NUMANCO L.L.C.
AMENDED AND RESTATED
OPERATING AGREEMENT
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") is
entered into as of the 30 day of November, 1997, by and among Nuvest, L.L.C., an
Oklahoma limited liability company ("Nuvest"), and NSS Numanco, Inc., a
Pennsylvania corporation ("Numanco Inc."), collectively referred to herein as
the "Members" of Numanco L.L.C., an Oklahoma limited liability company (the
"Company"), and supersedes all prior operating agreements of the Company. In
consideration of the mutual covenants and conditions hereinafter set forth, the
Members hereby agree that the terms of the Operating Agreement governing the
Company shall be as follows:
ARTICLE I
Organizational Matters
1.01 Formation. The Company has been formed as a limited liability
company pursuant to the provisions of the Act (as hereinafter defined). The
rights and obligations of the Members, the Manager designated herein, and the
affairs of the Company, shall be governed first by the mandatory provisions of
the Act, second by the Company's Articles of Organization, third by this
Agreement and fourth by the optional provisions of the Act. In the event of any
conflict among the foregoing, the conflict shall be resolved in the order of
priority set forth in the preceding sentence.
1.02 Name. The name of the Company shall be "Numanco L.L.C.".
1.03 Principal Office. The principal office of the Company in the State
of Oklahoma shall be located at 0000 Xxxx 00xx Xxxxx, Xxxxxx Xxxxx, Xxxxx,
Xxxxxxxx 00000. The name and address of the resident agent of the Company is Xxx
Xxxxxx, 0000 Xxxx 00xx Xxxxx, Xxxxxx Xxxxx, Xxxxx, Xxxxxxxx 00000. The Company
may also maintain offices at such other place or places as the Manager deems
advisable.
1.04 Term. The Company commenced upon the filing for record of the
Company's Articles of Organization with the Oklahoma Secretary of State, and
shall continue until 12:00 midnight, December 31, 2015, unless sooner terminated
as herein provided.
ARTICLE II
Definitions
2.01 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings.
"Act" means the Oklahoma Limited Liability Company Act, 18 Okla. Stat.
ss. 2000 et seq. (Supp. 1993), as it may be amended from time to time, and any
successor to such act.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant taxable year, after giving effect to the following adjustments: (i)
Credit to such Capital Account any amounts which such Member is obligated to
restore or is deemed to be obligated to restore pursuant to the penultimate
sentence of Reg. ss. 1.704-2(g)(1) and (i)(5); and (ii) Debit to such Capital
Account the items described in Reg. ss. 1.704-1(b)(2)(ii)(d)(4),(5) and (6)
(generally including certain Capital Account adjustments for depletion
allowances, certain future allocations of loss and deduction which are
reasonably expected as of year end, and future distributions, in excess of
offsetting Capital Account increases, which are reasonably expected as of year
end). The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Reg. ss. 1.704- 1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person. As used in this
definition of "Affiliate," the term "control" means either (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise or (ii) a direct or indirect equity
interest of ten percent (10%) or more in the entity.
"Agreement" means this Operating Agreement, as it may be amended or
supplemented from time to time.
"Articles of Organization" means the articles of organization, as
amended from time to time, filed by the Company under the Act.
"Business Day" means Monday through Friday of each week, except legal
holidays recognized as such by the government of the United States or the State
of Oklahoma.
"Business Plan" shall have the meaning ascribed to it in the Member
Agreement.
"Buy-Sell Event" shall have the meaning ascribed to it in the Member
Agreement.
"Capital Account" means each capital account maintained for a Member
pursuant to Section 4.03.
"Capital Contributions" means the sum of the total amount of cash and
the total value of property contributed or a promissory note or other binding
obligation to contribute cash or property to the Company by all Members, or any
one Member, as the case may be.
"Cash Available for Distribution" means, with respect to any period,
all cash receipts and funds received by the Company (except for Capital
Contributions) minus (i) all cash expenditures and (ii) the Company's cash
management fund representing working capital or other reserves as determined by
the unanimous consent of the Members.
"Code" means the Internal Revenue Code of 1986, as amended, as in
effect from time to time.
"Company" means the limited liability company formed by the filing of
the Company's Articles of Organization with the Oklahoma Secretary of State.
"Company Minimum Gain" means that amount determined by first computing
Company Nonrecourse Liability, any gain the Company would realize if it disposed
of the Company Property subject to such liability for no consideration other
than full satisfaction of the liability, and by then aggregating the separately
computed gains. For purposes of determining the amount of such gain, the
additional rules set forth in Reg. ss. 1.704-2(d) shall be followed.
"Company Property" means all property owned, leased or acquired by the
Company from time to time, whether real or personal, tangible or intangible.
"Dissociated Member" shall have the meaning ascribed to it in
Section 12.02.
"Event of Dissociation" has the meaning specified in Section 12.02.
