Exhibit 3.4
LIMITED LIABILITY COMPANY AGREEMENT
OF
PARALLEL, L.L.C.
THE INTERESTS IN THIS LIMITED LIABILITY COMPANY HAVE NOT BEEN REGISTERED UNDER,
AND ARE BEING OFFERED IN RELIANCE UPON, EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS. NO SUCH INTEREST MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION (SATISFACTORY TO THE COMPANY) OF
COUNSEL (SATISFACTORY TO THE COMPANY) THAT REGISTRATION IS NOT REQUIRED; NOR MAY
SUCH INTEREST BE TRANSFERRED EXCEPT WITH THE CONSENT OF THE COMPANY. SUCH
INTERESTS MAY NOT BE TRANSFERRED IN ANY EVENT EXCEPT IN ACCORDANCE WITH
SUBSTANTIAL ADDITIONAL RESTRICTIONS SET FORTH IN THIS AGREEMENT.
LIMITED LIABILITY COMPANY AGREEMENT
OF
PARALLEL, L.L.C.
TABLE OF CONTENTS
ARTICLE I - ORGANIZATIONAL MATTERS.................................... 1
1.1 Formation................................................ 1
1.2 Name..................................................... 1
1.3 Registered Office; Principal Office...................... 1
1.4 Power of Attorney........................................ 2
1.5 Term..................................................... 3
ARTICLE II - DEFINITIONS.............................................. 3
Additional Member........................................ 4
Affiliate................................................ 4
Agreement................................................ 4
Assignee................................................. 4
Capital Account.......................................... 4
Capital Contribution..................................... 4
Certificate.............................................. 4
Code..................................................... 4
Company.................................................. 4
Company Assets........................................... 4
Company Nonrecourse Liability............................ 5
Delaware Act............................................. 5
Fiscal Year.............................................. 5
Initial Members.......................................... 5
Interest................................................. 5
IRS...................................................... 5
Limited Liability Company Certificate.................... 5
Majority Interest of Members............................. 5
Managers................................................. 5
Member................................................... 5
Member Nonrecourse Debt.................................. 6
Member Nonrecourse Deductions............................ 6
Minimum Gain............................................. 6
Person................................................... 6
Record Date.............................................. 6
Record Holder............................................ 6
Related Person........................................... 67
Substituted Member....................................... 7
Tax Matters Partner...................................... 7
(i)
Treasury Regulations..................................... 7
ARTICLE III - PURPOSE................................................. 7
3.1 Purpose and Business..................................... 7
3.2 Powers................................................... 7
ARTICLE IV - CAPITAL CONTRIBUTIONS.................................... 8
4.1 Initial Contributions by the Members..................... 8
4.2 Issuances of Additional Interests........................ 8
4.3 Capital Accounts......................................... 9
4.4 Additional Provisions Regarding Capital Accounts......... 10
4.5 No Withdrawal............................................ 11
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS............................. 11
5.1 Allocation............................................... 11
5.2 Distributions............................................ 13
5.3 Tax Distributions........................................ 14
5.4 Liquidating Distributions................................ 14
ARTICLE VI - THE MANAGERS- POWERS, DUTIES AND RIGHTS.................. 14
6.1 Managers................................................. 14
6.2 Committees............................................... 17
6.3 Officers................................................. 19
6.4 Powers................................................... 22
6.5 Restrictions on Manager's Authority...................... 23
6.6 Limited Liability Company Certificate.................... 24
6.7 Reimbursement of the Managers............................ 25
6.8 Outside Activities....................................... 25
6.9 Transactions with the Managers........................... 26
6.10 Other Related Transactions............................... 26
6.11 Indemnification.......................................... 26
6.12 Liability of Indemnitees................................. 28
6.13 Other Matters Concerning the Managers.................... 28
6.14 Title to Company Assets.................................. 29
6.15 Reliance by Third Parties................................ 29
6.16 Resolution of Conflicts of Interest...................... 30
6.17 Liability of Managers.................................... 30
ARTICLE VII - RIGHTS AND OBLIGATIONS OF MEMBERS....................... 31
7.1 Limitation of Liability.................................. 31
7.2 Outside Activities....................................... 31
7.3 Return of Capital........................................ 31
7.4 Rights of Members Relating to the Company................ 31
7.5 Status as Limited Liability Company...................... 32
7.6 Withdrawal of a Member................................... 32
(ii)
ARTICLE VIII - RECORDS AND ACCOUNTING................................. 33
8.1 Records and Accounting................................... 33
8.2 Fiscal Year.............................................. 33
ARTICLE IX - TAX MATTERS.............................................. 33
9.1 Tax Matters Partner...................................... 33
9.2 Tax Returns.............................................. 35
9.3 Tax Elections............................................ 35
9.4 Authority of Managers to Vary Allocations................ 35
ARTICLE X - ISSUANCE OF CERTIFICATES.................................. 36
10.1 Issuance of Certificates................................. 36
10.2 Lost, Stolen or Destroyed Certificates................... 37
10.3 Registered Owner......................................... 38
ARTICLE XI - TRANSFER OF INTERESTS.................................... 39
11.1 Transfer................................................. 39
11.2 Substituted Members...................................... 39
11.3 Admission of Additional Members.......................... 39
11.4 Amendment of Agreement and Limited
Liability Company Certificate........................ ... 40
ARTICLE XII - DISSOLUTION AND LIQUIDATION............................. 40
12.1 Dissolution.............................................. 40
12.2 Liquidation.............................................. 41
12.3 Dissolution of Limited Liability Company Certificate..... 43
12.4 Reasonable Time for Winding Up........................... 43
12.5 Return of Capital........................................ 43
12.6 Waiver of Partition...................................... 43
ARTICLE XIII - AMENDMENT OF AGREEMENT; MEETINGS
OF MEMBERS.................................................. 43
13.1 Amendments to be Adopted Solely by Managers.............. 43
13.2 Amendment Procedures..................................... 45
13.3 Meetings................................................. 45
13.4 Notice of Meeting........................................ 45
13.5 Record Date.............................................. 46
13.6 Adjournment.............................................. 46
13.7 Waiver of Notice; Approval of Meeting-Approval
of Minutes............................................... 46
13.8 Quorum................................................... 46
13.9 Conduct of Meeting....................................... 47
(iii)
13.10 Action Without a Meeting................................. 47
ARTICLE XIV - GENERAL PROVISIONS...................................... 48
14.1 Addresses and Notices.................................... 48
14.2 Titles and Captions...................................... 49
14.3 Pronouns and Plurals..................................... 49
14.4 Further Action........................................... 49
14.5 Binding Effect........................................... 49
14.6 Creditors................................................ 49
14.7 Waiver................................................... 49
14.8 Applicable Law........................................... 49
14.9 Invalidity of Provisions................................. 49
14.10 Third Party Beneficiaries................................ 49
14.11 Counterparts............................................. 50
(iv)
LIMITED LIABILITY COMPANY AGREEMENT
OF
PARALLEL, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT OF PARALLEL, L.L.C., dated as of
April 2, 2002, is entered into by and among the Persons whose names appear on
the signature pages of this Agreement as Members, together with any other
Persons who hereafter become Members in the Company as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation. The Company has been organized as a limited liability
company pursuant to the provisions of the Delaware Act. Except as expressly
provided to the contrary in this Agreement, the rights and obligations of the
Members and the administration, dissolution and termination of the Company shall
be governed by the Delaware Act. The Interest of each Member shall be personal
property for all purposes.
