EXHIBIT 10.20
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OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
DATED JUNE 23, 2004
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OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
THIS OPERATING AGREEMENT (this "Agreement"), dated June 23, 2004, is
entered into by and between Touchstone Resources USA, Inc., a Delaware
corporation ("Touchstone Resources"), as a Member and Manager, and PHT Gas, LLC,
a Delaware limited liability company ("PHT Gas"), as a Member.
RECITALS
WHEREAS, the Members desire to form a limited liability company under
the Act to engage in any lawful act or activity, either alone or with other
businesses or purposes, for which limited liability companies may be organized
under the Act; and
WHEREAS, the initial Members wish to provide for the administration of
the business and affairs of the Company and the rights and obligations of the
Members with respect thereto;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, mutually agree as follows:
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
definitions ascribed to them herein:
"Act" shall mean the Delaware Limited Liability Company Act, Ch. 18, Tit. 6,
Sec. 18-101, et seq. (the "Act") and any successor statutes, as amended.
"Additional Capital" shall have the meaning ascribed to such term in Section
3.4(b).
"Additional Member" shall have the meaning ascribed to such term in Section 2.3.
"Capital Account" shall mean the dollar amount of the Member's claim on the
capital of the Company (or, if the Member has a negative Capital Account, the
Company's claim on the capital of the Member).
"Capital Contributions" shall mean any contributions of cash, non-cash property
and services and the promises of cash, non-cash property and services, made to
the Company by a Member.
"Certificate" shall have the meaning ascribed to such term in Section 1.2.
"Class A Member" shall have the meaning ascribed to such term in Section 2.2.
"Class A Percentage Interest" shall mean the fraction (expressed as a
percentage), the numerator of which is the Percentage Interest of the applicable
Class A Member and the denominator of which is the aggregate Percentage Interest
of all Class A Members on the applicable date of computation.
"Class B Member" shall have the meaning ascribed to such term in Section 2.2.
"Class B Percentage Interest" shall mean the fraction (expressed as a
percentage), the numerator of which is the Percentage Interest of the applicable
Class B Member and the denominator of which is the aggregate Percentage Interest
of all Class B Members on the applicable date of computation.
"Class C Member" shall have the meaning ascribed to such term in Section 2.2.
"Class C Percentage Interest" shall mean the fraction (expressed as a
percentage), the numerator of which is the Percentage Interest of the applicable
Class C Member and the denominator of which is the aggregate Percentage Interest
of all Class C Members on the applicable date of computation.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Maverick Basin Exploration, LLC, a Delaware limited
liability company.
"Confidential Information" shall mean the terms of this Agreement, information
that the Company maintains in confidence, information that the Managers know to
be proprietary to the Company, financial information relating to the Company and
to the Managers, information relating to Company marketing and business plans
and strategies, information concerning the design and manufacture of Company
products and concerning methods of providing Company services, information in
Company personnel files and similar files relating to Company Managers and
employees, information entrusted to the Company in confidence by third parties,
and information reasonably designated by the Managers as Confidential
Information
"Dissolution" shall mean the cessation of the Company's normal business
activities and the beginning of the process of winding up its business and
internal affairs and of liquidating it.
"Distributable Cash" shall mean amounts determined by the Manager, as being
available out of all cash received by the Company from all sources for
distribution to the Members after (1) all expenditures by the Company, including
capital expenditures, are paid, (2) all current debt is paid, and (3) there are
made such additions to the reserves of the Company for contingencies, working
capital or future expansion needs as the Manager may reasonably determine to be
necessary.
"Distribution" shall mean a transfer of Distributable Cash to a Member in the
Member's capacity as a member in cash, by check or otherwise. Payments
specifically identified in this Agreement as compensation to the Members for
services to or on behalf of the Company shall not be deemed to be Distributions
within the meaning of this Agreement.
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"Effective Date" shall have the meaning ascribed to such term in Section 1.1.
"Incapacity" shall mean: (i) with respect to a natural Person, the bankruptcy,
death, disability or incompetency of such Person, and (ii) with respect to any
other Person, the bankruptcy, liquidation, dissolution or termination of such
Person.
"Management Rights" shall mean all rights of a Member as a member except the
Member's right to receive allocations of Company Profits and Losses and
Distributions of Company assets.
"Manager" or Managers" means any Person or Persons elected by the Members as a
manager of the Company as provided in this Agreement or appointed as such in
this Agreement, but does not include any Person who has ceased to be a Manager.
"Member" means any Person executing this Agreement as of the date of this
Agreement as a member or hereafter admitted to the Company as a member as
provided in this Agreement, but does not include any Person who has ceased to be
a member in the Company.
"Membership Interest" shall mean a Member's share of the Company's Profits and
Losses, and the Member's right to receive Distributions of the Company's assets.
"Membership Rights" shall have the meaning ascribed to such term in Section 2.5.
"Non-Contributing Member" shall have the meaning ascribed to such term in
Section 3.4(b).
"Percentage Interest" means, with respect to any Member, the Percentage Interest
set forth opposite such Member's name on Schedule A attached hereto.
"Person" means a natural person, partnership (whether general or limited),
limited liability company, trust, estate, association, corporation, custodian,
nominee, or any other individual or entity in its own or any representative
capacity.
"Proceeding" shall have the meaning ascribed to such term in Section 9.2.
"Profits" and "Losses" shall mean the taxable income and losses, respectively,
of the Company as determined for Federal income tax purposes in accordance with
the accounting method followed by the Company for such purposes, adjusted as
follows: (i) any expenditures of the Company described in Section 705(a)(2)(B)
of the Code, or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulation Section 1.704(b)(2)(iv)(i), shall be subtracted from such
taxable income or losses, and (ii) if property is reflected on the books of the
Company at a book value that differs from the adjusted tax basis of such
property, depreciation, amortization and gain or loss with respect to such
property shall be determined by reference to such book value.
"Substituted Member" shall mean a transferee of any economic and non-economic
rights of an existing Member.
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"Unlawful Distribution" shall have the meaning ascribed to such term in Section
4.5.
SECTION 1
PRELIMINARY PROVISIONS
1.1 Intentionally Omitted
1.2 Acceptance of Certificate of Formation
Each initial Member hereby acknowledges that the initial Member has
carefully reviewed the Certificate of Formation of the Company (the
"Certificate") and that each of its provisions is acceptable to the initial
Member.
1.3 Amendment of Agreement and Certificate
Except as otherwise expressly provided in this Agreement, no amendment
of the Agreement or the Certificate shall be valid unless it is in writing and
signed by all of the Members.
1.4 Formation
On or promptly after the date of this Agreement, the initial Members
shall cause the Certificate to be filed with the Secretary of State of the State
of Delaware.
1.5 Entity Status
Upon its formation, the Company shall be a legal entity separate and
distinct from its Members.
1.6 Name
The name of the Company shall be "Maverick Basin Exploration, LLC."
1.7 Principal Office
The principal office of the Company shall be ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such place or places
as the Managers may designate from time to time. The Company may have such other
offices and places of business as the Managers may designate from time to time.
1.8 Registered Office; Registered Agent
The registered office of the Company required by the Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not
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be a place of business of the Company) as the Managers may designate from time
to time in the manner provided by law. The registered agent of the Company in
the State of Delaware shall be the initial registered agent named in the
Certificate or such other Person or Persons as the Managers may designate from
time to time in the manner provided by law.
1.9 Purpose
The Company's principal purpose shall be to acquire, explore, drill and
develop domestic natural gas and oil properties, and to engage in any other
business activity that now or hereafter may be necessary, appropriate,
desirable, incidental, advisable or convenient to accomplish the foregoing
purpose (including obtaining financing therefor), and that is not forbidden by
the Act or the law of the jurisdiction in which the Company engages in business.
1.10 Powers
In pursuing its lawful purposes, the Company shall be empowered to do
all things that limited liability companies are permitted to do under the Act.
1.11 Foreign Qualifications
Prior to the Company conducting business in any jurisdiction other than
Delaware, the Managers shall cause the Company to comply, to the extent
procedures are available and those matters are reasonably within the control of
the Managers, with all requirements necessary to qualify the Company as a
foreign limited liability company in that jurisdiction. At the request of the
Managers, each Member shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Agreement that are
necessary or appropriate to qualify, continue, and terminate the Company as a
foreign limited liability company in all such jurisdictions in which the Company
may conduct business
1.12 Management Structure
The management of the business and internal affairs of the Company
shall be reserved to one or more Managers. Except as otherwise provided in this
Agreement, only the Managers may bind the Company and decide matters relating to
the Company's business and internal affairs, provided that the Members shall
have voting rights, information rights and dispute resolution rights provided in
this Agreement and by law. The Members may change the number of the Company's
Managers at any time upon the affirmative vote of Members holding a majority of
Member votes.