"Event of Termination" shall have the meaning ascribed to it in the
Manager's Agreement.
"Majority Vote of the Members" means the vote of the Members owning a
majority of the Voting Rights.
"Manager" means the Person designated pursuant to Article VI.
"Manager's Agreement" shall mean that certain agreement between the
Manager, the Company, and others, of even date herewith.
"Member Agreement" means that certain Amended and Restated Member
Agreement between Nuvest, Numanco Inc., and certain other Persons, of even date
therewith.
"Member Loan Nonrecourse Deductions" shall have the meaning set forth
in Reg. ss. 1.704-2(i)(2). The amount of Member Loan Nonrecourse Deductions with
respect to a Member Nonrecourse Debt for a Company taxable year equals the net
increase, if any, in the amount of Member Minimum Gain attributable to such
Member Nonrecourse Debt during that taxable year, reduced (but not below zero)
by proceeds of the liability distributed during the year to the Member bearing
the economic risk of loss for the liability that are both attributable to the
liability and allocable to an increase in the Member Nonrecourse Debt Minimum
Gain.
"Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Reg. ss. 1.704-2(i).
"Member Nonrecourse Debt" shall have the meaning set forth in Reg.
ss. 1.704-2(b)(4), being generally any nonrecourse debt of the Company for which
any Member (or related person within the meaning of Reg. ss. 1.752-4(b)) bears
the economic risk of loss.
"Members" means the Record Holders of all interests in the profits and
capital of the Company. The term does not include a transferee of an interest
unless the transferee has been admitted as a Substitute Member.
"Nonrecourse Deductions" shall have the meaning set forth in Reg. ss.
1.704-2(b)(1). The amount of Nonrecourse Deductions for a Company taxable year
equals the net increase in the amount of Company Minimum Gain during that
taxable year determined under Reg. ss. 1.704-2(d), reduced (but not below zero)
by the aggregate distributions made during the taxable year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Company Minimum Gain
determined pursuant to Reg. ss. 1.704-2(h).
"Nonrecourse Liability" shall have the meaning set forth in Reg.
ss. 1.704-2(b)(3).
"Person" means a natural person, partnership, domestic or foreign
limited partnership, domestic or foreign limited liability company, trust,
estate, association or corporation.
"Record Holder" means the Person in whose name an interest in the
profits and capital of the Company is registered on the books and records of the
Company as of the close of business on a particular Business Day.
"Regulations" or "Reg." means the Treasury Regulations promulgated
under the Code, as amended from time to time.
"Substitute Member" means a transferee of an interest in the profits
and capital of the Company who is admitted as a Member to the Company pursuant
to Section 12.01 in place of and with all the rights of a Member.
"Tax Distribution" shall have the meaning ascribed to such term in
Nuvest's Operating Agreement.
"Tax Item" means the Company's taxable income or loss for each taxable
year, determined in accordance with Section 703(a) of the Code, all items of
income, gain, loss, deduction or credit required to be stated separately
pursuant to Section 703(a)(1) of the Code, and the following:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing taxable income;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Reg. ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing taxable income or loss; and
(c) Upon the distribution of property by the Company to a
Member, gain or loss attributable to the difference between the fair market
value of the property and its basis.
"Tax Matters Partner" means the Member designated pursuant to
Section 9.02.
"Term" means the period of time the Company shall continue in existence
as provided in Section 1.04.
"Unit" means an interest in the profits and capital of the Company, to
the extent provided in Articles IV and V.
"Voting Rights" has the meaning specified in Section 7.02.
ARTICLE III
Purpose
3.01 Purpose of the Company. The purpose of the Company is to engage in
any lawful act or activity for which limited liability companies may be
organized under the Act. Such acts or activities may include, but shall not be
limited to, acquiring, operating and maintaining real and personal properties in
the United States and foreign countries. In transacting such business, the
Company may:
(a) acquire an ownership, working, royalty or other interest
in stocks, real estate, oil and gas leases and other properties, either alone or
in conjunction with other parties;
(b) dispose of, rent, lease, transfer, encumber or otherwise
utilize Company Property used in connection with Company operations;
(c) employ such personnel and obtain such legal, accounting,
and other professional services and advice as may be necessary in the course of
the Company's operations under this Agreement;
(d) pay all ad valorem taxes levied or assessed against the
Company's assets, and all other taxes (other than income taxes) directly
relating to operations conducted under this Agreement;
(e) execute all options, leases, contracts, agreements,
documents, or instruments of any kind which are appropriate for carrying out the
purposes of the Company;
(f) procure and maintain in force such insurance, including
public liability, automotive liability, worker's compensation, and employer's
liability insurance, as may be prudent to protect the Company against liability
for loss and damages which may be occasioned by the activities to be engaged in
by the Company;
(g) purchase and establish inventories of equipment and
material required or expected to be required in connection with the Company's
operations;
(h) contract or enter into agreements for the performance of
services and the purchase and sale of material, equipment, supplies, and
property, both real and personal;
(i) conduct operations either alone or as a joint venturer,
co-tenant, partner, member, shareholder or in any other manner of participation
with any Member or third parties and to enter into agreements and contracts
setting forth the terms and provisions of such participation;
(j) borrow money from banks and other lending institutions for
Company purposes and pledge Company Property for the repayment of such loans, it
being understood that no bank or other lending institution to which the Company
makes application for a loan will be required to inquire as to the purposes for
which such loan is sought, and as between the Company and such bank or lending
institution it will be conclusively presumed that the proceeds of such loans are
to be and will be used for purposes authorized under the terms of this
Agreement;
(k) sell, relinquish, release, abandon, or otherwise dispose
of Company Property, including undeveloped, productive, and condemned
properties, in accordance with other provisions herein; and
(l) perform any and all other acts or activities customary or
incident to conducting the above Company operations.
