HomeMy WebLinkAbout5 F Operating agreementTHE SECURITIES REFERENCED BY THIS OPERATING AGREEMENT AND
REPRESENTING THE OWNERSHIP INTERESTS IN THIS COMPANY HAVE NOT
BEEN REGISTERED UNDER THE ALASKA SECURITIES ACT OR FEDERAL
SECURITIES LAWS, AND CANNOT BE RESOLD WITHOUT REGISTRATION
UNDER, OR EXEMPTION FROM, THOSE LAWS.
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OF
BANNER WIND, LLC
TABLE OF CONTENTS
Section1. Definitions...............................................................................................................
1
Section
2. Name and Formation...............................................................................................
2
2.1.
Name..................................................................................................................................2
2.2.
Formation...........................................................................................................................3
2.3.
Principal Place of Business................................................................................................
3
2.4.
Registered Agent and Address..........................................................................................
3
2.5.
Effective Date of Agreement/Company............................................................................
3
2.6.
Company Property and Expenses......................................................................................
3
2.7.
Purpose and Powers...........................................................................................................
3
Section
3. Percentage Interests and Capital Contributions.......................................................
3
3.1.
Initial Capital Contributions; Percentage Interests............................................................
4
3.1.1
BSDC Capital Contribution........................................................................................
4
3.1.2
BFI Capital Contribution............................................................................................
4
3.1.3
Contributions of Cash.................................................................................................
4
3.2.
No Interest on Capital........................................................................................................
4
3.3.
No Withdrawal of Capital..................................................................................................
4
3.4,
Additional Capital..............................................................................................................
4
3.5.
Capital Accounts................................................................................................................
5
Section
4. Allocations of Profits and Losses............................................................................
6
Section5.
Distributions............................................................................................................
6
5.1.
Distribution of Cash Available From Operations..............................................................
6
Section
6. Special Provisions Related to the Project................................................................
6
Section
7. Management of the Company..................................................................................
6
7.1.
Management by Management Board and Managers Generally ........................................
6
7.2.
Management Board............................................................................................................
6
7.3.
Managers...........................................................................................................................
9
7.4.
Liability of Management Board Members and Managers to Members and Company ...
10
7.5.
Indemnification................................................................................................................
10
7.5.1.
Of Management Board and Managers......................................................................
10
7.5.2.
Of Members..............................................................................................................
11
7.6.
Assistance in Obtaining Financing..................................................................................
11
7.7.
Member Meetings............................................................................................................
11
7.8.
Other Ventures; Related -Party Transactions...................................................................
12
7.9.
Liability of Members to Other Members and Company .................................................
12
7.10.
Authority to Bind Company............................................................................................
12
7.11.
Limitation of Liability.....................................................................................................
13
7.12.
Death/Incapacity/Bankruptcy/Dissolution/Withdrawal of Member ................................
13
7.13.
Recourse of Members......................................................................................................
13
7.14
Annual Budget.................................................................................................................
13
Section
8. Books and Records, Accounting, Reports and Statements and Tax Matters........
13
8.1.
Books and Records..........................................................................................................
13
8.2.
Annual Accounting Period..............................................................................................
14
8.3.
Reports to Members.........................................................................................................
14
8.4.
Right to Examine and Copy Records . ................... :.........................................................
14
se
8.5.
Tax Matters Partner.........................................................................................................
14
8.6.
Tax Returns......................................................................................................................
15
Section
9. Transfers of Company Interests; Withdrawal and Admission of Members..........
15
9.1.
Transfer Prohibited..........................................................................................................
15
9.2.
Right of First Refusal......................................................................................................
15
9.3.
Admission of Transferees as Members...........................................................................
16
Section
10. Dissolution, Winding Up and Termination...........................................................
16
10.1.
Events Causing Dissolution.............................................................................................
16
10.2.
Allocations of Gain and Losses Upon Termination.......................................................
16
10.3.
Distribution of Cash or Company Assets Upon Termination .........................................
17
Section11.
Securities Laws......................................................................................................
17
Section12.
Miscellaneous........................................................................................................
18
12.1.
Amendment.....................................................................................................................
18
12.2.
Notices.............................................................................................................................
18
12.3.
Governing Law................................................................................................................
19
12.4.
Jurisdiction and Venue....................................................................................................
19
12.5.
Agreement Binding..........................................................................................................
19
12.6.
Waiver.............................................................................................................................
19
12.7.
Severability......................................................................................................................20
12.8.
Section Headings.............................................................................................................
20
12.9.
Counterparts.....................................................................................................................20
Exhibit A — Project Budget
Exhibit B — Approved Budget 2008
THIS OPERATING AGREEMENT is made and entered as of September 2, 2008, by
and between BERING STRAITS .DEVELOPMENT COMPANY, an Alaska corporation
("BSDC") and BONANZA FUEL, INC., an Alaska corporation ("BFI"). BSDC and BFI are
sometimes referred to herein individually as "Member" and collectively as "Members." The
Members have caused to be formed a limited liability company upon the terms and conditions set
forth herein.
The parties hereto agree as follows:
Section 1. Definitions. The following terms used in this Operating Agreement shall
have the meanings specified below:
"Act" means the Alaska Revised Limited Liability Company Act, AS 10.50, as
amended from time to time.
"Agreement" or "Operating Agreement" means this Operating Agreement of
BANNER WIND, LLC, as it may from time to time be amended.
"Approved Budget" means an annual operating budget for the Company
approved by the Members pursuant to Section 7.14. The Approved Budget for 2008, which have
been approved by the Members, is attached hereto as Exhibit B.
"Articles of Organization" means the Articles of Organization pursuant to which
the Company was formed, as filed with the Department of Community and Economic
Development, State of Alaska, on August 13, 2008, and as may be amended from time to time.
"Capital Account" means the account maintained for each Member in
accordance with Section 3.5.
"Capital Contribution" means the cash and other property contributed to the
Company by a Member.