1.2 Name. The name of the Company shall be "PARALLEL, L.L.C." The
Company's business may be conducted under any other name or names deemed
necessary or appropriate by the Managers, but not including the name of any
Affiliate of the Company. The words "Limited Liability Company," "L.L.C.," "LC"
or similar words or letters shall be included in the Company's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires.
1.3 Registered Office; Principal Office. Unless and until changed by the
Managers, the address of the registered office of the Company in the State of
Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000, and the name of the registered agent for service of process on the
Company in the State of Delaware at such address is The Corporation Trust
Company. The principal office and address of the Company shall be as the
Managers may from time to time designate by notice to the Members. The Company
may maintain offices at such other place or places within or outside the State
of Delaware as the Managers deem advisable.
1.4 Power of Attorney.
(a) Each Member and each Assignee hereby constitutes and appoints each
of the Company's authorized officers and attorneys-in-fact with full power of
substitution, as his true and lawful agent and attorney-in-fact with full power
and authority in his name, place and xxxxx to do the following:
(i) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (A) all articles, certificates, documents and
other instruments (including this Agreement and the Limited Liability Company
Certificate) and all amendments or restatements thereof that the officers deem
necessary or appropriate to form, qualify or continue the existence or
qualification of the Company as a limited liability company in the State of
Delaware and in all other jurisdictions in which the Company may conduct
business or own property, (B) all articles, certificates, documents and other
instruments that the officers deem necessary or appropriate to reflect, in
accordance with its terms, any amendment, change, modification or restatement of
this Agreement, (C) all articles, certificates, documents and other instruments
(including conveyances and a certificate of cancellation) that the officers deem
necessary or appropriate to reflect the dissolution and liquidation of the
Company pursuant to the terms of this Agreement and (D) all articles,
certificates, documents and other instruments relating to the admission,
withdrawal, removal or substitution of any Member pursuant to this Agreement, or
relating to other events described in this Agreement;
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates and other instruments
necessary or appropriate, in the sole discretion of the officers, to make,
evidence, give, confirm or ratify any vote, consent, approval, agreement or
other action that is made or given by the Members, provided, that when required
by any other provision of this Agreement that establishes a percentage of the
Members required to take any action, the officers may exercise the power of
attorney made in this Section 1.4(a)(ii) only after the necessary vote, consent
or approval of the Members;
(iii) sign, execute and file with any federal or state agencies,
departments, bureaus, offices or authorities, any documents or instruments
related to the Company or its business that the officers in their discretion
determine should be filed, including any statements, notices or communications
now or hereafter required or permitted to be filed under any law, rule or
regulation of the United States or any state.
Nothing contained in this Section 1.4(a) shall be construed as authorizing
the officers to amend this Agreement except as may be otherwise expressly
provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest and it shall survive and not be affected by
the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of any Member or Assignee and the transfer of all or
any portion of the Member's or Assignee's Interest and shall extend to the
Member's or Assignee's heirs, successors, assigns and personal representatives.
Each such Member or Assignee hereby agrees to be bound by any representation
made by the officers acting in good faith pursuant to such power of attorney,
and each such Member or Assignee hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of the officers taken in
good faith under such power of attorney. Each Member or Assignee shall execute
and deliver to the officers, within 15 days after receipt of the officers'
request therefor, such further designations, powers of attorney and other
instruments as the officers deem necessary to effectuate this Section 1.4.
1.5 Term. The Company commenced upon the filing of the Limited Liability
Company Certificate in accordance with the Delaware Act and shall continue in
existence until terminated in accordance with the provisions of Article XII.
ARTICLE II
DEFINITIONS
The following definitions shall, for all purposes, unless otherwise
clearly indicated to the contrary, be applied to the terms used in this
Agreement:
"Additional Member" means a Person admitted to the Company as a Member
pursuant to Section 11.3 and who is shown as such on the books and records of
the Company.
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"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control
with, the Person in question. As used herein, the term "control" means 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.
"Agreement" means this Limited Liability Company Agreement of Parallel,
L.L.C., as the same may be amended, restated or supplemented from time to time.
"Assignee" means a Person to whom an Interest has been transferred in a
manner permitted under this Agreement but who has not become a Substituted
Member.
"Capital Account" has the meaning given that term in Section 4.3.
"Capital Contribution" means, with respect to any Member, any cash or
property that the Member contributes or is deemed to contribute to the Company
pursuant to Section 4.1.
"Certificate" means a certificate in such form as may be adopted by the
Company in its sole discretion, issued by the Company evidencing ownership of an
Interest in the Company.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder.
"Company" means PARALLEL, L.L.C., a Delaware limited liability company
established pursuant to the Limited Liability Company Certificate, and any
successor thereto.
"Company Assets" means all assets of the Company, whether tangible or
intangible and whether real, personal or mixed.
"Company Nonrecourse Liability" means any nonrecourse liabilities (or
portions thereof) of the Company for which no Member bears the economic risk of
loss, determined in accordance with Section 1.704-2(b)(3) of the Treasury
Regulations.
"Delaware Act" means the Delaware Limited Liability Company Act, as
amended, supplemented or restated from time to time, and any successor to such
statute.
"Fiscal Year" has the meaning assigned to that term in Section 8.2.
"Initial Member" means Parallel Petroleum Corporation, a Delaware
corporation.
"Interest" means the equity interest of a Member in the Company, expressed
as a percentage, the numerator of which is a Member's Capital Contribution made
to the Company and the denominator of which is the total Capital Contributions
made to the Company by all Members. The total outstanding Interests at all times
will be equal to 100%.
"IRS" means the United States Internal Revenue Service.
"Limited Liability Company Certificate" means the Certificate of Formation
of the Company filed with the Secretary of State of the State of Delaware as
referenced in Section 6.6, as such Limited Liability Company Certificate may be
amended or restated from time to time.
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"Majority Interest of Members" means the owners (other than an Assignee)
of more than 50% of the aggregate Interests owned by all Members.
"Managers" means any Person elected, appointed or otherwise designated as
a Manager of the Company as provided in this Agreement, but does not include any
Person who has ceased to be a Manager of the Company.
"Member" means each Initial Member, each Substituted Member and each
Additional Member and, solely for purposes of determining allocations and
distributions under Articles V and XII, shall include an Assignee.
"Member Nonrecourse Debt" means any nonrecourse debt of the Company (or
portion thereof) for which any Member bears the economic risk of loss, as
determined in accordance with Section 1.704-2(b)(4) of the Treasury Regulations.
"Member Nonrecourse Deductions" means the amount of deductions, losses and
expenses equal to the net increase during the year in Minimum Gain attributable
to a Member Nonrecourse Debt, reduced (but not below zero) by proceeds of such
Member Nonrecourse Debt distributed during the year to the Members who bear the
economic risk of loss for such debt, as determined in accordance with Section
1.704-2(i) of the Treasury Regulations.