ARTICLE IV
Capital Contributions
4.01 Authorized Units. The Company is authorized to issue an aggregate
of One Thousand (1,000) Units. Upon the execution and delivery of this
Agreement, the Company shall issue Units to the Members in the following
proportions:
Number Percentage of
Member of Units Outstanding Units
Nuvest 900 90%
Numanco Inc. 100 10%
1,000 100%
4.02 Capital Contributions. Capital Contributions shall be in the form
of cash or property, or an obligation to contribute cash or property.
4.03 Capital Accounts.
(a) The Company shall maintain for each Member a separate
Capital Account. The term "Capital Account" shall mean as to any Member the
amount of the initial Capital Contribution attributable to the Member, which
amount shall be (i) increased by subsequent Capital Contributions by such
Member, (ii) increased or decreased, as the case may be, by Tax Items allocated
to such Member pursuant to Article V, and (iii) decreased by distributions to
such Member pursuant to Section 5.01. Distributions shall be debited to Capital
Accounts in the year containing the record date for such distribution.
(b) In the event any in-kind contributions are made, the
Capital Account of the Member shall be increased by the fair market value of the
property contributed by such Member.
(c) The foregoing definition of Capital Account and certain
other provisions of this Agreement are intended to comply with Reg. ss.
1.704-1(b), and shall be interpreted and applied in a manner consistent with
that regulation. Such regulation contains additional rules governing maintenance
of capital accounts that have not been addressed in this Agreement.
(d) A transferee of an interest in the profits and capital of
the Company transferred in accordance with Article XI will succeed to the
Capital Account relating to the Member transferring such interest. However, if
the transfer causes a termination of the Company under Section 708(b)(1)(B) of
the Code, the Company Property shall be deemed to have been distributed in
liquidation of the Company to the Members (including the transferee of the
interest) pursuant to Section 13.02 and re-contributed by such Members and
transferees in reconstitution of the Company. The Capital Accounts of such
reconstituted Company shall be maintained in accordance with the principles of
this Section 4.03.
(e) At such times as may be permitted or required by Treasury
Regulations issued pursuant to Section 704 of the Code, the Capital Accounts
shall be revalued and adjusted to reflect the then fair market value of Company
Property and the Capital Accounts shall be maintained to comply with Reg. ss.
1.704-1(b)(2)(iv)(f). All allocations of gain resulting from such revaluation
shall be made consistently with that regulation, and to the extent not
inconsistent therewith, the allocation provisions of Section 5.02 hereof.
4.04 Interest. No interest shall be paid by the Company on Capital
Contributions, on balances in a Member's Capital Account or on any other funds
distributed or distributable under this Agreement.
4.05 No Withdrawal. No Member shall without the written consent of all
remaining Members of the Company have any right to the withdrawal or reduction
of any part of his Capital Contribution.
4.06 Loans. Loans by a Member to the Company shall not be considered
Capital Contributions. The Company may not make loans to any Member or any
Affiliate of any Member.
4.07 Borrowings. Subject to Section 6.03, the Manager may arrange for
the Company to borrow funds and to pledge Company Property as security therefor.
ARTICLE V
Distributions and Allocations
5.01 Distribution of Cash Available for Distribution. Cash Available
for Distribution shall be determined by the unanimous consent of the Members and
the Manager, except that on or before April 15 of each year the Company shall
distribute to Nuvest an amount sufficient to allow Nuvest to make any Tax
Distribution that Nuvest may be required to make pursuant to the terms of
Nuvest's Operating Agreement. Any distribution of property shall be treated as a
distribution of cash in the amount of the fair market value of such property.
Except as otherwise provided herein, distributions shall be allocated between
the Members in accordance with their respective Unit ownership.
5.02 Allocation of Tax Items. All Tax Items shall be allocated between
the Members in accordance with their respective Unit ownership.
