LIMITED LIABILITY COMPANY AGREEMENT

Exhibit 10.55

EXECUTION COPY

 

 

CROWFOOT DEVELOPMENT, LLC

 

A Delaware Limited Liability Company

 

LIMITED LIABILITY COMPANY AGREEMENT

Dated as of October 1, 2008

MEMBERSHIP INTERESTS IN CROWFOOT DEVELOPMENT, LLC, A DELAWARE LIMITED LIABILITY COMPANY, HAVE NOT BEEN REGISTERED WITH OR QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE. THE INTERESTS ARE BEING SOLD IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS. THE INTERESTS CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THE LIMITED LIABILITY COMPANY AGREEMENT OF CROWFOOT DEVELOPMENT, LLC AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

 

 

*	indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

Exhibits

Exhibit A – Members, Capital Contributions, Capital Commitments and Percentage Interests

Exhibit B – Development Milestones

Exhibit C – Form of Membership Interest Certificate

Exhibit D – Initial Board Designations

Exhibit E – Interim Budget

Exhibit F – Form of Project Company Limited Liability Company Operating Agreement

Exhibit G – Member Addresses

 

iv

Exhibit 10.55

EXECUTION COPY

LIMITED LIABILITY COMPANY AGREEMENT

OF

CROWFOOT DEVELOPMENT, LLC

A Delaware Limited Liability Company

This LIMITED LIABILITY COMPANY AGREEMENT of Crowfoot Development, LLC, a Delaware limited liability company (the “ Company ”), effective as of October 1, 2008 (the “ Effective Date ”), is made and entered into by ENERGY CAPITAL PARTNERS I, LP, a Delaware limited partnership (“ ECP I ”), as a Member; ENERGY CAPITAL PARTNERS I-A, LP, a Delaware limited partnership (“ ECP I-A ”), as a Member; ENERGY CAPITAL PARTNERS I-B IP, LP, a Delaware limited partnership (“ ECP I-B ”), as a Member; ENERGY CAPITAL PARTNERS I (Crowfoot IP), LP, a Delaware limited partnership (“ ECP Crowfoot ”) and, together with ECP I, ECP I-A and ECP I-B, the “ ECP Members ”), as a Member; and ADA-ES, Inc., a Colorado corporation (“ ADA-ES ”), as a Member.

R E C I T A L S

WHEREAS, the Company was organized as a limited liability company under the Act pursuant to the Certificate of Formation of the Company filed with the Delaware Secretary of State on February 19, 2008 (the “ Delaware Certificate ”);

WHEREAS, the Members desire that the Company pursue opportunities including the production and supply of activated carbon; and

WHEREAS, the parties desire that the Company be governed by the Act and this Agreement.

A G R E E M E N T

NOW, THEREFORE, in consideration of the promises and the covenants hereinafter contained and to induce the parties hereto to enter into this Agreement, it is agreed as followed:

ARTICLE I

ORGANIZATION

1.1 Continuation of the Company . The Company was organized as a Delaware limited liability company on February 19, 2008 by the filing of the Delaware Certificate in the office of the Delaware Secretary of State pursuant to the Act. The Members desire to continue the Company for the purposes and upon the terms and conditions set forth herein. As of the Effective Date, ADA-ES, ECP I, ECP I-A, ECP I-B and ECP Crowfoot are admitted to the Company and constitute its sole Members. Except as provided herein, the rights, duties and liabilities of each Member will be as provided in the Act.

1.2 Name . The name of the Company is “Crowfoot Development, LLC.” Company business will be conducted in such name or such other names that comply with applicable law as the Board may select from time to time.

1.3 Registered Office; Registered Agent . The registered office of the Company in the State of Delaware will be the initial registered office designated in the Delaware Certificate or such other office (which need not be a place of business of the Company) as the Board may designate from time to time in the manner provided by law. The registered agent of the Company in the State of Delaware will be the initial registered agent designated in the Delaware Certificate, or such other Person or Persons as the Board may designate from time to time in the manner provided by law.

1.4 Principal Place of Business . The principal place of business of the Company will be at 8100 SouthPark Way, Unit B, Littleton, Colorado 80120 or such other location as the Board may designate from time to time, which need not be in the State of Delaware. The Company may have such other offices as the Board may determine appropriate.

1.5 Fiscal Year . The fiscal year of the Company (the “ Fiscal Year ”) for financial statement and federal income tax purposes will end on December 31 ^st unless otherwise determined by the Board or required under the Code.

1.6 Foreign Qualification . The Board is authorized to cause the Company and its subsidiaries to comply, to the extent procedures are available, with all requirements necessary to qualify the Company or such subsidiaries as a foreign limited liability company in such jurisdiction. Each Officer is authorized, on behalf of the Company, to execute, acknowledge, swear to and deliver all certificates and other instruments as may be necessary or appropriate in connection with such qualifications. Further, each Member will execute, acknowledge, swear to and deliver all certificates and other instruments that are necessary or appropriate to qualify, or, as appropriate, to continue or terminate such qualification of, the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business.

1.7 Term . The term of the Company commenced on the date the Delaware Certificate was filed with the office of the Secretary of State of Delaware and shall continue in existence until dissolution as determined under Section 13.1.

1.8 No State-Law Partnership . Except to the extent provided in the next sentence, the Members intend that the Company shall not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member or Officer shall be a partner or joint venturer of any other Member or Officer, for any purposes, and this Agreement shall not be construed to the contrary. The Members intend that the Company shall be treated as a partnership for federal and, if applicable, state and local income tax purposes. Except to the extent otherwise provided herein, each Member and the Company shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment unless otherwise required by law.

1.9 ECP Representative . The ECP Members have designated the ECP Representative to act as their agent and representative with respect to the making of, and the delivery and receipt of, any and all notices, elections, approvals, requests or other instructions or determinations (including as to whether any condition has been met to the satisfaction of the ECP Members) hereunder and to otherwise act on behalf of any or all of the ECP Members with respect to any and all notices, elections, approvals, requests or other

 

2

instructions or determinations made or delivered in connection with this Agreement. The ECP Members shall cause the ECP Representative to act at the direction of the ECP Members holding a majority of the shares held by all ECP Members with respect to all such notices, elections, approvals, requests or other instructions or determinations. Each Member (other than any ECP Member) agrees to direct any notice or other communication to be made to any ECP Member hereunder to the ECP Representative and further agrees that any notice, election, approval, request or other instruction or determination made or delivered in connection with this Agreement by the ECP Representative shall be deemed to be a notice, election, approval, request or other instruction or determination made or delivered by the ECP Members. Any notice or other communication made to the ECP Representative (referencing the ECP Members) shall be deemed to have been made to the ECP Members in the form and at the time made to the ECP Representative.

1.10 Purposes . The nature of the business or purposes to be conducted or promoted by the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Act. The Company may engage in any and all activities necessary, desirable or incidental to the accomplishment of the foregoing. In furtherance of its purpose, (a) the Company shall have and may exercise all of the powers now or hereafter conferred by Delaware law on limited liability companies formed under the Act and (b) the Company shall have the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or for the protection and benefit of the Company. Notwithstanding anything herein to the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any purpose or power, or to do any act or thing, forbidden by law to a limited liability company organized under the laws of the State of Delaware.

ARTICLE II

MEMBERS

2.1 Members . As of the Effective Date, the ECP Members and ADA-ES are the sole Members of the Company. The names, addresses, initial Capital Contributions, initial Capital Account balances and initial Percentage Interests of the Members are set forth on Exhibit A attached hereto and incorporated herein. The Board is hereby authorized to complete or amend Exhibit A to reflect the admission of additional Members, the withdrawal of a Member, the change of address of any Member, the Capital Contributions of a Member, the Membership Interests, the Percentage Interests of a Member, the Capital Commitment of a Member and other information called for by Exhibit A , and to correct or amend Exhibit A . Such completion, correction or amendment may be made from time to time as and when the Board considers it appropriate.

2.2 No Liability of Members . Except as otherwise required by applicable law and as expressly set forth in this Agreement, no Member shall have any personal liability whatsoever in such Member’s capacity as a Member, whether to the Company, to any of the other Members, to the creditors of the Company or to any other third party, for the debts, liabilities, commitments or any other obligations of the Company or for any losses of the Company. Each Member shall be liable only to make such Member’s Capital Contribution to the Company and the other payments and covenants provided expressly herein.

 

3

2.3 Representations and Warranties . Each Member hereby represents and warrants to the Company and each other Member that, as of the Effective Date:

(a) Power and Authority . Such Member has full power and authority to enter into this Agreement and to perform its obligations hereunder;

(b) No Conflicts . The execution, delivery and performance of this Agreement do not conflict with any other agreement or arrangement to which such Member is a party or by which it is or its assets are bound;

(c) No Liens . All property contributed to the Company by such Member, and any property thereafter to be contributed to the Company by such Member, has been or will be duly and lawfully acquired and will be contributed to the Company without any Liens or encumbrances;

(d) Own Account . Such Member is and will be acquiring its interest in the Company for investment purposes only for his or its own account and not with a view to the distribution, reoffer, resale or other disposition not in compliance with the Securities Act and applicable state securities laws;

(e) Expertise . Such Member alone, or together with his or its representatives, possesses such expertise, knowledge and sophistication in financial and business matters generally, and in the type of transactions in which the Company proposes to engage in particular, that such Member is capable of evaluating the merits and economic risks of acquiring and holding an Interest, and that such Member is able to bear all such economic risks now and in the future;

(f) Access to Information . Such Member has had access to all of the information with respect to his or its Membership Interest that such Member deems necessary to make a complete evaluation thereof;

(g) Own Evaluation . Such Member’s decision to acquire a Membership Interest for investment has been based solely upon the evaluation made by such Member;

(h) Awareness of Economic Risk . Such Member is aware that he or it must bear the economic risk of such Member’s investment in the Company for an indefinite period of time because Membership Interests have not been registered under the Securities Act or under the securities laws of any state, and, therefore, such Membership Interests cannot be sold unless they are subsequently registered under the Securities Act and any applicable state securities laws or an exemption from registration is available;

(i) No Registration Rights . Such Member is aware that only the Company can take action to register Membership Interests in the Company and that the Company is under no such obligation and does not propose or intend to attempt to do so;

(j) Transfer Restrictions . Such Member is aware that this Agreement provides restrictions on the ability of a Member to Transfer Membership Interests, and such Member will not seek to effect any Transfer other than in accordance with such restrictions;

 

4

(k) Accredited Investor . Such Member is, and at such time that it makes any additional Capital Contributions to the Company, will be, an “accredited investor” within the meaning of Rule 501 under the Securities Act; and

(l) Potential Loss of Investment . Such Member understands that the acquisition of its Membership Interest will be a highly speculative investment and represents that it is able, without impairing its financial condition, to hold its Membership Interest for an indefinite period of time and to suffer a complete loss on its investment.

