendments in such
jurisdictions as CTTV may deem necessary or desirable in order to perfect
the security interests granted by OBC under this Agreement.
Notwithstanding the foregoing, so long as no Default with respect to OBC
shall have occurred and be continuing, OBC shall be entitled to exercise
any and all rights relating to the Collateral otherwise available to it
under the terms of this Agreement.
(b) Representations and Warranties regarding the Collateral. OBC
represents and warrants to CTTV as of the date hereof as follows:
(i) OBC is a corporation organized under the laws of the State
of Delaware. OBC's mailing address is 2968 Waterview Drive,
Rochester Hills, Michigan 48309. OBC's chief executive office is
located at 2968 Waterview Drive, Rochester Hills, Michigan 48309.
OBC's organizational identification number is 2075852.
(ii) "Ovonic Battery Company, Inc." is the correct legal name
of OBC indicated on the public record of OBC's jurisdiction of
organization which shows OBC to be organized.
(iii) All names and tradenames that OBC has used within the
five years prior to the date hereof are as set forth on Schedule
OBC-8.4(b)(iii).
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(iv) OBC has good and marketable title to all the Collateral
owned by it and will have good and marketable title to all
Collateral hereafter acquired upon acquisition thereof. The security
interests granted pursuant to this Section 8.4 constitute (in the
case of Collateral now owned) and will constitute upon acquisition
thereof (in the case of Collateral hereafter acquired), valid, first
priority Liens in such Collateral.
(v) The Collateral is (in the case of Collateral now owned)
and (in the case of Collateral hereafter acquired) will be upon
acquisition thereof, free and clear of all Liens other than the
Liens granted under this Agreement.
(vi) OBC is solvent and is paying its debts as they become due
and owing insofar as this affects the Collateral, and OBC shall
remain solvent upon the execution of and compliance with the terms
of this Agreement and OBC's obligations under this Agreement, such
that execution of this Agreement does not render OBC insolvent.
(vii) There are no actions or proceedings that are pending or,
to OBC's knowledge, threatened against OBC that might adversely
affect the Collateral.
(viii) No security agreement, financing statement, or
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record
in any public office, except such as may have been filed in favor of
CTTV pursuant to this Agreement or with respect to the Liens granted
to CTTV under this Agreement.
(c) Covenants with respect to the Collateral. OBC hereby covenants
and agrees with CTTV that during the term of this Agreement:
(i) OBC shall not (A) adopt a trade name or change its name,
or (B) change its identity, jurisdiction, structure or tax
identification number, unless in any case OBC (x) provides CTTV no
less than 30 days' prior written notice thereof and (y) makes all
filings under applicable law and takes all other actions that are
required so that such change will not at any time adversely affect
the validity, perfection or priority of CTTV's Lien on any of the
Collateral.
(ii) OBC shall not sell, lease or otherwise dispose of any of
the Collateral, or any interest therein.
(iii) OBC shall not grant or suffer to exist any Lien on any
of the Collateral other than the Liens granted under this Agreement.
(iv) At any time and from time to time, upon the request of
CTTV, and at the sole expense of OBC, OBC will promptly execute and
deliver any and all such further documents and take such further
actions as CTTV may deem desirable in obtaining the full benefits of
the security interest granted pursuant to this Section 8.4 and of
the rights and powers herein granted, including, without limitation,
the
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filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect to the
liens and security interests granted hereby and, if applicable,
transferring any Collateral to CTTV's possession in order to perfect
or enhance the priority thereof. If any amount payable under or in
connection with any Collateral shall be or become evidenced by any
promissory note or other instrument (other than an instrument that
constitutes chattel paper), such note or instrument shall be
immediately pledged to CTTV hereunder, and shall be endorsed in a
manner satisfactory to CTTV and delivered to CTTV.
(v) OBC irrevocably appoints CTTV, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of OBC and in
the name of OBC or in its own name, from time to time in CTTV's
discretion, for the purpose of carrying out the terms of this
Article 8, to exercise any of the rights and remedies granted to
CTTV under this Article 8, and to take any and all other appropriate
action and to execute any and all documents and instruments that may
be necessary or desirable under this Article 8. All powers,
authorizations, and agencies contained in this Section 8.4 with
respect to the Collateral are irrevocable and powers coupled with an
interest. OBC ratifies all that the attorney shall lawfully do or
cause to be done by virtue hereof.