5.03 Regulatory Allocations. The following special allocations shall
be made for each Company taxable year in the following order:
(a) Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain (other than Minimum Gain attributable to Member Nonrecourse
Debt or net decreases in Minimum Gain attributable to transactions subject to
the exceptions contained in Reg. ss. 1.704-2(f)(2)-(5)) during any Company
taxable year, each Member shall be specially allocated items of Company income
and gain for such year equal to such Member's share of the net decrease in
Company Minimum Gain during that year. Each Member's share of the net decrease
in Company Minimum Gain shall be determined in accordance with Reg. ss.
1.704-2(g)(2). This Section 5.03(a) is intended to comply with the minimum gain
chargeback requirement in Reg. ss. 1.704-2(f) and shall be interpreted
consistently therewith.
(b) Member Nonrecourse Debt Minimum Gain Chargeback.
If there is a net decrease in Member Minimum Gain attributable to a Member
Nonrecourse Debt during any Company taxable year, each Member with a share of
such Member Minimum Gain attributable to a Member Nonrecourse Debt determined in
accordance with Reg. ss. 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years)
equal to such Member's share of the net decrease in Member Minimum Gain during
such year. Each Member's share of the net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt shall be determined in a manner
consistent with Reg. ss. 1.704-2(g)(2). This subsection is intended to comply
with the minimum gain chargeback requirement in Reg. ss. 1.704-2(i)(4)
pertaining to Member Nonrecourse Debt and shall be interpreted consistently
therewith.
(c) Gross Income Allocation. In the event any Member has a
Capital Account deficit at the end of any Company taxable year which is in
excess of the sum of (i) the amount such Member is obligated to restore, and
(ii) the amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Reg. ss. 1.704-2(g)(1), each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 5.03(c) shall be made only if and to the extent that any such Member
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Article V have been tentatively made as if this
Section 5.03(c) hereof and Section 5.03(d) were not in the Agreement.
(d) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
Reg. ss. 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided
that an allocation pursuant to this Section 5.03(d) shall be made only if and to
the extent that any such Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article V have been tentatively
made as if this Section 5.03(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable year or other periods shall be allocated among the Members in proportion
to their respective Capital Contributions.
(f) Member Loan Nonrecourse Deductions. Any Member Loan
Nonrecourse Deductions for any fiscal year or other period shall be allocated to
the Members who bear the risk of loss with respect to the loan to which such
Member Loan Nonrecourse Deductions are attributable in accordance with Reg. ss.
1.704-2(i).
(g) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company Property pursuant to Section 734(b) or
Section 743(b) of the Code is required, pursuant to Reg. ss.
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Member(s) in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such section of the
Regulations.
5.04 Curative Allocations. The allocations set forth in Section 5.03,
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other Tax Items pursuant
to this Article V. Therefore, notwithstanding any other provision of this
Article V (other than the Regulatory Allocations), the Manager shall make such
offsetting special allocations of Tax Items in whatever manner he determines
appropriate so that, after such offsetting allocations are made, each Member's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the Regulatory Allocations were not part
of the Agreement and all Tax Items were allocated pursuant to Section 5.03. In
exercising his discretion under this Section 5.04, the Manager shall take into
account future Regulatory Allocations under Sections 5.03(a) and (b) that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 5.03(e) and (f).
5.05. Special Allocation of Gain or Loss on Contributed Property. Under
Regulations prescribed by the Secretary of the Treasury pursuant to Section
704(c) of the Code, Tax Items with respect to property contributed to the
Company by a Member shall be shared among Members so as to take account of the
variation between the basis of the property to the Company and its fair market
value at the time of contribution. The Manager shall have the power to make such
elections, adopt such conventions, and allocate Tax Items as he deems
appropriate to comply with Section 704(c) of the Code and any Regulations
promulgated thereunder and to preserve, to the extent possible, uniformity of
the Members' interests in the profits and capital of the Company. Any Tax Items
allocated under this Section 5.05 shall not be debited or credited to Capital
Accounts to the extent that item is already taken into account (upon formation
or otherwise) in determining a Member's Capital Account.
5.06. Change or Transfer of Interests in Profits and Capital. Upon the
transfer of an interest in the profits and capital of the Company in accordance
with Article XI, Tax Items attributable to the transferred interest shall, for
federal income tax purposes, be allocated between the transferor and the
transferee of such interest based on the number of months that each such Person
was the owner of the interest, in a manner determined by the Manager to be
consistent with the requirements of Section 706 of the Code and Regulations or
rulings promulgated thereunder.
5.07. Deemed Income or Gain. If, and to the extent that, any Member is
deemed to recognize income or gain as a result of any transaction between the
Member and the Company pursuant to Sections 482, 483, 1272-1274, or 7872 of the
Code, or any similar provision now or hereafter in effect, any corresponding
resulting loss or deduction of the Company shall be allocated to the Member who
was allocated such income or gain.
