Exhibit B-104
LIMITED LIABILITY COMPANY AGREEMENT
OF
FOREST CITY, LLC
MAY 31, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I FORMATION OF LIMITED LIABILITY COMPANY 1
SECTION 1.1 Formation 1
SECTION 1.2 Purposes and Powers 1
SECTION 1.3 Offices 1
SECTION 1.4 Definitions and Related Matters 2
SECTION 1.5 References and Titles 5
ARTICLE IIMEMBERS, MEMBERSHIP INTERESTS AND
CONTRIBUTIONS; MEETINGS OF MEMBERS 6
SECTION 2.1 Members, Membership Units and
Capital Contributions 6
SECTION 2.3 Optional Member Loans 6
SECTION 2.4 No Interest; Return of
Contributions 7
SECTION 2.5 Rights of Members 7
SECTION 2.6 Nonliability of Members 7
SECTION 2.7 Meetings 7
SECTION 2.8 Place of Meetings; Chairman 8
SECTION 2.9 Notice of Meetings 8
SECTION 2.10 Quorum of Members 8
SECTION 2.11 Action and Voting by Members 8
SECTION 2.12 Action Without a Meeting 9
SECTION 2.13 Telephone Meetings 9
SECTION 2.14 Confidentiality 10
ARTICLE III ALLOCATIONS AND DISTRIBUTIONS 10
SECTION 3.1 Allocation of Profits and Losses 10
SECTION 3.2 Distributions 11
ARTICLE IV MANAGEMENT 11
SECTION 4.1 Management of the Company 11
SECTION 4.2 Duties and Services of the Manager 11
SECTION 4.3 Reliance by Manager 11
SECTION 4.4 Authority of Managers 12
SECTION 4.5 Number and Qualifications of
Managers 12
SECTION 4.6 Election and Term of Service 12
SECTION 4.7 Removal; Filling of Vacancies 12
SECTION 4.8 Place of Meetings; Chairman 12
SECTION 4.9 Regular Meetings 12
SECTION 4.10 Special Meetings 13
SECTION 4.11 Quorum of and Action by Managers 13
SECTION 4.12 Action Without a Meeting 13
SECTION 4.13 Telephone Meetings 13
SECTION 4.14 Costs and Expenses 13
SECTION 4.15 Manager's Compensation 14
SECTION 4.16 Interested Members, Manager
and Officers; Outside Activities 14
SECTION 4.17 Time Devoted to Company 14
SECTION 4.18 Liability of Manager 14
ARTICLE V OFFICERS 15
SECTION 5.1 Officers 15
SECTION 5.2 Compensation 15
SECTION 5.3 Term of Office; Removal; Filling
of Vacancies 15
SECTION 5.4 President 15
SECTION 5.5 Vice Presidents 15
SECTION 5.6 Secretary and Assistant
Secretaries 16
SECTION 5.7 Treasurer and Assistant
Treasurers 16
SECTION 5.8 Additional Powers and Duties 16
SECTION 5.9 Limitations on Powers and
Duties of Officers 16
ARTICLE VI ACCOUNTING AND TAX MATTERS; BANKING;
REPORTS 17
SECTION 6.1 Books and Records; Capital
Accounts 17
SECTION 6.2 Tax Returns 18
SECTION 6.3 Tax Matters Member 18
SECTION 6.4 Tax Elections 19
SECTION 6.5 Tax Characterization 19
SECTION 6.6 Bank Accounts; Investment of
Company Funds 19
SECTION 6.7 Signature of Negotiable
Instruments 19
SECTION 6.8 Records 19
SECTION 6.9 Reports 19
ARTICLE VII DISSOLUTION, LIQUIDATION AND TERMINATION 20
SECTION 7.1 Dissolution 20
SECTION 7.2 Liquidation and Termination 20
ARTICLE VIII RESTRICTIONS ON TRANSFER OF MEMBERSHIP
INTERESTS 21
SECTION 8.1 Restrictions on Transfer 21
SECTION 8.2 Involuntary Assignment by a Member 21
SECTION 8.3 Assignee's Tax Liability 22
SECTION 8.4 Specific Performance 22
SECTION 8.5 Members of Record; Related Matters 22
ARTICLE IX EXCULPATION AND INDEMNIFICATION 22
SECTION 9.1 Exculpation 22
SECTION 9.2 Indemnification 23
SECTION 9.3 Report to Members 24
SECTION 9.4 Entitlement 24
SECTION 9.5 Severability 25
ARTICLE X MISCELLANEOUS 25
SECTION 10.1 Manner of Giving Notice 25
SECTION 10.2 Waiver of Notice 25
SECTION 10.3 No Company Seal 25
SECTION 10.4 Choice of Law 26
SECTION 10.5 Amendments 26
SECTION 10.6 Severability 26
EXHIBITS
Exhibit A Members, Addresses, Contribution and
Membership Interests
Exhibit B Form of Addendum Agreement
LIMITED LIABILITY COMPANY AGREEMENT
OF
FOREST CITY, LLC
This Limited Liability Company Agreement (this "Agreement") of Forest
City, LLC, a Delaware limited liability company, is entered into effective
for all purposes as of the 31st day of May, 2001 (the "Effective Date"), by
and among the undersigned initial sole Member of such limited liability
company for and in consideration of the provisions herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged:
ARTICLE I
FORMATION OF LIMITED LIABILITY COMPANY
SECTION 1.1 FORMATION. Forest City, LLC (the "Company") was formed as a
limited liability company under the laws of the State of Delaware on May 31,
2001, by the filing of a Certificate of Formation with the Secretary of
State of the State of Delaware.
SECTION 1.2 PURPOSES AND POWERS. The purpose of the Company is (a) to
acquire those certain oil and gas properties located in Brown, Doniphan,
Xxxxxxx and Xxxxxxxxx Counties, Kansas and Nemaha County, Nebraska from
the initial Member (either directly from the initial Member or from a third
party as the initial Member's designee) as a Capital Contribution to the
Company; (b) to acquire other properties within the Forest City Basin in the
States of Kansas, Nebraska, Iowa and Missouri; (c) to hold, maintain, renew,
explore, drill, develop and operate such properties; (d) to produce,
collect, store, treat, deliver, market, sell or otherwise dispose of oil,
gas and related hydrocarbons and minerals from such properties; (e) to
farmout, sell, abandon and otherwise dispose of such properties; (f) to
enter into commodity hedging transactions in order to minimize the risk
associated with the fluctuation of prices to be received by the Company from
the sale of oil, gas and related hydrocarbons and minerals from Company
properties, whether on organized exchanges or otherwise; and (g) to take all
such other actions incidental to any of the foregoing or as expressly set
forth herein as the Managers may determine to be necessary or desirable. In
carrying out such purpose, the Company shall have all of the powers
provided for a limited liability company under the Act.
SECTION 1.3 OFFICES. The principal place of business of the Company shall
be at such place as the Managers may from time to time determine. The
Company may have, in addition to such office, such other offices and places
of business at such locations, both within and without the State of
Delaware, as the Managers may from time to time determine or the business
and affairs of the Company may require.
SECTION 1.4 DEFINITIONS AND RELATED MATTERS.
(a) When used in this Agreement, the following terms shall have the
respective meanings set forth below:
"ACT" shall mean the Delaware Limited Liability Company Act, as amended
from time to time, or any successor statute thereto.
"ADJUSTED CAPITAL ACCOUNT" shall mean the Capital Account maintained for
a Member, as provided in Section 6.1, as of the end of each Fiscal Year,
(a)increased by (i) the amount of any unpaid Capital Contributions agreed
to be contributed by such Member under Article II, if any, (ii) an amount
equal to such Member's allocable share of Company Minimum Gain
attributable to Company Nonrecourse Liabilities, as computed on the last
day of such Fiscal Year in accordance with applicable Treasury Regulations,
(iii) an amount equal to such Member's allocable share of Member
Nonrecourse Debt Minimum Gain attributable to Member Nonrecourse Debt, as
computed on the last day of such Fiscal Year in accordance with applicable
Treasury Regulations, and (iv) the amount of Company liabilities allocable
to such Member under Section 752 of the Internal Revenue Code with respect
to which such Member bears the economic risk of loss to the extent such
liabilities do not constitute Member Nonrecourse Debt, and (b) reduced by
the adjustments provided for in Treasury Regulation Section 1.704-1(b)(2)
ii)(d)(4)-(6).