(d) Sale of Collateral. If a Default with respect to OBC shall have
occurred and be continuing, then CTTV shall have the right to sell the
Collateral (in addition to exercising any other remedies available to it
under applicable law or this Agreement). CTTV shall not be required to
register or qualify any of the Collateral that constitutes securities
under applicable state or federal securities laws in connection with any
sale or other disposition thereof if such disposition is effected in a
manner that complies with all applicable federal and state securities
laws. CTTV shall be authorized at any such disposition (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to
persons who will represent and agree that they are "accredited investors"
or "qualified institutional buyers" under applicable law and purchasing
the Collateral for their own account for investment and not with a view to
the distribution or sale thereof. OBC agrees that if any such Collateral
is sold in a manner that CTTV in good faith believes to be reasonable
under the circumstances then existing, then (A) the sale shall be deemed
to be commercially reasonable in all respects and (B) CTTV shall not incur
any liability or responsibility to OBC in connection therewith,
notwithstanding the possibility that a substantially higher price might
have been realized at a public sale. OBC recognizes that a ready market
may not exist for such Collateral and that a sale by CTTV of any such
Collateral for an amount substantially less than the price that might have
been achieved had the Collateral been publicly traded may be commercially
reasonable in view of the difficulties that may be encountered in
attempting to sell Collateral that is not publicly traded. CTTV or any
ChevronTexaco Group Entity may purchase any of the Collateral at any sale
of Collateral hereunder. In addition, OBC recognizes that, in connection
with any sale of the Collateral, CTTV has certain rights of first refusal
to purchase the Collateral pursuant to Section 7.1 of this Agreement, and
that such rights of first refusal may result in a sale of the Collateral
(including a sale of all or part of the Collateral to CTTV) for an amount
less than the price that might have been achieved had the Collateral not
been
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subject to such rights of first refusal. Notwithstanding anything to the
contrary in this Section 8.4(d), neither CTTV nor any ChevronTexaco Group
Entity shall be entitled to purchase the Interest of the Defaulting Member
(or any portion thereof) in a sale of Collateral under this Section 8.4(d)
for a price less than the minimum price at which CTTV or any ChevronTexaco
Group Entity would be entitled to purchase such Interest (or any portion
thereof) under Section 8.2(b). TO THE MAXIMUM EXTENT PERMISSIBLE UNDER
APPLICABLE LAW, OBC HEREBY WAIVES ANY OBJECTION OR CLAIM BASED UPON ANY OF
THE FOREGOING AND AGREES THAT ANY SALE OR OTHER DISPOSITION EFFECTED IN
ACCORDANCE WITH THE FOREGOING (INCLUDING PURSUANT TO ANY SUCH RIGHT OF
FIRST REFUSAL) SHALL BE CONCLUSIVELY DEEMED COMMERCIALLY REASONABLE WITHIN
THE MEANING OF THE UNIFORM COMMERCIAL CODE.
(e) The provisions of this Section 8.4 shall terminate and shall be
of no further force or effect on the first date after January 1, 2008 on
which (A) no Preferred Interest is outstanding and (B) no Default with
respect to OBC has occurred and is continuing. Upon the termination of the
provisions of this Section 8.4, CTTV shall cooperate with the reasonable
requests of OBC to release any Collateral in the possession of CTTV and to
file appropriate termination statements and other documents evidencing and
giving effect to the termination of the security interest in the
Collateral granted hereunder.
ARTICLE 9
DISSOLUTION
Section 9.1 Dissolution. The Company shall dissolve and commence winding
up upon the first to occur of any of the following events (each, a "Dissolution
Event"):
(a) a decision by Unanimous Approval to dissolve, wind up and
terminate the Company;
(b) upon a Default, the Nondefaulting Member elects to dissolve the
Company pursuant to Section 8.2(a); or
(c) the entry of a decree of judicial dissolution pursuant to
Section 18-802 of the Michigan Act.