"Minimum Gain" means (i) with respect to Company Nonrecourse Liabilities,
the amount of gain that would be realized by the Company if it disposed of (in a
taxable transaction) all Company properties which are subject to Company
Nonrecourse Liabilities in full satisfaction of such liabilities, computed in
accordance with applicable Treasury Regulations, and (ii) with respect to each
Member Nonrecourse Debt, the amount of gain that would be realized by the
Company if it disposed of (in a taxable transaction) the Company property that
is subject to such liability in full satisfaction of such liability, as
determined in accordance with Treasury Regulation Section 1.704-2(d) and Section
1.704-2(i)(3), as applicable.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Record Date" means the date established by the Managers for determining
(a) the identity of Members entitled to notice of or to vote at any meeting of
Members or entitled to vote by ballot or give consent to Company action in
writing without a meeting or entitled to exercise rights in respect of any other
lawful action of Members, or (b) the identity of Record Holders entitled to
receive any report or distribution.
"Record Holder" means the Member or Assignee in whose name an Interest is
registered on the books of the Company as of the close of business on a
particular Record Date.
"Related Person" means, as to any Member, any person who is related to the
Member (within the meaning of Section 1.752-4(b) of the Treasury Regulations).
"Substituted Member" means a Person who is admitted as a Member to the
Company pursuant to Section 11.2 in place of and with all the rights of a Member
and who is shown as a Member on the books and records of the Company.
"Tax Matters Partner" has the meaning given to that term in Section 9.1.
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"Treasury Regulations" means the regulations promulgated by the United
States Department of the Treasury pursuant to and in respect of provisions of
the Code. All references herein to sections of the Treasury Regulations shall
include any corresponding provision or provisions of succeeding, similar,
temporary, proposed or final Treasury Regulations.
ARTICLE III
PURPOSE
3.1 Purpose and Business. The purpose and business of the Company shall
be any business which may be lawfully conducted by a limited liability company
organized pursuant to the Delaware Act, including without limitation, directly
or indirectly, (i) consulting within the oil and gas industry, (ii) owning,
operating, maintaining, selling and generally dealing in and with oil and gas
interests and properties, (iii) acquiring or obtaining options or other rights
to acquire interests in, or in Persons owning, or owning an interest or
interests in oil and gas properties, and (iv) related services.
3.2 Powers. The Company shall be empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described in
Section 3.1 and for the protection and benefit of the Company.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Contributions by the Members.
(a) The Initial Member contributed to the Company an amount in cash as
set forth in Schedule 1 hereto and the Company issued to the Initial Member the
Interests set forth therein.
(b) Each Member (other than the Initial Member), upon his admission to
the Company, made a Capital Contribution to the Company in the amount and for
the Interest reflected in the Company's records and entitles each such Member to
all of the rights and obligations of a Member pursuant to this Agreement.
4.2 Issuances of Additional Interests.
(a) In order to raise additional capital or to acquire assets, to redeem
or retire Company debt or for any other Company purposes, the Managers are
authorized to cause the Company to issue Interests, in addition to those issued
pursuant to Section 4.1, at any time or from time to time to Members or to other
Persons and to admit them to the Company as Additional Members, but only upon
the prior written consent of all Members approving the specific terms and
conditions of any such issuance, including the admission of any such other
Persons as Members.
(b) The Managers are hereby authorized and directed to take all actions
that they deem necessary or appropriate in connection with each issuance of
Interests pursuant to Section 4.2(a) to amend this Agreement in any manner that
they deem necessary or appropriate to provide for each such issuance, and to
admit Additional Members in connection therewith.
(c) The Company shall do all things necessary to comply with the
Delaware Act and is authorized and directed to do all things it deems necessary
or advisable in connection with any future issuance of Interests, including
compliance with any statute, rule, regulation or guideline of any federal, state
or other governmental agency.
-5-
4.3 Capital Accounts. The Company shall maintain a separate "Capital
Account" for each Member in accordance with the capital accounting rules of
Section 1.704-1(b)(2)(iv) of the Treasury Regulations. Each Member shall have
only one Capital Account, regardless of the Interests owned by the Member and
regardless of the time or manner in which such Interests were acquired by the
Member. Pursuant to the basic rules of Section 1.704-1 (b)(2)(iv) of the
Treasury Regulations, the balance of each Member's Capital Account:
(a) shall be increased by the amount of money contributed by the Member
(or the Member's predecessor in interest) to the Company (including but not
limited to the Member's Capital Contributions described in this Article IV and
decreased by the amount of money distributed to the Member (or the Member's
predecessor in interest);
(b) shall be increased by the fair market value (determined without
regard to Section 7701 (g) of the Code) of each property contributed by the
Member (or the Member's predecessor in interest) to the Company (net of
liabilities secured by such property that the Company is considered to assume or
take subject to under Section 752 of the Code), and decreased by the fair market
value (determined without regard to Section 7701(g) of the Code) of each
property distributed to the Member (or the Member's predecessor in interest) by
the Company (net of liabilities secured by such property that the Member is
considered to assume or take subject to under Section 752 of the Code);
(c) shall be increased by the amount of Company items of income or gain
allocated to the Member (or the Member's predecessor in interest);
(d) shall be decreased by the amount of Company items of loss or
deduction allocated to the Member (or the Member's predecessor in interest); and
(e) shall be otherwise adjusted in accordance with the other capital
account maintenance rules of Section 1.704- I (b)(2)(iv) of the Treasury
Regulations.
The foregoing provisions of this Section 4.3 and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulations. The Members shall also make any appropriate modification if
unanticipated events might otherwise cause this Agreement not to comply with
such Treasury Regulations. If any Interest is transferred pursuant to the terms
of this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent the Capital Account is attributable to the transferred
Interest.
4.4 Additional Provisions Regarding Capital Accounts.
(a) If a Member pays any indebtedness of the Company, the payment shall
be treated as a contribution by that Member to the capital of the Company and
the Capital Account of the Member shall be increased by the amount so paid by
the Member.
(b) Except as specifically provided in this Agreement, no Member may
contribute capital to, or withdraw capital from, the Company.
-6-
(c) A loan by a Member to the Company shall not be considered a
contribution of money to the capital of the Company, and the balance of the
Member's Capital Account shall not be increased by the amount so loaned. No
repayment of principal or interest on any such loan, or reimbursement made to a
Member with respect to advances or other payments made by the Member on behalf
of the Company or payments of fees to a Member or Related Person to the Member
that are made by the Company shall be considered a return of capital or in any
manner affect the balance of the Member's Capital Account.
(d) No Member with a deficit balance in its Capital Account shall have
any obligation to the Company or any other Member to restore that deficit
balance.
(e) No interest will be paid on any capital contributed to the Company
or the balance in any Member's Capital Account.
4.5 No Withdrawal. A Member shall not be entitled to withdraw any part
of the Member's Capital Contribution or Capital Account or to receive any
distribution from the Company, except as provided in Section 5.2 and Article
XII.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations.
(a) Except as otherwise provided in this Section 5.1 or as may be
required by Section 704(c) of the Code and Treasury Regulation Section
1.704-1(b)(2)(iv)(f)(4), all items of income, gain, loss, deduction, and credit
of the Company, shall be allocated among the owners of the Interests in
proportion to their respective Interests.