"AFFILIATE" shall mean, when used with respect to a specified person, any
person that directly or indirectly controls, is controlled by or is under
common control with such specified person. As used in this definition,
the term "control" means possession, directly or indirectly (through one
or more intermediaries), of the power to direct or cause the direction of
management and policies of a person through an ownership of voting
securities (or other ownership interests), contract, voting trust or
otherwise.
"CAPITAL CONTRIBUTIONS" shall mean the aggregate of the dollar amounts of
any cash, or the fair market value of any property, contributed to the
capital of the Company, or, if the context in which such term is used so
indicates, the dollar amounts of cash or the fair market value of any
property agreed to be contributed, or requested to be contributed, by a
Member to the capital of the Company.
"CAUSE" shall mean, with respect to any person, the final, nonappealable
determination by a court of competent jurisdiction (or any other
determination made in accordance with a process that has been approved by
the Managers) that such person has committed or engaged in (i) any
willful malfeasance, bad faith, or gross negligence in disregard of such
person's material duties to the Company; (ii) any commission of any fraud
by such person except for any violation of fraudulent conveyance or
similar laws; or (iii) any conviction of or plea of no contest to any
felony by such person.
"COMPANY MINIMUM GAIN" shall have the same meaning as the term
"partnership minimum gain," as set forth in Sections 1.704-2(b)(2) and
1.704-2(d) of the Treasury Regulations.
"COMPANY NONRECOURSE LIABILITIES" shall mean nonrecourse liabilities (or
portions thereof) of the Company for which the Members bear no economic
risk of loss.
"DEPRECIATION" shall mean, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except
that if the fair market value of property contributed to the Company
differs from its adjusted basis for federal income tax purposes at the
date of contribution, Depreciation shall be an amount that bears the
same ratio to such beginning fair market value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis.
"DISTRIBUTION" or "DISTRIBUTIONS" shall mean any cash or other property
distributed to any Member by the Company on account of such Member's
Membership Interest as provided in Section 3.2 or Section 7.2 of this
Agreement, and does not include payments to any Member (a) pursuant to
a loan by such Member to the Company or other transaction in which
such Member is acting other than in its capacity as a Member within the
meaning of Section 707(a) of the Internal Revenue Code, (b) that are
guaranteed payments within the meaning of Section 707(c) of the Internal
Revenue Code or (c) that are made to reimburse such Member or an
affiliate of such Member for amounts paid for or on behalf of the
Company or that are made to indemnify such Member or an affiliate of
such Member as permitted under this Agreement.
"FISCAL YEAR" shall mean the calendar year, provided that the initial
Fiscal Year of the Company shall commence as of the date of this
Agreement.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute or statutes.
"MANAGER" or "MANAGERS" shall mean those persons designated by the
initial Member as the initial managers of the Company, and any person
or persons elected by the Members as a successor thereto in accordance
with this Agreement.
"MEMBER" shall mean KLT Gas Inc., in its capacity as the sole initial
member of the Company, and any person or persons that become substituted
or additional Members in accordance with the terms of this Agreement.
"MEMBER NONRECOURSE DEBT" shall have the same meaning as the term "partner
nonrecourse debt," as set forth in Section 1.704-2(b)(4) of the Treasury
Regulations.
"MEMBER NONRECOURSE DEBT MINIMUM GAIN" shall mean an amount, equal to the
Company Minimum Gain that would result if Member Nonrecourse Debt were
treated as a "nonrecourse liability" (within the meaning of Section
1.704-2(b)(3) of the Treasury Regulations), determined in accordance
with Section 1.704-2(i)(3) of the Treasury Regulations.
"MEMBER NONRECOURSE DEDUCTIONS" shall mean the amount of deductions,
losses and expenses equal to the net increase during the year in Member
Nonrecourse Debt Minimum Gain, reduced (but not below zero) by proceeds
of Member Nonrecourse Debt distributed during the year.
"MEMBERSHIP INTEREST" shall mean each Member's interest in the Company,
including such Member's (i) ownership interest in the Company, (ii)
share in any Net Profits, Net Losses and Distributions from the Company;
and (iii) right to participate in the decisions of the Company pursuant
to this Agreement.
"NET PROFIT" or "NET LOSS" shall mean, with respect to any Fiscal Year
or other period, the net income or net loss of the Company for such
period, determined in accordance with U.S. Federal income tax accounting
principles and Section 703(a) of the Internal Revenue Code (including
any items that are separately stated for purposes of Section 702(a) of
the Internal Revenue Code), with the following adjustments:
(a) any income of the Company that is exempt from U.S. Federal
income tax shall be included as income;
(b) any expenditures of the Company that are described in Section
705(a)(2)(B) of the Internal Revenue Code or treated as so described
pursuant to Treasury Regulation 1.704-1(b)(2)(iv)(i) shall be treated
as current expenses;
(c) if Company assets are distributed to a Member, such
Distributions shall be treated as sales of such assets for cash at their
respective fair market values in determining Net Profit and Net Loss;
(d) Gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the fair market
value of the property disposed of at the time of contribution,
notwithstanding that the adjusted tax basis of such property differs from
its fair market value at the time of contribution; and
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year or other period.
"PERSON" shall mean an individual, partnership, limited partnership,
limited liability company, foreign limited liability company, trust,
estate, corporation, custodian, trustee, executor, administrator,
nominee or entity in a representative capacity.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
any successor statute thereto.
(b) The following capitalized terms when used herein shall have the
respective meanings assigned to such terms in the Sections referred to
opposite such terms:
Term Section
Agreement Preamble
Capital Account 6.1(b)
Company 1.1
Effective Date Preamble
Indemnitee 9.2(a)
Loan Account 2.2
TMP 6.3
Transfer 8.1
SECTION 1.5 REFERENCES AND TITLES. As used in this Agreement, pronouns
in masculine, feminine and neuter genders shall be construed to include
any other gender, and words in the singular form shall be construed to
include the plural and vice versa, unless the context clearly otherwise
requires. As used in this Agreement, the term "including" shall be
construed to be expansive rather than limiting in nature and to mean
"including, without limitation," except where the context clearly
requires otherwise. Unless the context indicates otherwise, "member"
or "members" and "limited liability company" or "limited liability
companies" shall be substituted in and for references to "partner" or
"partners" and "partnership" or "partnerships," respectively, in the
Internal Revenue Code, Treasury Regulations and any pronouncements by
the Internal Revenue Service. Except to the extent a provision of this
Agreement expressly incorporates federal income tax rules by reference
to sections of the Internal Revenue Code or Treasury Regulations or is
expressly prohibited or ineffective under the Act, this Agreement shall
govern, even when inconsistent with, or different from, the provisions
of the Act or any other law or rule. To the extent any provision of
this Agreement is prohibited or ineffective under the Act, this
Agreement shall be deemed to be amended to the least extent necessary
in order to make this Agreement effective under the Act. In the event
the Act is subsequently amended or interpreted in such a way to make any
provision of this Agreement that was formerly invalid valid, such
provision shall be considered to be valid from the effective date of
such interpretation or amendment.
ARTICLE II
MEMBERS, MEMBERSHIP INTERESTS AND CONTRIBUTIONS; MEETINGS OF MEMBERS
SECTION 2.1 MEMBERS, MEMBERSHIP INTERESTS AND CAPITAL CONTRIBUTIONS.
(a) The initial Member of the Company is KLT Gas, Inc. and its initial
Membership Interest is as set forth on Exhibit A of this Agreement. The
Company and the initial Member acknowledge that such Member has made the
Capital Contribution to the Company of cash and/or properties as
consideration for such Membership Interest set forth on Exhibit A.
Such properties have been contributed to the Company (either in a
conveyance directly from the Member or from a third party as the
Member's designee) subject to all liabilities and other obligations,
and the Capital Account of the initial Member shall be adjusted to
reflect the fair market value of such properties. Such Capital
Contribution shall represent the maximum Capital Contribution to the
Company that such Member shall be required to make to the Company
(unless the Manager requests and such Member otherwise elects to make
additional Capital Contributions and thereby acquire an additional
Membership Interest). In return for such Capital Contribution, the
entirety of such Member's interest in the Company as of the date of
this Agreement shall consist of the Membership Interest set forth
opposite such Member's name on Exhibit A, which entitles such Member
to all of the rights and obligations of a Member pursuant to this
Agreement.
(b) Additional persons may be admitted to the Company as Members and
Membership Interests may be created and issued to such persons on such
terms and conditions as the Members shall determine and as shall be
reflected in an appropriate amendment to this Agreement which is
approved by all the Members.
(i) Any such party becoming an additional Member shall
be required to execute and deliver a counterpart of this Agreement in
the form of the Addendum Agreement set forth as Exhibit B in order to
confirm its agreement to the terms hereof and such party's agreement
to make its Capital Contributions.