1.13 Limited Liability of Members and Managers
No Member or Manager shall be personally obligated to any third party
for any debt, obligation or liability of the Company solely by reason of being a
Member or Manager. Members and Managers shall be liable for their personal
conduct as provided by law.
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1.14 Business Activities and Ventures of Members and Managers
Each Member, Manager and officer of the Company at any time and from
time to time may engage in and possess interests in other business activities
and ventures of any and every type and description, independently or with
others, including ones in competition with the Company, with no obligation to
offer to the Company or any other Member, Managers or officers the right to
participate therein, and neither the Company nor the other Members, Manager or
officers shall have any rights in such other business activities and ventures.
The Company may transact business with any Manager, Member, officer or affiliate
thereof, provided the terms of those transactions are no less favorable than
those the Company could obtain from unrelated third parties.
1.15 Annual Accounting Period
The Company's fiscal year for financial and tax purposes shall be the
calendar year.
1.16 Method of Accounting
The Company shall use the accrual method of accounting to compute its
taxable income.
1.17 Business Asset Protection
The Members intend that to the maximum extent permitted by the Act and
by other applicable law, the assets of the Company shall be unavailable to
satisfy obligations incurred by the Members in their personal capacity.
SECTION 2
MEMBERSHIP IN THE COMPANY;
TRANSFERS AND PLEDGES OF MEMBERSHIP RIGHTS;
MEMBERS' VOTING RIGHTS
2.1 Identity of Initial Members
The initial Members are as set forth on Schedule A attached hereto.
2.2 Classes of Members
The Company shall have three (3) classes of Members: Class A Members
("Class A Members"), Class B Members ("Class B Members") and Class C Members
("Class C Members"). The initial Class A Member and Class B Member shall be
Touchstone Resources. The initial Class C Member shall be PHT Gas. Except as
otherwise expressly provided in this Agreement, each Member shall have the same
rights, duties, privileges, authority and liabilities as each other Member.
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2.3 Admission of Additional Members
The Members shall admit no Person as an additional Member of the
Company after the Company's formation (an "Additional Member") except upon the
affirmative vote of Members holding a majority of Member votes.
2.4 Execution of This Agreement by Substituted Member
No Person shall be admitted as an Additional or Substituted Member of
the Company until the Additional or Substituted Member signs this Agreement (as
it may be amended from time to time before the admission of the Additional or
Substituted Member).
2.5 Membership Rights
For purposes of this Agreement, the membership rights of a Member (the
"Membership Rights") shall mean the totality of a Member's rights as a member
under the Agreement and the Act, including both economic and non-economic
rights.
2.6 Lack of Authority
No Member shall have any power or authority, in his or her capacity as
a Member, to represent, act for, sign for, or bind the Managers or the Company,
or to do any act that would be binding on the Company, or to incur any
expenditures or obligations on behalf of the Company. Except when acting as a
Manager or an officer of the Company, or pursuant to separate service agreements
or other agreements or contracts between the Company and a Member, or as
otherwise specifically provided herein, the Members shall not participate in the
management or control of the Company business, nor shall the Members transact
any business for the Company. The Members hereby consent to the exercise by the
Managers of the powers conferred on the Managers by law and by this Agreement.
2.7 Forum; Remedies
Subject to any contrary provisions in Section 14, any claim against a
Member in the Member's capacity as a member shall be decided in arbitration
under Section 14, and in any such arbitration, the arbitrator may impose any
legal or equitable remedy that the arbitrator determines to be reasonable in the
circumstances.
2.8 Transfers or Pledges of Membership Rights to Substituted
Members
Except with the consent of a majority of the Managers, which consent
the Managers may not unreasonably withhold, no Member shall transfer all or any
part of the Member's rights as a member (whether these rights are economic or
non-economic) to any Substituted Member, including another Member, nor shall any
Member pledge all or any part of such Member's rights to any Person. In the
event that any Membership Interests are transferred in accordance with the
provisions of this Agreement, the transferees of such Membership Interests shall
succeed to the Percentage Interest of its transferor to the extent that it
relates to the transferred Membership Interest.
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2.9 Transfers and Pledges in Breach of This Agreement
Transfers and pledges of Membership Rights in breach of the terms of
this Agreement shall be void and of no effect.
2.10 Right of First Refusal
Except as otherwise provided in this Agreement, the Company may require
a Member to promptly sell all or any part of the Member's Membership Interest to
the Company or to the other Members for its then fair value and upon other
reasonable purchase terms if the Member is dissociated from the Company under
Section 11, or an arbitrator orders such a sale under Section 14 on the ground
that it is fair and reasonable in the circumstances.
2.11 Election Under Code Section 754
Before any Member transfers any Membership rights to any Person, the
Members shall negotiate in good faith and shall agree whether to file an
election under Code Section 754 to adjust the basis of Company property in
connection with that transfer.
2.12 Members' Voting Rights
Except as otherwise expressly provided herein or by law, the
Class A Members shall have the exclusive right to vote on those matters
pertaining to the Company with respect to which Members are entitled to vote,
either under this Agreement or by law, and each Class A Member shall be entitled
to cast that number of votes as shall equal the product of the Class A
Percentage Interest of such Member (expressed as a fraction) multiplied by one
hundred (100). Each matter voted on by the Class A Members shall be decided by
the affirmative vote of Class A Members holding a majority of Class A Member
votes. Except as otherwise expressly provided in this Agreement or by law, the
Class B Members and Class C Members shall not be entitled to any voting rights
on any matters pertaining to the Company.
2.13 Procedures for Member Voting
Members may vote on matters in person, by phone, by fax, by e-mail or
by any other reasonable means. Each Member shall have a reasonable opportunity
to be heard on each matter on which the Members vote. The Managers shall use
their best efforts to record each Member vote accurately and to circulate this
record among the Members promptly after the vote, provided that the failure of
the Managers to circulate this record with respect to any vote shall not be
evidence of the invalidity of the vote. If the chairman of any meeting of
Members appoints one or more inspectors for that meeting, those inspectors shall
perform the Managers' obligations under this Section 2.13.
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2.14 Intentionally Omitted
2.15 Meetings
(a) A quorum shall be present at a meeting of Members if the
holders of a majority of Member votes are represented at the meeting in person
or by proxy. With respect to any matter, other than a matter for which the
affirmative vote of the holders of a specified portion of the Membership
Interests of all Members entitled to vote is required by the Act, the
affirmative vote of a majority of Member votes at a meeting of Members at which
a quorum is present shall be the act of the Members.
(b) All meetings of the Members shall be held at the principal
place of business of the Company or at such other place within or without the
State of Pennsylvania as shall be specified or fixed in the notices or waivers
of notice thereof, provided that any or all Members may participate in any such
meeting by means of conference telephone or similar communications equipment by
means of which all Persons participating in the meeting can hear each other.
(c) Notwithstanding the other provisions of the Certificate or
this Agreement, the chairman of the meeting or the holders of a majority of
Member votes shall have the power to adjourn such meeting from time to time,
without any notice other than announcement at the meeting of the time and place
of the holding of the adjourned meeting. If such meeting is adjourned by the
Members, such time and place shall be determined by a vote of the holders of a
majority of the Member votes. Upon the resumption of such adjourned meeting, any
business may be transacted that might have been transacted at the meeting as
originally called.
(d) Intentionally Omitted.
(e) Special meetings of the Members for any proper purpose or
purposes may be called at any time by the Managers or the holders of at least
ten percent (10%) of Member votes. If not otherwise stated in or fixed in
accordance with the remaining provisions hereof, the record date for determining
Members entitled to call a special meeting is the date any Member first signs
the notice of that meeting. Only business within the purpose or purposes
described in the notice (or waiver thereof) required by this Agreement may be
conducted at a special meeting of the Members.
(f) Written or printed notice stating the place, day and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10) nor
more than sixty (60) days before the date of the meeting, either personally or
by mail, by or at the direction of the Managers or one or more Members calling
the meeting, to each Member. If mailed, any such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the Member,
with postage thereon prepaid.
(g) The date on which notice of a meeting of the Members is
mailed or the date on which the resolution of the Managers declaring a
Distribution is adopted, as the case may be, shall be the record date for the
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determination of the Members entitled to notice of or to vote at such meeting,
including any adjournment thereof, or the Members entitled to receive such
Distribution.
(h) The right of Members to cumulative voting in the election of
Managers is expressly prohibited.
2.16 Voting List
The Managers shall make, at least ten (10) days before each meeting of
the Members, a complete list of the Members entitled to vote at such meeting or
any adjournment thereof, arranged in alphabetical order, with the address of and
the Membership Interests held by each, which list shall be kept on file at the
registered office or principal place of business of the Company and shall be
subject to inspection by any Member at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any Member during the whole
time of the meeting. The original membership records shall be prima-facie
evidence as to the identity of the Members entitled to examine such list or
transfer records or to vote at any meeting of Members. Failure to comply with
the requirements of this Section shall not affect the validity of any action
taken at the meeting.