Section 9.2 Winding Up. The Members shall be responsible for overseeing
the winding up and dissolution of the Company. A reasonable amount of time shall
be allowed for the period of winding up in light of prevailing market conditions
and so as to avoid undue loss in connection with any sale of the Company's
assets. Upon the occurrence of a Dissolution Event, the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying or making reasonable provision for the
satisfaction of the claims of its creditors and Members, and no Member shall
take any action that is inconsistent with, or not necessary to or appropriate
for, the winding up of the Company's business and affairs; provided that all
covenants contained in this Agreement and obligations provided for in this
Agreement shall continue to be fully binding upon the Members until such time as
the assets or property or the
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proceeds from the sale thereof have been distributed pursuant to this Article 9
and the existence of the Company has been terminated by the filing by the
Members of a Certificate of Dissolution with the Administrator.
Section 9.3 Distributions upon Liquidation.
(a) In connection with the winding up of the Company, first the Fair
Market Value of the Company's assets shall be determined as provided in
Section 2.6. Such Fair Market Value shall then be used as a basis for
computing the Profit or Loss, if any, arising as a result of the operation
of, and subject to allocation under, Section 3.8(d) and Article 4
(including without limitation Section 4.2(c)(xi)), respectively.
(b) In connection with the winding up of the Company, the Company's
assets constituting Company Technology Assets shall first be applied and
distributed to the maximum extent permitted by applicable Laws in
accordance with Section 4.2 of the Technology Agreement.
(c) Thereafter, in connection with the winding up of the Company,
the Company's assets or the proceeds from the sale thereof shall be
applied and distributed to the maximum extent permitted by applicable Laws
as follows:
(i) To creditors, including Members who are creditors (other
than by reason of the operation and effect of Sections 304 and 305
of the Michigan Act), to the extent otherwise permitted by law, in
satisfaction of liabilities of the Company (whether by payment or
the making of reasonable provision for payment thereof);
(ii) To the Preferred Member(s), an amount equal to such
Member(s)' Preferred Interest Amounts, pro rata in accordance with
such amounts;
(iii) With respect to any assets not distributed pursuant to
(b) above, to those Persons entitled to such assets in accordance
with Section 4.2 of the Technology Agreement;
(iv) To Members in satisfaction of liabilities for
distributions under the Michigan Act; and
(v) Thereafter to Members in proportion to their respective
Capital Account balances, to the extent the same are positive, up to
the full amount thereof (after giving effect to adjustments to
Capital Account balances under Section 3.8 and, as applicable,
Article 4, through the date of distribution); with any remaining
assets to be distributed to Members in accordance with their
respective Percentage Interests.
Section 9.4 Claims of the Members. The Members will look solely to the
Company's assets for the return of their contributions to their Capital
Accounts, and if the assets of the Company remaining after payment of or due
provision for all debts, liabilities and obligations of the Company are
insufficient to return such contributions, the Members will have no recourse
therefor
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against the Company or any other Member or any other Person. No Member shall
have any obligation to restore, or otherwise pay to the Company, the other
Member or any third party, the amount of any deficit balance in such Member's
Capital Account upon dissolution and liquidation.
Section 9.5 Rights and Obligations of Members. Dissolution of the Company
for any cause shall not release a Member from any liability which such Member
had already incurred at the time of dissolution and termination or affect in any
way the survival of the rights, duties and obligations of a Member provided for
in Section 4.5, Article 8, Section 11.11 or Section 11.13 of this Agreement.
ARTICLE 10
FINANCIAL MATTERS
Section 10.1 Books and Records. The Company shall maintain, at the
Company's principal place of business and at the Company's expense, accurate and
complete books and records, on the accrual basis, in accordance with GAAP (the
application of which, having been adopted, shall not be changed without the
prior written consent of the Management Committee), showing all costs,
expenditures, sales, receipts, assets and liabilities, and profits and losses
and all other records necessary, convenient or incidental to recording the
Company's business and affairs. Such books and records shall be audited at least
annually, at the Company's expense, by independent certified public accountants
selected by the Management Committee. The initial certified public accountants
for the Company shall be Deloitte & Touche LLP. The books and records of the
Company shall be open to inspection by each Member or its designated
representatives at the inspecting Member's expense at any reasonable time during
business hours for any proper purpose.