"Cash Available From Operations" means all cash receipts of the Company in
excess of amounts reasonably required for payment of operating expenses, repayment of current
liabilities, and the establishment of and additions to the cash reserves reasonably established by
the Members for the operation of the business, reasonable reserves for contingent or unforeseen
liabilities or obligations of the Company, and amounts required for payment of the Company's
debt obligations.
"Code" and "Regulations" mean the United States Internal Revenue Code of
1986, as amended and the income tax regulations, including temporary regulations, promulgated
under the Code. References to specific sections of the Code or Regulations shall be deemed to
refer to such sections as they may be amended, modified or supplemented from time to time
(including corresponding provisions of succeeding sections of the Code or Regulations).
Operating Agreement of Banner Wind, LLC — Draft Page 1
"Company" means Banner Wind, LLC, an Alaska limited liability company, as
created and governed by this Operating Agreement and the Articles of Organization.
"Company Property" means all the real and personal (tangible and intangible)
property owned by the Company, and all leasehold or like interests therein.
"Effective Date" is defined in Section 2.5.
"Fiscal Year" is defined in Section 8.2.
"Interest" or "Company Interest" means the ownership interest of a Member in
the Company at any particular time, including the right of such Member to any and all benefits to
which such Member may be entitled as provided in this Operating Agreement, the Articles of
Organization, and in the Act, together with the obligations of such Member to comply with all
the terms and provisions of this Operating Agreement, the Articles of Organization, and the Act.
"Member(s)" means the Members set forth in Section 3.1, or their respective
successors, and those persons who are hereafter admitted as Members under Section 9 below.
"Non -Disturbance Agreement" means that certain non -disturbance agreement
with respect to the Property, by and between BSDC and the Company, as the same may be
amended from time to time.
"Percentage Interest" means a fraction, expressed as a percentage, the
numerator of which is a Member's Capital Contribution, and the denominator of which is the
total Capital Contributions of all Member's.
"Profit" and "Losses" is defined in Section 4.
"Project" means the entire development of the Property, as more particularly
described in Section 6.
"Project Budget" means the budget for the development of the Project, attached
hereto as Exhibit A.
"Property" means the real property subject to the separate "Agreement to
develop and operate wind power facilities".
"Regulations" has the meaning set forth in the definition of "Code" and
"Regulations."
Section 2. Name and Formation.
2.1. Name. The name of the Company is "BANNER WIND, LLC"
(sometimes referred to herein as the "Company").
Operating Agreement of Banner Wind, LLC — Draft Page 2
2.2. Formation. The Members hereby agree to form and operate the Company
as a limited liability company under. the Act, classified as a partnership for federal, and to the
maximum extent possible, state income taxes.
2.3. Principal Place of Business. The principal office and place of business
of the Company shall be at 400 Bering Street, Nome, Alaska 99762, or at such other place
designated by the Members. The mailing address for the principal place of business shall be
P.O. Box 905, Nome, Alaska 99762, unless changed by the Members. The Company may have
other places of business at any other place or places as the Members may from time to time deem
advisable.
2.4. Registered Agent and Address. The Company's registered agent is
Philip Blumstein, and the address of its registered office in the State of Alaska is 701 West 8th
Avenue, Suite 1200, Anchorage, Alaska 99501. The registered office and/or registered agent
may be changed from time to time by the Members by filing a signed statement with the
appropriate state authority in accordance with the Act.
2.5. Effective Date of Agreement/Company. This Agreement is effective as
of �k 2008 (the "Effective Date"). The effective date of organization of the
Company is August 13, 2008, as evidenced in the Company's Certificate of Organization. The
Company will have perpetual existence, unless sooner terminated as provided in this Operating
Agreement.
2.6. Company Property and Expenses. All Company Property shall be
owned by the Company as an entity and no Member shall have any ownership interest in such
property in the Member's individual name or right, and each Member's Interest in the Company
shall be personal property for all purposes. Except as otherwise provided in this Agreement, the
Company shall hold all Company Property in the name of the Company and not in the name or
names of any Member. The Company shall pay for all costs and expenses of the Company's
operations and activities, and no Member shall be bound by, or be personally liable for, the
expenses, costs, liabilities or obligations of the Company, except as otherwise explicitly provided
in this Agreement or required under the Act. The Company's credit and assets shall be used
solely for the benefit of the Company, and no asset of the Company shall be transferred or
encumbered for or in payment of, or for purposes of guarantee of, any individual obligation of
any Member unless otherwise provided for herein.
2.7. Purpose and Powers. The primary purpose of the Company is to
develop, own, operate and manage the Project on the Property. In addition, the Company shall
have such other purposes as may be necessary, incidental or convenient to carry on the
Company's primary purpose. The Company shall have all powers of a limited liability company
formed under the Act to engage in all activities necessary, incidental or convenient to its
purposes.
Section 3. Percentage Interests and Capital Contributions.
Operating Agreement of Banner Wind, LLC — Draft Page 3
3.1. Initial Capital Contributions; Percentage Interests. In connection with
the formation of the Company, each Member shall contribute cash, property or interests in
property as its initial Capital Contribution having the following agreed values in exchange for the
following Percentage Interests in the Company:
Name Value Percentage Interest
BSDC $2,750,000 50%
BFI $2,750,000 50%
3.1.1 BSDC Capital Contribution. The initial Capital Contribution
shown above for BSDC shall consist of $2,750,000 cash.
3.1.2 BFI Capital Contribution. The initial Capital Contribution
shown above for BFI shall consist of $2,750,000 cash.
3.1.3 Contributions of Cash. The amounts set forth in Sections 3.1.1
and 3.1.2 as the cash amounts of each Member's Capital Contribution are based on each
Member's proportionate share (50/50) of the amount set forth in the Project Budget. The Project
Budget is hereby approved by the Members. As of the Effective Date, the Members have each
incurred expenditures in connection with such development to be credited toward their respective
Capital Contributions. The Members shall make additional cash contributions to be credited
toward the total amount of the cash portion of their initial Capital Contributions set forth in
Section 3.1.2 and 3.1.3 within three (3) business days of call by the Management Board, until the
total amount has been contributed by each Member.