2.17 Proxies
A Member may vote either in person or by proxy executed in writing by
the Member. A telegram, telex, cablegram 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. Proxies for use at any meeting of Members or in connection with
the taking of any action by written consent shall be filed with the Managers,
before or at the time of the meeting or execution of the written consent, as the
case may be. All proxies shall be received and taken charge of and all ballots
shall be received and canvassed by the Managers, who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or inspectors shall have
been appointed by the chairman of the meeting, in which event such inspector or
inspectors shall decide all such questions. No proxy shall be valid after twelve
(12) months from the date of its execution unless otherwise provided in the
proxy. A proxy shall be revocable unless the proxy form conspicuously states
that the proxy is irrevocable and the proxy is coupled with an interest. Should
a proxy designate two or more Persons to act as proxies, unless that instrument
shall provide to the contrary, a majority of such Persons present at any meeting
at which their powers thereunder are to be exercised shall have and may exercise
all the powers of voting or giving consents thereby conferred, or if only one be
present, then such powers may be exercised by that one; or, if an even number
attend and a majority do not agree on a particular issue, the Company shall not
be required to recognize such proxy with respect to such issue if such proxy
does not specify how the Membership Interests that are the subject of such proxy
are to be voted with respect to such issue.
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2.18 Conduct of Meetings
All meetings of the Members shall be presided over by the chairman of
the meeting, who shall be a Manager (or representative thereof) designated by a
majority of the Managers. The chairman of any meeting of Members shall determine
the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
in order.
2.19 Action by Written Consent or Telephone Conference.
(a) Any action required or permitted to be taken at any annual
or special 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 holder or holders of not less than
the minimum number of Member votes that would be necessary to take such action
at a meeting at which the holders of all Member votes entitled to vote on the
action were present and voted. Every written consent shall bear the date of
signature of each Member who signs the consent. No written consent shall be
effective to take the action that is the subject to the consent unless, within
sixty (60) days after the date of the earliest dated consent delivered to the
Company in the manner required by this Section, a consent or consents signed by
the holder or holders of not less than the minimum Member votes that would be
necessary to take the action that is the subject of the consent are delivered to
the Company by delivery to its registered office, its principal place of
business, or the Managers. Delivery shall be by hand or certified or registered
mail, return receipt requested. Delivery to the Company's principal place of
business shall be addressed to the Managers. A telegram, telex, cablegram 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. Prompt notice of the taking
of any action by Members without a meeting by less than unanimous written
consent shall be given to those Members who did not consent in writing to the
action.
(b) The record date for determining Members entitled to
consent to action in writing without a meeting shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the Company by delivery to its registered office, its principal
place of business, or the Managers. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Company's principal
place of business shall be addressed to the Managers.
(c) If any action by Members is taken by written consent, any
articles or documents filed with the Secretary of State of the State of Delaware
as a result of the taking of the action shall state, in lieu of any statement
required by the Act concerning any vote of Members, that written consent has
been given in accordance with the provisions of the Act and that any written
notice required by the Act has been given.
(d) Members may participate in and hold a meeting by means of
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.
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SECTION 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Initial Capital Contributions
The initial Members shall make initial Capital Contributions to the
Company in the amounts and at the dates set forth on Schedule A attached hereto
in exchange for their respective Membership Interests. Notwithstanding the dates
set forth on Schedule A, the Company may request that the Initial Capital
Contribution of a Member be made on an earlier date. Any such request shall be
made by written notice to such Member.
3.2 Establishment of Capital Accounts.
An individual Capital Account shall be established for each Member. The
Capital Account of each Member shall consist of its initial Capital Contribution
and shall be increased by: (i) any additional Capital Contributions by such
Member; (ii) such Member's share of any income or gains, including the Profits
allocated to such Member pursuant to this Agreement; and (iii) such Member's
share of any income or gain exempt from federal income tax (determined in the
same manner as Profits are allocated to such Members), and shall be decreased
by: (i) such Member's share of Losses allocated to such Member pursuant to this
Agreement; (ii) any Distribution to such Member of cash or the fair market value
of any other property (net of liabilities assumed by such Member and liabilities
to which such property is subject); and (iii) such Member's share of
expenditures of the Company described in Code Section 705(a)(2)(B) (determined
in the same manner as Losses are allocated to such Members).
3.3 Determination of Capital Accounts.
The Company shall compute the Capital Account of each Member on a
reasonably current basis. Except as otherwise provided herein, the Capital
Account of a Member shall be determined in all events solely in accordance with
the rules set forth in Treasury Regulation Section 1.704-1(b)(2)(iv) and other
applicable Treasury Regulations as the same may be amended or revised hereafter.
To the extent that any provision of this Agreement is inconsistent with the
requirements of Treasury Regulation Section 1.704(b)(2)(iv) as to the
calculation of a Member's Capital Account, such Treasury Regulation shall
control. Any references in this Agreement to the Capital Account of a Member
shall be deemed to refer to such Capital Account as the same may be credited or
debited from time to time as set forth above.
3.4 Additional Contributions
(a) Except as provided in this Agreement, no Member shall have
an obligation to make an additional Capital Contribution or loan to the Company.
If additional funds are advanced to the Company by the Members as provided in
this Agreement, such funds shall be additional Capital Contributions.
(b) The Company may request that the Members provide the
Company with such additional capital as the Managers may determine from time to
time in their sole discretion ("Additional Capital"). In the event the Company
requests Additional Capital from the Members, the Additional Capital shall be
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contributed 75% by the Class A Members and 25% by the Class B Members. The Class
C Members will in no event be required to provide Additional Capital.
In the event the Company requests Additional Capital under this Section
3.4(b), the Company shall notify the applicable Members of the need for the
Additional Capital, which notice must include a statement in reasonable detail
of the proposed uses of the Additional Capital and a date before which each such
Member's share of the Additional Capital shall be delivered to the Company. If
one or more of the Members fails to contribute all or any portion of its share
of such requested Additional Capital ("Non-Contributing Members"), the
Percentage Interests of all Members shall be recalculated to reflect a
proportionate reduction in the Percentage Interests of the Non-Contributing
Members and an increase in the Percentage Interests of those Members that timely
complied with this Section 3.4(b).
3.5 Contributions and Compromises by Incapacitated Members
Each Member and such Member's representative or successor (as the case
may be) shall be obligated to perform any promise by the Member to make a
Capital Contribution to the Company even if the Member is prevented from doing
so because of any Incapacity.
3.6 Promises to Make Capital Contributions
No promise by a Member to make a Capital Contribution to the Company
shall be enforceable unless set forth in this Agreement or in another writing
signed by the Member. No promise by a Member to make a Capital Contribution to
the Company shall be compromised except by the affirmative vote of all of the
other Members.
3.7 No Interest on Contributions
The Members shall earn no interest on their Capital Contributions.
3.8 Adequacy of the Company's Capital
Each Member hereby acknowledges and agrees that in the Member's
considered opinion, the contributions provided for in this Section 3 are
reasonably sufficient to meet the initial capital needs of the Company.
3.9 Negative Capital Accounts.
No Member shall be required to pay to any other Member any deficit or
negative balance which may exist from time to time in such Member's Capital
Account. No Member shall be liable to the Company or any other Member or any
creditor of the Company solely because of the existence of a negative balance in
such Member's Capital Account.
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3.10 Reimbursement of Expenses
If any Member or Manager incurs a reasonable expense on behalf of the
Company and reasonably documents this expense to the Company, the Company shall
reimburse the Member or Manager for this expense as promptly as reasonably
possible after receiving this documentation.
3.11 Member Representations and Warranties
Each Member hereby represents and warrants to and acknowledges to the
Company that the Membership Interests being acquired in connection herewith are
being acquired for such Member's own account for investment purposes only and
not with a view to, or with any present intention of, distributing or reselling
any of such Membership Interests. The Member acknowledges and agrees that the
Membership Interests have not been registered under the Securities Act or under
any state securities laws, and that the Membership Interests may not be,
directly or indirectly, sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act and applicable state securities laws, except pursuant to an available
exemption from such registration. The Member also acknowledges and agrees that
neither the SEC nor any securities commission or other governmental authority
has (i) approved the transfer of the Membership Interests or passed upon or
endorsed the merits of the transfer of the Membership Interests, this Agreement
or the transactions contemplated hereby; or (ii) confirmed the accuracy of,
determined the adequacy of, or reviewed this Agreement. The Member has such
knowledge, sophistication and experience in financial, tax and business matters
in general, and investments in securities in particular, that it is capable of
evaluating the merits and risks of this investment in the Membership Interests,
and the Member has made such investigations in connection herewith as they
deemed necessary or desirable so as to make an informed investment decision
without relying upon the Company for legal or tax advice related to this
investment. The Member is an "accredited investor" within the meaning of Rule
501 promulgated under the Securities Act
SECTION 4
ALLOCATIONS AND DISTRIBUTIONS
4.1 Generally
Subject to Section 10.7, the Managers shall have sole discretion as to
the amounts and timing of Distributions to Members, subject to the retention of,
or payment to, third parties of such funds as it shall deem necessary with
respect to the reasonable business needs of the Company, which shall include the
payment or the making of provision for the payment when due of Company
obligations, including the payment of any management or administrative fees and
expenses or any other obligations.