Section 10.2 Financial Reports. The Management Committee shall cause to be
prepared (a) as of the end of each calendar month or quarter as appropriate, (b)
as of the end of each Fiscal Year, (c) as of the date of dissolution of the
Company, and (d) as of such additional dates as the Management Committee may
direct, in accordance with GAAP, appropriate financial statements showing the
assets, liabilities, capital, profits, expenses, losses and recovered and
unrecovered capital expenditures of the Company and a statement showing all
amounts credited and debited to each Member's capital account (for both GAAP and
Capital Accounts) and of each Member's distributive share, for federal income
tax purposes, of income, gains, deductions, losses and credits (or items
thereof) arising out of the Company's operations, as required by law, and a
further statement reconciling any difference between the Member's respective
capital accounts as shown in such financial statements and their capital
accounts as determined in accordance with the provisions of this Agreement. A
copy of each such report shall be delivered to each Member within ninety (90)
days after each such applicable date.
Section 10.3 Company Funds. Pending application or distribution, the funds
of the Company shall be deposited in such bank accounts, or invested in such
interest-bearing or non-interest-bearing investments, including without
limitation, federally insured checking and savings accounts, certificates of
deposit, government issued or backed securities, or mutual funds investing
primarily in such types of securities, as shall be designated by the Management
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Committee. Such funds shall not be commingled with the funds of any other
Person. Withdrawals therefrom shall be made upon such signatures as the
Management Committee may designate.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices. All notices, notifications, consents, requests,
demands and other communications to be provided to any Person pursuant to the
terms hereof shall be in writing and shall be deemed to have been duly given or
delivered upon the date of receipt if: (a) delivered personally; (b) telecopied
or telexed with transmission confirmed; (c) mailed by registered or certified
mail return receipt requested; or (d) delivered by a recognized commercial
courier to the Person as follows (or to such other address as any Person shall
have last designated by fifteen (15) days written notice to the other Persons):
If to CTTV: ChevronTexaco Technology Ventures LLC
3901 Briarpark
Houston, TX 77042
Attention: Jerry Lomax
Facsimile: (713) 954-6016
Telephone: (713) 954-6001
With copies of notices for CTTV to:
ChevronTexaco Corporation
6001 Bollinger Canyon Road, Building T
San Ramon, California 94583
Attention: Chief Corporate Counsel
Attention: Allen H. Uzell
Facsimile: (925) 842-2056
Telephone: (925) 842-1679
If to OBC: Ovonic Battery Company, Inc.
2968 Waterview Drive
Rochester Hills, Michigan 48309
Attention: Robert Stempel
Facsimile: (248) 844-1214
Telephone: (248) 293-0440
With copies of notices for OBC to:
General Counsel
Ovonic Battery Company, Inc.
2956 Waterview Drive
Rochester Hills, Michigan 48309
Facsimile: (248) 844-1214
Telephone: (248) 293-0440
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Energy Conversion Devices, Inc.
2956 Waterview Drive
Rochester Hills, Michigan 48309
Attention: Robert Stempel
Facsimile: (248) 844-1214
Telephone: (248) 293-0440
Section 11.2 Modification. This Agreement, including this Section 11.2 and
the Exhibits to this Agreement, shall not be modified except by a written
instrument signed by or on behalf of the Members.
Section 11.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Michigan as
applied to contracts made and performed within the State of Michigan, without
regard to principles of conflict of laws.
Section 11.4 Assignment, Binding Effect. This Agreement shall not be
assigned by any Member directly or indirectly to any other Person (whether by
the sale of stock or other transfer of ownership interest in a Person, or the
sale or transfer by a Person that has an indirect stock or ownership interest in
a Person or otherwise). This Agreement shall be binding upon and inure to the
benefit of the Members and their respective successors and permitted assigns.
Section 11.5 No Third Party Rights. Nothing in this Agreement shall create
or be deemed to create any third party beneficiary rights in any Person
(including any employee of any Person) not party to this Agreement, except that
the Indemnitees may be third party beneficiaries pursuant to Article 6 of this
Agreement in which instance their rights are subject to the terms of such
Article 6, and the Company and its Members may be third party beneficiaries to
Section 11.13(a) and (b) of this Agreement in which instance their rights are
subject to the terms of Section 11.13(a) and (b).