(ii) The Managers shall reflect in the books and records of the
Company the addition of an additional Member as a party hereto, such
additional Member's Capital Contributions and the Membership Interest
it has acquired (or in the case of a Member that has increased its
Capital Contribution, the amount of its additional Capital
Contributions and additional Membership Interest).
SECTION 2.2 OPTIONAL MEMBER LOANSERROR! BOOKMARK NOT DEFINED.. The
Managers may request that one or more Members lend to the Company
such funds as the Company may need for working capital purposes,
provided that no Member shall have any obligation to make any such
loan to the Company unless such Member shall otherwise agree. A
loan account (the "Loan Account") shall be established and maintained
for each Member separate and apart from such Member's Capital Account,
and loans made by such Member to the Company will be credited to such
Member's Loan Account. Interest on advances through a Member's Loan
Account shall be at such rate as the Manager shall determine and such
Member shall agree, and all advances through a Member's Loan Account
shall be repaid prior to any Distributions to the Members. A credit
balance in a Member's Loan Account shall constitute a liability of
the Company to such Member; it shall not constitute a part of such
Member's Capital Account.
SECTION 2.3 NO INTEREST; RETURN OF CONTRIBUTIONS. No interest shall
accrue on any Capital Contributions to the Company (except to the
extent permitted with respect to loans made pursuant to Section 2.2).
No Member shall be entitled to the return of its Capital
Contributions except (1) to the extent, if any, that Distributions
made pursuant to the express terms of this Agreement may be
considered as such by law or by the determination of the Managers, (2)
upon dissolution and liquidation of the Company, and then only to the
extent expressly provided for in this Agreement and as permitted by
law, or (3) to the extent that any amounts paid by the Company to a
Member upon the Company's acquisition of any Membership Interest
may be considered as such by law.
SECTION 2.4 RIGHTS OF MEMBERSERROR! BOOKMARK NOT DEFINED.. In addition
to the other rights specified herein, each Member shall have the
right to: (a) have the Company's books and records kept at the
principal place of business of the Company and at all reasonable times
to inspect and copy any of them at such Member's sole expense; (b)
have on demand true and full information of all things affecting the
Company and a formal account of Company affairs whenever
circumstances render it just and reasonable; and (c) exercise all
rights of a member under the Act (except, in all of the foregoing
cases, to the extent otherwise specifically provided herein).
Notwithstanding the forgoing or any other provision of this
Agreement, the Managers may limit the inspection and copying of,
and other access to (i) information received by the Company which is
subject to a confidentiality agreement, (ii) information on any
prospective or potential acquisition, operation or business, (iii)
seismic, geological and other similar information, and (iv) other
information which the Managers determine should not be made
available to any Member.
SECTION 2.5 NONLIABILITY OF MEMBER. No Member shall be liable for the
debts, liabilities, contracts or other obligations of the Company
except to the extent of any unpaid Capital Contributions, if any,
that a Member has agreed to make to the Company and such Member's
share of the assets (including undistributed revenues) of the
Company; and in all events, a Member shall be liable and obligated
to make payments of its Capital Contributions only as and when such
payments are due in accordance with the terms of this Agreement, and
a Member shall not be required to make any loans to the Company.
The Company shall indemnify and hold each Member harmless in the
event such Member (a) becomes liable for any debt, liability, contract
or other obligation of the Company except to the extent expressly
provided in the preceding sentence or (b) is directly or indirectly
required to make any payments with respect thereto.
SECTION 2.6 MEETINGS. Meetings of the Members, for any purpose or
purposes, unless otherwise prescribed by statute, the Certificate of
Formation or this Agreement, may be called by the Managers or those
Members representing a majority of the Membership Interests then
outstanding. Any business as may properly be brought before the
meeting may be conducted at a meeting of the Members.
SECTION 2.7 PLACE OF MEETINGS; CHAIRMAN. Meetings shall be held at the
Company's principal place of business or at such other places, within
or without the State of Delaware, as may from time to time be fixed
by the Managers.
SECTION 2.8 NOTICE OF MEETINGS. Written or printed notice stating the
place, date and time of each meeting of the Members shall be delivered
not less than three nor more than 60 days before the date of the
meeting, by or at the direction of the Person(s) calling the meeting,
to each Member entitled to vote at the meeting.
SECTION 2.9 QUORUM OF MEMBERS. The holders of a majority of the
Membership Interests then outstanding and entitled to vote thereat,
present in person or represented by proxy, shall be requisite to and
shall constitute a quorum at each meeting of Members for the
transaction of business, except as otherwise provided by statute or
the Certificate of Formation. Unless otherwise provided in the
Certificate of Formation, the Members represented in person or by
proxy at a meeting of Members at which a quorum is not present may
adjourn the meeting until such time and to such place as may be
determined by a vote of the holders of a majority of the Membership
Interests represented in person or by proxy at that meeting. At
any such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been
transacted at the meeting as originally convened. Unless otherwise
provided in the Certificate of Formation, once a quorum is present
at a meeting of Members, the Members represented in person or by
proxy at the meeting may conduct such business as may be properly
brought before the meeting until it is adjourned, and the subsequent
withdrawal from the meeting of any Member represented in person or
by proxy, or the refusal of any Member represented in person or by
proxy to vote, shall not affect the presence of a quorum at the
meeting.
SECTION 2.10 ACTION AND VOTING BY MEMBERS.
(a) With respect to any matter other than those matters set forth in
Section 2.10(b) below or a matter for which the affirmative vote of the
holders of a specified portion of the Membership Interests entitled to
vote is required by statute or the Certificate of Formation (in which
case the vote of the holders of such specified portion of the
Membership Interests shall be requisite to constitute the act of the
Members), the affirmative vote of Members holding a majority of the
Membership Interests then outstanding shall be the act of the Members.
(b) With respect to any of the matters set forth below in this Section
2.10(b), the affirmative vote of Members holding at least 75% of the
Membership Interests then outstanding shall be the act of the Members
with respect to the authorization or approval of each of the following
matters:
(i) any merger or consolidation of the Company with or into
another Person or any share or Membership Interest exchange between the
Members and another Person;
(ii) any sale, transfer or lease of all or substantially all of the
assets of the Company to another Person;
(iii) any action by the Company to initiate the dissolution,
liquidation or winding up of the business and affairs of the Company or
the termination of its existence as a separate legal entity;
(iv) any action by the Company to file a voluntary petition in
bankruptcy or for reorganization or for the adoption of an arrangement
under Title 11 of the United States Code (or any corresponding provision
or provisions of succeeding law) or an admission seeking the relief
therein provided or the taking of similar action under the laws of any
state or local jurisdiction or otherwise consenting to the appointment
of a receiver for all or a substantial part of the Company's property;
(v) any action to bind or obligate the Company with respect to any
matter outside the scope of the Company's business; or.
(vi) any other action described in this Agreement that requires the
consent of the Members pursuant to this Section 2.10(b).
(c) At any meeting of the Members, every Member having the right to
vote shall be entitled to vote either in person or by proxy executed in
writing by such Member. A telegram, telex, cablegram, email or similar
transmission by the Member, or a photographic, photostatic, facsimile
or similar reproduction of a writing executed by the Member, shall be
treated as an execution in writing for purposes of this Section 2.10.
No proxy shall be valid after 11 months from the date of its execution
unless otherwise provided in the proxy. Each proxy shall be revocable
unless the proxy form conspicuously states that the proxy is
irrevocable and the proxy is coupled with an interest. Each proxy shall
be delivered to the Managers prior to or at the time of the meeting of
Members.
(d) Each Member's percentage voting power shall be in proportion to
its respective Membership Interest.
SECTION 2.11 ACTION WITHOUT A MEETING. Any action required by
the Act to be taken at any meeting of Members, or any action that may
be taken at any meeting of Members, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents
in writing, setting forth the action so taken, shall be signed by the
Members having not fewer than the minimum number of Membership
Interests that would be necessary to take the action at a meeting at
which all Members entitled to vote on the action were present and
voted. Any such writing or writings shall be filed with the minutes
of proceedings of the Members. A telegram, telex, cablegram, email
or similar transmission by a Member, or a photographic, photostatic,
facsimile or similar reproduction of a writing signed by a Member,
shall be regarded as signed by the Member for purposes of this
Section 2.11. The Secretary of the Company shall promptly send
copies of all such writings that effect actions by the Members to
each of the Members.