3.2. No Interest on Capital. No Member shall be entitled to receive interest
on such Member's Capital Contributions or such Member's Capital Account.
3.3. No Withdrawal of Capital. Except as otherwise provided in this
Operating Agreement, no Member shall have the right to withdraw or demand a return of any or
all of such Member's Capital Contribution. It is the intent of the Members that no distribution
(or any part of any distribution) made to any Member pursuant to Section 5 hereof shall be
deemed a return or withdrawal of Capital Contributions, even if such distribution represents (in
full or in part) a distribution of revenue offset by depreciation or any other non -cash item
accounted for as an expense, loss or deduction from, or offset to, the Company's income, and
that no Member shall be obligated to re -pay any such amount to or for the account of the
Company or any creditor of the Company. However, if any court of competent jurisdiction holds
that, notwithstanding the provisions of this Operating Agreement, any Member is obligated to
make any such payment, such obligation shall be the obligation of such Member and not of any
other Member.
3.4. Additional Capital.
(a) Members shall make additional Capital Contributions to the
Company, including but not limited to Capital Contributions necessary to complete the Project,
in accordance with the mutual agreement of the Members and in accordance with any budget
Operating Agreement of Banner Wind, LLC — Draft Page 4
approved by the Members (an "Approved Budget"). Except as otherwise provided for herein or
mutually agreed upon by the Members, no Member shall be obligated to make any additional
Capital Contributions to the Company beyond the amount required pursuant to Section 3.1.
(b) A Member or an affiliate may elect to lend funds to the Company
for Company purposes. Such loans shall be made on commercially reasonable terms and
conditions as mutually agreed by the Members. Such loans shall be an obligation of the
Company and shall be repaid prior to any distributions to the Members.
(c) If the Members mutually agree that one or more Capital
Contributions shall be made to the Company on a basis other than the then applicable Percentage
Interests, the Members shall contribute the amounts mutually agreed upon and the Percentage
Interests of the Members in the Company shall he adjusted so that the Percentage Interest of each
Member is in the ratio of a fraction, the numerator of which is the aggregate Capital
Contributions of each Member pursuant to Section 3.1 and Section 3.4, and the denominator of
which is the aggregate Capital Contributions of all Members pursuant to Section 3.1 and Section
3.4.
3.5. Capital Accounts. The Company shall establish and maintain a capital
Account for each Member in accordance with Treasury Regulations issued under Code Section
704. The initial Capital Account balance for each Member shall be the amount of initial Capital
Contributions made by each Member under Section 3.1 above. The Capital Account of each
Member shall be increased to reflect (i) such Member's additional cash contributions, (ii) the fair
market value of property contributed by such Member (net of liabilities securing such
contributed property that the Company is considered to assume or take subject to under Code
Section 752), (iii) such Member's share of Net Income (including all gain as calculated pursuant
to Section 1001 of the Code) of the Company, and (iv) such Member's share of income and gain
exempt from tax. The Capital Account of each Member shall be reduced to reflect (a) the amount
of money and the fair market value of property distributed to such Member (net of liabilities
securing such distributed property that the Member is considered to assume or take subject to
under Section 752), (b) such Member's share of noncapitalized expenditures not deductible by
the Company in computing its taxable income as determined under Code section 705(a)(2)(13),
(c) such Member's share of Net Loss of the Company, and (d) such Member's share of amounts
paid or incurred to organize the Company or to promote the sale of Company Interests to the
extent that an election under Code Section 709(b) has not properly been made for such amounts.
The Members shall determine the fair market value of all property which is distributed in kind,
and the Capital Accounts of the Members shall he adjusted as though the property had been sold
for its fair market value and the gain or loss attributable to such sale allocated between the
Members in accordance with Section 4 or 10.2, as applicable. In the event of a contribution of
property with a fair market value which is not equal to its adjusted basis (as determined for
federal income tax purposes) or a reevaluation of the Members' Capital Accounts upon the
admission of new Members to the Company, the Company shall maintain separate "tax" and
"book" Capital Accounts in accordance with the rules prescribed in Treasury Regulations
promulgated under Code Section 704.
Operating Agreement of Banner Wind, LLC — Draft Page 5
Section 4. Allocations of Profits and Losses. Except as otherwise provided in this
Operating Agreement, Profits and Losses of the Company (as defined below) resulting from
operations shall be allocated between the Members in accordance with their Percentage Interests.
Profits or Losses of the Company resulting from the sale or disposition of Company assets shall
he allocated in accordance with Section 10. If the fair market value of any Company asset differs
from its adjusted tax basis and Code Section 704(c) applies to such Company asset, the
Members' distributive shares of depreciation, amortization, gain or loss as computed for federal
income tax purposes for such Company asset shall, solely for tax purposes, be allocated between
the Members so as to take into account may variation between the adjusted tax basis of such
asset to the Company and its fair market value. "Profits" or "Losses" mean taxable income or
loss (including items requiring separate computation under Section 702 of the Code) of the
Company as determined using the method of accounting chosen by the Members and used by the
Company for federal income tax purposes.
Section 5. Distributions.
5.1. Distribution of Cash Available From Operations. Subject to Section
3.4(b), Cash Available From Operations shall be distributed quarterly to the Members in
proportion to their Percentage Interests.
Section 6. Special Provisions Related to the Proiect. [Reserved]
Section 7. Management of the Company.
7.1. Management by Management Board and Managers Generally.
Subject to the limitations in this Agreement, the Members hereby delegate the management of
the day-to-day affairs of the Company to the Management Board, which, in turn (and in
conjunction with a further delegation by the Members), and subject to the Management Board's
general oversight and limitations, delegates to the Managers the authority to run the day-to-day
operational affairs of the Company.