Section 11.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 11.7 Invalidity. If any of the provisions of this Agreement
including the Exhibits hereto is held invalid or unenforceable, such invalidity
or unenforceability shall not affect in any way the validity or enforceability
of any other provision of this Agreement. In the event any provision is held
invalid or unenforceable, the Members shall attempt to agree on a valid or
enforceable provision which shall be a reasonable substitute for such invalid or
unenforceable provision in light of the tenor of this Agreement and, on so
agreeing, shall incorporate such substitute provision in this Agreement.
Section 11.8 Entire Agreement. This Agreement and the Associated
Agreements contain the entire agreement between the parties hereto with respect
to the matters contemplated herein and therein and all prior or contemporaneous
understandings and agreements shall merge herein. There are no additional terms,
whether consistent or inconsistent, oral or written, which are intended to be
part of the parties' understandings which have not been incorporated into this
Agreement or the Associated Agreements.
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Section 11.9 Expenses. Except as the parties may otherwise agree or as
otherwise provided herein, each party shall bear their respective fees, costs
and expenses in connection with this Agreement and the transactions contemplated
hereby.
Section 11.10 Waiver. No waiver by any party, whether express or implied,
of any right under any provision of this Agreement shall constitute a waiver of
such party's right at any other time or a waiver of such party's rights under
any other provision of this Agreement unless it is made in writing and signed by
the president or a vice president of the party waiving the condition. No failure
by any party hereto to take any action with respect to any breach of this
Agreement or default by another party shall constitute a waiver of the former
party's right to enforce any provision of this Agreement or to take action with
respect to such breach or default or any subsequent breach or default by such
other party.
Section 11.11 Dispute Resolution. Any claim, controversy or dispute
arising out of, relating to, or in connection with this Agreement, or the
agreements and transactions contemplated hereby, including the interpretation,
validity, termination or breach thereof, shall be resolved solely in accordance
with the dispute resolution procedures set forth in Exhibit B.
Section 11.12 Disclosure. Each Member is acquiring its Interest in the
Company based upon its own independent investigation, and the exercise by such
Member of its rights and the performance of its obligations under this Agreement
are based upon its own investigation, analysis and expertise. Each Member's
acquisition of its Interest in the Company is being made for its own account for
investment, and not with a view to the sale or distribution thereof.
Section 11.13 Non-Compete.
(a) Each of OBC and ECD agrees, for the benefit of the Company and
its Members, that it shall not and shall not permit any of its Affiliates
to compete in any way against the Company in the Battery Business, except
as may be permitted by the Technology Agreement; provided that
(i) if the Members decide by Unanimous Approval to dissolve,
wind up and terminate the Company, the obligations of OBC and ECD
under this Section 11.13(a) shall terminate, effective upon the
termination of the Company;
(ii) if there is a Default by OBC (or a subsequent OBC Member)
that results in a Default Purchase or in an election by the
Nondefaulting Member to dissolve the Company pursuant to Section
8.2(a)(i), the obligations of OBC and ECD under this Section
11.13(a) shall terminate, effective upon the later of (x) three
years after the Default Purchase or the termination of the Company,
as applicable, and (y) six years after the date of this Agreement;
(iii) if each OBC Member Transfers all of its Interest to a
Person that is not an OBC Group Entity either in compliance with
Section 7.1(c) or earlier with consent, the obligations of OBC and
ECD under this Section 11.13(a) shall terminate, effective three
years after Transfer.
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During the period prior to the termination of the obligations of OBC and
ECD under this Section 11.13(a) as provided in subsections (ii) and (iii)
above, each of OBC and ECD shall use its best efforts to enable the
Company to utilize all technology which OBC and/or ECD has given the
Company rights to use pursuant to the Technology Agreement. In this
regard, each of OBC and ECD shall make available to the Company and its
Affiliates all personnel, services and facilities necessary for this
purpose. Any personnel so provided by OBC and/or ECD shall be subject to
appropriate confidentiality obligations in favor of the Company. During
this period, the Company and its Affiliates may offer employment to any
OBC or ECD employees who are associated with the Company's Battery
Business.