SECTION 2.12 TELEPHONE MEETINGS. Subject to the provisions of
applicable law and this Agreement regarding notice of meetings,
Members may participate in and hold a meeting by using conference
telephone or similar communications equipment by means of which all
Persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 2.12 shall
constitute presence in person at such meeting, except when a Person
participates in the meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting
was not lawfully called or convened.
SECTION 2.13 CONFIDENTIALITY. Each Member recognizes and
acknowledges that the Company's trade secrets and other confidential
or proprietary information, as they may exist from time to time, are
valuable, special and unique assets of the Company's business.
Accordingly, during the term of the Company's existence and for the
two years subsequent to the term of the Company's existence or the
two years subsequent to a Member's withdrawal from the Company, such
Member shall hold in strict confidence and shall not, directly or
indirectly, disclose or reveal to any Person, or use for its own
personal benefit or for the benefit of anyone else, any trade secrets,
seismic information, geological and geophysical information,
confidential dealings or other confidential or proprietary information
of any kind, nature or description (whether or not acquired, learned,
obtained or developed by such Member alone or in conjunction with
others) belonging to or concerning the Company, or any of its
customers or clients or others with whom they now or hereafter have
a business relationship, except (i) in the course of the proper
performance of a Member's duties hereunder or (ii) as required by
applicable law or legal process. Each Member confirms (i) that all
such information constitutes the exclusive property of the Company
and (ii) the survival of the provisions of this Section 2.13 for
the period subsequent to the term of the Company's existence or the
withdrawal of such Member from the Company.
ARTICLE III
ALLOCATIONS AND DISTRIBUTIONS
SECTION 3.1 ALLOCATION OF PROFITS AND LOSSES. The Members shall share
Company Net Profit and Net Loss and all related items of income, gain,
loss, deduction and credit for U.S. Federal income tax and all other
purposes as follows:
(a) For any Fiscal Year in which the Company has Net Profit, such Net
Profit shall be allocated between the Members in proportion to their
Membership Interests.
(b) For any Fiscal Year in which the Company has Net Loss, such Net
Loss shall be allocated between the Members in proportion to their
Membership Interests.
(c) The Managers shall make the foregoing allocations as of the last
day of each Fiscal Year; provided that if during any Fiscal Year of the
Company there is a change in a Member's interest in the Company, the
Managers shall make the foregoing allocations as of the date of each
such change in a manner that takes into account the varying interests
of the Member and in a manner the Managers reasonably deem appropriate.
SECTION 3.2 DISTRIBUTIONS. The Managers may cause the Company to make
Distributions of funds of the Company that the Managers reasonably
determine are not needed for the payment of existing or foreseeable
Company obligations and expenditures to the Members at such times and
in such amounts as the Managers determine to be appropriate. All
nonliquidating Distributions or dividends (i.e., those other than
Distributions made pursuant to Section 7.2 of this Agreement) shall,
in the absence of the consent of the Members pursuant to Section
2.10(b), be made only in proportion to the Members' respective
Membership Interests.
ARTICLE IV
MANAGEMENT
SECTION 4.1 MANAGEMENT OF THE COMPANYERROR! BOOKMARK NOT DEFINED.. The
initial Member hereby appoints the following persons to serve as the
initial Managers of the Company: Xxxxx X. Xxxxxxx, III, Xxxxxxx X.
Xxxx and Xxxx X. Xxxxxx. The xxxxxx of the Company shall be
exclusively exercised by and under the exclusive authority of, and the
business and affairs of the Company shall be managed under the
exclusive direction of, the Managers of the Company. The Managers
shall have the power and authority to do or cause to be done any and all
acts deemed by the Managers to be necessary or appropriate to conduct the
business of the Company, including the authority to bind the Company in
making contracts and incurring obligations in the Company's name in the
course of the Company's business, without obtaining the consent of the
Members. The Managers shall, subject to the provisions of this
Agreement and the availability of cash funds of the Company, use
reasonable efforts to implement the Company's then applicable business
plan, and, subject to the provisions of this Agreement, shall have all
right, power and authority to do so. The Managers shall act by the
consent or approval, as applicable, of a majority of the Managers.
SECTION 4.2 DUTIES AND SERVICES OF A MANAGER. Each Manager shall comply
in all respects with the terms of this Agreement. In the conduct of the
business and operations of the Company, each Manager shall (a) use
reasonable good faith efforts to cause the Company (i) to comply with
the terms and provisions of all agreements to which the Company is a
party or to which its properties are subject, (ii) to comply with all
applicable laws to which the Company is subject and (iii) to obtain
and maintain all licenses, permits, franchises and other governmental
authorizations necessary with respect to the ownership of Company
properties and the conduct of the Company's business and operations and
(b) attend to other day-to-day affairs of the Company. Managers shall
be obligated to perform the duties, responsibilities and obligations
of a Manager hereunder only to the extent that funds of the Company are
available therefor.
SECTION 4.3 RELIANCE BY MANAGER. Consistent with each Manager's duties
and responsibilities as Manager hereunder, each Manager may rely and
shall be protected in acting or refraining from acting upon any
certificate, instrument, opinion, report, notice, request, consent,
order, bond, debenture or other substantially similar third party paper
or document reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties. Consistent with
such Manager's duties and responsibilities as Manager hereunder,
Managers may consult with legal counsel (which may include legal
counsel who are employees of such Manager), and third party
accountants, appraisers, management consultants, engineers and other
consultants and advisers reasonably selected by it. No Manager
shall have liability for any action taken or suffered or omitted
hereunder in good faith and in reasonable reliance upon, and in
accordance with, the opinion of any such persons as to matters
within such person's professional or expert competence.
SECTION 4.4 AUTHORITY OF MANAGERS. The Managers shall not have the
authority or power to act as agent for or on behalf of the Company
or any other Manager or Member, to do any act which would be binding
on the Company or any other Manager or Member, to incur any
expenditures on behalf of or for the Company, or to execute, deliver
and perform any agreements, acts, transactions or other matters on
behalf of the Company unless specifically authorized by a resolution
duly adopted by a majority of the Managers.
SECTION 4.5 NUMBER AND QUALIFICATIONS OF MANAGERS. There shall be
three initial Managers of the Company, which number may be increased
or decreased from time to time by the vote or consent of the Members
holding a majority of the Membership Interests then outstanding. No
decrease in the number of Managers shall have the effect of shortening
the term of any incumbent Manager unless the Members holding a
majority of the Membership Interests then outstanding otherwise agree.
None of the Managers need be Members of the Company or residents of the
State of Delaware.
SECTION 4.6 ELECTION AND TERM OF SERVICE. At the date hereof, the
initial Managers of the Company are as stated in this Section 4.1.
Each Manager elected shall serve as Manager until a successor shall
have been elected by the Members holding a majority of the Membership
Interests then outstanding or until such Manager's earlier death,
resignation, retirement, disqualification or removal in accordance
with this Agreement.
SECTION 4.7 REMOVAL; FILLING OF VACANCIES. Any or all of the Managers
may be removed, either for or without cause, at any meeting of the
Members called expressly for that purpose, by the affirmative vote of
those Members holding a majority of the Membership Interests then
outstanding. Any vacancy occurring among the Managers resulting from
the death, resignation, retirement, disqualification or removal from
office of any Manager, as the result of an increase in the number of
Managers, or otherwise, may be filled by a person or persons
designated in writing by all the Members.
SECTION 4.8 PLACE OF MEETINGS; CHAIRMAN. Meetings of the Managers,
either regular or special, may be held either within or without the
State of Delaware. The Managers may designate one of the Managers
to serve as the Chairman of the Managers. The Chairman of the
Managers, if one has been designated by the Managers, shall preside
when present at meetings of the Managers.
SECTION 4.9 REGULAR MEETINGS. Regular meetings of the Managers, of
which no notice shall be necessary, shall be held at such times and
places as may be fixed from time to time by resolution adopted by
the Managers. Except as otherwise provided by statute or this
Agreement, any and all business may be transacted at any regular
meeting.
SECTION 4.10 SPECIAL MEETINGS. Special meetings of the Managers may
be called by any Manager or the President of the Company on not
less than twenty-four (24) hours' notice to each Manager, either
personally or by telegram, telephone, telefax or similar communication.
Only business within the purpose or purposes described in the notice
of special meeting of Managers may be conducted at the meeting.