7.2. Management Board.
7.2.1. The business and affairs of the Company shall be managed by or
under the control of a Management Board (the "Management Board"), to which the authority
has been delegated by the Members. The Management Board shall be vested with complete
management and control of the day-to-day affairs of the Company. Except for situations in
which the approval of the Members is expressly required by this Agreement or the Act, the
Management Board shall have (without further consent or approval of the Members being
required) full and complete authority, power and discretion to (i) manage and control the
business, property and affairs of the Company; (ii) make all decisions and bind the Company
with respect to those matters; (iii) perform or cause to be performed any and all other acts or
activities customary or incident to the management of the Company's business, or required under
this Agreement; and (iv) subject to limitations in this Agreement, delegate such authority and
power to the Managers.
Operating Agreement of Banner Wind, LLC — Draft Page 6
7.2.2. The Management Board shall be comprised of four (4) individuals
as follows: (i) two individuals appointed by and serving at the pleasure of BSDC; and (ii) two (2)
individuals appointed by and serving at the pleasure of BFI. As of the Effective Date, the
Management Board is comprised of Roy Ashenfelter and Eugene Asicksik appointed by BSDC,
and Homer Hoogendorn and Neal Foster appointed by BFI. The appointing Member may
change its Management Board designee(s) at any time from time to time upon written notice to
the other Member. Each member of the Management Board shall be entitled to one (1) vote in
any and all Management Board decisions relating to the Company. The members of the
Management Board shall devote so much of their time to the business of the Company as in the
individual Management Board member's judgment the conduct of the Company's business
reasonably requires; however, the Members acknowledge and agree that the Management Board
members shall not be required to manage the Company as their sole and exclusive function.
Except as otherwise specifically provided in this Agreement, or approved by the Members, the
members of the Management Board will receive no compensation from the Company for their
services as members of the Management Board.
7.2.3. Meetings of the Board shall be held no less than quarterly at such
times and places as approved by the Management Board. Special meetings of the Management
Board may be called by any member of the Management Board or by a Manager. Such special
meetings of the Board shall be held at the Company's principal place of business unless
otherwise approved by the Board. Written notice stating the place, day and hour of the meeting
shall be delivered to each member of the Management Board not less than two (2) nor more than
ten (10) days before the meeting, in the manner provided in Section 7.7(b). Members of the
Management Board may participate in a meeting through the use of any means of
communication by which all members of the Management Board participating in the meeting can
communicate with each other during the meeting. Participation by such means shall constitute
presence in person at a meeting. Emergency meetings may be held on twenty-four (24) hour
notice in person or by telephone.
7.2.4. Three (3) of the members of the Management Board shall
constitute a quorum for the transaction of business at any Management Board meeting. If less
than a quorum is present at a meeting, the meeting shall be adjourned without further notice. If a
quorum is present at a Management Board meeting when a vote is taken, the affirmative vote of
at least three (3) of the members of the Management Board present shall be required to approve
any action of the Management Board, which shall be the act of the Board. The Management
Board shall endeavor to operate on the basis of consensus of all its members. In the event of a
tie or deadlock, the matter shall be referred to the Members for resolution. Any action that could
be taken at a meeting of the Management Board may be taken without a meeting if a written
consent setting forth the action so taken is signed by all of the Management Board members
either before or after the action is taken. Facsimile signatures and counterparts of such consents
are authorized.
7.2.5. Subject to Section 7.2.6, the Management Board is authorized, on
behalf of the Company:
Operating Agreement of Banner Wind, LLC -Draft Page 7
(a) To spend the capital and revenues of the Company in
accordance with this Operating Agreement, the Project Budget or an Approved Budget;
(b) To employ persons, firms and/or corporations for the
operation and management of the Company's business including but not limited to
attorneys and accountants;
(c) To acquire, lease and sell personal and/or real property,
enter into leases, power sale contracts, and any other agreement(s) with respect to the
Project, hire and fire employees, and to do all other acts necessary, appropriate or helpful
for the operation of the Company business;
(d) To execute, acknowledge and deliver any and all
instruments to effectuate any of the foregoing powers and any other powers granted the
Company under the laws of the State of Alaska or other provisions of this Operating
Agreement;
(e) To enter into and to execute agreements for employment or
services, as well as any other agreements and all other instruments the Board deems
necessary or appropriate to operate the Company's business and to operate and dispose of
Company Property or to effectively and properly perform its duties or exercise its powers
hereunder;
(f) To enter into such agreements and contracts and to give
such receipts, releases and discharges, with respect to the business of the Company, as
the Board deems advisable or appropriate;
(g) To purchase, at the expense of the Company, such liability
and other insurance as the Board deems advisable to protect the Company's assets and
business; and
(h) To sue and be sued, complain, defend, settle and/or
compromise, with respect to any claim in favor of or against the Company, in the name
and on behalf of the Company.
7.2.6. Notwithstanding anything herein to the contrary, the following
Company decisions shall require the written consent of both Members:
(a) The dissolution and winding up of the Company;
(b) The sale, exchange or other transfer of all or substantially
all of the assets of the Company, or merger with or acquisition of another Company;
(c) Amendments to this Agreement or the Company's Articles
of Organization;
Operating Agreement of Banner Wind, LLC — Draft Page 8
(d) Admitting new Members to the Company; and
(e) Incurring debt or pledging Company Property.
7.3. Managers.
7.3.1. The Company will have two Managers, one appointed by each
Member, and each serving at the pleasure of the appointing Member. The appointing Members
may change its Manager at any time from time to time upon written notice to the other Member
and to all members of the Management Board. Managers may be members of the Management
Board. As of the Effective Date, the Manager appointed by BSDC is Jerald Brown, and the
Manager appointed by BFI is Neal Foster. Except as otherwise specifically provided in this
Agreement, or approved by the Management Board, or provided in the Approved Budget, the
Managers shall receive no compensation from the Company for their services as Managers.
7.3.2. Subject to the oversight and limitations placed on the Managers by
the Management Board, and Section 7.3.3, each Manager shall have the right and power to run
the day-to-day affairs of the Company, and to do all things and make all decisions necessary or
appropriate to carry on the business and affairs of the Company. The Managers shall consult
with each other on a regular and on -going basis and endeavor to act on the basis of consensus
between them, provided that each acting alone shall have the power to bind the Company within
the authority granted by this Agreement or by the Management Board. In the event of
disagreement between the Managers, the matter shall be resolved by the Management Board.