4.2 Distributions
The Company shall make Distributions to the Members no later
than 60 days after the end of each fiscal year of the Company and may make
additional Distributions to the Members on such dates and in such amounts as the
Managers shall determine. All Distributions shall be made in the following
priority:
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(a) as provided in Section 10.7;
(b) then, to the Class A Members until the aggregate
Distributions made to the Class A Members under this Section 4.2 equal
$1,500,000;
(c) then, 75% to the Class A Members and 25% to the Class B
Members until the aggregate Distributions made to the Class A Members under this
Section 4.2 equal 100% of the Capital Contribution made by the Class A Members;
and
(d) then, 63.75% to the Class A Members, 21.25% to the Class B
Members, and 15% to the Class C Members.
Distributions made to Class A Members shall be allocated among
the Class A Members in proportion to each Class A Member's respective Class A
Percentage Interest, Distributions made to Class B Members shall be allocated
among the Class B Members in proportion to each Class B Member's respective
Class B Percentage Interest, and Distributions made to Class C Members shall be
allocated among the Class C Members in proportion to each Class C Member's
respective Class C Percentage Interest.
4.3 Allocations of Profits and Losses
Profits and Losses and all items of Company income, gain or
loss for any fiscal year shall be allocated among the Members in the same manner
as Distributions are allocated among the Members under Section 4.2, provided
that:
(a) if a Member makes a Capital Contribution of non-cash
property to the Company, the Company shall allocate its income, gains,
deductions, losses and other tax items to the Member in respect of this Capital
Contribution in accordance with Code Section 704 (c) (1) (A) and the regulations
thereunder; and
(b) if the Company allocates any of its Profits and Losses to
a Member in a manner that is disproportionate to the Member's respective
Percentage Interest in the Company, the Company shall make this allocation in
compliance with the requirements of Code Section 704(b) and the regulations
thereunder.
For purposes of this Agreement: (i) an allocation of Profits to a Member shall
mean an apportionment of those Profits on the books of the Company for
distribution to the Member upon the satisfaction of the conditions for
Distributions set forth in this Agreement, and (ii) Capital Contributions shall
(except as otherwise expressly provided in this Agreement) include only the
value of Capital Contributions that the Company has actually received from the
Members and has not returned.
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4.4 Distributions in Kind
If this Agreement or applicable law requires the Company to make a
Distribution to any Member, the Member may not require the Company to make this
Distribution except in the form of cash, and the Company may not compel a Member
to accept a Distribution except in the form of cash.
4.5 Unlawful Distributions
The Company shall not make any Unlawful Distributions of its assets to
any Member. Except as otherwise provided under the Act, a Distribution shall be
an "Unlawful Distribution" within the meaning of this Agreement if, immediately
after the Distribution, the aggregate value of the Company's liabilities would
exceed the aggregate value of its assets, or if, as a result of the
Distribution, the Company would be unable to pay its reasonably foreseeable
obligations as they become due.
4.6 Liability for Unlawful Distributions
Members and Managers who vote to authorize Unlawful Distributions and
Members that receive these Distributions shall be liable as provided in the Act.
4.7 Members as Creditors of the Company
With respect to Profits allocated to a Member under this Agreement, the
Member shall have the status of a creditor.
SECTION 5
MANAGEMENT OF THE COMPANY
5.1 Qualifications; Initial Manager
The Managers shall be Members of the Company. A Manager may be a
natural person or a legal entity. Managers need not be residents of the State of
Delaware. The Managers shall have such other qualifications as are determined
from time to time by the affirmative vote of Members holding a majority of
Member votes. The following Person is hereby appointed and elected by the
Members as the initial Manager, to serve in accordance with this Agreement,
until successors or additional Managers are appointed by the Members:
Touchstone Resources USA, Inc.
5.2 Titles
In performing management functions for the Company, Managers may use
the title "Manager" or such other title or titles as the Members may determine
from time to time by affirmative vote of Members holding a majority of Member
votes.
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5.3 Voting
If there are two or more Managers, the prior affirmative vote of a
majority of all of the Managers shall be required for any action taken by any
one or more Managers on behalf of, or with respect to, the Company or its
business or affairs. Each Manager shall have one vote on each matter, and each
matter shall be decided by the affirmative vote of a majority of the Managers.
Each Manager shall have a reasonable opportunity to be heard on each matter on
which the Managers vote. Managers may vote in person, by telephone, by e-mail,
by fax or by any other reasonable means. The Managers shall appoint one of the
Managers to make a written record of each Manager vote and to circulate the
record among the Managers promptly after the vote, provided that the failure of
that Manager to make or circulate such a record shall not affect the validity of
any Manager vote.
5.4 Time Devoted By Managers
Each Manager shall devote to the Company such time and effort as may be
necessary for the proper performance of his, her or its duties hereunder.
5.5 General Responsibilities
Except for situations in which the approval of the Members is required
by this Agreement or by nonwaivable provisions of applicable law: (i) the powers
of the Company shall be exercised by or under the authority of, and the business
and affairs of the Company shall be managed under the direction of, the
Managers; and (ii) the Managers shall make all decisions and take all actions
regarding the business of the Company.
5.6 Authority
Without limiting the generality of Section 5.5 above, the Managers are
hereby authorized to do any of the following on behalf of the Company:
(a) execute any and all agreements, contracts, documents,
certifications and instruments necessary or convenient in connection with the
management of the Company;
(b) engage in any kind of activity and perform and carry out
contracts of any kind necessary to, in connection with or incidental to the
accomplishment of the purposes of the Company as may be lawfully carried on or
performed by a limited liability company under the laws of the State of Delaware
or of any other jurisdiction in which the Company conducts business;
(c) acquire by purchase, lease, option, capital contribution
or otherwise, any real, personal or mixed property or any interest therein,
which may be necessary, convenient, or incidental to the accomplishment of the
purposes of the Company;
(d) subject to Section 12.12, sell, assign, exchange or
otherwise transfer all or part of the Company property;
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(e) subject to Section 2.3, issue or sell to Members,
affiliates of Members, or Persons other than Members or affiliates of any
Member: (i) additional Membership Interests (including other classes or series
of Membership Interests having different rights); (ii) obligations, evidences of
indebtedness or other securities convertible or exchangeable into Membership
Interests; and (iii) warrants, options or other rights to purchase or otherwise
acquire Membership Interests, and no Member shall have any preemptive rights in
any of the foregoing.
(f) borrow money required for the business and affairs of the
Company, and issue evidences of indebtedness necessary, convenient, or
incidental to the accomplishment of the purposes of the Company, and secure the
repayment of such borrowings by executing mortgages or deeds of trust, and
pledge or otherwise encumber or subject to security interests, all or any part
of the Company's property, and in connection with any such borrowing to confess
judgment, or authorize the confession of judgment, against the Company;
(g) lend the Company's funds or make guarantees of obligations
of others upon such terms as the Managers shall determine;
(h) invest the Capital Contributions of the Members and
reinvest the proceeds from the sale of any Company property in such investments
and upon such terms as the Managers shall determine;
(i) dissolve the Company;
(j) prepay in whole or in part, refinance, increase, modify or
extend any indebtedness or mortgage affecting the Company's property, and in
connection therewith to execute any extension or renewal of any indebtedness or
mortgage on any Company property;
(k) place record title to, or the right to use, Company
property in the name or names of a nominee or nominees for any purpose
convenient or beneficial to the Company;
(l) purchase contracts of liability, casualty, and other
insurance deemed necessary, appropriate, or convenient for the protection of the
property or affairs of the Company or for any purpose convenient or beneficial
to the Company;
(m) employ, engage and enter into contracts and agreements
with Persons, firms or companies, including entities in which any Member has an
interest, in the development, operation, and management of the Company's
property and business on such terms and for such compensation as the Managers
may determine;
(n) retain counsel, accountants, financial advisors and other
professional personnel;
(o) enter into, make and perform such contracts, agreements
and other undertakings, and do such other acts as the Managers may deem
necessary or advisable, or as may be incidental to or necessary for the conduct
of the business of the Company;
(p) file Federal, state and local tax returns on behalf of the
Company and make such elections as are required or permitted under Federal,
state, or local tax laws;
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(q) designate the depository or depositories in which all bank
accounts of the Company shall be kept and the person or persons upon whose
signature or signatures withdrawals therefrom shall be made;
(r) prosecute, defend, settle, compromise or submit to
arbitration, any suits, actions, or claims at law or in equity to which the
Company is a party or by which the Company is affected, and satisfy out of
Company funds any judgment, decree, or decision of any court, board, agency, or
authority having jurisdiction, or any settlement of any suit, action, or claim;
and
(s) engage in such other activities and incur such other
expenses as may in the Managers' judgment be necessary or appropriate for the
furtherance of the Company's purposes, and to execute, acknowledge and deliver
any and all instruments necessary to the foregoing.