(b) CTTV agrees, for the benefit of the Company and its Members,
that CTTV shall not and shall not permit any of its Affiliates to compete
in any way against the Company in the Battery Business, except as may be
permitted by the IP Agreement; provided that
(i) if the Members decide by Unanimous Approval to dissolve,
wind up and terminate the Company, CTTV's obligations under this
Section 11.13(b) shall terminate, effective upon the termination of
the Company;
(ii) if there is a Default by CTTV (or a subsequent
ChevronTexaco Member) that results in a Default Purchase or in an
election by the Nondefaulting Member to dissolve the Company
pursuant to Section 8.2(a)(i), CTTV's obligations under this Section
11.13(b) shall terminate, effective upon the later of (x) three
years after the Default Purchase or the termination of the Company,
as applicable, and (y) six years after the date of this Agreement;
(iii) if each ChevronTexaco Member Transfers all of its
Interest to a Person that is not a ChevronTexaco Group Entity either
in compliance with Section 7.1(c) or earlier with consent, CTTV's
obligations under this Section 11.13(a) shall terminate, effective
three years after Transfer.
During the period prior to the termination of CTTV's obligations under
this Section 11.13(b) as provided in subsections (ii) and (iii) above,
CTTV shall use its best efforts to enable the Company to utilize all
technology which CTTV has given the Company rights to use pursuant to the
Technology Agreement. In this regard, CTTV shall make available to the
Company and its Affiliates all personnel, services and facilities
necessary for this purpose. Any personnel so provided by CTTV shall be
subject to appropriate confidentiality obligations in favor of the
Company. During this period, the Company and its Affiliates may offer
employment to any CTTV employees who are associated with the Company's
Battery Business.
(c) For the avoidance of doubt, for purposes of Sections 11.13(a)
and (b), activities conducted outside the scope of the Battery Business
shall be deemed not to be in competition with the Battery Business. Except
as provided herein, each Member shall otherwise have the unqualified right
to conduct its business as it may choose, whether or not in competition
with the Company, without incurring any liability to the Company or to the
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other Member and wholly free from any right or privilege of the Company or
the other Member.
Section 11.14 Further Assurances. The Members shall provide to each other
such information with respect to the transactions contemplated hereby (including
sales or transfers of Interests in the Company) as may be reasonably requested,
and shall execute and deliver to each other such further documents and take such
further action as may be reasonably requested by any party to this Agreement in
order to document, complete or give full effect to the terms and provisions of
this Agreement and the transactions contemplated herein.
Section 11.15 Press Releases. The Members agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby. Neither Member shall
make any press release or other announcement respecting this Agreement without
the consent of the other unless a Member refuses to consent and the Member
desiring to make the release or other announcement is advised by its counsel
that the release or other announcement is required to comply with any Law.
Section 11.16 CTTV Non-Assertion. CTTV agrees that with respect to any
intellectual property right, including any United States patent which, on the
date of this Agreement, it or Texaco Inc. ("Texaco") owns or under which it or
Texaco has the right to grant licenses of the scope of the licenses granted in
the Technology Agreement, or any intellectual property right, including any
United States patent which may later issue on an application for patent, which
was filed during the term of the Technology Agreement, it or Texaco owns or
under which it or Texaco has the right to grant licenses of the scope of the
license granted in the Technology Agreement, CTTV will not, and will not permit
Texaco to, assert against the Company, or its vendees, mediate or immediate, any
claims for infringement based on the manufacture, use, or sale of any apparatus
made or sold by the Company within the Battery Business.
Section 11.17 ECD/OBC Non-Assertion. Each of ECD and OBC agrees that with
respect to any intellectual property right, including any United States patent
which, on the date of this Agreement, it owns or under which it has the right to
grant licenses of the scope of the licenses granted in the Technology Agreement,
or any intellectual property right, including any United States patent which may
later issue on an application for patent, which was filed during the term of the
Technology Agreement, it owns or under which it has the right to grant licenses
of the scope of the license granted in the Technology Agreement, it will not
assert against the Company, or its vendees, mediate or immediate, any claims for
infringement based on the manufacture, use, or sale of any apparatus made or
sold by the Company within the Battery Business.
Signatures on following page
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CHEVRONTEXACO TECHNOLOGY VENTURES, LLC
By: /s/ GREGORY M. VESEY
------------------------------------
Gregory M. Vesey
President
OVONIC BATTERY COMPANY, INC.
By: /s/ ROBERT C. STEMPEL
------------------------------------
Robert C. Stempel
Chairman
ENERGY CONVERSION DEVICES, INC.