5.08. Recapture Items. Any portion of any income or gain attributable
to the sale or other disposition of any depreciable Company Property required to
be recaptured as ordinary income shall, to the maximum extent possible in
accordance with Section 704 of the Code and the Regulations thereunder, be
allocated among the Members for tax purposes in the same ratio as the deductions
giving rise to such recapture were allocated. Any recapture of tax credit shall
be allocated among the Members in accordance with Reg. ss. 1.704-1(b)(4)(ii).
ARTICLE VI
Management and Operation of Business
6.01. Manager. Management of the Company shall be vested in a Manager.
Unless and until there has occurred an Event of Termination, the Manager shall
be X. Xxxxx. Upon the occurrence of a Buy-Sell Event, the holder of a majority
of the Voting Rights shall, subject to the limitations imposed under Section
8.3(b) of the Member Agreement, be entitled to designate a new Manager at any
annual or special meeting called for that purpose.
6.02. Authority of Manager. The Manager may exercise all the powers of
the Company whether derived from law, the Articles of Organization, this
Agreement, or the Manager's Agreement, except such powers as are by statute, by
the Articles of Organization, by this Agreement, or by the Manager's Agreement
vested solely in the Members.
6.03. Restrictions on Manager. Notwithstanding any other provision
hereof, unless and until there shall have occurred an Event of Default, the
Manager shall not have the authority to cause the Company to do or commit to do
any of the following acts, without the prior unanimous written consent of the
specific act by the Members; however, upon the occurrence of an Event of
Default, the Manager shall have the authority to cause the Company to do or
commit to do such acts upon the Majority Vote of the Members:
(a) Borrow money in excess of the amounts set forth in the
Business Plan;
(b) Sell any assets of the Company (or assets, in related
transactions) having a fair market value over $500,000;
(c) Enter into any contract involving an anticipated total
expenditure of over $100,000;
(d) Do any act which would make it impossible to carry on the
ordinary business of the Company;
(e) Compromise any claim over $50,000;
(f) Admit a Person as a Member;
(g) Knowingly perform any act that would subject a Member to
personal liability;
(h) Amend the Articles of Organization;
(i) Approve any Business Plan of the Company;
(j) Increase the compensation of any officer of the Company
above the amount set forth in the Business Plan; or
(k) Enter the Company into new business ventures, alliances or
teaming agreements.
6.04. Outside Activities. The Members and Manager and their respective
Affiliates have business interests and engage in business activities in addition
to those relating to the Company. No provision of this Agreement shall be deemed
to prohibit the Members, the Manager or their respective Affiliates from
conducting such businesses and activities, provided they are not in direct
competition with the Company. Neither the Company nor any Member shall have any
rights by virtue of this Agreement or the relationship contemplated herein in
any non-competing business ventures of any other Member or the Affiliates of
such Member.
6.05. Limitation on Liability of Manager. No Person serving as Manager
shall be liable to the Company for monetary damages for breach of fiduciary duty
as a Manager; provided, however, that nothing contained herein shall eliminate
or limit the liability of such Person (i) for any breach of the Manager's duty
of loyalty to the Company, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law and, (iii) for
any transaction from which the Manager derived an improper personal benefit.
ARTICLE VII
Rights and Obligations of the Members
7.01 Limitation of Liability. Anything herein to the contrary
notwithstanding, except as otherwise expressly agreed in writing, a Member shall
not be personally liable for any debts, liabilities, or obligations of the
Company, whether to the Company, to any of the other Members, or to creditors of
the Company, beyond the Capital Account of the Member, together with the
Member's share of the assets and undistributed profits of the Company.
7.02 Voting Rights. Action requiring a vote of the Members may be taken
upon a Majority Vote of the Members. Each Unit shall entitle the holder thereof
to one (1) vote.
7.03 Indemnification.
(a) To the maximum extent permitted by law, the Company shall
indemnify and hold harmless the Manager, all Members, their respective
Affiliates, and the employees and agents of the Company (each, an "Indemnitee")
from and against any and all losses, claims, demands, costs, damages,
liabilities, joint and several, expenses of any nature (including attorneys'
fees and disbursements), judgments, fines, settlements, penalties and other
expenses actually and reasonably incurred by the Indemnitee in connection with
any and all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, by reason of the fact that
the Indemnitee is or was a Manager or Member of the Company or is or was an
employee or agent of the Company, including Affiliates of the foregoing, arising
out of or incidental to the business of the Company, provided, (i) the
Indemnitee's conduct did not constitute willful misconduct or recklessness, (ii)
the action is not based on breach of this Agreement, (iii) the Indemnitee acted
in good faith and in a manner he or it reasonably believed to be in, or not
opposed to, the best interests of the Company and within the scope of such
Indemnitee's authority and (iv) with respect to a criminal action or proceeding,
the Indemnitee had no reasonable cause to believe its conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, in
and of itself, create a presumption or otherwise constitute evidence that the
Indemnitee acted in a manner contrary to that specified above.