5.7 Actions by Managers; Committees; Delegation of Authority and
Duties
(a) In managing the business and affairs of the Company and
exercising its powers, the Managers shall act: (i) collectively through meetings
and written consents pursuant to this Section 5; (ii) through committees
pursuant to Section 5.7(b); and (iii) through Managers to whom authority and
duties have been delegated pursuant to Section 5.7(c).
(b) The Managers may, from time to time, designate one or more
committees, each of which shall be comprised of one or more Managers. Any such
committee, to the extent provided in such resolution, in the Certificate or this
Agreement, shall have and may exercise all of the authority of the Managers. At
every meeting of such committee, the presence of a majority of all the Managers
that are Members thereof shall constitute a quorum, and the affirmative vote of
a majority of the Managers present shall be necessary for the adoption of any
resolution. The Managers may dissolve any committee at any time, unless
otherwise provided in the Certificate or this Agreement.
(c) The Managers may, from time to time, delegate to one or
more Managers such authority and duties as the Managers may deem advisable. In
addition, the Managers may assign titles (including, without limitation,
president, vice president, secretary, assistant secretary, treasurer and
assistant treasurer) to any such Managers and delegate to such Managers certain
authority and duties. Any number of titles may be held by the same Manager. Any
delegation may be revoked at any time by the Managers, and no delegation shall
relieve the Managers of their management responsibility under Section 5 of this
Agreement, and any persons to whom the Managers delegate duties shall perform
them at the direction of the Managers.
5.8 Tax Identification Number, Insurance, Bank Accounts
Before or promptly after the Company begins its business activities,
the Managers shall (i) obtain for the Company a federal tax identification
number and any necessary state tax identification numbers, (ii) open any
necessary bank accounts for the Company, (iii) obtain on commercially reasonable
terms insurance policies covering all reasonably foreseeable Company business
risks, and (iv) do all other things necessary or useful in connection with the
commencement of the Company's business.
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5.9 Number
The number of Managers of the Company shall be determined from time to
time by resolution of Members holding a majority of votes. If the Members make
no such determination, there shall be only one Manager. Each Manager shall hold
office until his successor shall have been elected and qualified, or until his
earlier death, resignation or removal.
5.10 Vacancies; Removal; Resignation
(a) Any Manager position to be filled by reason of an increase
in the number of Managers or by other reason may be filled by election at an
annual or special meeting of the Members called for that purpose, or by the
affirmative vote of a majority of the remaining Managers though less than a
quorum of the Managers.
(b) The Members may, without liability, remove a Manager at
any time with or without cause by affirmative vote of Members holding a majority
of Member votes.
(c) A Manager may resign as a manager upon giving thirty (30)
days' written notice to each Member. Except as otherwise provided in this
Agreement, the Manager shall have no liability to the Company or to the other
Members for any such resignation, provided, however, that the resignation shall
not absolve the Manager from any liabilities arising on or before effective date
of the resignation. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly so provided in the resignation.
5.11 Meetings
(a) A majority of the total number of Managers fixed by or as
provided in this Agreement shall constitute a quorum for the transaction of
business of the Managers, and 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. A Manager
who is present at a meeting of the Managers at which action on any Company
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the Person acting as a secretary of the
meeting before the adjournment thereof or shall deliver such dissent to the
Company immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a Manager who voted in favor of such action.
(b) Meetings of the Managers may be held at such place or
places as shall be determined from time to time by resolution of the Managers.
At all meetings of the Managers, business shall be transacted in such order as
shall from time to time be determined by resolution of the 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 the meeting is not lawfully
called or convened.
(c) In connection with any annual meeting of Members at which
Managers were elected, the Managers may, if a quorum is present, hold its first
meeting for the transaction of business immediately after and at the same place
as such annual meeting of the Members. Notice of such meeting at such time and
place shall not be required.
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(d) Regular meetings of the Managers shall be held at such
times and places as shall be designated from time to time by resolution of the
Managers. Notice of such meetings shall not be required.
(e) Special meetings of the Managers may be called by any
Manager on at least 24 hours' notice to each other Manager. Such notice need not
state the purpose or purposes of, nor the business to be transacted at, such
meeting, except as may otherwise be required by law or provided for in this
Agreement.
5.12 Approval or Ratification of Acts or Contracts by Members
The Managers in their discretion may submit any act or contract for
approval or ratification at any annual meeting of the Members, or at any special
meeting of the Members called for the purpose of considering any such act or
contract, and any act or contract that shall be approved or be ratified by
Members holding a majority of Class A Member votes shall be as valid and as
binding upon the Company and upon all the Members as if it shall have been
approved or ratified by every Member of the Company.
5.13 Action by Written Consent or Telephone Conference
Any action permitted or required by the Act, the Certificate or this
Agreement to be taken at a meeting of the Managers or any committee designated
by the Managers may be taken without a meeting if a consent in writing, setting
forth the action to be taken, is signed by a majority of the Managers or members
of such committee, as the case may be. 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 the State of
Delaware, and the execution of such consent shall constitute attendance or
presence in person at a meeting of the Managers or any such committee, as the
case may be. Subject to the requirements of the Act, the Certificate or this
Agreement for notice of meetings, unless otherwise restricted by the
Certificate, Managers or members of any committee designated by the Managers may
participate in and hold a meeting of the Managers or any committee of Managers,
as the case may be, 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.
5.14 Compensation and Expenses
The Managers shall receive such compensation, if any, for their
services as may be designated from time to time by the Members. In addition, the
Managers shall be entitled to be reimbursed for out-of-pocket costs and expenses
incurred in the course of their service hereunder, including the portion of
their overhead reasonably allocable to Company activities.
5.15 Officers
(a) The Managers may, from time to time, designate one or more
Persons to be officers of the Company. No officer need be a resident of the
State of Delaware, a Member or a Manager. Any officers so designated shall have
21
such authority and perform such ministerial duties as the Managers may, from
time to time, delegate to them, subject to the authority of the Managers
provided in Section 5.7. The Managers may assign titles to particular officers.
Each officer shall hold office until his successor shall be duly designated and
shall qualify or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. Any number of offices may be held by
the same person. The salaries or other compensation, if any, of the officers and
agents of the Company shall be fixed from time to time by the Managers.
(b) Any officer may resign as such at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or if no time be specified, at the time of its receipt by the Managers.
The acceptance of a resignation shall not be necessary to make it effective,
unless expressly so provided in the resignation. Any officer may be removed as
such, either with or without cause, by the Managers whenever in their judgment
the best interests of the Company will be served thereby; provided, however,
that 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. Any vacancy occurring in any office of the Company may be
filled by the Managers.
5.16 Compliance with Laws and Regulations
Before the Company conducts business in this State or in any other
state and at all times while it is conducting this business, the Managers shall
ensure that the Company is in compliance with all applicable federal, state and
local laws, regulations and ordinances, including federal and state tax and
securities laws, laws governing the registration and taxation of foreign
companies, and regulations governing specific professions, trades and
businesses. For purposes of this Agreement, "state" shall include the District
of Columbia.
5.17 Valuation of Capital Contributions
Whenever the Company admits a Person as a Member of the Company, the
Managers shall promptly determine in dollars a value for the Capital
Contribution of that Person in exchange for the Person's Membership Interest or
that there was no Capital Contribution, shall record this determination in the
records of the Company, and shall promptly notify all Members concerning the
determination. Thereafter, in the absence of fraud, the determination shall be
conclusive as to the value of the Capital Contribution or as to whether there
was a Capital Contribution.
5.18 Third Party Claims Against the Company
No Manager in the Manager's capacity as a Manager shall have personal
liability for any claim against the Company by any third party.
22
5.19 Intentionally Omitted.
5.20 Reliance on Company Information and Other Company Managers
No Manager in the Manager's capacity as a Manager shall be personally
liable to the Company or to the Members if, to the extent that, with respect to
the matter in question, the Manager acted in reasonable reliance on Company
records, other Company Managers, employees or officers of the Company, other
Persons whom, at the time of the action, the Manager reasonably believed to be
competent in the matter in question, or any provision of this Agreement.
5.21 Intentionally Omitted
5.22 Intentionally Omitted
5.23 Intentionally Omitted
5.24 Execution of This Agreement
As a condition to becoming Managers, the initial Manager and all
subsequent Managers shall sign this Agreement in their capacity as managers and
shall be bound by all provisions of the Agreement relating to managers.