By: /s/ ROBERT C. STEMPEL
------------------------------------
Robert C. Stempel
Chairman and Chief Executive Officer
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
EXHIBIT A
TO AMENDED AND RESTATED OPERATING AGREEMENT
BUDGET PROTOCOL
1. Authority. Authority for expenditures resides in the Management Committee.
2. Presentation of Budget Documents. Three months before the start of each
Fiscal Year, the President will submit to the Management Committee a
proposed Annual Budget and a proposed Annual Operating Plan for that
Fiscal Year.
A. Proposed Annual Budget
The proposed Annual Budget shall contain estimates of the monthly
research and development, capital and operating expenditures
required for execution of the proposed Annual Operating Plan for
each of the twelve months in the Fiscal Year to which it applies, as
well as estimates of the annual expenditures for the following 3
Fiscal Years. Each proposed Annual Budget shall be in substantially
the same format as the Initial Annual Budget, unless the Management
Committee requests otherwise.
B. Proposed Annual Operating Plan
The proposed Annual Operating Plan shall, in detail acceptable to
the Management Committee, describe the Company's Objectives for the
Fiscal Year to which it applies and the actions the Company intends
to take in furtherance of these Objectives.
3. Approval of the Budget Documents. The Management Committee shall use diligent
efforts to approve an Annual Budget and Annual Operating Plan no later
than 30 days prior to the start of each Fiscal Year. Upon approval by the
Management Committee of the proposed Annual Budget and Annual Operating
Plan, the President and other authorized officers of the Company are
authorized to make expenditures and commitments in accordance with
Disbursement and Commitment Schedules approved by the Management Committee
on the activities described therein.
4. Monitoring and Cash Calls. The President will monitor the Company's actual
cash balances and expected monthly expenditures on a regular basis. No
less than 10 Business Days prior to the first of each month, the President
shall provide written notice to the appropriate funding Member(s) of the
amount of cash the Company requires from such Member(s) as set forth in
the applicable Disbursement and Commitment Schedule, and the funding
Member(s) shall provide or make available to the Company immediately
available funds in the amount set forth in such notice on or before the
first Business Day of that month. The President will also monitor actual
and forecasted expenditures of the Company against the forecasts contained
in the Approved Annual Budget and Annual Operating Plan and provide the
Members with a written summary of this information as of the end of each
month by no later than the 15th of the following month. In addition, the
President shall present status reports on actual versus forecasted
expenditures at each Management Committee meeting. The aggregate amount of
cash requested by the President to meet the Company's expenditures for any
calendar quarter or any Fiscal Year shall not exceed the aggregate amount
covered by the applicable Disbursement and Commitment Schedule or the
applicable Approved Annual Budget, as the case may be, without the prior
approval of the Management Committee.
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
5. Adjustments to Plans and Budgets. In the event the President determines
that changes beyond his delegated authority are required in the current
schedule for the Company's operations (whether as set forth in the then
applicable Disbursement and Commitment Schedule, the Annual Operating Plan
or the Approved Annual Budget), he will present his recommendations for
adjustments thereto to the Management Committee and seek its approval. Only
the Management Committee can authorize spending in excess of previously
approved levels. Such expenditures, if approved, will be authorized by the
approval of a revised Disbursement and Commitment Schedule or Annual
Budget, as the case may be.
-2-
AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
EXHIBIT B
TO AMENDED AND RESTATED OPERATING AGREEMENT
DISPUTE RESOLUTION
1. The parties shall attempt to amicably settle any dispute, controversy or
claim related to this Agreement, including any dispute over the breach,
interpretation, or validity of this Agreement (all of which such possible
disputes are hereinafter collectively referred to as a "Dispute");
provided that in no event shall either party be obligated to attempt to
reach such a settlement for more than fifteen (15) days from the date
either party gives written notice to the other party specifying that it is
a Notice of Dispute and setting forth a brief description of such Dispute
(the "Issue Date").