ARTICLE III

MEMBERSHIP INTERESTS AND CAPITAL CONTRIBUTIONS

3.1 Membership Interests . Each Member’s interest in the Company will be represented by its Capital Account, by its Membership Interests issued by the Company to such Member and its Percentage Interests as set forth on Exhibit A hereto. Subject to Section 3.5 and Section 5.8(d), additional Membership Interests may be issued from time to time as may be determined by the Board. Subject to Section 5.8, the Board may also create additional series or classes through subdivision or by issuance of Membership Interests of such classes or series.

3.2 Capital Contributions Generally . At such times as the Company requires Capital to meet the Capital Requirements of the Company, the Company shall send to the Members a written notice (a “ Capital Request Notice ”) advising the Members of such Capital requirements and specifying the individual Capital Contribution amount of each Member not less than 20 Business Days prior to the date on which the Capital Contributions are to be made (the “ Required Funding Date ”). Any such request will be directed to Members in a manner consistent with such Members’ obligations to make additional Capital Contributions at such time pursuant to the capital contribution tranches set forth in Section 3.3 or as provided in Section 3.4, as applicable. Each Capital Request Notice will specify the general purpose for which the Capital Contributions are required to be made. Each Member will be required to make a Capital Contribution in cash in the amount stated in, on or before the date set forth in, and otherwise pursuant to the terms and provisions of, the Capital Request Notice and otherwise in accordance with this Article III. No Member shall have any obligation to contribute Capital except as expressly provided in this Article III.

3.3 Capital Contribution Tranches and Timing .

(a) Effective Date Contributions . As of the Effective Date, ADA-ES has contributed the ADA-ES Contributed Assets to the Company, with a value of $17,063,273. All Members acknowledge and agree that the initial Capital Contributions set forth on Exhibit A represent the amount of money and the agreed upon value of all property (other than money) initially contributed by the Members.

(b) Initial $17,063,273 Capital Contribution Tranche by ECP Members . As of the Effective Date, the ECP Members have contributed to the Company an aggregate amount equal to $200,000. The ECP Members shall make an additional Capital Contribution to the Company (pro rata in accordance with their respective Percentage Interests) in the aggregate amount of $16,863,273 no later than 15 Business Days following the Effective Date.

 

5

(c) Second $17,000,000 Tranche by ADA-ES and ECP Members .

(i) On the date on which the ADA-ES Adjustment Amount is finally determined pursuant to Section 2.4 of the Joint Development Agreement, ADA-ES shall be deemed to have contributed pursuant to this Section 3.3(c), an amount equal to the ADA-ES Adjustment Amount and the Company shall promptly provide a Capital Request Notice to the ECP Members requesting that the ECP Members contribute (pro rata in accordance with their respective Percentage Interests) an aggregate amount equal to the ADA-ES Adjustment Amount. The ECP Members shall make such Capital Contribution to the Company on or prior to the Required Funding Date.

(ii) From and after the date on which the ECP Members have made all Capital Contributions required to be made pursuant to Section 3.3(b) and pursuant to clause (i) of this Section 3.3(c), the Members shall fund, on a pro rata basis in accordance with their respective Percentage Interests, 100% of the Capital Requirements of the Company pursuant to appropriate Capital Request Notices; provided that, unless waived in writing by the Member so obligated to contribute Capital pursuant to this Section 3.3(c), the amount of the additional Capital so requested from such Member, when taken together with all other previous Capital Contributions made by such Member pursuant to this Section 3.3(c), does not exceed such Member’s pro rata share (based on Percentage Interests) of $17,000,000.

(d) Third Tranche by ADA-ES and ECP Members . From and after the later of the date on which the Members have made all Capital Contributions required to be made to the Company pursuant to Section 3.3(c) and the SPA Pricing Date, the Members shall make Capital Contributions as follows:

(i) Prior to the ECP PIPE Financing, for so long as no Triggering Event or termination of the Securities Purchase Agreement has occurred, and subject to the Funding Conditions and any Capital Contributions to be made by ADA-ES prior to the ECP PIPE Financing pursuant to Section 3.3(d)(ii), the ECP Members shall contribute (pro rata in accordance with their relative Percentage Interests) 100% of the Capital Requirements of the Company, if and as required, until the earlier of (A) the date on which the ECP Members have contributed the Third Tranche Amount in the aggregate pursuant to this clause (i) and (B) the date of the ECP PIPE Financing. All amounts contributed by ECP pursuant to this clause (i) shall be deemed to be Preferred Equity Contributions.

(ii) Immediately following the consummation of each Other Financing and the ECP PIPE Financing, ADA-ES shall make a Capital Contribution to the Company in an amount equal to the lesser of (A) 100% of the aggregate Net Proceeds from such Other Financing or ECP PIPE Financing and (B) (1) the amount equal to the 12% Annualized Rate of Return on the portion of Unreturned Preferred Equity that is subject to such return pursuant to Section 3.3(d)(i) plus (2) the amount of any Unreturned

 

6

Preferred Equity that constitutes Preferred Equity Contributions made pursuant to Section 3.3(d)(i) with respect to which the Preferred Equity Redemption Price includes a 12% Annualized Rate of Return. The Company shall apply all Capital Contributions by ADA-ES pursuant to this clause (ii) to Redeem and, as applicable, Convert the ECP Members’ Unreturned Preferred Equity, in the manner set forth in Section 3.8 unless and until the ECP Members’ Unreturned Preferred Equity equals zero. If, immediately following the Capital Contribution of Net Proceeds from the ECP PIPE Financing pursuant to this Section 3.3(d)(ii), such Capital Contribution was equal to 100% of the aggregate Net Proceeds, then no further amounts will be contributed pursuant to this Section 3.3(d). If such Capital Contribution equals the amount described in subpart (B) of this clause (ii) but is less than 100% of the aggregate Net Proceeds, then the ECP Members and ADA-ES shall continue under this Section 3.3(d) to fund Capital Contributions to satisfy the Company’s Capital Requirements pursuant to clause (iii) below.

(iii) If the ECP PIPE Financing has occurred and contributions may no longer be made under clause (ii) of this Section 3.3(d), subject to the Funding Conditions, each of ADA-ES and the ECP Members shall make Capital Contributions, as and when required by the Company to fund Capital Requirements pursuant to the appropriate Capital Request Notices, on a pro rata basis in accordance with their respective Percentage Interests until such time as ADA-ES has contributed pursuant to this Section 3.3(d) an aggregate amount equal to 100% of the Net Proceeds.

(iv) From and after the earliest of (A) the date on which all Capital Contributions have been made pursuant to clause (iii), (B) the date on which a Triggering Event or other termination of the Securities Purchase Agreement has occurred and (C) any Material Default by ADA-ES, then, subject to any election made pursuant to Section 3.6 or Section 12.2, as applicable, no further Capital Contributions shall be made to the Company pursuant to this Section 3.3(d) and the Members shall make Capital Contributions pursuant to, and solely to the extent permitted and required by, Sections 3.3(e), 3.3(f) and 3.4.

(e) Fourth Tranche Following Construction Equity Commitment Date .

(i) Fourth Tranche Election Notice . If at any time or from time to time prior to Construction Debt Financial Close, the ECP Members reasonably determine, based on negotiations with proposed Construction Financing lenders, based on anticipated delays in the ability to achieve Construction Debt Financial Close, or based on the Capital Requirements of the Company, that the Red River Project will require additional equity Capital in excess of amounts reasonably contemplated by Sections 3.3(b), 3.3(c) and 3.3(d) hereof (including for this purpose only those net proceeds actually received by ADA-ES from Other Financings as of the date of the first such determination and considering in any such determination any event or circumstance that would cause less than all Capital Contributions contemplated by Section 3.3(d) to be made), then the ECP Members may deliver a notice to the Company (a “Fourth Tranche Election Notice ”) (i) setting forth the aggregate amount of any additional Capital that the ECP Members believe will be required (such amount, as increased by any subsequent Fourth

 

7

Tranche Election Notices, the “ Fourth Tranche Amount ”) and (ii) irrevocably committing to fund through Capital Contributions all or any portion of such Fourth Tranche Amount. If the ECP Members commit to fund an amount equal to less than 100% of the applicable Fourth Tranche Amount, then the Company shall promptly provide notice to ADA-ES offering ADA-ES the right to commit to fund the portion of such Fourth Tranche Amount that the ECP Members have not committed to fund (the “ Remaining Fourth Tranche Amount ”). ADA-ES shall respond within ten Business Days from the date of such notice by written notice to the Company and to the ECP Members either stating that ADA-ES elects not to fund any portion of the Remaining Fourth Tranche Amount or irrevocably committing to fund all or any portion of the Remaining Fourth Tranche Amount. If ADA-ES does not respond within such ten Business Day period, ADA-ES shall be deemed to have elected not to fund any portion of the Remaining Fourth Tranche Amount. If ADA-ES elects to fund less than all of the Remaining Fourth Tranche Amount, the Company shall promptly offer the ECP Members the option to increase their respective commitments to fund the Fourth Tranche Amount such that the Company may receive commitments to fund the entire Fourth Tranche Amount, which the ECP Members may accept or decline in their sole discretion. If the ECP Members decline to increase their respective commitments to fund the Remaining Fourth Tranche Amount following any commitment by ADA-ES, then the Fourth Tranche Amount shall be automatically reduced to the amount of commitments actually made by the Members pursuant to this Section 3.3(e)(i). The date on which the ECP Members deliver the first Fourth Tranche Election Notice pursuant to this Section 3.3(e)(i) shall be referred to herein as the “ Construction Equity Commitment Date .”