SECTION 6
MANAGERS' REPRESENTATIONS AND WARRANTIES
6.1 Representations by All Managers
Each Manager warrants in the Manager's capacity as a Manager as
follows:
(a) The Manager is legally free to enter into this Agreement
and to perform the Manager's obligations under this Agreement in accordance with
its terms and is not prevented from doing so by order of any court or other
governmental authority, by any agreement with a third party (including an
employment agreement, non-competition agreement or nondisclosure agreement) or
by any other reason.
(b) In negotiating and entering into this Agreement, the
Manager has acted fairly and in good faith.
(c) Before accepting the terms of this Agreement, the Manager
has had every reasonable opportunity to consider these terms and to review them
with the Manager's personal attorney.
(d) The Manager has accepted the terms of this Agreement
knowingly and freely.
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6.2 Representations by Corporate Manager
If a Manager is an entity, the Manager represents and warrants, in
addition to its representations and warranties under Section 6.1, that it is
duly formed, organized and existing under its state of incorporation, and has
full corporate authority and all necessary authorization to enter into this
Agreement and to perform its duties hereunder in accordance with the terms of
this Agreement.
SECTION 7
CONFIDENTIALITY OF COMPANY INFORMATION
7.1 Confidentiality of Company Information
The Managers shall use every reasonable means to maintain the
confidentiality of Confidential Information. Except as required in conducting
the business and internal affairs of the Company or by federal or state law, the
Managers shall not disclose Confidential Information to any third party.
Promptly after ceasing to be Managers, the Managers shall return to the Company
all documents and other media in their possession or control that contain
Confidential Information.
7.2 Exceptions to Duty of Confidentiality
For purposes of Section 7.1, the following types of information do not
constitute "Confidential Information":
(a) Information lawfully obtained by a Manager from another
source before receiving it from the Company.
(b) Information that is already in the public domain at the
time of its disclosure to a Manager or that thereafter enters the public domain
through no fault of the Manager.
(c) Information whose disclosure is permitted or required by
final order of a court of competent jurisdiction.
(d) Information whose disclosure is made on a confidential
basis to an arbitrator in an arbitration under Section 14; and
(e) Information the Company discloses without restriction to
any Person other than the Manager.
7.3 Binding Effect; Termination
This Section 7 shall bind each recipient even after the recipient
ceases to be a Manager, and shall terminate upon the termination of the legal
existence of the Company.
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SECTION 8
COMPANY RECORDS, ETC.
8.1 Information and Records Maintained by the Company
The Company shall maintain at its principal place of business the
following types of records and information:
(a) Promptly after they become available, copies of its
federal, state and local income tax returns for each year;
(b) A current list of the name and last known business,
residence or mailing address of each Member;
(c) A copy of the Certificate and this Agreement and of all
amendments thereto, together with executed copies of any written powers of
attorney pursuant to which the Certificate and this Agreement and all amendments
thereto have been executed;
(d) True and full information regarding the amount of cash and
a description and statement of the agreed value of any other property or
services contributed by each Member to the Company and which each Member has
agreed to contribute in the future, and the date on which each Member became a
Member; and
(e) True and full information regarding the amount of cash and
a description and statement of the agreed value of any other property or
services contributed by each Member to the Company and which each Member has
agreed to contribute in the future, and the date on which each Member became a
Member; and
(f) Minutes of every annual and special meeting and any
written covenants for action taken by the Members or Managers without a meeting.
8.2 Books of Account
The Company shall maintain books of account concerning the business and
affairs of the Company that are accurate, reasonably current, and in compliance
with financial and other standards normally applicable to the records of
business organizations generally similar to the Company in size and business
activities.
8.3 Inspection of Records.
During normal business hours and after reasonable notice, each Member
shall be entitled, for any purpose reasonably related to the Member's membership
in the Company, to inspect and, at the Member's expense, to copy any documents
and other media in the Company's possession or control, including the documents
identified in Section 8.1, provided that all information available to the Member
under this Section 8 shall be subject to the provisions of Section 7, and all
applicable federal and state laws and regulations, including laws concerning the
privacy of employee medical information.
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SECTION 9
EXCULPATION AND INDEMNIFICATION
9.1 Exculpation
No Manager shall be liable to any other Manager, any Member or the
Company for any loss suffered by the Company unless such loss is caused by the
Manager's gross negligence, willful misconduct, violation of law or material
breach of this Agreement. A Manager may consult with counsel and accountants in
respect of Company affairs and, provided the Manager acts in good faith reliance
upon the advice or opinion of such counsel or accountants, the Manager shall not
be liable for any loss suffered by the Company in reliance thereon.
9.2 Indemnification
Subject to the limitations and conditions as provided in this Section
9, each Person who was or is made a party to or is threatened to be made a party
to, or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative (hereinafter a
"Proceeding"), or any appeal in such a Proceeding or any inquiry or
investigation that could lead to such a Proceeding, by reason of the fact that
he, she or it, or a Person of whom he, she or it is the legal representative, is
or was a Manager, officer, employee or agent of the Company or while a Manager,
officer, employee or agent of the Company is or was serving at the request of
the Company as a Manager, director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise shall be
indemnified by the Company to the fullest extent permitted by the Act, as the
same exist or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar taxes
and punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred by such Person in
connection with such Proceeding, and indemnification under this Section 9 shall
continue as to a Person who has ceased to serve in the capacity which initially
entitled such Person to indemnity hereunder. The rights granted pursuant to this
Section 9 shall be deemed contract rights, and no amendment, modification or
repeal of this Section 9 shall have the effect of limiting or denying any such
rights with respect to actions taken or Proceedings arising prior to any
amendment, modification or repeal. It is expressly acknowledged that the
indemnification provided in this Section 9 could involve indemnification for
negligence or under theories of strict liability.
9.3 Advance Payment
The right to indemnification conferred in this Section 9 shall include
the right to be paid or reimbursed by the Company for the reasonable expenses
incurred by a Person of the type entitled to be indemnified under Section 9.2
who was or is, or is threatened to be made, a named defendant or respondent in a
Proceeding in advance of the final disposition of the Proceeding and without any
26
determination as to the Person's ultimate entitlement to indemnification;
provided, however, that the payment of such expenses incurred by any such Person
in advance of the final disposition of a Proceeding shall be made only upon
delivery to the Company of a written affirmation by such Person of his, her or
its good faith belief that he, she or it has met the standard of conduct
necessary for indemnification under this Section 9 and a written undertaking, by
or on behalf of such Person, to repay all amounts so advanced if it shall
ultimately be determined that such indemnified Person is not entitled to be
indemnified under this Section 9 or otherwise.
9.4 Appearance as a Witness
Notwithstanding any other provision of this Section 9, the Company may
pay or reimburse expenses incurred by a Manager or officer in connection with
his appearance as a witness or other participation in a Proceeding at a time
when the Manager or officer is not a named defendant or respondent in the
Proceeding.
9.5 Insurance
The Company may purchase and maintain insurance, at its expense, to
protect itself and any Person who is or was serving as a Manager, officer, or
agent of the Company or is or was serving at the request of the Company as a
Manager, director, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another foreign or domestic limited liability
company, corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise against any expense, liability or
loss, whether or not the Company would have the power to indemnify such Person
against such expense, liability or loss under this Section 9.
9.6 Nonexclusivity of Rights
The right to indemnification and the advancement and payment of
expenses conferred in this Section 9 shall not be exclusive of any other right
which a Manager or other Person indemnified pursuant to this Section 9 may have
or hereafter acquire under any law (common or statutory), provision of the
Certificate or this Agreement, agreement, vote of Members or Managers, or
otherwise.
9.7 Savings Clause
If this Section 9 or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify and hold harmless each Manager or any other Person
indemnified pursuant to this Section 9 as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative to the full extent permitted by any applicable
portion of this Section 9 that shall not have been invalidated and to the
fullest extent permitted by applicable law.
27
SECTION 10
TAX PLANNING AND COMPLIANCE
10.1 Taxation of the Company and Members
Under federal tax law and to the maximum extent possible under the tax
laws of each state and the District of Columbia, the Company and its Members
shall be taxable as a partnership and as partners. The provisions of this
Agreement shall be construed and applied in such a manner as to ensure full
compliance with the provisions of the Code applicable to partnerships and
partners and with the regulations thereunder.
10.2 Tax Management and Compliance
The parties acknowledge the importance to the Company and the Members
of competent tax planning for the Company and for the Members as Members, and
full compliance by the Company and by the Members with federal and state tax
requirements applicable to the Company and the Members in their capacity as
such.
10.3 Appointment and Replacement of Company Tax Adviser
In connection with its formation and on a continuing basis thereafter,
the Manager may appoint a tax adviser. This individual or firm shall have
expertise in all areas of tax practice relevant to the needs of the Company and
its Members in their capacities as such and in particular in the field of
federal partnership taxation. The Managers may replace the Company's tax adviser
from time to time upon the affirmative vote of a majority of the Managers.