(b) Notwithstanding any of the foregoing provisions of this Section 5.1
to the contrary:
(i) If during any fiscal year of the Company there is a net
increase in Minimum Gain attributable to a Member Nonrecourse Debt that
gives rise to Member Nonrecourse Deductions, each Member bearing the
economic risk of loss for such Member Nonrecourse Debt shall be allocated
items of Company deductions and losses for such year (consisting first of
cost recovery or depreciation deductions with respect to property that is
subject to such Member Nonrecourse Debt and then, if necessary, a pro rata
portion of the Company's other items of deductions and losses, with any
remainder being treated as an increase in Minimum Gain attributable to
Member Nonrecourse Debt in the subsequent year) equal to such Member's
share of Member Nonrecourse Deductions, as determined in accordance with
applicable Treasury Regulations.
(ii) If for any fiscal year of the Company there is a net decrease
in Minimum Gain attributable to Company Nonrecourse Liabilities, each
Member shall be allocated items of Company income and gain for such year
(consisting first of gain recognized from the disposition of Company
property subject to one or more Company Nonrecourse Liabilities and then,
if necessary, a pro rata portion of the Company's other items of income
and gain, and then, if necessary, for subsequent years) equal to such
Member's share of such net decrease (except to the extent such Member's
share of such net decrease is caused by a change in debt structure with
such Member commencing to bear the economic risk of loss as to all or part
of any Company Nonrecourse Liability or by such Member contributing
capital to the Company that the Company
-7-
uses to repay a Company Nonrecourse Liability), as determined in
accordance with applicable Treasury Regulations.
(iii) If for any fiscal year of the Company there is a net decrease
in Minimum Gain attributable to a Member Nonrecourse Debt, each Member
bearing the economic risk of loss for such Member Nonrecourse Debt shall
be allocated items of Company income and gain for such year (consisting
first of gain recognized from the disposition of Company property subject
to Member Nonrecourse Debt, and then, if necessary, a pro rata portion of
the Company's other items of income and gain, and if necessary, for
subsequent years) equal to such Member's share of such net decrease
(except to the extent such Member's share of such net decrease is caused
by a change in debt structure or by the Company's use of capital
contributed by such Member to repay the Member Nonrecourse Debt) as
determined in accordance with applicable Treasury Regulations.
(c) The losses and deductions allocated pursuant to this Article V shall
not exceed the maximum amount of losses and deductions that can be allocated to
a Member without causing or increasing a deficit balance in the Member's Capital
Account. If, at the end of any fiscal year, as a result of the allocations
otherwise provided for in this Section 5.1, the Capital Account balance of any
Member shall become negative, items of deduction and loss otherwise allocable to
such Member for such year, to the extent such items would have caused such
negative balance, shall instead be allocated to Members having positive Capital
Account balances remaining at such time in proportion to such balances.
(d) If a Member unexpectedly receives any adjustment, allocation or
distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4)-(6) that causes or increases a deficit balance in such
Member's Capital Account, items of Company income and gain shall be allocated to
that Member in an amount and manner sufficient to eliminate the deficit balance
as quickly as possible.
(e) The allocations set forth in subsections (b), (c) (last sentence),
and (d) (collectively, the "Regulatory Allocations") are intended to comply with
certain requirements of the Treasury Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations that are made
be offset either with other Regulatory Allocations or with special allocations
pursuant to this Section 5.1(e). Therefore, notwithstanding any other
provisions of this Article V (other than the Regulatory Allocations), the
Managers shall make such offsetting special allocations in whatever manner it
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 this Agreement and all Company items were allocated pursuant to
the remaining section of this Article V.
(f) In accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, income and deductions with respect to any property
carried on the books of the Company at an amount that differs from such
property's adjusted tax basis shall, solely for federal income tax purposes, be
allocated among the Members in a manner to take into account any variation
between the adjusted tax basis of such property to the Company and such book
value. In making such allocations, the Directors shall use the "traditional
method with curative allocations" pursuant to Treasury Regulations Section
1-704-3(c).
-8-
(g) All items of income, gain, loss, deduction, and credit allocable to
any Interests that may have been transferred shall be allocated between the
transferor and the transferee based on the portion of the calendar year during
which each was recognized as owning those Interests, without regard to whether
cash distributions were made to the transferor or the transferee during that
calendar year; provided, however, that this allocation must be made in
accordance with a method permissible under Section 706 of the Code and the
applicable Treasury Regulations.
5.2 Distributions. Except as specifically provided in Section 12.2, the
Company may make distributions of cash to the holders of Interests in respect of
the Interests at such times and in such amounts as shall be determined by the
Managers in their sole discretion, and any such distributions shall be allocated
among the owners of the Interests in accordance with their respective Interests.
5.3. Tax Distributions. Notwithstanding Section 5.2, as soon as
conveniently possible after the end of each taxable year of the Company (but in
no event sooner than the time the Company's accountants have determined the
Company's income, gains, deductions, losses and credits for such taxable year
with reasonable accuracy) cash distributions shall be made to the holders of
Interests in proportion to and to the extent of their respective Presumed
Company Tax Liabilities. For purposes of this Section 5.3, "Presumed Company Tax
Liability" shall, as to each holder of Interests for any given taxable year of
the Company, be deemed to be equal to (i) the product of (a) the excess, if any,
of the amount of the income and gain items reported or reportable on such
holder's Schedule K- I (IRS Form 1065) for such taxable year over the deduction
and loss items reported or reportable on such Schedule K-1 for such taxable
year, and (b) the higher of the maximum effective federal individual income tax
rate or the federal corporate income tax rate in effect for such taxable year
(as determined by the Company's accountants).
5.4 Liquidating Distributions. All Company liquidating distributions
shall be made as provided under Section 12.2.
ARTICLE VI
THE MANAGERS; POWERS, DUTIES AND RIGHTS
6.1 Managers.
(a) Management. 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, managers who shall be referred to herein as the "Board
of Managers" or the "Managers", who shall make all decisions and take all
actions for the Company. No Member in its capacity as a Member has the right,
power or authority to act for or on behalf of the Company, to do any act that
would be binding on the Company, or to incur any expenditures on behalf of the
Company.
(b) Number, Election and Terms of Office. The number of Managers
comprising the whole Board of Managers shall be determined from time to time by
the Managers. Until changed by the Board of Managers, the number of Managers of
the Company which shall constitute the whole Board of Managers shall be three.
The initial Managers of the Company shall be Xxxxx X. Xxxxxx, Xxxx X. Xxxxxxxxxx
and Xxxxx X. Xxxxxxx. Managers need not be residents of the State of Delaware
nor Members of the Company. Each Manager shall hold office from the date of his
designation, election or appointment until the next annual or special meeting of
Members convened for the election of Managers and until his successor shall have
been duly elected and qualified or until his death, resignation,
disqualification or removal.
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(c) Meetings. The Board of Managers shall appoint officers annually for
the ensuing year. The Board of Managers by resolution may provide for the
holding of other regular meetings and may fix the time and place of holding the
same. Special meetings of the Board of Managers shall be held whenever called by
the president or by any two Managers.