(ii) Subject to clause (iii) of this Section 3.3(e) and the Funding Conditions, from and after the date on which no more Capital Contributions may be made pursuant to Section 3.3(d), the ECP Members and ADA-ES shall make Capital Contributions on or prior to each Required Funding Date occurring after such date, on a pro rata basis based on the percentage of the Fourth Tranche Amount that such Member has committed to fund pursuant to Section 3.3(e)(i); provided that unless waived in writing by the Member so obligated to contribute Capital pursuant to this Section 3.3(e), the amount of additional Capital so requested from such Member, when taken together with all other previous Capital Contributions made by such Member pursuant to this Section 3.3(e), does not exceed the portion of the Fourth Tranche Amount that such Member has committed to fund.

(iii) From and after any ECP Triggering Event occurring prior to the date on which ADA-ES has made all Capital Contributions to be made by ADA-ES pursuant to Sections 3.3(d)(ii) and (iii), until the earlier of (A) the date on which ADA-ES has made aggregate Capital Contributions pursuant to Sections 3.3(d) and this Section 3.3(e)(iii) equal to one-half of the Third Tranche Amount and (B) the three month anniversary of such ECP Triggering Event, or, if an ADA-ES Election Notice has been delivered pursuant to such ECP Triggering Event, the date of consummation of the remedy elected by ADA-ES pursuant to Section 3.6(b), ADA shall have the option to contribute to the Company, in addition to any portion of the Fourth Tranche Amount that ADA-ES commits to contribute, any net cash proceeds ADA-ES may receive from time to time from Other Financings promptly upon receipt of such proceeds. The Company shall apply Capital Contributions made by ADA-ES pursuant to this clause (iii) Redeem and, as applicable, Convert the ECP Members’ Unreturned Preferred Equity, if any, in the manner set forth in Section 3.8.

 

8

(f) Cost Overruns . If, following Construction Debt Financial Close, any Member reasonably determines that the Company requires additional Capital in respect of the first production line of the Red River Project in excess of the amounts which the Members have committed to fund pursuant to Sections 3.3(a) through Section 3.3(e) hereof (a “ Cost Overrun ”), then such Member shall cause the Company to provide a Capital Request Notice to each Member providing a reasonably detailed explanation of such Cost Overrun and offering each Member the opportunity to fund such Cost Overrun on a pro rata basis in proportion to such Member’s Percentage Interest. Each Member shall respond no later than 15 Business Days following receipt of such Capital Request Notice stating whether such Member will contribute all or less than all of its full pro rata share of the amount of such Cost Overrun as specified in the Capital Request Notice. If any Member elects to fund less than all of its full pro rata share of such Cost Overrun, each other Member electing to contribute its full pro rata share of such Cost Overrun shall have the option to commit to fund its pro rata share of the unfunded balance of such Cost Overrun in the form of ordinary Capital Contributions or Preferred Equity Contributions.

3.4 Unused Capital Commitments; No Obligation to Fund Amounts in Excess of Unused Capital Commitments .

(a) If the Company makes any distribution pursuant to Section 4.1 which the Board specifically designates as a return of Capital to be added to a Member’s Unused Capital Commitment, such Member shall be obligated to make Capital Contributions on a pro rata basis (based on their respective Percentage Interests) on or prior to each Required Funding Date until such time as such Member’s Unused Capital Commitment equals zero. Notwithstanding anything to the contrary herein, no Member shall be obligated to make Capital Contributions in excess of the then-current amount of its Unused Capital Commitment.

(b) From and after the time at which a Member’s Unused Capital Commitment equals zero, such Member may accept or reject any Capital Request Notice in whole or in part in its sole and absolute discretion. To the extent any Member rejects any Capital Request Notice in whole or in part, the amount so rejected may be requested from those Members who have accepted the initial request in full (and among such Members, pro rata according to their relative Percentage Interests).

3.5 Successor Funds . At any time, any ECP Member may cause one or more Successor Funds to make any Capital Contributions which such ECP Member is obligated to make. If any Capital Contribution is made by such a Successor Fund, the Board shall cause such Successor Fund to be admitted as an “ECP Member” hereunder for all purposes and in all respects.

 

9

3.6 Triggering Events . Notwithstanding anything to the contrary contained in this Agreement, if at any time a Triggering Event occurs or shall have occurred, then until such time as 100% of the Capital Contributions contemplated by Section 3.3 have been made to the Company, the Members shall have the following respective rights and obligations:

(a) ADA-ES Triggering Events . Upon any ADA-ES Triggering Event, the ECP Members shall have the collective right, but not the obligation, to elect from time to time by written notice (the “ ECP Election Notice ”) to the Company and to each other Member during the period commencing on the date of such ADA-ES Triggering Event and ending on the three month anniversary thereof, to:

(i) purchase or cause one or more Designees to purchase all, but not less than all, of ADA-ES’s Membership Interests for the Call Purchase Price for such Membership Interests (the “ ECP Call Right ”). Notwithstanding the foregoing, the ECP Members shall not have the option to exercise the ECP Call Right pursuant to this clause (i) if the ADA-ES Triggering Event that has occurred is attributable solely to a termination of the Securities Purchase Agreement by the Purchasers (as defined therein) pursuant to section 6.03(f) thereof on the basis that any of the conditions set forth in section 6.01 of the Securities Purchase Agreement have become incapable of fulfillment. Any ECP Election Notice electing the ECP Call Right shall specify the Call Purchase Price for such Membership Interests and a single closing date for such purchase, which shall be on or prior to the 45th day following delivery of the ECP Election Notice;

(ii) dissolve the Company; provided that for the 30 days immediately following the date of delivery of the ECP Election Notice, ADA-ES shall have the option, upon written notice to the ECP Members no later than 14 days following delivery of the ECP Election Notice, to purchase all, but not less than all, of the Membership Interests of the ECP Members at the Call Purchase Price for such Membership Interests. Any such written notice by ADA-ES electing to purchase the Membership Interests of the ECP Members shall specify the Call Purchase Price for such Membership Interests and a single closing date for such purchase, which shall be on or prior to the 30 ^th day following delivery of the ECP Election Notice. Notwithstanding any such election by ADA-ES to purchase the Membership Interests of the ECP Members, the Members shall use all reasonable efforts to prepare for and facilitate the anticipated dissolution of the Company during the pendancy of such proposed purchase. If such closing of the purchase of the ECP Members’ Membership Interests occurs prior to the expiration of such 30-day period, the Company shall not be dissolved. If such closing does not occur on or prior to the expiration of such 30-day period (for any reason other than as a result of a material breach or refusal to close by the ECP Members), then the Company shall immediately be dissolved in the manner set forth in Article XIII; and

(iii) cause the Company to enter into a Company Sale Transaction; provided that for the 30 days immediately following the date of delivery of the ECP Election Notice, ADA-ES shall have the option, upon written notice to the ECP Members no later than 14 days following delivery of the ECP Election Notice, to purchase all, but not less than all, of the Membership Interests of the ECP Members at the Call Purchase Price for such Membership Interests. Any such written notice by ADA-ES electing to purchase the Membership Interests of the ECP Members shall specify the Call Purchase Price for such Membership Interests and a single closing date for such purchase, which shall be on or prior to the 30 ^th day following delivery

 

10

of the ECP Election Notice. Notwithstanding any election by ADA-ES to purchase the Membership Interests of the ECP Members, the Members shall use all reasonable efforts to prepare for and facilitate the anticipated Company Sale Transaction. If such closing or the purchase of the ECP Members’ Membership Interests occurs prior to the expiration of such 30-day period, the Company shall not consummate a Company Sale Transaction. If such closing does not occur on or prior to the expiration of such 30-day period (for any reason other than as a result of a material breach or refusal to close by the ECP Members), then the Company shall be immediately (or as promptly as practicable thereafter) sold pursuant to the proposed Company Sale Transaction. Such Company Sale Transaction shall be consummated on the terms set forth in Article XIV hereof. If such Company Sale Transaction cannot be consummated within 150 days of the date of the ECP Election Notice, the ECP Members shall have the option to pursue either of the alternate remedies set forth in clauses (i) or (ii) of this Section 3.6(a).

Following the occurrence of an ADA-ES Triggering Event, but prior to the date of any ECP Election Notice, Members shall continue to fund Capital Contributions as and when required in the manner set forth in this Article III. From and after the date of any ECP Election Notice until the consummation of the transactions contemplated thereby, each ECP Member also shall have the option, but not the obligation, to fund all or any portion of (i) the Capital Contributions that such ECP Member otherwise would be obligated to make pursuant to this Agreement, and (ii) such ECP Member’s pro rata share of the Capital Contributions that ADA-ES otherwise would be obligated to make pursuant to this Agreement; provided that in the event the ECP Members fail or determine not to fund such ADA-ES Capital Contributions, ADA-ES shall have the option to make such Capital Contributions.