The Managers shall devote so much of their time and efforts to the Company and its business as
in the judgment of the Management Board the Company's business shall require, however the
Managers shall not be required to manage the Company as their sole and exclusive function.
7.3.3. Notwithstanding anything to the contrary herein, the following
Company decisions shall require approval of the Management Board:
(a) Amendment to the Project Budget;
(b) Approval of all construction, consulting agreements, and
power sale contracts;
(c) Approval of, and amendment to, the Approved Budget and
approval any financial plans prepared for the Company;
(d) Demands for capital contributions in excess of the amounts
necessary to fund expenditures provided for in any Approved Budget for such year;
(e) Approval of any material agreements, documents or other
arrangements between or involving the Company and any Member or affiliate thereof, as
well as any amendment, consent or waiver with respect to such arrangements;
Operating Agreement of Banner Wind, LLC — Draft Page 9
(f) Appointment, removal or change of any officer or
employee, and approval of the terms of any employment agreements with officers and
employees of the Company;
(g) Approval of the appointment of any persons to any
committee established for the management or operation of the Company;
(h) Approval of any distribution of any Cash Available for
Distribution;
(i) Borrowings or expenditures by the Company which are not
provided for in any Approved Budget for such year; or
0) Transaction of business other than as set forth herein or in
an Approved Budget.
7.4. Liability of Management Board Members and Managers to Members
and Company. In carrying out their duties and exercising the powers hereunder, the
Management Board members and the Managers shall exercise reasonable skill, care and business
judgment, and shall perform their duties in good faith, in a manner they reasonable believe to be
in the best interests of the Company, and with the care, including reasonable inquiry, that an
ordinarily prudent person in a like position would use under similar circumstances, and as
otherwise may be required under any employment agreement with the Company and such
individual. The Management Board members and the Managers shall not be liable to the
Company or the Members for any act or omission performed or omitted by them in good faith
pursuant to the authority granted to them by this Agreement as a Management Board Member,
Managers or Tax Matters Partner (as defined in the Code), unless such act or omission
constitutes gross negligence, recklessness or willful misconduct by such individual, or with
respect to the Managers, such act or omission is in violation of any employment agreement
between such individual and the Company.
7.5. Indemnification.
7.5.1. Of Management Board and Managers. The Company shall
indemnify, defend and hold harmless the Management Board members and Managers, to the
fullest extent permitted under the Act (unless otherwise limited by an employment agreement or
such act or omission to be subject to the indemnification is in breach of the employment
agreement), from any loss or damage, including attorneys' fees actually and reasonably incurred
by them, by reason of any act or omission performed or omitted by them as a Management Board
Member or Managers on behalf of the Company or in furtherance of the Company's interests or
as Tax Matters Partner; however, such agreement to indemnify, defend and hold harmless shall
be recoverable only out of the assets of the Company and not from the Members. The foregoing
indemnity shall extend only to acts or omissions performed or omitted by the Management Board
members or Managers in good faith and in the belief that the acts or omissions were in the
Company's interest or not opposed to the best interests of the Company.
Operating Agreement of Banner Wind, LLC — Draft Page 10
7.5.2. Of Members. The Company shall indemnify and hold harmless
each Member from any loss or damage, including attorneys, fees actually and reasonably
incurred by it, by reason of any act or omission performed or omitted by it on behalf of the
Company or in furtherance of the Company's interests or as Tax Matters Partner; however, such
indemnification or agreement to hold harmless shall be recoverable only out of the assets of the
Company and not from the Members. The foregoing indemnity shall extend only to acts or
omissions performed or omitted by a Member in good faith and in the belief that the acts or
omissions were in the Company's interests or not opposed to the best interests of the Company.
7.6. Assistance in Obtaining Financing. To the extent that the paid in capital
and revenues of the Company are insufficient to cover the operating and capital expenses of the
Company, the Company shall have the responsibility to obtain such financing as the
Management Board may determine, and any debt incurred by the Company shall be secured
solely by the assets of the Company, or shall be secured by other assets that do not provide
recourse to the Company or its Members, unless the Members or some of the Members
specifically agree in writing, in each of their sole discretion, to individually guarantee the debt,
or a portion thereof.
7.7. Member Meetings. Meetings of the Members may be called by any
Member. Except as otherwise provided in this Agreement or required under the Act, approval by
both Members shall constitute approval by the Members to the extent required for any Company
action.
(a) The Members may designate any place, either within or outside of
Alaska, as the location for any meeting of the Members. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the principal office of the Company.
(b) Except as provided in paragraph (c) below, written notice stating
the place, day and hour of the meeting and the purpose or purposes for which the meeting is
called shall be delivered not less than three (3) nor more than ten (10) days before the date of the
meeting, either personally, by facsimile, e-mail or mail, by or at the direction of the person
calling the meeting, to each Member. If mailed, such notice shall be deemed to be delivered five
(5) calendar days after being deposited in the United States mail, addressed to the Member at the
Member's address as it appears on the books of the Company, with postage thereon prepaid. If
faxed, such notice shall be deemed to be delivered upon confirmation of the sending/receipt of
the facsimile by the facsimile machine. If e-mailed, such notice shall be deemed to be delivered
upon receipt. If personal delivery, such notice shall be deemed to be delivered upon personal
delivery.
(c) If all of the Members shall meet at any time and place, either
within or outside of Alaska, and consent to the holding of a meeting at such time and place, such
meeting shall be valid without call or notice, and at such meeting lawful action may be taken.
(d) At all meetings of the Members, a Member entitled to vote shall
vote in person through its Member Representatives. Both Member Representatives must be
present for the transaction of any business of a meeting of the Members.