(d) Place of meetings. The Board of Managers shall hold their meetings
at such place or places, within or without the State of Delaware, as the
Managers may from time to time determine or as may be designated in the notice
or in waivers of notice thereof signed by all of the Managers not in attendance
at such meeting.
(e) Notice of meetings. Except as hereinafter provided, notice need not
be given (i) of the regular meetings of the Board of Managers, or (ii) with
respect to an adjourned meeting if the time and place thereof are set at a
meeting duly called and adjourned, or (iii) with respect to any meeting if all
Managers are present. Except as otherwise required by law, notice of the time,
place and purpose of holding each other meeting of the Board of Managers shall,
at least seven (7) days before the day on which the meeting is to be held, be
mailed to each Manager, postage prepaid, addressed to him at his residence or
his place of business or at such other address as he may have designated in a
written request filed with the secretary of the Company, or shall be sent to him
at such address by telecopy at least five (5) days before the time at which such
meeting is to be held. Notice shall be deemed to have been given when deposited
in the mail or sent by telecopy properly addressed.
(f) Quorum and Manner of Acting; Consent. At each meeting of the Board
of Managers, not less than a majority of the total number of Managers then
acting must be present to constitute a quorum for the transaction of business,
and (except as otherwise provided by law or by this Agreement) the act of the
majority of the Managers, so present at a meeting at which a quorum is present
shall constitute the act of the Managers. Whether or not there is a quorum at
any meeting, a majority of the Managers who are present may, by resolution
fixing the time and place for the holding of an adjourned meeting, adjourn the
meeting and may, by similar action, successively adjourn and readjourn the
meeting until the business to be transacted thereat shall be done. Any action
required to be taken at a meeting of the Managers, or any action which may be
taken at a meeting of the Managers may be taken without a meeting if a consent
in writing setting forth the action so taken is signed by all of the Managers,
and such consent shall have the same force and effect as a unanimous vote at a
meeting. Managers may participate in and hold a meeting of the Managers 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 the meeting in this manner shall constitute presence at the 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.
(g) Resignations. Any Manager may resign at any time by giving written
notice thereof to the Chairman of the Board, to the president or to the
Managers. Such resignation shall take effect as of its date unless some other
date is specified therein, in which event it shall be effective as of such other
date. The acceptance of such resignation shall not be necessary to make it
effective.
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(h) Vacancies. Any vacancy in the Managers arising at any time whether
through the failure of the Members to elect a full Board of Managers or through
any other cause, may be filled by a vote of a majority of the Managers remaining
in office although such majority is less than a quorum. Any Manager so appointed
shall hold office until the next election of one or more Managers by the Members
and until his successor shall have been duly elected and qualified. A Manager
position to be filled by reason of an increase in the number of Managers may be
filled by the Managers, and any Manager so appointed shall hold office until the
next election of one or more Managers by the Members and until his successor
shall have been duly elected and qualified. A Manager position to be filled by
reason of an increase in the number of Managers may instead be filled by
election at an annual or special meeting of the Members called for that purpose,
and any Manager so elected shall hold office until the next election of one or
more Managers by the Members and until his successor shall have been duly
elected and qualified.
(i) Removal of Managers. Any Manager of the Company may be removed
either with or without cause by a Majority Interest of Members at a meeting of
the Members called at the written request of the holders (excluding Assignees)
of not less than ten percent (10.00%) of all Interests of the Company filed with
the Secretary of the Company. Such meeting shall be called by the Managers,
conducted and held according to the provisions of law and this Agreement
regulating meetings held for the election of Managers.
6.2 Committees.
(a) Executive Committee, General Powers and Membership. The Board of
Managers may designate, by resolution or resolutions passed by a majority of the
total number of Managers, an Executive Committee and one or more other
committees, each committee to consist of one or more Managers of the Company.
Except as otherwise expressly provided by law or by this Agreement or by
resolution of the Managers, the Executive Committee shall have and may exercise
all of the powers of the Managers in the management of the business and affairs
of the Company, except that neither the Executive Committee nor any other
committee appointed by the Managers shall have the authority of the Board of
Managers in reference to amending this Agreement, approving a plan of merger or
consolidation, recommending to the Members the sale, lease or exchange of all or
substantially all of the property and assets of the Company otherwise than in
the usual and regular course of business, recommending to the Members a
voluntary dissolution of the Company or a revocation thereof, filling vacancies
in or removing members of the Board of Managers or a committee appointed by the
Managers, fixing the compensation of any member of a committee appointed by the
Managers, or repealing any resolution of the Board of Managers which by its
terms provides that it shall not be so amendable or repealable. The Executive
Committee may have power to authorize the seal (if there shall be one) of the
Company to be affixed to all papers which may require it, and each other
committee shall have and may exercise, when the Board of Managers is not in
session, such powers as the Board of Managers shall confer. All action by any
committee shall be reported to the Board of Managers at its next meeting
succeeding such action and shall, insofar as the rights of third parties shall
not be affected thereby, be subject to revision and alteration by the Board of
Managers.
(b) Organization. Unless otherwise provided by resolution of the Board
of Managers, a chairman chosen by each committee from among its members shall
preside at all meetings of such committee and the secretary of the Company shall
act as secretary thereof. In the absence of the secretary, the chairman of such
meeting shall appoint an assistant secretary of the Company or, if none is
present, some other person to act as secretary of the meeting.
(c) Meetings. Each committee shall adopt its own rules governing the
time and place of holding and the method of calling its meetings and the conduct
of its proceedings, and shall meet as provided by such rules or by resolution of
the Board of Managers, and it shall also meet at the call of any member of the
committee.
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(d) Quorum and Manner of Acting. A majority of the members of each
committee shall be present in person at each meeting of such committee in order
to constitute a quorum for the transaction of the business thereat. The act of a
majority of the members so present at a meeting at which a quorum is present
shall be the act of such committee. Any action which may be taken by the
Executive Committee, or other committee, at a meeting thereof, may be taken
without a meeting if a consent in writing setting forth the action to be taken
is signed by all members of the Executive Committee, or other committee, and
such consent shall have the same force and effect as a unanimous vote at a
meeting. Members of the Executive Committee or any other committee appointed by
the Managers may participate in and hold a meeting of such committee 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 a
meeting in the manner herein described shall constitute presence in person at
the 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.
(e) Removal. Any member of any committee may be removed from such
committee, either with or without cause, at any time by resolution adopted by a
majority of the whole Board of Managers at any meeting of the Managers.
(f) Vacancies. Any vacancy in any committee shall be filled by the
Managers in the manner prescribed by this Agreement for the original appointment
of the members of such committee.
6.3 Officers.
(a) Appointment and Term of Office. The officers of the Company shall
consist of the president and a secretary, and there may be one or more vice
presidents, treasurers, assistant secretaries, assistant treasurers, and such
other officers, assistants and agents as the Managers may from time to time
appoint, none of whom need be either a Manager or a Member of the Company. One
of the Managers may be chosen Chairman of the Board of Managers. Each of such
officers shall be chosen annually by the Managers and shall hold office until
his successor is chosen and qualified by the Managers. One person may hold and
perform the duties of any two or more of said offices.