(b) ECP Triggering Events . Upon an ECP Triggering Event, ADA-ES shall have the right, but not the obligation, to elect from time to time by written notice to the Company and to each ECP Member (the “ ADA-ES Election Notice ”) during the period commencing on the date of such ECP Triggering Event and ending on the three month anniversary thereof, to:

(i) purchase all, but not less than all, of the ECP Members’ Membership Interests for the Call Purchase Price for such Membership Interests (the “ ADA-ES Call Right ”). Any ADA-ES Election Notice electing the ADA-ES Call Right shall specify the Call Purchase Price for such Membership Interests and a single closing date for such purchase, which shall be on or prior to the 45th day following delivery of the ADA-ES Election Notice;

(ii) dissolve the Company; provided that for the 30 days immediately following the date of delivery of the Election Notice, the ECP Members (or their Designees) shall have the option, upon written notice to ADA-ES no later than 14 days following delivery of the ECP Election Notice, to purchase all, but not less than all, of the Membership Interests of ADA-ES at the Call Purchase Price for such ADA-ES Membership Interests. Any such written notice by the ECP Members electing to purchase the Membership Interests of ADA-ES shall specify the Call Purchase Price for such Membership Interests and a single closing date for such purchase, which shall be on or prior to the 30 ^th day following delivery of the ADA-ES Election Notice.

 

11

Notwithstanding any such election by the ECP Members to purchase the Membership Interests of ADA-ES, the Members shall use all reasonable efforts to prepare for and facilitate the anticipated dissolution of the Company during the pendancy of such proposed purchase. If such closing of the purchase of ADA-ES’s Membership Interests occurs prior to the expiration of such 30-day period, the Company shall not be dissolved. If such closing does not occur on or prior to the expiration of such 30-day period (for any reason other than as a result of a material breach or refusal to close by ADA-ES), then the Company shall immediately be dissolved in the manner set forth in Article XIII; and

(iii) cause the Company to enter into a Company Sale Transaction; provided that for the 30 days immediately following the date of delivery of the ECP Election Notice, ECP Members shall have the option, upon written notice to ADA-ES no later than 14 days following delivery of the ECP Election Notice, to purchase all, but not less than all, of the Membership Interests of ADA-ES at the Call Purchase Price for such ADA-ES Membership Interests. Any such written notice by the ECP Members electing to purchase the Membership Interests of ADA-ES shall specify the Call Purchase Price for such ADA-ES Membership Interests and a single closing date for such purchase, which shall be on or prior to the 30 ^th day following delivery of the ECP Election Notice. Notwithstanding any election by the ECP Members to purchase the Membership Interests of ADA-ES, the Members shall use all reasonable efforts to prepare for and facilitate the anticipated Company Sale Transaction. If such closing or the purchase of ADA-ES’s Membership Interests occurs on or prior to expiration of the 30-day period, the Company shall not consummate a Company Sale Transaction. If such closing does not occur on or prior to the expiration of such 30-day period (for any reason other than as a result of a material breach or refusal to close by ADA-ES), then the Company shall be immediately (or as promptly as practicable thereafter) sold pursuant to the proposed Company Sale Transaction. Such Company Sale Transaction shall be consummated on the terms set forth in Article XIV hereof. If such Company Sale Transaction cannot be consummated within 150 days of the date of the ADA-ES Election Notice, ADA-ES shall have the option to pursue either of the alternate remedies set forth in clauses (i) or (ii) of this Section 3.6(b).

Following the occurrence of an ECP Triggering Event, but prior to the date of any ADA-ES Election Notice, Members shall continue to fund Capital Contributions as and when required in the manner set forth in this Article III. From and after the date of any ADA-ES Election Notice until the consummation of the transactions contemplated thereby, ADA-ES also shall have the option, but shall no longer have the obligation, to fund all or any portion of (i) the Capital Contributions that ADA-ES otherwise would be obligated to make pursuant to this Agreement, and (ii) the Capital Contributions that the ECP Members otherwise would be obligated to make pursuant to this Agreement; provided that in the event ADA-ES fails or determines not to fund such ECP Members’ Capital Contributions, the ECP Members shall have the option to make such Capital Contributions; and

(c) Closing Actions and Deliveries . At the closing of any sale of Membership Interests contemplated by this Section 3.6, each Member that is selling its Membership Interests shall deliver to the Member purchasing such Membership Interests (or its

 

12

designee(s)) an assignment certificate for its Membership Interest in favor of the purchasing Member and a letter of resignation of each Manager designated to the Board by such selling Member, and the purchasing Member shall deliver to each selling Member the applicable Call Purchase Price by wire transfer of immediately available funds.

3.7 Funding Stop Based on Failure of Funding Condition .

(a) ECP Funding Stop . Notwithstanding anything to the contrary in this Agreement, each ECP Member’s obligations to make Capital Contributions under this Article III shall be subject to the Funding Conditions. Any ECP Member that determines not to fund Capital Contributions as the result of the failure of a Funding Condition set forth in clauses (ii) or (iii) of the definition of “Funding Condition” shall promptly deliver notice to the Company and to each other Member stating such ECP Member’s intention not to fund future Capital Contributions and specifying the unsatisfied Funding Condition (an “ ECP Funding Stop Notice ”). From and after the delivery of an ECP Funding Stop Notice, but subject to compliance by ADA-ES with ADA-ES’s obligations under Section 3.7(b), no Member shall have any further obligation to fund Capital Contributions to the Company unless and to the extent such Funding Condition is waived in writing by the ECP Member who delivered the ECP Funding Stop Notice. If any ECP Member has delivered an ECP Funding Stop Notice, then all Members shall negotiate in good faith to determine whether such ECP Member will waive the Funding Conditions identified in such ECP Funding Stop Notice or amend this Agreement on terms mutually acceptable to the ECP Members and ADA-ES. If such Members cannot agree on such a waiver of Funding Conditions or amendment to this Agreement within 15 days of the date on which the ECP Funding Stop Notice was delivered, then ADA-ES shall have the rights and obligations set forth in Section 3.7(b).

(b) ADA Funding Stop . If ADA-ES and the ECP Members cannot agree on a waiver of Funding Conditions or amendment to this Agreement within 15 days of the date on which any ECP Member delivers an ECP Funding Stop Notice, then ADA-ES shall have the option to either (i) unconditionally commit in writing to fund the Capital Requirements of the Company (subject to the provisions of Article XII hereof for any failure to fund such Capital Requirements which ADA-ES has committed in writing to fund), it being acknowledged that any Capital Contributions made to fund such Capital Requirements shall first be applied to Redeem any Unreturned Preferred Equity contributed by the ECP Members pursuant to Section 3.3(d)(i) in the manner set forth in Section 3.8, or (ii) deliver a notice to the Company and to each other Member stating ADA-ES’s intention not to fund future Capital Contributions (an “ ADA-ES Funding Stop Notice ”). If ADA-ES does not unconditionally commit in writing to fund the Capital Requirements of the Company pursuant to clause (i) of this Section 3.7(b), then ADA-ES shall be deemed to have delivered a Funding Stop Notice pursuant to clause (ii) of this Section 3.7(b). From and after the date on which ADA-ES has delivered, or is deemed to have delivered, an ADA-ES Funding Stop Notice, then the Members shall promptly use their reasonable best efforts to enter into a Company Sale Transaction on terms mutually acceptable to them in accordance with Article XIV hereof; provided that if the Members cannot reach agreement as to the aggregate price and other material terms a proposed Company Sale Transaction after a period of 45 days from the date of delivery (or deemed delivery) of the ADA-ES Funding Stop Notice contemplated by this Section 3.7, or cannot consummate such Company Sale Transaction after a period of 150 days from such date, the Members shall, unless otherwise agreed in writing, dissolve the Company in accordance with Article XIII hereof.

 

13

3.8 Preferred Equity .

(a) Third Tranche Preferred Equity . If any ECP Member has made a Preferred Equity Contribution pursuant to Section 3.3(d)(i), then immediately upon the Company’s receipt of any Capital Contribution made by ADA-ES pursuant to Section 3.3(d)(ii) or Section 3.3(e)(iii), the Company shall apply such Capital Contribution to the extent necessary:

(i) first, to Redeem the portion of any Unreturned Preferred Equity that constitutes a 12% Annualized Rate of Return on Preferred Equity Contributions made pursuant to Section 3.3(d)(i) (which Redemption shall be effected pro rata among the ECP Members based on their relative Percentage Interests);

(ii) second, to Redeem the portion of any Unreturned Preferred Equity constituting Preferred Equity Contributions made pursuant to Section 3.3(d)(i) with respect to which the Preferred Equity Redemption Price includes a 12% Annualized Rate of Return (which Redemption shall be effected pro rata among the ECP Members based on their relative Percentage Interests); and

(iii) concurrently with the Redemption described in clause (ii) of this Section 3.8(a), Convert a portion of the ECP Members’ Unreturned Preferred Equity for which the Preferred Equity Redemption Price includes a 0% Annualized Rate of Return equal to the amount of Unreturned Preferred Equity Redeemed pursuant to clause (ii) (which Conversion shall be effected pro rata among the ECP Members based on their relative Percentage Interests).

If, on or after any applicable Preferred Equity Redemption Date, the Capital Contributions made by ADA-ES pursuant to Section 3.3(d)(ii) or pursuant to Section 3.3(e)(iii) are insufficient to Redeem and Convert all of the Unreturned Preferred Equity of the ECP Members contributed pursuant to Section 3.3(d)(i) that corresponds with such Preferred Equity Redemption Date, then the ECP Members shall have the option, at any time and from time to time, to Convert all or any portion of such remaining Unreturned Preferred Equity.