SECTION 4.11 QUORUM OF AND ACTION BY MANAGERS. At all meetings of
the Managers, the presence of a majority of the number of Managers
fixed by or in the manner provided in this Agreement shall be necessary
to constitute a quorum for the transaction of business, except as
otherwise provided by statute. The act of a majority of the Managers
present at a meeting at which a quorum is present shall be the act
of the Managers unless the act of a greater number is required by
statute or this Agreement. If a quorum shall not be present at any
meeting of the Managers, the Managers present thereat may adjourn
the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present. At any such
adjourned meeting any business may be transacted that might have been
transacted at the meeting as originally convened.
SECTION 4.12 ACTION WITHOUT A MEETING. Unless otherwise restricted
by this Agreement, any action required or permitted to be taken at
any meeting of the Managers may be taken without a meeting, if all
Managers consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Managers.
SECTION 4.13 TELEPHONE MEETINGS. Subject to the provisions of
applicable law and this Agreement regarding notice of meetings,
the Managers may participate in and hold a meeting of Managers by
using conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section
shall constitute presence in person at such meeting, except when a
person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that
the meeting was not lawfully called or convened.
SECTION 4.14 COSTS AND EXPENSES. Subject to the other express
provisions of this Agreement, all costs and expenses reasonably
incurred in the Company's business shall be paid from Company funds,
including costs of preparing Company tax returns, costs of reports
to Members, reasonable outside legal costs, interest expense,
general and administrative expenses, operating expenses, marketing
costs, taxes and other costs and expenses of the Company. In
conducting the business and operations of the Company, a Manager
may use its own or its Affiliates' personnel (including consultants
retained by such Manager or its Affiliates), properties and equipment;
provided that any such services, properties or equipment utilized by
such Manager on behalf of the Company shall be for such consideration
and on such terms and conditions that are no less favorable than
those available from third parties and that such Manager determines
in good faith to be in the best interests of the Company.
SECTION 4.15 MANAGER'S COMPENSATION. The Manager shall not
receive or be entitled to receive any compensation from the
Company for its service as such. Nothing herein contained shall be
construed to preclude the Manager or its Affiliates from serving the
Company in any other capacity and receiving compensation therefore.
SECTION 4.16 INTERESTED MEMBERS, MANAGER AND OFFICERS; OUTSIDE
ACTIVITIES.
(a) No contract or transaction between the Company and one or more of
its Members, Managers or officers or between the Company and any other
corporation, partnership, association, or other organization in which
one or more of its Members, Managers or officers are shareholders,
partners, members, directors, managers or officers, or have a
financial interest, shall be void or voidable solely for this reason,
or solely because the Member, Manager or officer is present at or
participates in the meeting of the Members or the determination of
the Managers, as the case may be, that authorizes the contract or
transaction, or solely because his or their votes are counted for
such purpose, if, in addition to any other requirement for approval set
forth in this Agreement:
(1) the material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the Managers, and
a majority of the Managers in good faith authorize the contract or
transaction; or (2) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed or are
known to the Members entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by the vote of
Members holding not less than a majority of the outstanding Membership
Interests of the Company; or (3) the contract or transaction is fair as
to the Company as of the time it is authorized, approved or ratified by
the Managers or the Members. Interested Members may be counted in
determining the presence of a quorum at a meeting of the Members that
authorizes the contract or transaction.
(b) Subject to the other express provisions of this Agreement, any
Manager may engage in and possess interests in other business ventures
of any and every type and description, independently or with others,
and neither the Company nor any of its Members shall have any right,
title or interest in or to such independent ventures. No Manager shall
by virtue of this Agreement have an obligation to offer any such
business activity or venture to the Company. No Manager shall by
virtue of this Agreement have any duty to refrain from engaging in,
nor any duty to offer to the Company, any business opportunity of such
Manager regardless of the scope of the Company's activities.
SECTION 4.17 TIME DEVOTED TO COMPANY. Each Manager shall devote such
time to Company business as he deems necessary to manage, supervise
and conduct Company business and affairs in an efficient manner; but
nothing in this Agreement shall preclude, subject to any approval
requirements set forth in this Agreement, the employment of any
officer, employee, agent, third party, or affiliate to manage or
provide other services with respect to the Company's assets or
business as the Managers shall determine.
SECTION 4.18 LIABILITY OF MANAGER. No Manager shall be liable for the
debts, liabilities, contracts or other obligations of the Company.
ARTICLE V
OFFICERS
SECTION 5.1 OFFICERS. The Managers may designate one or more
individuals to serve as officers of the Company. The Company shall
have such officers as the Managers may from time to time determine,
which officers may (but need not) include a President, one or more
Vice Presidents (and in case of each such Vice President, with such
descriptive title, if any, as the Managers deem appropriate),
a Secretary, a Treasurer and one or more Assistant Secretaries and
Assistant Treasurers. Any two or more offices may be held by the same
person.
SECTION 5.2 COMPENSATION. The compensation, if any, of all officers
of the Company shall be fixed from time to time by the Managers.
The Managers may from time to time delegate to the President the
authority to fix the compensation of any or all of the other officers
of the Company.
SECTION 5.3 TERM OF OFFICE; REMOVAL; FILLING OF VACANCIES. Each
officer of the Company shall hold office until his successor is
chosen and qualified in his stead or until his earlier death,
resignation, retirement, disqualification or removal from office.
Any officer designated by the Managers may be removed at any time
by the Managers whenever in their judgment the best interests of the
Company will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Designation of an officer shall not of itself create contract rights.
If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Managers.
SECTION 5.4 PRESIDENT. The President, if one is designated by the
Managers, shall be the chief executive officer of the Company and,
subject to the provisions of this Agreement, shall have general
supervision of the affairs of the Company and shall have general
and active control of all its business. Except as otherwise provided
by statute, the Certificate of Formation or this Agreement, the
President shall have power and general authority to execute bonds,
deeds and contracts in the name of the Company; to cause the
employment or appointment of such employees and agents of the
Company as the proper conduct of operations may require and to
fix their compensation; to remove or suspend any employee or agent
who shall have been employed or appointed under his authority or
under authority of an officer subordinate to him; to suspend for cause,
pending final action by the authority that shall have elected or
appointed him, any officer subordinate to the President; and in
general to exercise all the powers usually appertaining to the office
of president of a corporation. In the event of the absence or
disability of the President, his duties shall be performed and his
powers may be exercised by such other officers of the Company as
shall be determined by the Managers.
SECTION 5.5 VICE PRESIDENTS. Each Vice President that is designated by
the Managers shall generally assist the President and shall have such
powers and perform such duties and services as shall from time to time
be prescribed or delegated to him by the President or the Managers.
The Managers may from time to time appoint certain Vice Presidents who
may have special designations, such as "Senior Vice President", "Vice
President - Operations" and the like. Vice Presidents having such
special designations shall have such powers and perform such duties
and services as shall from time to time be prescribed or delegated by
the President or the Managers.
SECTION 5.6 SECRETARY AND ASSISTANT SECRETARIES. The Managers shall
designate the Secretary of the Company, who shall attend all meetings
of the Members, shall see that notice is given of all meetings of the
Members and shall keep and attest true records of all proceedings at
all meetings of the Members. The Secretary shall have authority to
attest any and all instruments or writings on behalf of the Company.
The Secretary shall keep and account for all books, documents,
papers and records of the Company except those for which some other
officer or agent is properly accountable. The Secretary shall
generally perform all duties usually appertaining to the office of
secretary of a corporation. In the absence or disability of the
Secretary, his duties shall be performed and his powers may be
exercised by the Assistant Secretaries of the Company, in the order
of their seniority, unless otherwise determined by the President, the
Secretary or the Managers. Each Assistant Secretary that is
appointed by the Managers shall generally assist the Secretary and
shall have such powers and perform such duties as shall from time to
time be prescribed or delegated to him by the Secretary, the
President or the Managers.
SECTION 5.7 TREASURER AND ASSISTANT TREASURERS. The Treasurer, if one
is designated by the Managers, shall supervise the books of account of
the Company and their arrangement and classification. The Treasurer
shall have the care and custody of all monies, funds and securities of
the Company; shall deposit or cause to be deposited all such funds in
and with such depositories as the Managers shall from time to time
direct or as shall be selected in accordance with procedures
established by the Managers; and shall advise upon all terms of
credit granted by the Company. He shall have the power to endorse
for deposit or collection or otherwise all checks, drafts, notes,
bills of exchange and other commercial paper payable to the Company
and to give proper receipts or discharges for all payments to the
Company. The Treasurer shall generally perform all duties usually
appertaining to the office of treasurer of a corporation. In the
absence or disability of the Treasurer, his duties shall be performed
and his powers may be exercised by the Assistant Treasurers of the
Company, if any, in the order of their seniority, unless otherwise
determined by the President, the Treasurer or the Managers. Each
Assistant Treasurer appointed by the Managers shall generally assist
the Treasurer and shall have such powers and perform such duties as
shall from time to time be prescribed or delegated to him by the
Treasurer, the President or the Managers.