Operating Agreement of Banner Wind, LLC — Draft Page 11
(e) Any action required or permitted to be taken at a meeting of
Members may be taken without a meeting if the action is evidenced by one or more written
consents describing the action taken, signed by Members sufficient to have approved the actions
or resolutions at issue had a duly called meeting been held at which all Members were in
attendance and delivered to the Company for inclusion in the Company records. Action taken
under this paragraph is effective when the necessary Members have signed the consent, unless
the consent specifies a different effective date.
(f) When any notice is required to be given to any Member, a waiver
thereof in writing signed by the person entitled to such notice, whether before, at or after the time
stated therein, shall be equivalent to the giving of such notice. '
(g) Any meeting of the Members may be conducted by use of any
means of communication by which all Members participating may simultaneously hear each
other.
(h) Emergency meetings of the Members may be held, if required,
upon twenty-four (24) hours notice (telephone or in person notice) to all Members, at a time and
place designated by the Members.
7.8. Other Ventures; Related -Party Transactions. The Members may
engage in business ventures and activities of any nature and description independently or with
others, whether or not in competition with the business of the Company, and shall have no
obligation to disclose business opportunities available to them, and neither the Company nor any
of the Members shall have any rights in and to such independent ventures and activities or the
income or profits derived therefrom by reason of their acquisition of interests in the Company.
Without limiting the foregoing, the Members acknowledge and approve the Company entering
into the Agreement to develop and operate wind power facilities. This Section 7.8 is intended to
modify any provisions or obligations of the Act to the contrary and each of the Members and the
Company hereby waives and releases any claims they may have under the Act with respect to
any such activities or ventures of the Members.
7.9. Liability of Members to Other Members and Company. In carrying
out its duties and exercising the powers hereunder, each Member shall act in a manner it
reasonably believes to be in the beet interests of the Company. No Member shall be liable to the
Company or the Members for any act or omission performed or omitted by it in good faith
pursuant to the authority granted to it by this Operating Agreement as a Member or Tax Matters
Partner (as defined in the Code) unless such act or omission constitutes gross negligence,
intentional misconduct, receipt by the Member of a benefit in money, property or services to
which the Member is not legally entitled, or a knowing violation of the law by such Member.
7.10. Authority to Bind Company. As between the Members, except as
specifically provided herein, by applicable law or as otherwise mutually agreed upon, no
Member shall have any right or authority to act for or on the behalf of, or otherwise bind, the
Company. However, any person dealing with the Company may rely (without duty of further
Operating Agreement of Banner Wind, LLC — Draft Page 12
inquiry) upon the authority of any member and/or upon a certificate signed by any Member as to
the identity and authority of any other person to act on behalf of the Company.
7.11. Limitation of Liability. Except as specifically provided herein or
otherwise mutually agreed upon, no Member shall have, solely by virtue of such Member's
statue as a Member in the Company, any personal liability whatever, whether to the Company, to
any Members or to the creditors of the Company, for the debts or obligations of the Company or
for any of its losses beyond the amount committed by such Member to the capital of the
Company, except as otherwise required by the Act.
7.12. Death/Incapacity/Bankruptcy/Dissolution/Withdrawal of Member.
The death, incompetence, withdrawal, bankruptcy or dissolution of a Member, or the occurrence
of any other event which terminates the continued membership of a Member in the Company,
shall not cause a dissolution of the Company. Upon the occurrence of such event, the rights of
such Member to share in the Profits and Losses of the Company, to receive distributions from the
Company, and to assign an interest in the Company pursuant to Section 8 below, shall, on the
happening of such an event, devolve upon such Member's executor, administrator, guardian,
conservator, or other legal representative or successor, subject to the terms and conditions of this
Agreement, and the Company shall continue as a limited liability company. However, in any
such event, such executor, administrator, guardian, conservator, or other legal representative or
successor, or any permitted assignee of such executor, administrator, guardian, conservator, or
other legal representative or successor, shall be admitted to the Company as a Member only in
accordance with and pursuant to all of the terms and conditions of Section 8 hereof.
7.13. Recourse of Members. Each Member shall look solely to the assets of
the Company for all distributions with respect to the Company and such Member's Capital
Contribution thereto and share of Profits and Losses thereof and shall have no recourse therefor,
upon dissolution or otherwise, against a Member or any Member.
7.14. Annual Budget. At least thirty (30) days prior to the commencement of
each Fiscal Year commencing with 2009, the Managers will submit to the Management Board a
proposed annual operating budget for operation of the Company providing a twelve (12) month
projection of Company income from all sources and an estimate of Company expenses, including
both operating expenses and estimated capital expenses. The proposed budget shall be subject to
approval of the Management Board and once approved shall be the "Approved Budget" for that
.year. The annual operating budget attached hereto as Exhibit B is the Approved Budget for
2008.
Section 8. Books and Records Accounting Reports and Statements and Tax
Matters.
8.1. Books and Records. BFI shall, at the expense of the Company to the
extent included in the Approved Budget, keep and maintain, or cause to be kept and maintained,
the books and records of the Company on the same method of accounting as utilized for federal
and state income tax purposes.
Operating Agreement of Banner Wind, LLC — Draft Page 13
8.2. Annual Accounting Period. All books and records of the Company shall
be kept on the basis of an annual accounting period ending December 31st of each year, except
for the final accounting period which shall end on the date of termination of the Company. All
references herein to the "Fiscal Year" of the Company are to the annual accounting period
described in the preceding sentence, whether the same shall consist of twelve months or less.
8.3. Reports to Members. The Members shall receive, at Company expense,
the following
(a) Within ninety days after the end of each fiscal year of the
Company, such information as shall be necessary for the preparation by such Member of such
Member's federal and state income tax return which shall include a computation of the
distributions to such Member and the allocation to such Member of profits or losses, as the case
may be; and
(b) Upon the request of any Member, and within ninety days after the
end of each fiscal year of the Company, the Members shall cause an annual audit of the
Company's books and records to be made in accordance with generally accepted auditing
standards by a CPA firm mutually agreeable to the Members. A copy of any audited statements,
prepared in accordance with generally accepted accounting principals, including a balance sheet
and statements of income, Members' equity, and changes in, financial position, shall be mailed
to the Members within 120 days after the preparation thereof.