(b) Cost Overrun Preferred Equity . If a Member has made a Preferred Equity Contribution pursuant to Section 3.3(f), then such Member shall have the option, at any time and from time to time following the Preferred Equity Redemption Date for such Preferred Equity Contribution, to Convert all or any portion of such Unreturned Preferred Equity contributed pursuant to Section 3.3(f).

(c) Default Preferred Equity . If a Non-Defaulting Member has made a Preferred Equity Contribution pursuant to Section 12.2(a)(vi), such Non-Defaulting Member shall have the option, at any time and from time to time, to Convert all or any portion of such Unreturned Preferred Equity contributed pursuant to Section 12.2(a)(vi).

 

14

(d) Certain Definitions .

(i) “ Redeem ,” “ Redeemed ” and “ Redemption ” shall mean, with respect to any Unreturned Preferred Equity, the Company’s distribution of cash to the holder of such Unreturned Preferred Equity, which distribution shall cause the applicable Unreturned Preferred Equity of the ECP Members to be reduced by a corresponding amount.

(ii) “ Convert ,” “ Converted ” and “ Conversion ” shall mean, with respect to any Unreturned Preferred Equity, deeming the following to have occurred: (i) the Company shall be deemed to have Redeemed the applicable portion of such Unreturned Preferred Equity for cash at the applicable Preferred Equity Redemption Price, and (ii) each Member making such election shall be deemed to have made an ordinary Capital Contribution of a corresponding amount of cash.

3.9 Member Loans .

(a) No Obligation to Make Loans . No Member shall be required to make any loans, provide any guarantees, post any letters of credit or otherwise lend funds or provide credit support to the Company or any Subsidiary of the Company without the consent of such Member.

(b) Option to Loan Funds Pro Rata . Members and their Affiliates may, in their sole discretion and subject to prior approval by the Board, make loans to the Company, on a pro rata basis based upon the relative Percentage Interests of the Members electing to make such loan, to the extent the Board determines that the terms of such loans are no less favorable to the Company than terms available from independent third parties. Loans made by any Member to the Company will represent a debt of the Company payable or collectible solely from the assets of the Company (or other security interest, if applicable) in accordance with the terms and conditions upon which such loans are made.

(c) Project Credit Support . Members and their Affiliates may, from time to time, to the extent requested by the Board, provide credit support for or on behalf of the Company and its Subsidiaries to support their respective obligations to third parties in connection with the development, construction, financing and operation of the Red River Project, in each case in the form (e.g., letters of credit, cash deposits) and amount as determined by the Board and such Member. Unless otherwise agreed in writing among the Members, any such credit support shall be provided by the ADA-ES Side, on the one hand, and the ECP Side, on the other hand, based on their respective Percentage Interests. With respect to the letters of credit required by Section 2.1.4 of the EPC Contract, as supplemented by the Second Letter Agreement, dated as of September 30, 2008, (i) ADA-ES shall at all times maintain, or cause to be maintained, letters of credit as necessary to cover $6,600,000 of the stated amount of such required letters of credit until such time as ADA-ES is required to make Capital Contributions pursuant to Section 3.3(c)(ii), and (ii) subject to clauses (ii) and (iii) of the Funding Conditions and compliance with Section 2.1(b) of the Reimbursement Agreement, the ECP Members shall cause the aggregate stated amount of such letters of credit to equal the amount from time to time set forth in the

 

15

table below, less, during any period in which the ADA-ES letter of credit referred to above is required to be issued in accordance with this Section, $6,600,000; provided that the ECP Members shall not be obligated to: (a) increase the stated amount of such letter of credit or extend the maturity date thereof at any time on or after the occurrence of an ADA-ES Triggering Event or a Material Default by ADA-ES or at any time during which a default or event of default has occurred and is continuing under the Effective Date Credit Support Documents; (b) replenish the stated amount of any such letter of credit to the extent drawn; or (c) increase the stated amount of any such letter of credit or extend the maturity date thereof at any time on or after February 28, 2009.

 

3.10 Additional Projects . The Members acknowledge that the provisions of this Article III governing Capital Contributions shall apply only in respect of Capital required to fund the first production line of the Red River Project and the development of a Supply Company facility in Louisiana, and, in the event the Members approve any Additional Project in accordance with Section 5.8(j), this Agreement shall either be amended to increase the Members’ respective Capital Commitments and provide for the funding of Capital Contributions pursuant to agreed upon Development Milestones for such Additional Projects or the Members shall enter into one or more other agreements with respect to the ownership and equity funding of such Additional Projects as may be mutually acceptable to them.

3.11 Return of Contribution . Except as provided in this Agreement, a Member is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. Any Capital Contribution that has not been repaid is not a liability of the Company or of the other Members. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return the other Members’ Capital Contributions.

3.12 Withdrawal of Capital . Except as provided in Article X, no Member has the right to withdraw any part of its Capital Contribution from the Company or to receive the return of any part of its Membership Interest in the Company prior to its liquidation and termination pursuant to Article XIII hereof.

 

16

3.13 Issuance of Additional Interests; Additional Members .

(a) Additional Interests . Subject to Section 5.8, the Board shall have the right to cause the Company to issue or sell to any Person (including Members and Affiliates of Members) any of the following: (which for purposes of this Agreement shall be “ Additional Interests ”): (i) additional Membership Interests or other interests in the Company (including new classes or series thereof having different rights); (ii) obligations, evidences of indebtedness or other securities or interests convertible into or exchangeable for Membership Interests or other interests in the Company and (iii) warrants, options or other rights to purchase or otherwise acquire Membership Interests or other interests in the Company. Subject to Section 5.8, the Board shall determine the terms and conditions governing the issuance of such Additional Interests, including the number and designation of such Additional Interests, the preference (with respect to distributions, in liquidation or otherwise), if any, over any other Membership Interests and any required contributions in connection therewith.

(b) Additional Members and Membership Interests . In order for a Person to be admitted as a Member of the Company with respect to an Additional Interest, (i) such Person shall have delivered to the Company a written undertaking to be bound by the terms and conditions of this Agreement, (ii) such Person shall have delivered such documents and instruments as the Board determines to be necessary or appropriate in connection with the issuance of such Additional Interest to such Person or to effect such Person’s admission as a Member and (iii) the Board shall amend Exhibit A without the further vote, act or consent of any other Person to reflect such new Person as a Member. Upon the amendment of Exhibit A , such Person shall be deemed to have been admitted as a Member and shall be listed as such on the books and records of the Company and thereupon shall be issued his or its Membership Interest. If an Additional Interest is issued to an existing Member, the Board or the Secretary of the Company shall amend Exhibit A without the further vote, act or consent of any other Person to reflect the issuance of such Additional Interest and, upon the amendment of such Exhibit A , such Member shall be issued his or its Additional Interest, including any Economic Interest that corresponds to and is part of such Additional Interest.

3.14 Capital Accounts .

(a) The Company shall maintain for each Member a separate Capital Account in accordance with Regulations Section 1.704-1(b) and including the following provisions. The initial Capital Account balance of each ECP Member shall equal $200,000, and immediately following the contribution of the amounts set forth in Section 3.3(b), shall equal $17,063,273. The initial Capital Account balance of ADA-ES, immediately after taking into account the contribution of the ADA-ES Contributed Assets shall equal $17,063,273. Each such Capital Account shall thereafter be (i)  increased by (A) the cash amount or Book Value at the time of contribution (net of any liabilities assumed) of all Capital Contributions subsequently made (or deemed to be made) by such Member to the Company pursuant to this Agreement, (B) Net Income and all items of Company income and gain and allocated to such Member pursuant to Article IV and (C) any other increases required by the Regulations, and (ii)  decreased by (A) the cash amount or Book Value of all distributions of cash or property (net of any liabilities assumed) made by the Company to

 

17

such Member pursuant to this Agreement, (B) Net Loss and all items of Company deduction and loss allocated to such Member pursuant to Article IV and (C) any other decreases required by the Regulations.

(b) The determination of the amount of any liability for purposes of this Section 3.13 shall be made in accordance with Section 752(c) of the Code and any other applicable provisions of the Code and Regulations promulgated thereunder.

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

(d) It is the intention of the Members that Capital Accounts shall be determined in a manner so that the allocations in this Agreement will have, or be deemed to have, substantial economic effect under Section 704(b) of the Code and Regulations promulgated thereunder. In the event that the Board determines that it is prudent to modify the manner in which Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities that are secured by contributed or distributed property or that are assumed by the Company or the Members or their Affiliates), are computed in order to comply with such Regulations, the Board shall make such modification provided it is not likely to have a material effect on the amounts distributable to any Member pursuant to Article XIII hereunder upon the dissolution of the Company. In the event that unanticipated events might otherwise cause this Agreement not to comply with such Regulations, the Board, consistent with the prior sentence, shall make such modifications as it deems appropriate.

3.15 Certification of Membership Interests . The Company shall cause the limited liability company interests in the Company to be evidenced by certificates in the form of Exhibit C hereto. The Company shall maintain books for the purpose of registering the transfer of Membership Interests.

ARTICLE IV

DISTRIBUTIONS AND ALLOCATIONS

4.1 Distributions .

(a) Operating Distributions . Subject to Sections 3.8, 4.1(b), 12.2(a)(vi) and 13.2(c)(iii), to the extent determined by the Board from time to time in its sole discretion, Available Cash will be applied or distributed among the Members:

(i) first, to the Members, pro rata in accordance with their relative amounts of Unreturned Preferred Equity, until each Member’s Unreturned Preferred Equity is zero; and

(ii) thereafter, to the Members, pro rata in accordance with their respective Percentage Interests on the date of distribution.