(b) Powers and Duties. The powers and duties of the officers shall be
those usually pertaining to their respective offices, subject to the supervision
and direction of the Board of Managers. The officers of the Company may, upon
appointment by the Board of Managers, be as follows:
(i) Chairman of the Board. The chairman of the Board of Managers
(if there shall be one) shall preside at all meetings of the Board of Managers
and shall perform such other duties as shall be assigned him from time to time
by the Managers.
(ii) President. The president shall be the chief executive officer
of the Company and shall have general supervision of the business of the Company
and over its officers, subject, however, to the control of the Board of
Managers. The president, when present, shall preside at all meetings of the
Members and, in the absence of the Chairman of the Board (if there shall be
one), shall preside at all meetings of the Board of Managers. He may execute and
deliver, in the name and on behalf of the Company, deeds, mortgages, leases,
assignments, bonds, contracts, or other instruments authorized by the Managers
unless the execution and delivery thereof shall be expressly delegated by this
Agreement or by the chairman of the board to some other officer or agent of the
Company. He shall, unless otherwise directed by the Board of Managers or by any
committee thereunto duly authorized, attend in person or by substitute or by
proxy appointed by him and act and vote on behalf of the Company at all meetings
of the Members of any corporation in which the Company holds stock.
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(iii) Vice Presidents. Vice presidents shall perform the duties
assigned to them by the Board of Managers or delegated to them by the president
and, in order of seniority, at his request or in his absence, shall perform as
well the duties of the president's office. Each vice president shall have the
power also to execute and deliver, in the name and on behalf of the Company,
deeds, mortgages, leases, assignments, bonds, contracts, or other instruments
authorized by the Board of Managers unless the execution and delivery thereof
shall be expressly delegated by this Agreement or by the Board of Managers to
some other officer or agent of the Company.
(iv) Secretary. The secretary shall keep the minutes of the
meetings of the Managers, of all committees and of the Members and shall be
custodian of all corporate records and of the seal of the Company. He shall see
that all notices are duly given in accordance with this Agreement or as required
by law.
(v) Assistant Secretaries. The assistant secretaries, in the order
of their seniority, unless otherwise determined by the Managers, shall, in the
absence or disability of the secretary, or at his request, perform the duties
and exercise the powers of the secretary. They shall perform such other duties
and have such other powers as the Managers may from time to time prescribe.
(vi) Treasurer. The treasurer shall be the principal accounting
officer of the Company and shall have charge of all the limited liability
company funds and Interests and shall keep a record of the property and
indebtedness of the Company. He shall, if required by the Managers, give bond
for the faithful discharge of his duties and for the restoration to the Company,
in case of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other personal property of whatever kind in
his possession or under his control, in such sum and with such surety or
sureties as the Managers may require, but the Company shall pay all premiums and
other expenses in connection with such bond.
(vii) Assistant Treasurers. The assistant treasurers, in the order
of their seniority, unless otherwise determined by the Managers, shall, in the
absence or disability of the treasurer or at his request, perform the duties and
exercise the powers of the treasurer. They shall perform such other duties and
have such other powers as the Managers may from time to time prescribe.
(viii) Other Officers. The Board of Managers may appoint such other
officers, agents or employees as it may deem necessary for the conduct of the
business of the Company. In addition, the Board of Managers may authorize the
president or some other officer to appoint such agents or employees as they deem
necessary for the conduct of the business of the Company.
(c) Resignations. Any officer may resign at any time by giving notice
thereof to the president or to the Board of Managers. Any such resignation shall
take effect as of the date on which notice thereof was given unless some other
date is specified, in which event it shall be effective as of such other date.
The acceptance of such resignation shall not be necessary to make it effective.
(d) Removal. Any officer may be removed at any time, either with or
without cause, by resolution adopted by a majority of the whole Board of
Managers at any meeting of the Managers or by the committee or superior officer
by whom he was appointed to office or upon whom such power of removal has been
conferred by a resolution adopted by a majority of the whole Board of Managers.
(e) Vacancies. A vacancy in any office arising at any time from any
cause may be filled by the Board of Managers or by the officer or committee
authorized by the Board of Managers to appoint to that office.
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(f) Salaries. The salaries of all officers shall be fixed from time to
time by the Board of Managers or the Executive Committee and no officer shall be
precluded from receiving a salary because he is also a Manager of the Company.
6.4 Powers. The Board of Managers shall conduct, direct and exercise
full control over all activities of the Company. Except as otherwise expressly
provided in this Agreement, all management powers over and control of the
business and affairs of the Company shall be vested exclusively in the Board of
Managers. No Member or Assignee shall have any management power or right of
control over the business and affairs of the Company. The Board of Managers
shall have the powers now or hereafter granted a manager of a limited liability
company under the Delaware Act or any other applicable law and, except as
otherwise expressly provided in this Agreement, shall have the full power and
authority to do all things and on such terms as they, in their sole discretion,
may deem necessary or appropriate to conduct the business of the Company, to
exercise all powers set forth in Section 3.2 and to effectuate the purposes set
forth in Section 3.1, including without limitation:
(a) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having jurisdiction
over the business or assets of the Company;
(b) the use of Company Assets (including cash on hand) for any purpose
consistent with the terms of this Agreement, including the financing of the
conduct of the operations of the Company, the lending of funds to other Persons
and the repayment of obligations of the Company;
(c) the distribution of Company cash;
(d) the selection, retention and dismissal of officers, employees and
agents, outside attorneys, accountants, consultants and contractors and the
determination of their compensation and other terms of employment or hiring;
(e) the maintenance of insurance for the benefit of the Members and the
Company (including the assets and operations of the Company) as they deem
necessary or appropriate;
(f) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general partnerships, joint
ventures, corporations or other relationships;
(g) the control of any matters affecting the rights and obligations of
the Company, including the bringing and defending of actions at law or in equity
and otherwise engaging in the conduct of litigation and the incurring of legal
expense and the settlement of claims and litigation;
(h) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(i) the establishment of Company bank accounts and the designation of
authorized signatories (which may include Persons who are not Managers or
Members) to execute checks, drafts and other negotiable instruments on behalf of
the Company; and
(j) the taking of such other actions and the performance of such other
acts as the Managers deem necessary, convenient or advisable in carrying out the
business of the Company.
The enumeration of powers in this Agreement shall not limit the general or
implied powers of the Managers or any additional powers provided by law.
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6.5 Restrictions on Manager's Authority. Notwithstanding anything in
this Agreement to the contrary, the prior written approval of a Majority
Interest of Members shall be required to:
(a) sell all or substantially all of the Company Assets;
(b) acquire, dispose of, mortgage, pledge, encumber, hypothecate or
exchange any Company Assets (whether in one transaction or a series of related
transactions) having an aggregate fair market value in excess of $10,000.00;
(c) execute, deliver and perform any contract, conveyance or other
instrument (including contracts between the Company and any Manager or Member
acting in such Manager's or Member's individual capacity), in each case which
involves an amount in excess of $10,000.00 or a term exceeding six months;
(d) guarantee in the name or on behalf of the Company the payment of
money or the performance of any contract or other obligation of any Person other
than the Company;
(e) mortgage, pledge, assign in trust or otherwise encumber any Company
Assets, or assign any monies owed or to be owed to the Company; or
(f) consummate the making of any single expenditure in excess of
$10,000.00, the lending or borrowing of money in excess of $10,000.00, or the
assumption of any indebtedness and other liabilities in excess of $10,000.00.