(c) Within thirty days after the end of each fiscal quarter of the
Company, a quarterly report, which shall include:
(i) A balance sheet;
(ii) A statement of income and expenses;
(iii) A statement of changes in Members' capital; and
(v) A statement of the balances in the Capital Accounts of the
Members
(d) Within thirty (30) days after the end of each month, an income
statement and balance sheet showing actual expenditures to budget.
8.4. Right to Examine and Copy Records. Members shall be entitled, upon
written request directed to the Members, to review and copy the records of the Company at all
reasonable times and at the location where such records are kept by the Company.
8.5. Tax Matters Partner. Should there be any controversy with the Internal
Revenue Service or any other taxing authority involving the Company, the Members may expend
such funds as it deems necessary and advisable in the interest of the Company to resolve such
controversy satisfactorily, including, without being limited thereto, attorneys' and accounting
Operating Agreement of Banner Wind, LLC — Draft Page 14
fees. The Members hereby designate BFI as the initial "Tax Matters Partner" as referred to in
Section 623 1 (a)(7)(A) of the Code, and BSDC is specially authorized to exercise all of the rights
and powers now or hereafter granted to the Tax Matters Partner under the Code. Any cost
incurred in the audit by any governmental authority of the income tax returns of a Member (as
opposed to the Company) shall not be a Company expense. The Members agree to consult with
and keep each other advised with respect to (i) any income tax audit of a Company income tax
return, and (ii) any elections made by the Company for federal, state or local income tax
purposes. The Members agree that all decisions made by the Tax Matters Partner hereunder will
be made in a manner consistent with applicable federal and state tax laws, with the intent of
maximizing return on investment hereunder.
8.6. Tax Returns. The Members shall, at Company expense, cause the
Company to prepare and timely file before delinquent (unless appropriate extensions are properly
filed) a United States Company Return of Income and all other tax returns required to be filed by
the Company for each fiscal year of the Company.
Section 9. Transfers of Company Interests• Withdrawal and Admission of
Members.
9.1. Transfer Prohibited. Except as hereinafter provided, without the prior
written consent of all Members, no Member may directly or indirectly sell, transfer, assign,
pledge or otherwise encumber, voluntarily or involuntarily, all or any part of its interest in the
Company except as provided in this Section 14. A Member may transfer such Member's interest
to a wholly -owned corporation, partnership, limited liability company or other entity, or to such
an entity that is owned by the transferring Member, provided that such entity is controlled by the
transferring Member or the transferring Member's shareholders, without need to obtain consent
from the other Members thereto. Any other purported sale, transfer, assignment, pledge or
encumbrance shall he null and void and of no force or effect whatsoever.
9.2. Right of First Refusal. A Member may sell its interest in the Company
upon compliance with the following conditions, provided that a transferee shall only become a
Member in accordance with Section 14.3;
(a) In the event a member ("Selling Member") desires to sell its
entire interest in the Company and receives a written offer ("Offer") therefor which the Selling
Member intends to accept, the Selling Member, before accepting such offer, shall first notify the
other Member ("Offeree") and provide it with a copy of the Offer. The Offer must contain all
material terms relating to the purchase and sale (including the name of the transferee), the
consideration must he entirely monetary, and the Offer must contain a provision that the
transferee agrees to be bound by all of the terms and conditions of this operating Agreement.
(b) After receiving a copy of the Offer, the Offeree shall have 60 days
within which to elect to purchase the entire interest of the Selling Member upon the terms and
conditions set forth in the Offer. If the Offeree does not respond or does not elect to purchase the
entire interest of the selling Member within 90 days following receipt of the Offer, the Selling
Operating Agreement of Banner Wind, LLC — Draft Page 15
Member may complete the purchase and sale to the purchaser identified in the offer and upon the
terms and conditions set forth in the Offer, but not otherwise.
(c) In the event the Offeree elects to purchase the interest of the
Selling Member, the Offeree shall complete the purchase and sale within the time period set forth
in the Offer or within 90 days after receipt of the Offer, whichever is later.
9.3. Admission of Transferees as Members.
(a) No transferee of a Member shall be admitted as a Member unless
all of the following conditions have been satisfied:
(i) The transfer complies with Section 14.1 and 14.2;
(ii) The further written consent of the other Member to such
transferee being admitted as a Member is first obtained, which consent may be arbitrarily
withheld;
(iii) The prospective transferee has executed an instrument, in
form and substance satisfactory to the other Member, accepting and agreeing to be bound
by all the terms and conditions of this operating Agreement and has paid all expenses of
the Company in effecting the transfer; and
(iv) Such transfer is effected in compliance with all applicable
state and federal securities laws.
Section 10. Dissolution, Winding Up and Termination.
10.1. Events Causing Dissolution. The Company shall be and its affairs shall
be wound up upon the happening of to occur of any of the following events:
to the Act;
of the Company; or
(a) Entry of a decree of administrative or judicial dissolution pursuant
(b) The sale or other disposition of all or substantially all of the assets
(c) The vote of both Members to dissolve.
No Member shall have the right to dissolve or terminate the Company for any reason
other than as set forth above or to withdraw from the Company other than as set forth in Section
14 and each Member hereby waives any other right it may have.
10.2. Allocations of Gain and Losses Upon Termination. Any Prof its or
Losses upon disposition of the Company assets which causes a dissolution of the Company
(including gain or loss resulting from condemnation, conversion, insurance awards, or similar
Operating Agreement of Banner Wind, LLC — Draft Page 16
capital events) ("Gain on Sale" or "Loss on Sale," is, respectively) shall be allocated between
the members as follows:
(a) Loss on Sale shall be allocated between the Members as follows:
(i) First, proportionately to those Members having positive
Capital Account balances until all positive Capital Accounts have been reduced to zero;
and
(ii) Thereafter, to the Members in proportion to their
Percentage Interests.