 

18

(b) Tax Distributions . Notwithstanding Section 4.1(a), not later than ten Business Days prior to March 15 ^th , June 15 ^th , September 15 ^th and December 15 ^th of each calendar year, Available Cash will be distributed to the Members, pro rata in accordance with their relative Assumed Tax Liability, until each Member receives an amount at least equal to its Assumed Tax Liability as of such date. Any distributions made to a Member pursuant to this Section 4.1(b) shall be treated as an advance against, and shall reduce, the next distributions to which such Member otherwise would be entitled to receive pursuant to Section 4.1(a).

(c) Limitations on Distributions . Notwithstanding any provision to the contrary contained in this Agreement, neither the Company nor the Board, on behalf of the Company, shall be required to make a distribution to any Person in violation of the Act or other applicable law. Any distributions pursuant to this Article IV made in error or in violation of Section 18-607(a) of the Act, will, upon demand by the Board, be returned to the Company.

4.2 Allocations for Capital Account Purposes .

(a) General . Net Income and Net Loss will be determined and allocated with respect to each Fiscal Year of the Company as of the end of such Fiscal Year and at such times as there is a Revaluation Event. Subject to the other provisions of this Article IV, an allocation to a Member of a share of Net Income or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Income or Net Loss. Except as otherwise provided for in this Article IV, Net Income and Net Loss shall be allocated for each Fiscal Year or other period to the Members such that the positive balance of the Capital Account of each Member (after adding to such capital account (i) the amount, if any, that such Member is obligated to contribute to the Company upon liquidation of such Member’s Interest, and (ii) the amount that such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and subtracting from such Capital Account such Member’s share of the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) immediately following such allocation is, as closely as possible, equal (proportionately) to the amount of the distributions that would be made to such Member if the Company sold all of its assets for their Book Values, all Company liabilities were satisfied (limited with respect to each nonrecourse liability to the book value of the assets securing such liability), and the remaining cash was distributed in accordance with the priority set forth in Section 4.1(a).

(b) Minimum Gain Chargeback . Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding any other provision of this Agreement, if there is a net decrease in the Partnership Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Partnership Minimum Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance

 

19

with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 4.2(b) is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

(c) Member Minimum Gain Chargeback . If there is a net decrease in “partner nonrecourse debt minimum gain” (as defined in Regulations Section 1.704-2(i)(2)) for the taxable year or other relevant taxable period, then, to the extent required by the Regulations, items of income (determined in accordance with the provisions of Regulations Section 1.704-2(i)(4)) shall be specially allocated to the Members in an amount equal to each Member’s share of the net decrease in partner nonrecourse debt minimum gain (determined in accordance with the provisions of Regulations Section 1.704-2(i)(5)). This Section 4.2(c) shall be interpreted consistently with, and subject to the exceptions contained in, Regulations Section 1.704-2(i)(4).

(d) Qualified Income Offset . If any Member unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by such Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible; provided that an allocation pursuant to this Section 4.2(d) shall be made only if and to the extent that such Members would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 4.2 have been tentatively made as if this Section 4.2(d) were not in this Agreement. This Section 4.2(d) is intended to constitute a “qualified income offset” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d)(3) and shall be interpreted consistently with such provisions.

(e) Excess Losses . No allocation of loss or item thereof shall be made to any Member to the extent such allocation would create or increase an Adjusted Capital Account Deficit of such Member that would trigger the application of Section 4.2(b) or (c). Any losses or items thereof that cannot be allocated to Members by reason of the prior sentence (“ Excess Loss ”) shall, subject to the prior sentence, be allocated to the other Members in proportion to such other Members’ remaining Percentage Interests, and this method of allocation shall continue until such Excess Loss shall have been completely allocated.

(f) Nonrecourse Deductions . “Nonrecourse deductions” (as defined in Regulations Sections 1.704-2(b)(1) and (c)) shall be specially allocated to the Members in proportion to their respective Percentage Interests. “Member nonrecourse deductions” (as defined in Regulations Section 1.704-2(i)(2)) shall be specially allocated to the Members who bear the economic risk of loss for the liability to which the deductions are attributable, determined in accordance with the principles of Regulations Section 1.704-2(i)(1).

(g) Section 734(b)/743(b) Adjustments . To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a

 

20

distribution to a Member in complete liquidation of its interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their Economic Interests in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(h) Curative Allocations . To minimize any distortions in the manner that the Members would have shared distributions if the special regulatory allocations required by paragraphs (a) through (g) above (“ Regulatory Allocations ”) had not been part of this Agreement, the Board may specially allocate to the Members offsetting items of income or loss so that the net amounts allocated to each Member pursuant to all subsections of Section 4.2 will, to the maximum extent possible, equal the net amounts that would have been allocated to each Member pursuant to Section 4.2(a) if the Regulatory Allocations had never occurred. In exercising such discretion, the Board may consider any expected future Regulatory Allocations which are likely to offset other Regulatory Allocations previously made.

4.3 Allocations for Tax Purposes .

(a) General . For federal, state and local income tax purposes, except as otherwise provided in this Section 4.3, each item of Company income, gain, loss and deduction shall be allocated to the Members consistent with the allocations of income, gain, loss and deduction described in Section 4.2.

(b) Section 704(c) . In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deductions with respect to any property (other than cash) contributed by a Member to the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Book Value using the remedial allocation method set forth in Regulations Section 1.704-3(d). In the case of any property whose Book Value is adjusted under clauses (ii) or (iii) of the definition of Book Value contained in Section 15.1, subsequent allocations of income, gain, loss and deduction with respect to such property shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Board in any manner that reasonably reflects the purpose and intention of this Agreement.

(c) Credits . Any credits of the Company shall be allocated to the Members in accordance with their respective Percentage Interests.

(d) Recapture . Depreciation or amortization recapture under Code Sections 1245 and 1250, as well as any other type of recapture of ordinary income items shall, to the maximum extent possible, be allocated to the Members that were allocated the depreciation, amortization or other deductions giving rise to such recapture amounts.

 

21

(e) Excess Nonrecourse Liabilities . The Company’s “excess nonrecourse liabilities” (as defined in Regulations Section 1.752-3(a)(3)) shall be allocated among the Members in proportion to their Percentage Interests.

(f) Varying Membership Interests . To reflect any Transfers of or other variations in the Membership Interests of the Members during any taxable year or other relevant taxable period, allocations of taxable income and loss for such taxable year or other relevant taxable period shall be determined by the Board on a daily, monthly or other basis using any method permitted by the provisions of Code Section 706 and the Regulations thereunder; provided , however , that the approval of the transferring Member shall be required in order to use any method other than a closing-of-the-books method.

(g) No Impact on Capital Accounts . Allocations pursuant to this Section 4.3 are solely for federal, state and local tax purposes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of income, gain, loss and deduction described in Section 4.2 or distributions pursuant to any provision of this Agreement.

(h) Acknowledgement by Members . The Members are aware of the income and other tax consequences of the allocations made by this Article IV and hereby agree to be bound by the provisions of this Article IV in reporting their shares of items of Company income, gain, loss, deduction and credit.

ARTICLE V

MANAGEMENT

5.1 Management by the Board of Managers . Except for cases in which the approval of the Members is expressly required by this Agreement or by non-waivable provisions of applicable law, the powers, business and affairs of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, a single board of managers (the “ Board ”).

5.2 Actions by the Board; Delegation of Authority and Duties; Reliance by Third Parties .

(a) In managing the business and affairs of the Company and exercising its powers, the Board may act through meetings and written consents pursuant to Sections 5.4 and 5.5 and through any Officer of the Company to whom authority and duties have been delegated pursuant to Section 5.6.

(b) Any Person other than a Member dealing with the Company may rely on the authority of any Officer in taking any action in the name of the Company authorized by the Board without inquiry into the provisions of this Agreement or compliance herewith, regardless of whether that action actually is taken in accordance with the provisions of this Agreement.

 

22

5.3 Board Composition .

(a) Composition . The Board shall be composed of four managers (or such greater number as the Board may unanimously determine in its sole discretion) that are natural persons (each a “ Manager ” and, collectively, the “ Managers ”). Subject to the other provisions of this Section 5.3(a), and to the extent ADA-ES (i) is not a Defaulting Member, and (ii) has not transferred its rights to designate Managers under this Section 5.3 in connection with any Transfer, two Managers will be designated from time to time by ADA-ES (“ ADA-ES Managers ”). Subject to the other provisions of this Section 5.3(a), and to the extent that (i) none of the ECP Members is a Defaulting Member, and (ii) the ECP Members have not transferred their respective rights to designate Managers under this Section 5.3 in connection with any Transfer, two Managers will be designated from time to time by the ECP Members (“ ECP Managers ”), as follows: each of ECP I and ECP I-A shall be entitled, in its sole discretion, to designate one of the two ECP Managers (the “ ECP I Manager ” and the “ ECP I-A Manager ,” respectively). Each of the ECP I Manager and the ECP I-A Manager will be deemed to be ECP Managers.

(i) Notwithstanding Section 5.3(a), if at any time either ADA-ES, together with its direct and indirect Transferees (the “ ADA-ES Side ”), on the one hand, or the ECP Members, together with their respective direct and indirect Transferees (the “ ECP Side ”), on the other hand, fails to hold an aggregate Percentage Interest of at least 35%, then one ADA-ES Manager or one ECP Manager, as applicable, designated by the ADA-ES Side or the ECP Side, as applicable, shall be removed and thereafter may be designated by the ADA-ES Side or ECP Side, as applicable, that continues to hold an aggregate Percentage Interest of at least 35%.

(ii) Notwithstanding Section 5.3(a) or (a)(i), if at any time the ADA-ES Side, on the one hand, or the ECP Side, on the other hand, fails to hold at least the Requisite Percentage Interest, then all ADA-ES Managers or ECP Managers, as applicable, designated by the ADA-ES Side or the ECP Side, as applicable, shall be removed and thereafter may be designated by the ADA-ES Side or the ECP Side, as applicable, that continues to hold at least the Requisite Percentage Interest.