SECTION 5.8 ADDITIONAL POWERS AND DUTIES. In addition to the foregoing
especially enumerated duties, services and powers, the several officers
of the Company shall perform such other duties and services and
exercise such further powers as may be provided by statute, the
Certificate of Formation or this Agreement, or as the Managers may
from time to time determine or as may be assigned to them by any
competent superior officer.
SECTION 5.9 LIMITATIONS ON POWERS AND DUTIES OF OFFICERS.
Notwithstanding the foregoing especially enumerated duties, services
and powers, the several officers of the Company shall not have the
power and authority to cause the Company to take any action that
requires the approval of the Members pursuant to Section 2.10 unless
the Members have specifically approved such action.
ARTICLE VI
ACCOUNTING AND TAX MATTERS; BANKING; REPORTS
SECTION 6.1 BOOKS AND RECORDS; CAPITAL ACCOUNTS. (a) The Managers
shall maintain or cause the Company to maintain books and records as
required and in accordance with Section 18-305 of the Act, and shall
make or cause to be made such records available to the Members upon
request thereby. All requests made by Members pursuant to this
Section 6.1 shall be directed to the Secretary of the Company at
the Company's principal place of business. The Managers and officers
of the Company shall keep books of account for the Company in
accordance with generally accepted accounting principles consistently
applied in accordance with the terms of this Agreement and, to the
extent inconsistent therewith, in accordance with federal income tax
accounting rules as provided in this Agreement.
(b) An individual capital account (a "Capital Account") shall be
maintained by the Company for each Member as provided below:
(i) Each Member's Capital Contributions when made shall be
credited to such Member's Capital Account. The Capital Account of each
Member shall, except as otherwise provided herein, be (A) credited with
the amount of any cash contributed to the Company by such Member; (B)
credited with the fair market value of any property contributed to the
Company by such Member (net of liabilities secured by such contributed
property that the Company is considered to assume or take subject to
under Section 752 of the Internal Revenue Code), (C) credited with the
amount of any item of taxable income or gain and the amount of any
item of income or gain exempt from tax allocated to such Member for
federal income tax purposes, (D) debited by the amount of any item of
deduction or loss allocated to such Member for federal income
tax purposes, (E) debited by such Member's allocable share of
expenditures described in Section 705(a)(2)(B) of the Internal Revenue
Code, and (F) debited by the amount of cash or the fair market value
of any property distributed to such Member (net of liabilities
secured by such distributed property that such Member is considered
to assume or take subject to under Section 752 of the Internal
Revenue Code).
(ii) Any adjustments of basis of Company property provided for
under Sections 734 and 743 of the Internal Revenue Code and comparable
provisions of state law (resulting from an election under Section 754
of the Internal Revenue Code or comparable provisions of state law)
shall not affect the Capital Accounts of the Members, except to the
extent required by Treasury Regulation Section 1.704-1(b)(2)(iv)(m),
and the Members' Capital Accounts shall be debited or credited
pursuant to the terms of this Section 6.1(b) as if no such election
had been made.
(iii) Capital Accounts shall be adjusted, in a manner consistent
with this Section 6.1(b), to reflect any adjustments in items of Company
income, gain, loss or deduction that result from amended returns filed
by the Company or pursuant to an agreement by the Company with the
Internal Revenue Service or a final court decision.
(iv) In the case of property contributed to the Company by a
Member, the Members' Capital Accounts shall be debited or credited in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g) for
items of depreciation, cost recovery, amortization, and gain or loss
with respect to such property computed in the same manner as such items
would be computed if the adjusted tax basis of such property were equal
to its fair market value on the date of the contribution of the property
to the Company, in lieu of the adjustments to the Capital Accounts
otherwise provided in this Section 6.1(b) for such items.
(v) It is the intention of the Members that the Capital Accounts
of each Member be kept in the manner required under Treasury Regulation
Section 1.704-1(b)(2)(iv). To the extent any additional adjustment to
the Capital Accounts is required by such Regulation, the Manager is
hereby authorized to make such adjustment after notice to the Members.
SECTION 6.2 TAX RETURNS. The Managers shall prepare or cause to be
prepared and timely file all federal, state and local income and other
tax returns and reports as may be required as a result of the business
of the Company. Within 90 days after the end of each Fiscal Year of
the Company, the Company shall cause to be delivered to each Member
information pertaining to the Company and its operations for the
previous Fiscal Year that is necessary for the Members to accurately
prepare their respective federal and state income tax returns for
such Fiscal Year.
SECTION 6.3 TAX MATTERS MEMBER. The initial Member is hereby
appointed and designated as the tax matters member for the Company
under Section 6231 of the Internal Revenue Code, and if such Member for
any reason becomes unable or unwilling to serve as such, the Managers
shall appoint another Member as the tax matters Member of the Company
under Section 6231 of the Internal Revenue Code (in either case, the
"TMP"). The TMP is authorized to take such actions and to execute and
file all statements and forms on behalf of the Company that may be
permitted or required by the applicable provisions of the Internal
Revenue Code or Treasury Regulations issued thereunder. The TMP
shall have full and exclusive power and authority on behalf of the
Company to represent the Company (at the Company's expense) in
connection with all examinations of the Company's affairs by tax
authorities, including resulting administrative and judicial
proceedings, and to expend Company funds for professional services
and costs associated therewith. Such power and authority shall
include the power and authority to extend the statute of limitations,
file a request for administrative adjustment and file suit concerning
any Company tax matter. Any settlement agreement proposed, or to be
proposed, relating to any Company tax matter, however, must be
approved by the Manager before being offered or accepted (as the
case may be) by the TMP. The TMP also shall take such action as
may be necessary to cause the other Members to become "notice
partners" within the meaning of Section 6223 of the Internal
Revenue Code.
SECTION 6.4 TAX ELECTIONS. The Managers shall make such elections on
behalf of the Company with respect to federal, state and local tax
matters as the Managers shall determine from time to time.
SECTION 6.5 TAX CHARACTERIZATION. The Members intend that the
Company be characterized and treated as a partnership for, and
solely for, U.S. federal, state and local income tax purposes. For
such purpose, (i) the Company shall be subject to all the provisions
of Subchapter K of Chapter 1 of Subtitle A of the Code, and (ii)
all references to a "Partner," to "Partners" and to the "Partnership"
in the provisions of the Code and Treasury Regulations cited in this
Agreement shall be deemed to refer to a Member, Members and the
Company, respectively. Neither the Company, the Manager nor any
Member shall file an election to classify the Company as an
association taxable as a corporation for federal income tax purposes.
SECTION 6.6 BANK ACCOUNTS; INVESTMENT OF COMPANY FUNDS. The Managers
shall cause one or more accounts to be maintained in the name of the
Company in one or more banks, which accounts shall be used for the
payment of expenditures incurred by or on behalf of the Company and
in which shall be deposited all funds and receipts of the Company.
All amounts shall be and remain the property of the Company and
shall be received, held and disbursed by the Managers or the officers
for the purposes specified in this Agreement. There shall not be
deposited in any of such accounts any funds other than funds
belonging to the Company, and no other funds shall in any way be
commingled with such funds. The Managers may invest the Company
funds in any manner that the Managers deem appropriate.
SECTION 6.7 SIGNATURE OF NEGOTIABLE INSTRUMENTS. All bills, notes,
checks or other instruments for the payment of money shall be
signed or countersigned by such Manager, officer, officers, agent
or agents, and in such manner, as are permitted by this Agreement
and as from time to time may be prescribed (whether generally or
specifically) by the Managers.
SECTION 6.8 RECORDS. The Company shall keep or cause to be kept
appropriate books and records in accordance with the Act with respect
to the Company's business, which books and records shall at all times
be kept at the principal office of the Company. Without limiting the
foregoing, the Company shall keep at its principal office the
following: (a) a current list of the full name and the last known
street address of the Managers and each Member; (b) a copy of the
Certificate of Formation and this Agreement and all amendments
thereto; and (c) such other documents with respect to the Company's
business as the Manager may reasonably determine.
SECTION 6.9 REPORTS. The Company shall deliver to the Members such
financial statements, reports and other information as the Managers
shall determine from time to time or as any Member may reasonably
request.
ARTICLE VII
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 7.1 DISSOLUTION. The Company shall be dissolved upon the
occurrence of any of the following:
(a) The unanimous consent in writing of the Members.