6.6 Limited Liability Company Certificate. The Limited Liability Company
Certificate has been filed with the Secretary of State of the State of Delaware
as required by the Delaware Act, and the Managers shall use all reasonable
efforts to cause to be filed such other articles, certificates or documents as
may be determined by the Managers in their discretion to be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited liability company in the State of Delaware or any other
state in which the Company may elect to do business or own property. To the
extent that such action is determined by the Managers in their discretion to be
reasonable and necessary or appropriate, the Managers shall cause to be filed
amendments to and restatements of the Limited Liability Company Certificate and
cause to be done all things to maintain the Company as a limited liability
company under the laws of the State of Delaware or of any other state in which
the Company may elect to do business or own property. Subject to the terms of
Section 7.4, the Company shall not be required, before or after filing, to cause
to be delivered or mailed a copy of the Limited Liability Company Certificate,
any qualification document or any amendment thereto to any Member or Assignee.
6.7 Reimbursement of the Managers.
(a) The Managers shall receive such compensation for their services as
may be approved and authorized from time to time by the Board of Managers, and
subject to such limitations as the Board of Managers may adopt from time to
time, the Managers may by resolution authorize the payment of fees in a
reasonable amount to be paid to the Managers for attendance at meetings of the
Managers, of the Executive Committee and of other committees and at adjournments
of any such meetings, and may determine the amount of such fees.
(b) The Managers shall be reimbursed for all reasonable expenses and
disbursements incurred or made in connection with their activities on behalf of
the Company.
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6.8 Outside Activities.
(a) Any Manager, officer or employee of the Company and any Affiliate of
any Manager, officer or employee shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Company and may engage in any other business and activities, including business
interests and activities that conflict with or are in direct competition with
the Company, for their own account and for the account of others, and may own
interests in the same properties and assets as those in which the Company owns
an interest, without having or incurring any obligation to offer any interest in
such properties, assets, businesses or activities to the Company, or any Member,
and no other provision of this Agreement shall be deemed to prohibit any such
Person from conducting such other business and other activities. It is
specifically acknowledged and agreed that certain of the Managers, officers and
employees of the Company and their Affiliates are and will continue to be or may
become involved, directly and indirectly, in the businesses of (i) consulting
within the oil and gas industry, (ii) owning, operating, maintaining, selling
and generally dealing in and with oil and gas interests and properties, (iii)
acquiring or obtaining options or other rights to acquire interests in, or in
Persons owning, or owning an interest or interests in oil and gas properties,
and (iv) related services. None of the Company or any of the Members shall have
any rights by virtue of this Agreement or the relationship created hereby in any
business ventures of any Manager, officer, Member or employee of the Company or
Affiliate.
6.9 Transactions with the Managers. In addition to distributions or
payments to or transactions with the Managers or their Affiliates that are
expressly contemplated in this Agreement, the Company may enter into a
transaction, agreement or payment involving any of the Managers or any of their
Affiliates, provided that the terms to the Company of any such transaction,
agreement or payment shall be competitive with the terms of similar
transactions, agreements or payments obtained by Persons in the same business
and in the same area in arm's-length agreements with unrelated parties. The
validity of any such transaction, agreement or payment involving the Company and
a Manager or any of their Affiliates shall not be affected by reason of the
relationship between the Company and the Manager, so long as such transactions,
agreements and payments do not result in expenditures or concessions by the
Company in excess of the amount or terms which would be paid or agreed to by the
Company in arm's-length agreements with unrelated parties in the same business
and in the same area as the contracting Manager or Affiliate.
6.10 Other Related Transactions. Transactions with Members or officers of
the Company, if effected, shall be on terms which are no less favorable to the
Company than those generally being provided to or available from unrelated third
parties and shall be in the best interests of the Company.
6.11 Indemnification.
(a) The Company shall indemnify, and shall advance and reimburse
expenses to, its Managers, officers, Members, employees, agents and
representatives (collectively, "Indemnitees"), to the maximum extent permitted
by the Delaware Act, including, without limitation, in cases of the Manager's or
such other Person's negligence. This indemnification shall include, without
limitation, payment of reasonable attorney's fees and other expenses incurred in
connection with the defense of any claim or proceeding based on any such action
or decision, which attorney's fees and expenses shall be paid as incurred.
Notwithstanding anything to the contrary in this Section or elsewhere in this
Agreement, no amendment to the Delaware Act after the date of this Agreement
shall reduce or limit in any manner the indemnification provided for or
permitted by this Section unless such reduction or limitation is mandated by
such amendment for limited liability companies formed prior to the enactment of
such amendment.
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(b) In no event may an Indemnitee subject the Members to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(c) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 6.11 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(d) The Company may purchase and maintain insurance, on behalf of such
Persons as the Board of Managers shall determine, against any liability that may
be asserted against or expense that may be incurred by such Person in connection
with the Company's activities, whether or not the Company would have the power
to indemnify such Person against such liabilities under the provisions of this
Agreement.
(e) The provisions of this Section 6.11 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Person.
(f) Each and every paragraph, sentence, term and provision of this
Section 6.11 is separate and distinct, so that if any paragraph, sentence, term
or provision shall be held to be invalid or enforceable for any reason, such
invalidity or unenforceability shall not affect the validity or unenforceability
of any other paragraph, sentence, term or provision. To the extent required, any
paragraph, sentence, term or provision of this Section 6.11 may be modified by a
court of competent jurisdiction to preserve its validity and to provide the
claimant with, subject to the limitations set forth in this Section 6.11 and any
agreement between the Company and claimant, the broadest possible
indemnification permitted under this Agreement and applicable law.
(g) Each of the rights conferred on Indemnitees by this Section 6.11
shall be a contract right and any repeal or amendment of the provisions of this
Section 6.11 shall not adversely affect any right hereunder of any Person
existing at the time of such repeal or amendment with respect to any act or
omission occurring prior to the time of such repeal or amendment, and, further,
shall not apply to any proceeding, irrespective of when the proceeding is
initiated, arising from the service of such Person prior to such repeal or
amendment.
6.12 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the Company,
the Members, the Assignees or any other Person who has acquired an Interest, for
losses sustained or liabilities incurred as a result of any act or omission.
(b) Subject to their obligations and duties as Managers or officers set
forth in this Agreement, the Managers and officers may exercise any of the
powers granted to them by this Agreement and perform any of the duties imposed
upon them hereunder either directly or through agents, and the Managers and
officers shall not be responsible for any misconduct or negligence on the part
of any such agent appointed by them in good faith and in the exercise of
reasonable judgment.
(c) Any amendment, modification or repeal of this Section 6.12 or any
other provision shall be prospective only and shall not in any way affect the
limitations on the liability of the Managers, officers and employees under this
Section 6.12 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be
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asserted.
6.13 Other Matters Concerning the Managers.
(a) The Managers may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture, or other paper or
document believed by them to be genuine and to have been signed or presented by
the proper party or parties.