10.4 Cooperation with Tax Adviser
The parties shall cooperate with the Company's tax adviser, if any, to
the maximum extent reasonable to ensure adequate Company tax planning and
compliance.
10.5 Tax Matters Partner
The Members by affirmative vote of Members holding a majority of Member
votes may appoint a Manager to serve as the Company's tax matters partner for
purposes of unified administrative and judicial federal tax proceedings under
Code Section 6231 (a) (1).
10.6 Planning of Individual Transactions
Before undertaking any major transaction involving the Company or any
Member in the Member's capacity as a Member, the Company and each affected
Member shall consult with one or more partnership tax experts concerning the tax
implications of the transaction, and the Company and affected Members shall make
any tax elections and shall take any other actions necessary or appropriate in
the circumstances to ensure tax compliance and maximum lawful tax avoidance. The
issue of the fairness of the transaction to the Company and to the Members shall
be subject to arbitration under Section 14.
28
10.7 Tax Distributions
If any Member requires a Distribution of all or any portion of the
Member's share of Profits in order to pay the Member's federal or other taxes on
the Member's share of these Profits for any taxable year, the Company shall, to
the extent that its financial condition reasonably permits, make this
Distribution to the Member on a timely basis, provided that as a condition for
the Distribution, the Company may, under reasonable conditions of
confidentiality, require the Member to disclose to the Company's tax adviser
relevant information concerning the Member's tax and financial affairs.
10.8 Tax Returns
The Company shall accurately complete and file its federal tax return
and all applicable state returns on a timely basis each year.
10.9 Provision of Tax Information to Members
As soon as reasonably possible after the close of each of its taxable
years, the Company shall provide each Member with completed federal and state
tax forms and with all other documents and information relevant to the federal
and state tax liabilities of the Member as a member of the Company, provided
that each Member shall have sole responsibility for preparing and timely filing
the Member's federal and state tax returns and for paying the Member's taxes,
and the Company shall have no responsibility or liability with respect to these
matters.
10.10 Computation and Recording of Members' Contributions
The Company shall maintain current and accurate records concerning each
Member's Capital Contributions and adjusted tax basis in the Member's Membership
Interest in accordance with applicable U.S. Treasury Department regulations and,
promptly after the request of any Member, shall make these records available to
the Member.
SECTION 11
MEMBER DISSOCIATIONS
11.1 Events of Dissociation
A Member shall be dissociated only if the Member dies (or, if the
Member is an entity, it incurs a dissolution or equivalent event), the Member
resigns in accordance with Section 11.4, the Member sells or otherwise transfers
all of the Member's Management Rights, or bankruptcy, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Member.
11.2 Certain Consequences of Dissociation
Except as otherwise expressly provided in this Agreement, a Member who
is dissociated from the Company shall immediately lose all of the Member's
Management Rights.
29
11.3 No Distributions to Dissociated Members
A Member's dissociation shall not entitle the Member to receive any
Distribution or to receive any payment for the Member's Membership Interest.
SECTION 12
DISSOLUTION; MERGERS, CONVERSIONS AND SALES OF ASSETS
12.1 Dissolution
The Company shall be dissolved upon the affirmative vote of Members
holding a majority of Member votes, upon the expiration of the period fixed for
the duration of the Company set forth in the Certificate, upon the issuance of
an order of dissolution by a court or by the Secretary of State of the State of
Delaware, or upon the issuance of an order of dissolution by an arbitrator under
Section 14.
12.2 Liquidation and Termination.
On dissolution of the Company, the Managers shall act as liquidator.
The Managers shall proceed diligently to wind up the affairs of the Company and
make final Distributions as provided herein and in the Act. The costs of
liquidation shall be borne as a Company expense. Until final Distribution, the
Managers shall continue to operate the Company properties with all of the power
and authority of the Managers. The steps to be accomplished by the Managers are
as follows:
(a) as promptly as possible after dissolution and again after
final liquidation, the Managers shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;
(b) the Managers shall cause the notice described in Section
18-203 of the Act to be mailed to each known creditor of and claimant against
the Company in the manner described in such section;
(c) the Managers shall pay, satisfy or discharge from Company
funds all of the debts, liabilities and obligations of the Company (including,
without limitation, all expenses incurred in liquidation) or otherwise make
adequate provision for payment and discharge thereof (including, without
limitation, the establishment of a cash escrow fund for contingent liabilities
in such amount and for such term as the Managers may reasonably determine); and
(d) all remaining assets of the Company shall be distributed
to the Members as follows:
(i) the Managers may sell any or all Company
property, including to Members, and any resulting gain or loss
from each sale shall be computed and allocated to the Capital
Accounts of the Members;
30
(ii) with respect to all Company property that has
not been sold, the fair market value of that property shall be
determined and the Capital Accounts of the Members shall be
adjusted to reflect the manner in which the unrealized income,
gain, loss, and deduction inherent in property that has not
been reflected in the Capital Accounts previously would be
allocated among the Members if there were a taxable
disposition of that property for the fair market value of that
property on the date of Distribution; and
(iii) Company property shall be distributed among the
Members in accordance with the positive Capital Account
balances of the Members, as determined after taking into
account all Capital Account adjustments for the taxable year
of the Company during which the liquidation of the Company
occurs (other than those made by reason of this clause (iii));
and those Distributions shall be made by the end of the
taxable year of the Company during which the liquidation of
the Company occurs (or, if later, ninety (90) days after the
date of the liquidation).
All Distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses, and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination and those
costs, expenses, and liabilities shall be allocated to the distributee pursuant
to this Section 12.2. The Distribution of cash and/or property to a Member in
accordance with the provisions of this Section 12.2 constitutes a complete
return to the Member of its Capital Contributions and a complete Distribution to
the Member of its interest in the Company and all the Company's property and
constitutes a compromise to which all Members have consented within the meaning
of the Act. To the extent that a Member returns funds to the Company, it has no
claim against any other Member for those funds.
12.3 Effective Date of Dissolution
The dissolution of an Company by vote of the Members shall be effective
on the date specified in that vote or, if the Members do not specify a date,
then on the date of completion of the vote.
12.4 Cessation of Company's Legal Existence
Unless a court or administrative authority duly and finally determines
otherwise, on completion of the Distribution of Company assets as provided
herein, the Company is terminated, and the Managers (or such other Person or
Persons as the Act may require or permit) shall file a certificate of
cancellation with the Secretary of State of the State of Delaware, cancel any
other filings made pursuant to this Agreement, and take such other actions as
may be necessary to terminate the Company.
31
12.5 Dissolution by Arbitrator
Upon petition by any Member, an arbitrator under Section 14 shall issue
an order dissolving the Company on one or more of the following grounds:
(a) the Company obtained its Certificate through fraud;
(b) the Company exceeded or abused the authority conferred
upon it by law;
(c) the Company conducted its business in a persistently
fraudulent or illegal manner;
(d) the Company abused its power contrary to the public policy
of this State;
(e) A deadlock exists on a matter involving Company management
which the Members are unable to resolve and which is causing or which threatens
to cause irreparable injury to the Company or which prevents it from conducting
its business or affairs to its advantage; or
(f) The dissolution of the Company is reasonable and fair in
the circumstances.
12.6 Exclusion of Certain Managers from Participation in Wind-Up
Process
Any Member may petition an arbitrator under Section 14 to exclude one
or more Managers from participating in the process of winding up and liquidating
the Company on the ground that, because of past wrongful conduct by the Manager
or Managers in question, their participation would be likely to affect that
process adversely.
12.7 Winding-Up of the Company
After the Company is dissolved, the Managers responsible for winding up
the Company shall as expeditiously as reasonably possible wind up its business
and internal affairs, and cause its liquidation. During the wind-up period, the
Company shall accept no new business except to the extent necessary to dispose
of existing inventory.
12.8 Liquidating Distributions by the Company
The Company shall make Distributions of its assets in connection with
its liquidation in accordance with the provisions of Section 4, provided that
the Company shall make no Distribution to Members or others in connection with
its liquidation until it has complied with all applicable laws and regulations
of this State (including tax laws and regulations) relating to its dissolution
and liquidation.
12.9 Deficit Capital Accounts.
Notwithstanding anything to the contrary contained in this Agreement,
to the extent that the deficit, if any, in the Capital Account of any Member
results from or is attributable to deductions and losses of the Company
(including non-cash items such as depreciation), or Distributions of money
32
pursuant to this Agreement to all Members in proportion to their respective
Membership Interests, upon dissolution of the Company such deficit shall not be
an asset of the Company and such Members shall not be obligated to contribute
such amount to the Company to bring the balance of such Member's Capital Account
to zero.