(b) The sale, lease or other disposition of all or substantially
all of the assets of the Company.
(c) The occurrence of any event that makes it unlawful for the
business of the Company to be continued.
(d) The sale of all of the outstanding Membership Interests of the
Company, unless within 90 days after such event the purchasers owning
a majority-in-interest (within the meaning of Treasury Regulation
Section 301.7701-2(b)) give their written consent to continue the
business of the Company on the same terms and conditions provided
in this Agreement by forming a new limited liability company on
terms identical to those set forth in this Agreement.
SECTION 7.2 LIQUIDATION AND TERMINATION. Upon dissolution of the
Company, the Members shall appoint in writing one or more
liquidators who shall have full authority to wind up the affairs
of the Company and make final distribution as provided herein.
The liquidator shall continue to operate the Company properties
with all of the power and authority of a Manager. The steps to be
accomplished by the liquidator are as follows:
(a) As promptly as possible after dissolution, the liquidator
shall cause a proper accounting to be made of the Company's assets,
liabilities and operations through the end of the day on which the
dissolution occurs or the final liquidation is completed, as
appropriate.
(b) The liquidator shall sell such of the assets of the Company
as may be sold on reasonable terms and pay all of the debts and
liabilities of the Company (including all expenses incurred in
liquidation) or otherwise make adequate provision therefor (including
the establishment of a cash escrow fund for contingent liabilities
in such amount and for such term as the liquidator may reasonably
determine). After making payment or provision for all debts and
liabilities of the Company, each Member's Capital Account shall then
be adjusted by (i) assuming the sale of any remaining assets of the
Company for cash at their respective fair market values (as
determined by an appraiser selected by the liquidator) as of the
date of dissolution of the Company and (ii) debiting or crediting
the Member's Capital Account with its respective share of the
hypothetical gains or losses resulting from such assumed sales
in the same manner as such Capital Account would be debited or
credited for gains or losses on actual sales of such assets. The
liquidator shall then by payment of cash or property (valued as of
the date of dissolution of the Company at its fair market value by
the appraiser selected in the manner provided above) make
Distributions to the Members of such amounts as are required to
pay the positive balances of their respective Capital Accounts.
Such a Distribution shall be in cash or in kind as determined by
the liquidator. Any Distribution in kind, to the extent possible
in complying with the foregoing provisions of this subsection (b),
shall be made to each Member in proportion to its Membership
Interest in the assets so distributed. Notwithstanding the
foregoing provisions of this subsection (b) to the contrary,
however, if a Member so elects by notice in writing delivered to
the liquidator, the liquidator shall not sell such Member's interest
in the assets and property of the Company and instead shall
distribute all of such interest, subject to such Member's share
of any Company obligations, to such Member in kind. Any
Distribution to the Members in liquidation of the Company
shall be made by the later of the end of the taxable year in which
the liquidation occurs or ninety (90) days after the date of such
liquidation. For purposes of the preceding sentence, the term
"liquidation" shall have the same meaning as set forth in Treasury
Regulation Subsection 1.704-1(b)(2)(ii) as in effect at such time.
(c) No Member shall be obligated to restore a negative balance
in its Capital Account at any time.
(d) Except as expressly provided herein, the liquidator shall
comply with any applicable requirements of the Act, including
Sections 18-803 and 18-804 thereof, and all other applicable laws
pertaining to the winding up of the affairs of the Company and
the final Distribution of its assets.
(e) The Distribution of cash and/or property to the Members in
accordance with the provisions of this Section 7.2 shall constitute
a complete return to the Members of their Capital Contributions and
a complete Distribution to the Members of their interest in the
Company and all Company property, save and except for any contingent
future interest that the Members may have in any cash or property
placed in an escrow fund to satisfy contingent liabilities that
ultimately is not used therefor.
ARTICLE VIII
RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTERESTS
SECTION 8.1 RESTRICTIONS ON TRANSFER. No Member or any assignee of
any Member, as the case may be, shall sell, transfer, assign,
hypothecate, make gifts of, or in any manner dispose of, encumber,
or alienate ("Transfer") any Membership Interest, or any right or
interest therein, without the prior written consent of the other
Members, the granting or denying of which shall be in such other
Members' sole discretion. Any such attempted Transfer not permitted
hereunder shall be null and void AB INITIO.
SECTION 8.2 INVOLUNTARY ASSIGNMENT BY MEMBER. In the event that a
Member's Membership Interest is taken or disturbed by levy,
foreclosure, charging order, execution or similar proceeding, the
assignee of a Member's Membership Interest shall be entitled to no
more than to receive distributions subject to the provisions of
this Agreement, and profits and losses attributable to the
Member's Membership Interest in the Company in accordance with
this Agreement and in no event shall such assignee have the right
to interfere with the management or administration of the Company
business or affairs or to become a substitute Member.
SECTION 8.3 ASSIGNEE'S TAX LIABILITY. An assignee of any Membership
Interest shall receive the federal and all relevant state Forms K-1
and report all income and loss on his, her or its income tax returns
each year in accordance the Rev. Rul, 77-137, 1977-1 C.B. 178.
SECTION 8.4 SPECIFIC PERFORMANCE. Each of the parties to this
Agreement acknowledges that it shall be impossible to measure in
money the damage to the Company or the Member(s), if any of them
or any transferee of any party hereto fails to comply with any
of the restrictions or obligations imposed by this Article VIII,
that every such restriction and obligation is material, and that
in the event of any such failure, the Company or the Member(s)
shall not have an adequate remedy at law or in damages. Therefore,
each Member consents to the issuance of an injunction or the
enforcement of other equitable remedies against such Member at
the suit of an aggrieved party without the posting of any bond or
other security, to compel specific performance of all of the terms
of this Article VIII and to prevent any disposition of Membership
Interests in contravention of any terms of this Article VIII, and
waives any defenses thereto, including the defenses of: (i)
failure of consideration; (ii) breach of any other provision of
this Agreement; and (iii) availability of relief in damages.
SECTION 8.5 MEMBERS OF RECORD; RELATED MATTERS. The Company, its
Managers, and officers will be entitled to consider the owner of any
Membership Interest as set forth in the books and records of the
Company as the absolute owner thereof for all purposes. Neither
the Company nor its Managers or officers will incur any liability
for Distributions of cash or other property made in good faith to
the owner of a Membership Interest until such time as a written
assignment of such Membership Interest has been received and accepted
by the Company and such assignment has been recorded in the books
and records of the Company and upon surrender to and cancellation
of the certificate for such Membership Interest, accompanied by
an assignment or transfer by the Member. In no event will any
purported Transfer of any Membership Interest, by operation of
law or otherwise, require the Company or its Managers or officers
to account to more than one Person with respect to such transferred
Membership Interest. In the event of a permitted Transfer of a
Membership Interest by a Member, allocations between the assignor
and assignee of deductions, credits and income of the Company for
federal, state and local income tax purposes shall be based on the
portion of the year during which the assignor and assignee each
owned such Membership Interest.
ARTICLE IX
EXCULPATION AND INDEMNIFICATION
SECTION 9.1 EXCULPATION. No Manager, nor any officer of the Company
or any Member, shall be liable, responsible, or accountable in
damages or otherwise to the Company or any Member by reason of, or
arising from, the operations, business, or affairs of, or any action
taken or failure to act on behalf of, the Company, except to the
extent that any of the foregoing is determined, by a final,
nonappealable order of a court of competent jurisdiction (or by any
other means approved by the Managers) to have been primarily caused
by any Cause of such person; provided that if the Cause of any
person claiming exculpation shall consist of a conviction of or plea
of no contest to a felony, then such person shall not be entitled
to exculpation unless it is determined, by final, nonappealable
order of a court of competent jurisdiction (or by any other means
approved by the Managers) that exculpation should be granted in whole
or part or that such Cause was not the primary cause of any of the
matters for which exculpation is being sought. THE MEMBERS RECOGNIZE
THAT THIS PROVISION SHALL RELIEVE ANY SUCH PERSON FROM ANY AND ALL
LIABILITIES, OBLIGATIONS, DUTIES, CLAIMS, ACCOUNTS AND CAUSES OF
ACTION WHATSOEVER ARISING OR TO ARISE OUT OF ANY ORDINARY NEGLIGENCE
BY ANY SUCH PERSON.
SECTION 9.2 INDEMNIFICATION.