(b) Gain on Sale to the extent available shall be allocated between the
members as follows:
(i) First, proportionately to those Members having negative
Capital Account balances until such negative balances are eliminated; and
(ii) Thereafter, to the Members in proportion to their
Percentage Interests.
10.3. Distribution of Cash or Company Assets Upon Termination. If the
Company is dissolved pursuant to Section 10.1, the Company affairs shall be wound up as
expeditiously as possible, the assets sold or distributed in kind, and the Company terminated.
Except as limited below, any Member may be a purchaser or transferee of any or all of the assets.
Except as hereinafter provided, after payment of all Company liabilities and expenses of sale, the
remaining cash or Company assets shall he distributed as follows:
(a) First, to pay off any indebtedness of the Company, including
indebtedness of the Company to any Member or Members;
(b) Second, to the Members in an amount equal to their positive
Capital Account balances as adjusted by the allocations provided for in and pursuant to this
Agreement; and
(c) Thereafter, any remaining amounts shall be distributed to the
Members in accordance with their Percentage Interests.
Section 11. Securities Laws. Each Member acknowledges and agrees that such
Member's Interest in the Company has not been registered under federal or state securities laws
(the "Acts") and is being sold in reliance upon exemptions from registration requirements set
forth in the Acts, and any permitted sale of such Interest must comply with exemption or
registration requirements under the Acts. Each Member further acknowledges and agrees that (i)
it is an "accredited investor" as such term is used under federal securities laws and regulations;
and (ii) the Company has complied with all of the requirements under AS 45.55.900(b)(5)(A);
Operating Agreement of Banner Wind, LLC — Draft Page 17
and (iii) the Company has complied with all of the requirements under AS 45.55.900(b)(5)(C)
including, without limitation, the information disclosure requirements thereunder.
Section 12. Miscellaneous.
12.1. Amendment. This Operating Agreement may be amended from time to
time, upon agreement by all of the members.
12.2. Notices. Any notice required or permitted under this Operating
Agreement shall be delivered by personal delivery, fax, e-mail or by first class mail, postage pre-
paid, addressed to each Member, Management Board member, and Manager as follows:
BSDC: Bering Straits Development Company
P.O. Box 1008
Nome, AK 99762
Telephone No.: (907) 443-5252
Facsimile No. (907) 443-2985
Attn: Jerald Brown
E-mail: ibrown@beringstraits.com
BSDC Management Board Members:
Roy Ashenfelter
PO Box 1008
Nome, AK 99762
Telephone No.: (907) 443-5252
Facsimile No. (907) 443-2985
E-mail:
Eugene Asicksik
PO Box 1008
Nome, AK 99762
Telephone No.: (907) 443-5252
Facsimile No. (907) 443-2985
E-mail:
BSDC Manager: Jerald Brown
P.O. Box 1008
Nome, AK 99762
Telephone No.: (907) 443-5252
Facsimile No. (907) 443-2985
E-mail: jbrown beringstraits.com
BFI: Bonanza Fuel, Inc.
P.O. Box 905
Nome, AK 99762
Telephone No.: (907) 443-2632
Operating Agreernent of Banner Wind, LLC — Draft Page 18
Facsimile No. (907) 443-3063
Attn: Neal Foster
E-mail: nfostergsnc.org
BFI Management Board Members:
Neal Foster
P.O. Box 905
Nome, AK 99762
Telephone No.: (907) 443-4029
Facsimile No. (907) 443-3063
E-mail: nfoster@snc.org
Homer Hoogendom
P.O. Box 84
Nome, AK 99762
Telephone No.: (907) 443-4318
Facsimile No. (907)
E-mail: homer beringstraits.com
BFI Manager: Neal Foster
P.O. Box 905
Nome, AK 99762
Telephone No.: (907) 443-2632
Facsimile No. (907) 443-3063
E-mail: nfosterna,snc.org
12.3. Governing Law. This Operating Agreement shall be governed by the
laws of the State of Alaska, without giving effect to principles or provisions thereof relating to
choice of law or conflict of laws.
12.4. Jurisdiction and Venue. In the event that a question or dispute should
arise with respect to the interpretation, construction, formation, execution, performance, default,
breach, enforceability or validity of this Agreement, the jurisdiction and venue therefor shall lie
exclusively with the courts for the Second Judicial District for the State of Alaska, at Nome,
Alaska, or alternatively with the United States District Court for the District of Alaska, at
Anchorage, Alaska.
12.5. Agreement Binding. This Operating Agreement shall be binding upon
the successors, assigns, heirs, executors, personal representatives and other legal representatives,
as the case may be, of the Members as provided herein.
12.6. Waiver. The failure by any party to object to a default under or breach of
this Agreement or insist upon the strict performance of any duty or obligation of any other party
shall not constitute a waiver, either express or implied, of the right to do so in the future.
Operating Agreement of Banner Wind, LLC — Draft Page 19
12.7. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the remaining provisions hereof, and, in any such
event, this Agreement shall be construed and interpreted in all respects as if such invalid or
unenforceable provision were omitted.
12.8. Section Headings. Section headings have been inserted solely for the
convenience of the parties and shall not be considered a part of this Operating Agreement for
interpretation or construction.
12.9. Counterparts. For the convenience of the Members, this Operating
Agreement may be executed, including by facsimile signature, in one or more counterparts, each
identical to the other, so long as the counterparts in a set contain the signatures of all of the
parties to this Operating Agreement.
IN WITNESS WHEREOF the Members have caused to be executed this Operating
Agreement as of the date first written above.
[SIGNATURE PAGE FOLLOWS]
Operating Agreement of Banner Wind, LLC — Draft Page 20
MEMBERS: BERING STRAITS DEVELOPMENT COMPANY
By:
Nar
Its:
BONANZA FUEL Inc.
EXHIBIT A
Project Budget
EXHIBIT B
Approved Budget 2008
NI:\CL I ENTS\G 1387 Bering Straits Native Corporation\042 Wind Power Grant & LLC\Operating Agreement\Oper Agmt 5-15-08-2.doc