(b) Transfer of Rights to Designate Managers . Notwithstanding Section 5.3(a) hereof, each of ADA-ES and the ECP Members shall be free to transfer their respective rights to designate one or more Managers to any Transferee that becomes a Substitute Member and that holds or acquires not less than the Requisite Percentage Interest. Upon such transfer, the aggregate number of ECP Managers or ADA-ES Managers, as the case may be, thereupon shall be reduced by the number of Managers that the ECP Members or ADA-ES, as the case may be, have so transferred, and thereafter such Manager(s) shall be replaced by such Manager(s) designated by such Transferee.

(c) Failure to Hold Requisite Percentage Interest . If the ECP Members in the aggregate, or any Transferee thereof who has been assigned the right to designate one or more Managers to the Board, fails at any time to hold the Requisite Percentage Interest, then all of the Managers that such ECP Members or such Transferee, as applicable, would be entitled to designate immediately

 

23

prior to the time at which such ECP Members or such Transferee, as applicable, fails to hold the Requisite Percentage Interest, thereupon shall be designated by the holders of a majority of the aggregate Percentage Interests held by all ECP Members and all direct and indirect Transferees thereof to the extent such Percentage Interests correspond to Membership Interests acquired from ECP Members. If ADA-ES, or any Transferee thereof who has been assigned the right to designate one or more Managers to the Board, fails at any time to hold the Requisite Percentage Interest, then all of the Managers that ADA-ES or such Transferee, as applicable, would be entitled to designate immediately prior to the time at which ADA-ES or such Transferee, as applicable, fails to hold the Requisite Percentage Interest, thereupon shall be designated by the holders of a majority of the aggregate Percentage Interests held by ADA-ES and all direct and indirect Transferees thereof to the extent such Percentage Interests correspond to Membership Interests acquired from ADA-ES.

(d) Removal; Vacancies . No Manager may be removed from the Board (with or without cause) except at the written direction of the Member entitled to designate such Manager, which Member will thereupon be entitled to appoint an alternative Manager to fill the vacancy. A Manager may resign at any time, such resignation to be made in writing and to take effect immediately or on such later date as may be specified therein. The Members may change or replace their respective designees to the Board upon 24 hours’ prior written notice to the Board and the other Members. Any vacancy in the Board, whether created by the removal, resignation, retirement of a Manager or otherwise, shall be filled only by the Member entitled to designate such Manager in accordance with this Section 5.3. The initial ECP I Manager, ECP I-A Manager and ADA-ES Managers are set forth on Exhibit D .

(e) Changes in Size . In the event the size of the Board is increased or decreased with the unanimous consent of the Board as contemplated hereby, the number of ECP Managers, ADA-ES Managers and, to the extent applicable, other Managers, shall be increased or decreased as unanimously determined by the Board.

5.4 Board Meetings; Quorum; Vote Required .

(a) Meetings . The Board shall meet at least quarterly at the offices of the Company (or such other place as determined by the Board). Special meetings of the Board, to be held at the offices of the Company (or such other place as shall be determined by the Board), shall be called at the direction of any two Managers, upon reasonable advance notice, but in any event upon not less than 48 hours’ prior written notice, to all Managers. Attendance of a Manager at a meeting shall constitute a waiver of notice of such meeting, except where a Manager attends a meeting for the express purpose of objecting to the transaction of any business on the ground that such meeting is not lawfully called or convened.

(b) Quorum . The presence of at least one ECP Manager and one ADA-ES Manager shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board; provided that if at any time the ADA-ES Side or the ECP Side loses its right to designate one or more Managers pursuant to the operation of Section 5.3(a)(i) or 5.3(a)(ii), then the presence of at least two Managers shall be necessary and sufficient to constitute a quorum.

 

24

(c) Board Voting . On all matters requiring the vote or action of the Board, each Manager shall be entitled to one vote, and all actions undertaken by the Board must be authorized by the affirmative vote of at least a majority of Managers at any meeting at which a quorum is present; provided , however , that the actions specified in Sections 5.11 and Section 5.12 shall require only the determinations of the Managers specified therein and a quorum shall be deemed to exist with the presence of solely the Managers specified therein.

5.5 Action by Written Consent or Telephone Conference . Any action permitted or required by the Act, the Delaware Certificate or this Agreement to be taken at a meeting of the Board may be taken without a meeting if a consent in writing, setting forth the action to be taken, is signed by all the Managers, or, with respect to any action specified in Section 5.11 or Section 5.12, signed by all of the Managers necessary to take such action pursuant to such Section. Such consent shall have the same force and effect as a unanimous vote at a meeting and may be stated as such in any document or instrument filed with the Secretary of State of Delaware, and the execution of such consent shall constitute attendance or presence in person at a meeting of the Board. Subject to the requirements of the Act, the Delaware Certificate or this Agreement for notice of meetings, the Managers may participate in and hold a meeting of the Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such meeting shall constitute attendance and presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened or is not called or convened in accordance with this Agreement.

5.6 Officers . Officers of the Company may, from time to time, be elected by the Board and may consist of a President and a Secretary, and such other officers and assistant officers as may be deemed necessary or desirable by the Board. The general areas of responsibility and specific powers and duties of each Officer will be as determined by the Board from time to time. Any number of offices may be held by the same person. In its discretion, the Board may choose not to fill any office for any period as it may deem advisable. Each Officer shall hold office until a successor is duly elected and qualified or until the earlier of his or her death, resignation or removal as hereinafter provided. Any Officer or agent of the Company elected by the Board may be removed at any time by the Board in accordance with the vote required in Section 5.4. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may, subject to Section 5.11 of this Agreement, be filled by the Board then in office. In the case of the absence or disability of any Officer of the Company and of any person hereby authorized to act in such Officer’s place during such Officer’s absence or disability, the Board may by resolution delegate the powers and duties of such Officer to any other Officer, or to any other person whom it may select. The President of the Company shall, subject to Section 5.7, any limitations, restrictions or directions provided by the Board and the constraints set forth in the Annual Plan, be responsible for the day-to-day operations of the Company. The Officers, in the performance of their duties as such, shall owe to the Company duties of loyalty and due care of the type owed by the officers of a corporation to such corporation and its stockholders under the laws of the State of Delaware.

 

25

5.7 Actions Requiring Approval of the Board .

In addition to such other matters as the Board may from time to time by resolution determine, neither the Company nor any Officer or agent of the Company shall take any of the actions described in this Section 5.7 (in each case except as provided in Section 3.6, Section 3.7, Section 3.8 and Article XIV) without the approval of the Board:

(a) subject to Section 5.9, approve the Annual Plan or any other budget of the Company or any amendments or alterations thereto;

(b) effect any material change in the business lines of the Company or any Subsidiary of the Company;

(c) acquire, directly or indirectly, another business or any competing investment other than as previously approved in the Annual Plan;

(d) sell or permit the sale, in any * period, of assets of the Company or of any Subsidiary of the Company, with an aggregate value exceeding $* or such other amount determined by a resolution of the Board;

(e) issue any Capital Request Notice to a Member at any time when such Member’s Unused Capital Commitment is equal to zero;

(f) incur any indebtedness for borrowed money in the name of the Company or any Subsidiary of the Company, create any Lien on the assets or properties of the Company or any Subsidiary of the Company; post a letter of credit, guaranty or provide surety for the obligations of any third party; or enter into any material amendment with respect to the foregoing;

(g) settle any claims relating to the Company or any Subsidiary of the Company not covered by insurance;

(h) modify any accounting policies of the Company or any Subsidiary of the Company except as required by regulatory authorities or the Company’s or such Subsidiary’s independent accountants;

(i) except as contemplated by the Master Services Agreement, the Intellectual Property License Agreement, the Joint Development Agreement and the Effective Date Credit Support Documents and except for Transfers of Membership Interests in accordance with the terms of this Agreement, enter into any transactions with any Affiliate of any Member;

(j) subject to Section 5.11, cause the removal of any individual under the Master Services Agreement or any Officer;

(k) appoint or remove, or cause the Company or any Subsidiary of the Company to appoint or remove, the independent auditors for the Company or such Subsidiary;

 

26

(l) except as contemplated by this Agreement, make any tax election or take, or cause the Company or any Subsidiary of the Company to take, any other action with respect to taxes;

(m) enter into material contracts related to the Red River Project or any other contract or transaction outside of the ordinary course of business or commit to or make any expenditure in excess of the amounts provided for such expenditures in the Annual Plan;

(n) except as provided in Section 3.8 and Section 13.2(c), make or declare any distribution or dividend or change the distribution policy of the Company; and

(o) enter into any agreement to do any of the foregoing.

The Board may, by unanimous resolution, determine additional actions of the Company that would require approval of the Board under this Section 5.7. Notwithstanding anything in this Section 5.7 to the contrary, unless otherwise provided by the Board by unanimous resolution, any actions or expenditures specifically authorized in the Company’s most recent Annual Plan approved by the Board shall be authorized for purposes of this Section 5.7 and shall not be included for purposes of determining whether the applicable threshold amounts are satisfied in subsection (d) of this Section 5.7.