(b) Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 7.03 may, from time
to time, be advanced by the Company prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified as
authorized in this Section 7.03.
(c) Indemnification provided by this Section 7.03 shall be in
addition to any other rights to which the Indemnitee may be entitled under any
agreement, vote of the Members, as a matter of law or equity, or otherwise, and
shall inure to the benefit of the successors, assignees, heirs, personal
representatives and administrators of the Indemnitee.
(d) The Company may purchase and maintain insurance, at the
Company's expense, on behalf of any Indemnities against any liability that may
be asserted against or expense that may be incurred by an Indemnitee in
connection with the activities of the Company regardless of whether the Company
would have the power to indemnify such Indemnitee against such liability under
the provisions of this Agreement.
ARTICLE VIII
Books, Records, and Accounting
8.01 Books and Records. Appropriate books and records with respect to
the Company's business shall at all times be kept at the principal office of the
Company or at such other places as agreed to by the Members. Any records
maintained by the Company in the regular course of its business may be kept on,
or be in the form of, magnetic tape, photographs or any other information
storage device, provided that the records so kept are convertible into clearly
legible written form within a reasonable period of time. Each Member shall have
the right upon demand and at such Member's own expense to inspect and copy any
of the Company's books and records and obtain such other information regarding
the affairs of the Company.
8.02 Accounting. The books of the Company for regulatory and financial
reporting purposes shall be maintained on cash basis of accounting. The Company
books for purposes of maintaining and determining Capital Accounts shall be
maintained in accordance with the provisions of this Agreement, Section 704 of
the Code and, to the extent not inconsistent therewith, the principles described
above for financial reporting and regulatory purposes. Comparisons of budgeted
income and expenses to actual income and expenses of the Company shall be on the
accrual basis of accounting.
8.03 Fiscal Year. The fiscal year of the Company shall be the
calendar year, unless otherwise determined by the Manager.
ARTICLE IX
Tax Matters
9.01 Taxable year. The taxable year of the Company shall be the
calendar year, unless otherwise determined by the Manager.
9.02 Tax Controversies. The "Tax Matters Partner" (as defined in
Section 6231(a)(7) of the Code) shall be determined by a Majority Vote of the
Members, and shall be authorized and required to represent the Company, at the
Company's expense, in connection with all examinations of the Company's affairs
by tax authorities, including resulting administrative and judicial proceedings.
Each Member agrees to cooperate with the Tax Matters Partner, and to do or
refrain from doing any or all things reasonably required by the Tax Matters
Partner to conduct such proceedings.
9.03 Taxation as a Partnership. No election shall be made by the
Company or any Member for the Company to be excluded from the application of any
provision of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state tax laws.
ARTICLE X
Transfer of Interests in the
Profits and Capital of the Company
10.01. Transfer.
(a) The term "transfer," when used in this Article X with
respect to an interest in the profits and capital of the Company, shall be
deemed to refer to a transaction by which the Member assigns all or a portion of
its interest to another Person, or by which the holder of an interest assigns
the interest to another Person as assignee, and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, transfer by will or
intestate succession, exchange, or any other disposition.
(b) No interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article X.
Any transfer or purported transfer of any interest not made in accordance with
this Article X shall be null and void. Should a Member attempt to transfer its
interest in contravention of this Article XI, then (i) such an alleged assignee
shall have no right to require any information or account of the Company's
transactions or to inspect the Company's books and records, tax return
information, or any other information, documents, or other data associated with
the Company; and (ii) the Company and the other Members (A) shall be entitled to
treat such assigning Member as the absolute owner thereof in all respects, and
(B) shall incur no liability for distributions or for allocations of income,
gain, loss, deduction or credit, or for transmittal of reports and notices
required to be given to such Member.
(c) A transferee of an interest in the profits and capital
transferred in accordance with this Article XI shall not become a Substitute
Member unless and until admitted as a Substitute Member pursuant to Article XII.
Any such transferee who does not become a Substitute Member shall have no right
to vote or otherwise participate in the Company's affairs as a Member thereof,
but instead shall be a Record Holder only for the purpose of receiving the share
of profits or other compensation by way of income and the return of
contributions to which the transferring Member would otherwise be entitled at
the time said transferring Member would be entitled to receive the same.
10.02. Transfer of Interests by a Member.
(a) No interests in the profits and capital may be transferred
by a Member unless the following conditions are first satisfied:
(i) The assigning Member and his transferee has (A)
delivered to the Company a duly executed and acknowledged counterpart of the
instrument of assignment and such instrument evidences the written acceptance by
the transferee of all of the terms and provisions of this Agreement and
represents that such assignment was made in accordance with all applicable laws
and regulations; and (B) executed and delivered to the Company such other
instruments as the Manager may reasonably deem necessary or desirable to effect
the assignment; and
(ii) The Company has received an opinion from counsel for
the assigning Member, in form and substance satisfactory to the Manager, that
such transfer; (A) would not materially adversely affect the classification of
the Company as a partnership for federal and (as applicable) state income tax
purposes; and (B) would not violate applicable federal and state securities laws
or rules and regulations of the Securities and Exchange Commission, any state
securities commission or any other governmental authority with jurisdiction over
the transfer.