12.10 Disposition of Known and Unknown Claims Against Company
Promptly after the dissolution of the Company, the Company shall take
all reasonable measures under the laws of this State to dispose of (and, to the
extent reasonable, to bar) known and unknown claims against the Company.
12.11 Duty to Consult Tax Adviser in Connection With Company
Dissolution
Before the Members begin the wind-up and liquidation of the Company,
the Company and the Members shall consult with their respective tax advisers and
shall structure and implement the liquidation in a manner that is as fair as
possible to each Member from a tax viewpoint.
12.12 Mergers, Conversions and Sales of Assets
Except as otherwise provided in this Agreement, the Company shall not
participate in a merger, change its business organization form, or sell all or
substantially all of its assets outside the ordinary course of business except
with the consent of a majority of Class A Member votes.
SECTION 13
TERM AND TERMINATION OF AGREEMENT
13.1 Term and Termination
Subject to the provision of Sections 13.2 and 13.3, the term of this
Agreement shall begin on the date of this Agreement and, unless earlier
terminated by the parties, shall terminate as follows:
(a) If the Company is terminated by vote of the Members, it
shall terminate on the effective date of the certificate of cancellation of the
Certificate.
(b) If the Company is terminated by decree of a duly
authorized judicial or administrative authority or by an arbitrator, it shall
terminate on the date of termination of the Company's existence as determined by
that authority or arbitrator.
(c) If no clear date is established under Sections 13.1 (a) or
(b) and if the Members cannot agree on such a date, it shall terminate upon the
determination of an arbitrator under Section 14.
33
13.2 Survival of Accrued Rights
Rights, duties and liabilities accrued by the parties under this
Agreement before its termination shall continue in full force and effect after
its termination.
13.3 Arbitration of Matters Relating to Company's Winding-Up, Etc.
Notwithstanding the termination of this Agreement, any party may, after
that termination, initiate an arbitration under Section 14 to determine and
enforce rights and duties of the party relating to matters arising before and
during the Company's winding-up, the Company's liquidation, and matters arising
after the cancellation of the Company's Certificate.
SECTION 14
ARBITRATION OF COMPANY DISPUTES
14.1 Mandatory Arbitration of Certain Disputed Matters
Except as provided herein, any dispute between or among the parties
relating to arbitrable matters shall be exclusively and finally resolved in
arbitration by a single arbitrator without recourse to any court.
14.2 Intentionally Omitted
14.3 Rules Governing Arbitration
Except as otherwise provided in this Section, any arbitration under
this section shall be governed by the Rules of Commercial Arbitration of the
American Arbitration Association as in effect at the time of the arbitration.
14.4 Notice of Arbitration
Any Member may initiate an arbitration of any matter not subject to
arbitration under Section 14.2 above. The initiating Member shall do so by
providing written notice of the arbitration to the other Members. The notice
shall bear a current date, shall state the name of the initiating Member and
shall briefly state the matter to be arbitrated.
14.5 Selection of Arbitrator
If, within fifteen (15) business days after all the parties entitled to
notice of an arbitration have received that notice, the Members have not agreed
among themselves as to the identity of the arbitrator or the site of the
arbitration, the Company shall immediately refer these matters for resolution by
the American Arbitration Association office located in the city of Philadelphia.
That office may resolve these matters without liability and in its sole
discretion.
34
14.6 No Appeal
No Member shall appeal to any court an order of an arbitrator under
this Section 14. The Company or any Member may enter any such order in any court
of competent jurisdiction.
14.7 Allocations of Costs and Fees
The arbitrator may allocate among the Members the costs, fees and other
expenses relating to an arbitration in any manner that the arbitrator shall
determine to be appropriate in his or her absolute discretion, provided that if
the arbitrator determines that a party has initiated an arbitration without a
reasonable basis for doing so, the arbitrator shall assess against that party
the costs of the other parties relating to the arbitration, including the
reasonable attorneys' fees.
SECTION 15
GENERAL PROVISIONS
15.1 Entire Agreement
This Agreement contains the entire agreement among the parties
concerning its subject matter and replaces all other agreements among them,
whether written or oral, concerning this subject matter.
15.2 Conflicts between Agreement and Certificate
If there is any conflict between the provisions of this Agreement and
those of the Certificate, then, in any dispute among the Members, the provisions
of this Agreement shall prevail.
15.3 Effect of Act
Except as otherwise provided in this Agreement or by law, the business
and internal affairs of the Company shall be governed by the Act as in effect on
the date of this Agreement.
15.4 Changes of Law
If mandatory rules of the Act or other applicable law change in a
manner that provides material advantages or disadvantages to any Member not
contemplated by this Agreement, the Members shall equitably amend the Agreement
to minimize or eliminate these advantages and disadvantages.
15.5 Incorporation of Schedules
All schedules identified in the Agreement as schedules to the Agreement
are hereby incorporated into the Agreement and made integral parts of it.
35
15.6 Governing Law
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Delaware without giving effect to any
choice-of-law or conflict-of-law provision or rule (whether of the State of
Delaware or of any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
15.7 Intentionally Omitted
15.8 Intentionally Omitted
15.9 Captions
All captions in this Agreement are for convenience only and shall be
deemed irrelevant in construing any provision of the Agreement.
15.10 Notices
Except as expressly set forth to the contrary in this Agreement, all
notices, requests, or consents provided for or permitted to be given under this
Agreement must be in writing and must be given either by depositing the writing
in the United States mail, addressed to the recipient, postage paid, and
registered or certified with return receipt requested or by delivering that
writing to the recipient in person, by courier, or by facsimile transmission;
and a notice, request, or consent given under this Agreement is effective on
receipt by the Person to receive it. All notices, requests, and consents to be
sent to a Manager, or the Company must be given to the Managers or the Company,
as applicable, at the following address:
Maverick Basin Exploration, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All notices, requests or consents to be sent to a Member must be given to such
Member to his, her or its address as set forth on the signature page hereto.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
15.11 Certain Meanings and Constructions
The terms "include" and similar terms as used in this Agreement shall
denote partial definitions. As the context shall require, the use of the
singular in this Agreement shall denote the plural and vice versa, and the use
of a particular gender shall denote another gender.
36
15.12 Waivers
No delay of or omission by a party in the exercise of any right, power
or remedy accruing to the party as a result of any breach or default by another
party under this Agreement shall impair any such right, power or remedy accruing
to the party, or shall be construed as a waiver of or acquiescence by the party
in any such breach or default or of any similar breach or default occurring
later. No waiver by a party of any single breach or default under this Agreement
shall be construed as a waiver by the party of any other breach or default
occurring before or after that waiver.
15.13 Separability of Provisions
Each provision of this Agreement shall be deemed separable. If any
provision or the application of any provision to any Person or circumstance
shall be held invalid or unenforceable in any jurisdiction, the provision shall
be ineffective only in that jurisdiction and only to the extent that it has been
expressly held to be invalid or unenforceable in that jurisdiction, without
invalidating any other provision of this Agreement or the application of the
provision itself to Persons or circumstances other than those to which it was
held invalid or unenforceable in the jurisdiction in question.
15.14 Counterparts
This Agreement may be executed in any number of counterparts and by
different parties to this Agreement in separate counterparts. Each of these
counterparts when so executed shall be deemed to be an original and all such
counterparts taken together shall constitute one and the same agreement.
15.15 Further Actions by the Parties
Each party, upon reasonable request by another party, shall furnish to
the other party any information reasonably requested by the other party, and
sign any documents and do any other things that the other party reasonably
requests for the purpose of carrying out the intent of this Agreement.
15.16 Adequacy of Consideration
Each party acknowledges and agrees that upon the effectiveness of this
Agreement, the party will be in receipt of valid and adequate consideration for
its undertakings under this Agreement.
15.17 Notice of Provisions of this Agreement and Certificate
By executing this Agreement, each Member acknowledges that it has
actual notice of all of the provisions of this Agreement, including, without
limitation (i) the restrictions on transfer of the Membership Interests set
37
forth in Section 3.11, and (ii) all of the provisions of the Certificate.
[Remainder of page intentionally left blank]
38
IN WITNESS WHREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CLASS A MEMBER:
TOUCHSTONE RESOURCES USA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President
CLASS B MEMBER:
TOUCHSTONE RESOURCES USA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President
CLASS C MEMBER:
PHT GAS, LLC
By: RMS Advisors, Inc., Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
39
SCHEDULE A
The Membership Interests of the initial Members are as follows:
Name of Member Capital Contribution Percentage Interest
-------------- -------------------- -------------------
Initial Class A Member
Touchstone Resources USA, Inc. $2,500,000 on or
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ before July 31, 2004
Suite 165 74.25%
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ $1,500,000 on or before
August 31, 2004
Initial Class B Member
Touchstone Resources, USA, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ $100,000 on July __, 2004 24.75%
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Initial Class C Member
PHT Gas, LLC
One ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ $100 on July __, 2004 1%
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