5.8 Actions Requiring Consent of the Members . Notwithstanding anything to the contrary in this Agreement, but subject to Section 12.2(d), neither the Company nor any Officer or agent of the Company shall take, or permit any Project Company to take, any of the actions described in this Section 5.8 (in each case except as provided in Section 3.6, Section 3.7, Section 3.8 and Article XIV) without the prior written consent of Members holding in the aggregate not less than 75% of the aggregate Percentage Interests held by all Members:

(a) alter, repeal, amend or adopt any provision of the Delaware Certificate or this Agreement or the similar governing documents of any Subsidiary of the Company;

(b) effect any Company Sale Transaction or any similar transaction with respect to any Subsidiary;

(c) issue any Additional Interests, admit any new Members (other than in accordance with Article X) authorize, issue, sell, dividend, distribute, redeem, convert, exchange, repurchase, cancel, retire or otherwise dispose of any equity interests, phantom equity or similar rights or interests or any warrants, options or other similar rights or interests or securities convertible into or exchangeable for any equity interests, phantom equity or similar rights of the Company or any Subsidiary of the Company;

(d) voluntarily liquidate, wind-up, dissolve or commence any bankruptcy, insolvency, reorganization, debt arrangement or other case or proceeding under, or obtain relief under, any federal or state bankruptcy or insolvency law or make a general assignment for the benefit of creditors;

(e) change or make any election to cause the Company or any Subsidiary of the Company to be classified as other than a partnership for federal income tax purposes;

 

27

(f) sell, in any * period, assets of the Company or any Subsidiary of the Company with an aggregate value exceeding $*;

(g) make, or cause any Subsidiary of the Company to make, in any * period, any capital expenditures in excess of approved capital expenditures in the then current Annual Plan with an aggregate value exceeding $*;

(h) except as specifically contemplated by the Effective Date Credit Support Documents, incur any indebtedness for borrowed money in excess of $* above any amounts approved in the then current Annual Plan (or in excess of $* if no indebtedness is approved in the then current Annual Plan) in the name of the Company or any Subsidiary, or create any Lien on the assets or properties of the Company or any Subsidiary, or guaranty or provide surety for the obligations of any third party in excess of $* above any amounts approved in the then current Annual Plan (or in excess of $* if no such amounts are approved in the then current Annual Plan); or enter into any material amendments with respect to the foregoing except as expressly approved in the then current Annual Plan;

(i) purchase or lease, or cause the Company to purchase or lease, in any * period, any assets in excess of $* in the aggregate (other than purchases of raw materials in the ordinary course of business or purchases or leases expressly contemplated in the then current Annual Plan);

(j) authorize the acquisition, development or construction by the Company of any Additional Project; and

(k) enter into any agreement to do any of the foregoing.

5.9 Budgets . Attached as Exhibit E is the Company’s operating budget for the period commencing as of the Effective Date and ending November 30, 2008 (the “ Interim Budget ” ) . During the period of time covered by the Interim Budget, the Board shall prepare and approve an operating budget for the period commencing December 1, 2008 and ending December 31, 2010 (the “ Initial Budget ”). At least 90 days prior to the start of each Fiscal Year of the Company commencing with 2011, the principal financial officer of the Company, or if no such principal financial officer has been designated, the President shall submit to the Board a proposed operating budget for such Fiscal Year (each, an “ Annual Plan ”). Such Annual Plan shall include: (a) (i) a financial projection for the Company setting forth estimates of volumes, revenues, costs, fees, expenses (including accruals items for high cost but infrequent maintenance events and estimates of cash expenditures to be applied against such accruals) and capital expenditures to be realized or borne by the Company on a month to month basis for the next Fiscal Year, and (ii) consolidated income, cash flow and balance sheet statements for the Company based on such estimates and (b) a proposed operating budget for the Company setting forth the authorized limit of the fees, costs, expenses and capital expenditures which may be incurred by the Company without additional prior approval by the Board. The Board shall consider the Annual Plan for approval prior to the start of the Fiscal Year to which it pertains and shall use all reasonable efforts to resolve any disagreements as to any item contained in the Annual Plan prior to such time. If any Annual Plan submitted to the Board in accordance with this Section 5.9 is not approved by the Board, then the Annual

 

28

Plan most recently approved by the Board pursuant to Section 5.7(a), excluding all non-recurring items, shall remain in effect as the Annual Plan for the next Fiscal Year, adjusted upwards by multiplying the recurring fees, costs, expenses and capital expenditures set forth in such Annual Plan by 1.03.

5.10 Limitation of Duties . No Manager (in his or her capacity as a Manager) shall have any duties (including fiduciary duties) or liabilities relating thereto to the Company, the Members or the other Managers, except as may be specifically provided herein and required by any provisions of the Act or other applicable law that cannot be waived. Accordingly, each Manager shall be entitled to act solely on behalf, and in the interests, of the Member that has designated such Manager. Moreover, each Manager and, except as expressly provided herein (including, without limitation, Section 6.2), each Member and each of their respective Affiliates, shall be free to engage or invest in, and devote its and their time to, any other business venture or activity of any nature and description, whether or not such activities are considered competitive with the Company, and neither the Company nor any other Person will have any right by virtue of this Agreement or the relationship created hereby in or to such other venture or activity of any Person (or to the income or proceeds derived therefrom), and the pursuit of such other venture or activity will not be deemed wrongful or improper. No notice, approval or other sharing of any such other opportunity or activity will be required. The legal doctrines of “corporate opportunity,” “business opportunity” and similar doctrines will not be applied to any such competitive venture or activity.

5.11 Certain Powers of the ECP Managers . Notwithstanding anything to the contrary in this Agreement, the ECP Managers shall have the sole power and authority to cause the Company to take any action to be taken by the Company with respect to (i) the contribution of the ADA-ES Contributed Assets by ADA-ES pursuant to the Joint Development Agreement and this Agreement, including the making and prosecution of any claim for indemnification thereunder, (ii) any action to be taken pursuant to the Master Services Agreement or the Intellectual Property License Agreement, including, without limitation, in each case, pursuing any right or remedy thereunder, (iii) any action to be taken with respect to indemnification of the Development Company or other AC Venture Companies pursuant to section 1.7 of the Joint Development Agreement, (iv) any action of the Board at such time as ADA-ES is a Defaulting Member or from and after such time as any ECP Member delivers an ECP Election Notice following the occurrence of an ADA-ES Triggering Event and (v) any other agreement between the Company on the one hand and ADA-ES or any of its Affiliates on the other, including the power to terminate such agreements in accordance with their terms.

5.12 Certain Powers of the ADA-ES Managers . Notwithstanding anything to the contrary in this Agreement, the ADA-ES Managers shall have the sole power and authority to cause the Company to take any action to be taken by the Company with respect to (i) the contribution of the Initial ECP Capital Contribution by the ECP Members pursuant to the terms of the Joint Development Agreement and this Agreement, including the making and prosecution of any claim for indemnification thereunder, (ii) any action of the Board at such time as any ECP Member is a Defaulting Member or, unless the ECP Members have made aggregate Capital Contributions to the Company in excess of the aggregate Capital Contributions made by ADA-ES, from and after such time as ADA-ES delivers an ADA-ES Election Notice following the occurrence of an ECP Triggering Event or (iii) any other agreement between the Company, on the one hand, and the ECP Members or any of their respective Affiliates, on the other, including the power to terminate such agreements in accordance with their terms.

 

29

5.13 Board Observation Rights . In addition to the Members’ respective rights to designate Managers to the extent set forth above, each of ECP I and ECP I-A will, for so long as such Member holds a Membership Interest in the Company, have the right to appoint one representative to attend the meetings of the Board in a nonvoting observer capacity (such representative, the “ Observer ”). The Company will provide each Observer with copies of all notices, minutes, consents and other materials that it provides to members of the Board; provided , however , that the Company reserves the right to withhold any information and to exclude such Observer from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel, or if access to such information or attendance at such meeting could result in a conflict of interest or otherwise be contrary to law. Each Member agrees to, and will cause each Observer of such Member to, hold in confidence all information provided to it or learned by it in connection with its observation rights under this Agreement, and will not use such information for any purpose that would be impermissible if such Person were a member of the Board of the Company, except to the extent otherwise required by law and any other regulatory process to which such Member or its respective Observer is subject.

5.14 Deadlock . If the Managers become deadlocked over, or because of a lack of quorum fail to vote on or approve, any matter requiring their approval in accordance with Section 5.7, or if the Members fail to approve any matter requiring their approval under Section 5.8 hereof (but excluding Section 5.8(j)) (each matter, a “ Disputed Matter ”), any Manager or Member, as applicable, may, within five Business Days of such deadlock or relevant meeting, notify the other Managers or Members that such Disputed Matter shall be voted on again by the Managers or Members at a special meeting that shall be held no later than five Business Days from the date of such notification. Such Disputed Matter on which the Managers or Members have been unable to agree shall be discussed by the Managers or Members for such five Business Day period and shall be voted upon during the special meeting at the end of the five Business Day period. If at the special meeting, the Managers or Members are unable to come to agreement on the Disputed Matter, the Disputed Matter shall be raised, by providing written notice to the ECP Members and to ADA-ES, to the principal executive officer of the ECP Members and the principal executive officer of ADA-ES, who shall use commercially reasonable efforts to obtain agreement on the Disputed Matter within 15 Business Days of receipt of such notice. In the event that the principal executive officers of the ECP Members and ADA-ES are unable to reach agreement on the Disputed Matter by the end of such 15 Business Day period, such Disputed Matter shall be deemed to be a “ Deadlock ,” and the ECP Members and ADA-ES shall have the rights set forth in Section 10.7(a), to the extent applicable. Notwithstanding the foregoing, any dispute between the Managers or the Members over (a) any budget item, expenditure, claim or other matter with a cost or potential income in the aggregate of less than $100,000 or (b) any determination to acquire, develop or construct an Additional Project as contemplated by Section 5.8(j), shall not give rise to a Deadlock and shall not give rise to the rights set forth in Section 10.7(a).

 

30

5.15 Insurance . The Company shall carry general liability, casualty and other insurance in such amounts and having such terms as is prudent and customary for businesses of the nature carried on by the Company.

5.16 No Participation in Management by Members; Member Voting Generally . The management of the business and affairs of the Company shall be vested in whole in the Board in accordance with this Article V. Except with respect to the execution and filing of the Delaware Certificate or as otherwise specifically provided by this Agreement, no Member, acting solely in the capacity of a Member, shall be an agent of t