2. IF THE PARTIES ARE UNSUCCESSFUL IN THEIR ATTEMPT TO SETTLE THE DISPUTE,
THE DISPUTE SHALL BE SUBMITTED TO, AND SETTLED BY, BINDING ARBITRATION IN
HOUSTON, TEXAS IN ACCORDANCE WITH THIS PARAGRAPH; UNLESS THE PARTIES AGREE
TO SEEK A NEGOTIATED RESOLUTION USING A MEDIATOR. THE ARBITRATION SHALL BE
CONDUCTED UNDER THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION ("AAA") BEFORE A SINGLE ARBITRATOR (THE
"ARBITRATOR") WHO SHALL BE A RETIRED U.S. DISTRICT COURT JUDGE AND SHALL
NOT BE THE MEDIATOR (IF ANY). IN THE EVENT THE PARTIES SHALL NOT HAVE
AGREED ON A CHOICE OF ARBITRATOR WITHIN THIRTY (30) DAYS FROM THE ISSUE
DATE, THE AAA SHALL FURNISH TO EACH PARTY A LIST OF THREE NAMES (EACH OF
WHOM SHALL BE A RETIRED U.S. DISTRICT COURT JUDGE) AND WITHIN THREE (3)
BUSINESS DAYS AFTER RECEIPT OF SUCH LIST, CTTV SHALL STRIKE ONE NAME AND
OBC AND/OR ECD SHALL STRIKE ONE NAME, THEREBY NOMINATING THE REMAINING
PERSON AS THE ARBITRATOR. IF MORE THAN ONE NAME REMAINS AT THE END OF SUCH
THREE BUSINESS DAY PERIOD, THE AAA WILL CHOOSE AN ARBITRATOR FROM THE LIST
OF REMAINING NAMES. IN NO EVENT IS THE ARBITRATOR AUTHORIZED OR EMPOWERED
TO AWARD PUNITIVE OR CONSEQUENTIAL DAMAGES OR DAMAGES IN EXCESS OF ACTUAL
DIRECT DAMAGES. THE ARBITRATION AWARD SHALL BE IN WRITING AND SHALL
SPECIFY THE FACTUAL AND LEGAL BASIS FOR THE AWARD. UNLESS OTHERWISE
AWARDED BY THE ARBITRATOR, THE COST OF THE ARBITRATION WILL BE SPLIT
EQUALLY BETWEEN (A) ECD AND ITS AFFILIATES AND (B) CTTV AND ITS
AFFILIATES. JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR MAY BE
ENTERED IN ANY COURT WITH JURISDICTION. THE PREVAILING PARTY SHALL BE
ENTITLED TO REASONABLE ATTORNEYS' FEES IN ANY COURT PROCEEDING RELATING TO
THE ENFORCEMENT OR COLLECTION OF ANY AWARD OR JUDGMENT RENDERED BY THE
ARBITRATOR UNDER THIS AGREEMENT. TO THE EXTENT ANY ISSUE RELATING TO THE
ARBITRATION IS NOT OTHERWISE COVERED BY THE CHOICE OF LAW PROVISIONS OF
THIS AGREEMENT OR THE APPLICABLE AAA RULES, THE LAW OF THE STATE OF TEXAS
SHALL GOVERN SUCH ISSUE.
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AMENDED AND RESTATED OPERATING AGREEMENT
COBASYS LLC
3. Notwithstanding any of the foregoing, any party may request injunctive
relief and/or equitable relief from the Arbitrator or the court in order
to protect the rights or property of such party pending the resolution of
the Dispute as provided hereunder.
-2-
AMENDED AND RESTATED OPERATING AGREEMENT
TEXACO COBASYS BATTERY SYSTEMS LLC
EXHIBIT C
TO AMENDED AND RESTATED OPERATING AGREEMENT
REDUCED FUNDING GUIDELINES
The President will cause spending to be reduced as follows when an
event has occurred that requires the Company to follow "Reduced Funding
Guidelines", unless the Management Committee grants specific permission for a
variance:
- No purchase orders for new capital assets or real property
shall be issued.
- All purchases of materials, supplies, outside services, etc.
will be minimized or eliminated, as appropriate, including the
elimination of non-essential expenditures.
- Out-of-pocket expenses will be minimized or eliminated, as
appropriate, including the elimination of non-essential
expenditures_
- No new employees will be hired. Current employees will be
retained but non-essential overtime will be eliminated.
- No leases for facilities or equipment will be entered into and
no debt will be incurred.
The guidelines above shall apply to all expenditures in connection with the
Company's operations.
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