(a) Indemnitees and Indemnifiable Claims. The Company shall
indemnify and hold harmless (i) any Manager, (ii) any Member, (iii)
any Affiliate of any Manager or any Member, or (iv) any officer,
director, employee, agent, stockholder, member or partner of the
Company, a Member or any of its Affiliates (each, an "Indemnitee"),
from and against any claim, loss, damage, liability, or reasonable
expense (including reasonable attorneys' fees, court costs, and costs
of investigation and appeal) suffered or incurred by any such
Indemnitee by reason of, or arising from, the operations, business,
or affairs of, or any action taken or failure to act on behalf of,
the Company, except to the extent any of the foregoing (A) is
determined by final, nonappealable order of a court of competent
jurisdiction (or by any other means approved by the Managers) to
have been primarily caused by any Cause of such person or (B) is
suffered or incurred as a result of any claim (other than a claim
for indemnification under this Agreement) asserted by the Indemnitee
as plaintiff against the Company; provided that if (for purposes of
clause (A) immediately above) the Cause of any person claiming
indemnification shall consist of a conviction of or plea of no
contest to a felony, then such person shall not be entitled to
indemnification unless it is determined, by final, nonappealable
order of a court of competent jurisdiction (or by any other means
approved by the Manager), that indemnification should be granted in
whole or part or that such Cause was not the primary cause of any
of the matters for which indemnification is being sought. THE
MEMBERS RECOGNIZE THAT SUCH INDEMNITEE SHALL BE ENTITLED TO
INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY GIVE RISE TO
NEGLIGENCE.
(b) Advancement of Expenses. Unless a determination has been
made (by final, nonappealable order of a court of competent
jurisdiction or by any other means approved by the Managers) that
indemnification is not required, the Company shall, upon the request
of any Indemnitee and except for any claim of the type described in
clause (B) of Section 9.2(a) of this Agreement, advance or promptly
reimburse such Indemnitee's reasonable costs of investigation,
litigation, or appeal, including reasonable attorneys' fees;
provided that the affected Indemnitee shall, as a condition of
such Indemnitee's right to receive such advances and reimbursements,
undertake in writing to promptly repay the Company for all such
advancements or reimbursements if a court of competent jurisdiction
determines, by final, nonappealable order (or by any other means
approved by the Managers), that such Indemnitee is not then
entitled to indemnification under this Section 9.2. The written
undertaking described in the immediately preceding sentence to
repay the amount paid or reimbursed to an Indemnitee by the Company
must be an unlimited general obligation of the Indemnitee but need
not be secured and it may be accepted without reference to financial
ability to make repayment.
(c) Insurance and Other Sources of Indemnification. The Managers
may cause the Company to purchase and maintain insurance, at the
expense of the Company and to the extent available at commercially
reasonable rates, for the protection of the Indemnitee described
under Section 9.2(a) of this Agreement. All payments that the
Company is obligated to make to any Indemnitee in respect of any
indemnifiable claim under Sections 9.2(a) or 9.2(b) of this Agreement
shall be reduced by all payments made to such Indemnitee in respect
of such claim under any such insurance policy purchased and
maintained by the Company or under any other indemnification
agreement or other arrangement provided for the protection of such
Indemnitee. Without limiting the power of the Company to purchase,
procure, establish or maintain any kind of insurance or other
arrangement, the Company may, for the benefit of persons indemnified
by the Company, (1) create a trust fund; (2) establish any form of
self-insurance; (3) secure its indemnity obligation by grant of a
security interest or other lien on the assets of the Company; or
(4) establish a letter of credit, guaranty or surety arrangement.
The insurance or other arrangement may be purchased, procured,
maintained or established within the Company or with any insurer or
other person deemed appropriate by the Managers regardless of whether
all or part of the stock or other securities of the insurer or other
person are owned in whole or part by the Company. In the absence
of fraud, the judgment of the Managers as to the terms and conditions
of the insurance or other arrangement and the identity of the insurer
or other person participating in an arrangement shall be conclusive
and the insurance or arrangement shall not be voidable and shall not
subject any Manager to liability, on any ground, regardless of whether
such Manager is a beneficiary of the insurance or arrangement.
(d) Settlements. Notwithstanding Section 9.2(a) of this Agreement,
the Company shall not be obligated to make any indemnification payment
to any Indemnitee in respect of any settlement unless such settlement
shall have been approved (i) by a Manager in writing or (ii) by final,
nonappealable order of a court of competent jurisdiction (or by any
other means approved by a Manager).
(e) Source of Funds. The indemnification provided by this Section
9.2 shall be made and shall be recoverable by the Indemnitee only out
of the tangible net assets of the Company and not from the Members.
SECTION 9.3 REPORT TO MEMBERS. Any indemnification of or advance of
expenses to any person in accordance with this Article or the provisions
of any statute shall be reported in writing to the Members within the
three-month period immediately following the date of the indemnification
or advance.
SECTION 9.4 ENTITLEMENT. These indemnification provisions shall inure
to each of the Managers, the Members, officers, employees and agents
of the Company, and to other persons serving at the request of the
Company (as provided in this Article), regardless of whether any such
person ceases to serve as such at any time and whether or not the
claim asserted against any such person is based on matters that
antedate the adoption of this Article, and in the event of any such
person's death, shall extend to such person's legal representatives;
but such rights shall not be exclusive of any other rights to which
any of the foregoing persons may be entitled.
SECTION 9.5 SEVERABILITY. The provisions of this Article are intended
to comply with Section 18-108 of the Act. To the extent that any
provision of this Article authorizes or requires indemnification or
the advancement of expenses contrary to such statutes or the
Certificate of Formation, the Company's power to indemnify or advance
expenses under such provision shall be limited to that permitted by
such statute and the Certificate of Formation and any limitation
required by such statutes or the Certificate of Formation shall not
affect the validity of any other provision of this Article.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 MANNER OF GIVING NOTICE. All notices, demands, requests,
or other communications required or permitted to be given pursuant to
this Agreement, the Certificate of Formation or the Act shall be in
writing and shall be given either (a) by hand delivery, (b) by United
States first class mail, postage prepaid, (c) by electronic facsimile
or (d) by overnight courier service (charges prepaid) with proof of
delivery. Each Member's address for notices and other communications
hereunder shall be that specified by such Member on Exhibit A to this
Agreement or as is otherwise reflected in the books and records of the
Company. Any Member may change its address for notices and
communications by giving notice in writing, stating its new address
for notices, to the Company in accordance with this Section 11.1, and
the Company may change its address for notice and communication by
giving such notice to the Members in accordance with this Section
10.1. Notices sent by hand delivery shall be deemed to have been
given when received; notices mailed in accordance with the foregoing
shall be deemed to have been given five days following the date
mailed; notice sent by electronic facsimile shall be deemed given on
the first business day after electronically confirmed; and notices
sent by overnight courier service shall be deemed to have been given
on the next business day following the date so sent.
SECTION 10.2 WAIVER OF NOTICE. Whenever any notice is required to
be given to any Member or any Manager of the Company under the
provisions of the Act, the Certificate of Formation or this Agreement,
a waiver thereof in writing signed by the Person or Persons entitled
to such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice. Attendance
of a Person at a meeting shall constitute a waiver of notice of such
meeting, except where such Person attends a 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.
SECTION 10.3 NO COMPANY SEAL. The Company shall not be required to
have a Company seal, and no agreement, instrument or other document
executed on behalf of the Company that would otherwise be valid and
binding on the Company shall be invalid or not binding on the
Company solely because no Company seal is affixed thereto.
SECTION 10.4 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
applicable to contracts to be performed therein, without regard to
principles of conflicts of laws thereof.
SECTION 10.5 AMENDMENTS. This Agreement may be amended only with the
written consent of all of the Members.
SECTION 10.6 SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised
a part of this Agreement; and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance
from this Agreement. Furthermore, in lieu of each such illegal,
invalid or unenforceable provision, there shall be added automatically
as a part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
IN WITNESS WHEREOF, the undersigned initial Member has executed this
Agreement as of the Effective Date.
MEMBER:
KLT GAS, INC.
By:
/s/Xxxxx X.Xxxxxxx
Name:Xxxxx X. Xxxxxxx
Title:President
EXHIBIT A
NAME AND ADDRESS Percentage
OF MEMBER Interest Contribution
KLT Gas, Inc. 100% All of its right, title and
10740 Xxxx, Suite 230 interest in those certain
Overland Park, Kansas properties located in Xxxxx,
66211 Doniphan, Xxxxxxx and
Jefferson Counites, Kansas
and Nemaha County,
Phone (000) 000-0000 Nebraska (including those
Fax (000) 000-0000 properties acquired from
Xxxxxxx Energy Corporation)