(b) Without the consent of the Manager, no transfer of an
interest in the profits and capital of the Company may be made if such transfer,
when added to the total of all other transfers within the preceding 12 months,
would result in the Company being considered to have terminated within the
meaning of Section 708(b)(1)(B) of the Code.
(c) In no event shall any interest be transferred to a minor
(except in trust pursuant to the Uniform Transfers to Minors Act) or any
incompetent (except in trust).
ARTICLE XI
Admission of Substitute and Additional Members
11.01. Admission of Substitute Members.
(a) Upon a transfer of an interest in the profits and capital
of the Company by a Member in accordance with Article X (but not otherwise), the
transferor shall have the power to give the transferee the right to apply to
become a Substitute Member with respect to the interest acquired, subject to the
conditions of and in the manner permitted under this Agreement. No transferee of
an interest shall become a Substitute Member with respect to the transferred
interest (whether or not such transferee is then a Member or Substitute Member
with respect to other previously acquired interests) unless and until all of the
following conditions are satisfied:
(i) The instrument of assignment sets forth the intentions of
the assignor that the transferee succeed to the assignor's interest as a
Substitute Member in his place;
(ii) The assignor and transferee shall have fulfilled all
other requirements of this Agreement;
(iii) The transferee shall have paid all reasonable legal fees
and filing costs incurred by the Company in connection with his substitution as
a Member; and
(iv) The Members shall have unanimously approved such
substitution in writing, which approval may be granted or withheld by each
Member in its sole and absolute discretion and may be arbitrarily withheld, and
the books and records of the Company have been modified to reflect the
admission; provided, in the event Public Service Company of Oklahoma ("PSO")
shall become a member of the Company, no such approval shall be required with
respect to any transfer by PSO to its parent corporation, Central and South West
Corporation, or any direct or indirect subsidiary of such parent corporation.
(b) The admission of a transferee as a Substitute Member with
respect to a transferred interest shall become effective on the date the Members
give their unanimous written consent to the admission and the books and records
of the Company have been modified to reflect such admission. Any Member who
transfers all of his interest in the profits and capital shall cease to be a
Member of the Company upon a transfer of such interest in accordance with
Article X and the execution of a counterpart of this Agreement by the transferee
and shall have no further rights as a Member in or with respect to the Company
(whether or not the transferee of such former Member is admitted to he Company
as a Substitute Member).
ARTICLE XII
Dissolution and Liquidation
12.01 Dissolution and Liquidation. The Company shall be dissolved and
its affairs shall be wound up upon the occurrence of any of the following: (i)
the term of the Company stated in the Articles of Organization expires; (ii) if,
upon the occurrence of an Event of Dissociation, the remaining Members fail to
continue the Company pursuant to Section 12.02; or (iii) all Members vote to
dissolve the Company.
12.02 Events of Dissociation. Upon the death, incapacity, resignation,
expulsion, bankruptcy or dissolution of a Member, or the occurrence of any other
event which terminates the continued membership of a Member in the Company (any
such Member shall be referred to herein as a "Dissociated Member" and any of
such events shall be referred to herein as an "Event of Dissociation"), the
Company shall dissolve and its affairs shall be wound up; provided, however, it
is agreed that without the consent of all other Members, no Member may
voluntarily resign from the Company. The Company shall thereafter conduct only
activities necessary to wind up its affairs, unless there is at least one (1)
remaining Member and within sixty (60) days after the occurrence of an Event of
Dissociation, all the remaining Members unanimously agree to continue the
Company. If any election to continue the Company is made, then, except as
otherwise provided in the Member Agreement or the Manager's Agreement:
(a) The remaining Members may elect, within thirty (30) days
of the decision to continue the Company, to purchase the Dissociated Member's
interest in the profits and capital of the Company upon such terms and
conditions as the remaining Members and the Dissociated Member or the legal
representative of the Dissociated Member, may agree. In the event the remaining
Members and the Dissociated Member (or such legal representative) do not agree
upon terms and conditions for a purchase of such interest of the Dissociated
Member,the remaining Members shall have an option (to be exercised within sixty
(60) days after the occurrence of the Event of Dissociation, by giving notice to
the Dissociated Member (or such legal representative) to purchase the interest
for a cash purchase price determined by the value of the Capital Account of the
Dissociated Member, as of the end of the calendar month preceding the occurrence
of the Event of Dissociation, adjusted as if all Company Property were sold at
fair market value, and all liabilities of the Company were paid and the Company
was liquidated in accordance with the provisions of Section 12.03.
(b) The Company shall continue until the expiration of the
term for which it was formed or until the occurrence of another Event of
Dissociation, in which event any remaining Members shall again elect whether to
continue the Company pursuant to this Section 12.02.
12.03 Method of Winding Up. Upon dissolution of the Company pursuant to
Section 12.01, the Company shall immediately commence to liquidate and wind up
its affairs. The Members shall continue to share profits and losses during the
period of liquidation and winding up in the same proportion as before
commencement of winding up and dissolution. Unless the Manager shall determine
otherwise, all distributions will be made in cash, and none of the Company
Property will be distributed in kind to the Members. The proceeds from the
liquidation and winding up shall be applied in the following order of priority:
(a) To creditors (other than the Manager), including Members
who are creditors, to the extent permitted by law, in satisfaction of
liabilities of the Company other than liabilities to Members on account of their
Capital Contributions or on account of a Member's withdrawal from the Company or
pursuant to a withdrawal of capital; and
(b) To the Manager, the balance of all sums due pursuant to
the terms and provisions of the Manager's Agreement, except as otherwise
provided pursuant to Section 5.5 of the Manager's Agreement; and
(c) To each Member the amount of his Capital Account balance,
and if the remaining proceeds are insufficient to allow each Member to receive
the full amount in his Capital Account, to the Members pro rata according to
their respective Capital Account balances; and
(d) The balance, if any, to the Members in proportion to their
respective Unit ownership.
12.04 Filing Articles of Dissolution. Upon the completion of the
distribution of Company Property as provided in Section 12.03, Articles of
Dissolution shall be filed as required by the Act, and each member agrees to
take whatever action may be advisable or proper to carry out the provisions of
this Section.
12.05 Return of Capital. The return of Capital Contributions shall be
made solely from Company Property.
ARTICLE XIII
Amendment of Agreement; Meetings
13.01 Amendments. Unless and until there shall have occurred a Buy-Sell
Event, all amendments to this Agreement shall require the unanimous consent of
the Members. Upon the occurrence of a Buy-Sell Event, all amendments to this
Agreement may be effected by a Majority Vote of the Members, subject to the
provisions of Section 13.02.
13.02 Limitations on Amendments. Notwithstanding any other provision of
this Agreement, no amendment to this Agreement may without the unanimous
approval of all Members (i) enlarge the obligations of any Member under this
Agreement or (ii) amend Section 13.01 or this Section 13.02.
13.03 Meetings. Meetings may be called by any Member, by providing at
least five (5) business days prior notice of the time, place and purpose of the
meeting to all Members. The holder of a majority of the Voting Rights,
represented in person or by proxy, shall constitute a quorum at a meeting of
Members.
13.04 Action Without a Meeting. Any action that may be taken by any
vote of all or any part of the Members may be taken without a meeting if a
consent to such action is signed by Members holding not less than the minimum
number of Voting Rights that would be necessary to authorize or take such action
at a meeting at which all Members entitled to vote thereon were present and
voted. Prompt notice of the taking of any action without a meeting shall be
given to those Members who have not consented in writing.
ARTICLE XIV
General Provisions
14.01 Notices. Any notice, demand, request or report required or
permitted to be given or made to a Member under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class mail to the Member. Any notice, payment, or report to be given or
sent to a Member hereunder shall be deemed conclusively to have been given or
sent, upon mailing of such notice, payment, or report to the address shown on
the records of the Company, regardless of any claim of any Person who may have
an interest by reason of an assignment or otherwise.
14.02 Captions. All article and section captions in this Agreement are
for convenience only. They shall not be deemed part of this Agreement and in no
way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
14.03 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
14.04 Further Action. The parties to this Agreement shall execute and
deliver all documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
14.04 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assignees.
14.06 Integration. Subject to the references to the Member Agreement,
the Manager's Agreement, and Nuvest's Operating Agreement, this Agreement
constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings
pertaining thereto. In the event of a conflict between this Agreement and the
Member Agreement, the Manager's Agreement, or Nuvest's Operating Agreement, such
other agreements shall be controlling.
14.07 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
14.08 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute an agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto, independently of the
signature of any other party.
14.09 Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Oklahoma, without regard to its
principles of conflict of laws.
14.10 Invalidity of Provisions. If any provision of this Agreement is
or becomes invalid, illegal, or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
14.11 Conveyances. All of the assets of the Company shall be held in
the name of the Company. Any deed, xxxx of sale, mortgage, lease, contract of
sale or other instrument purporting to convey or encumber the interest of the
Company of all or any portion of the assets of the Company shall be sufficient
when signed by a Manager.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ______ day of ______________, 199 .
MEMBERS:
NUVEST, L.L.C.
By:___________________________
Title:________________________
NSS NUMANCO, INC.
By:___________________________
Title:________________________