(b) The Managers may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by them and any act taken or omitted in reliance upon the
opinion of such Persons as to matters that the Managers believe to be within
such Person's professional or expert competence shall constitute full and
complete authorization and protection with respect to any action taken or
omitted by the Managers in good faith reliance on and in accordance with such
opinion.
6.14 Title to Company Assets. Title to Company Assets, whether real,
personal or mixed and whether tangible or intangible, shall be deemed to be
owned by the Company as an entity, and no Member or Assignee, individually or
collectively, shall have any ownership interest in the Company Assets or any
portion thereof.
6.15 Reliance by Third Parties. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Company shall be entitled to
assume that any officer of the Company authorized by the Managers to act on
behalf of and in the name of the Company has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the Company
and to enter into any contracts on behalf of the Company, and such Person shall
be entitled to deal with any such officers as if they were the Company's sole
party in interest, both legally and beneficially. Except in the case of actual
fraud or willful misconduct, each Member hereby waives any and all defenses or
other remedies that may be available against such Person to contest, negate or
disaffirm any action of any of the Company's officers in connection with any
such dealing. In no event shall any Person dealing with the Company be obligated
to ascertain that the terms of this Agreement have been complied with or to
inquire into the necessity or expedience of any act or action of the officers.
Each and every certificate, document or other instrument executed on behalf of
the Company by an officer shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement were in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Company and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement, and is binding upon the Company.
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6.16 Resolution of Conflicts of Interest. Unless otherwise expressly
provided in this Agreement, whenever a potential conflict of interest exists or
arises between a Manager or any of his Affiliates, on the one hand, and the
Company, any Member or any Assignee, on the other, any resolution or course of
action in respect of such conflict of interest shall be permitted and deemed
approved by unanimous approval of the Members, and shall not constitute a breach
of this Agreement, of any agreement contemplated by this Agreement, or of any
duty stated or implied by law or equity, if the resolution or course of action
is, or by operation of this Agreement is deemed to be, fair and reasonable to,
and in the best interests of, the Company. Any conflict of interest or
resolution of a conflict of interest shall be conclusively deemed fair and
reasonable to the Company if the conflict involves a transaction which (i) is on
terms no less favorable to the Company than those generally being provided to or
available from unrelated third parties or (ii) is fair to the Company, taking
into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous
to the Company). The Managers shall be authorized in their determination of what
is "fair and reasonable" to the Company in connection with the resolution of any
conflict of interest to consider (A) the relative interests of any party to the
conflict, agreement, transaction or situation and the benefits and burdens
relating to the interest; (B) any customary or accepted industry practices and
any customary or historical dealings with a particular Person; (C) any
applicable generally accepted accounting practices or principles; and (D) such
additional factors as the Managers determine in their discretion to be relevant,
reasonable or appropriate under the circumstances. Nothing contained in this
Agreement, however, is intended to nor shall it be construed to require the
Managers to consider the interests of any Person other than the Company. In the
absence of bad faith by the Managers, the resolution, action or terms so made,
taken or provided by the Managers with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Delaware Act or any other law, rule or
regulation.
6.17 Liability of Managers. The Managers will attempt to increase the
value of the Company Assets. Each of the Members recognizes the inherent market
fluctuations and risks that are present in the investment and management of such
assets. The Managers shall not be liable for any action, failure to act or any
errors of judgment in managing the business of the Company, except to the extent
the Managers have acted in a grossly negligent manner.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF MEMBERS
7.1 Limitation of Liability. The Members and the Assignees shall have no
liability under this Agreement except as expressly provided in this Agreement or
the Delaware Act. Without limiting the generality of the foregoing, the debts,
liabilities and obligations of the Company, whether arising in tort, contract or
otherwise, shall be solely the debts, liabilities and obligations of the
Company; and no Member shall be obligated for any such debt, obligation or
liability of the Company solely by reason of being a Member. No Member shall be
liable to any Person (i) as the result of any act or omission of another Member
or (ii) for Company losses, liabilities or obligations (except as otherwise
expressly agreed in writing by such Member).
7.2 Outside Activities. Any Member or Assignee shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Company. Neither the Company nor any of the other Members
or Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Manager, Member or Assignee.
7.3 Return of Capital. No Member shall be entitled to the withdrawal or
return of his Capital Contributions, except to the extent, if any, that
distributions made pursuant to this Agreement or
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upon termination of the Company may be considered as such by law and then only
to the extent provided for in this Agreement. No Member or Assignee shall have
priority over any other Member or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions.
7.4 Rights of Members Relating to the Company.
In addition to other rights provided by this Agreement or by applicable
law, each Member shall have the right for a proper purpose reasonably related to
such Member's interest as a Member in the Company, upon reasonable demand and
reasonable advance notice, during normal Company business hours and at such
Members own expense:
(i) to obtain true and full information regarding the status of
the business and financial condition of the Company,
(ii) promptly after becoming available, to obtain a copy of the
Company's federal, state and local income tax returns for each year;
(iii) to have furnished to him, upon notification to the Company, a
current list of the name and last known business, residence or mailing address
of each Member and Manager;
(iv) to have furnished to him, upon notification to the Company, a
copy of this Agreement and the Limited Liability Company Certificate and all
amendments thereto, together with executed copies of any powers of attorney
pursuant to which this Agreement, the Limited Liability Company Certificate and
all amendments thereto have been executed;
(v) to have furnished to him, upon notification to the Company,
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 and which each Member has agreed to contribute in the future, and
the date on which each became a Member; and
(vi) to inspect and copy any of the Company's books and records and
obtain such other information regarding the affairs of the Company, upon showing
of a proper purpose within the meaning of the Delaware Act.
7.5 Status as Limited Liability Company. Each Member agrees that it will
not take any action the effect of which would be to cause the Company to be
taxable as a corporation or otherwise taxed as an entity for federal income tax
purposes.
7.6 Withdrawal of a Member. No Member may withdraw from the Company
without the prior written consent of all other Members, which consent may be
granted, withheld or conditioned in the sole discretion of each Member.
ARTICLE VIII
RECORDS AND ACCOUNTING
8.1 Records and Accounting. The Managers shall cause to be kept at the
principal office of the Company, or such other locations as may be designated by
the Managers from time to time, appropriate books and records with respect to
the Company's business. The books of the Company shall be maintained for
financial reporting purposes on an accrual basis in accordance with generally
accepted accounting principles or such other principles as the Managers shall
determine after consultation with the Company's independent accountants.
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8.2 Fiscal Year. The fiscal year of the Company (the "Fiscal Year")
shall be the calendar year.
ARTICLE IX
TAX MATTERS
9.1 Tax Matters Partner.
(a) Each Member does hereby appoint and designate Parallel Petroleum
Corporation as "Tax Matters Partner," as that term is defined in the Code and
the Treasury Regulations thereunder, so long as he is both a Member and a
Manager. At any such time as he is not both a Manager and Member, the Tax
Matters Partner shall be that person who is the Manager and Member with the
largest Interest among all Managers. The Tax Matters Partner is authorized to
take all action on behalf of the Company and the Members permitted under the
Code. The Company may engage its accountants or attorneys to assist the Tax
Matters Partner in discharging its duties hereunder.
(b) The Tax Matters Partner shall be entitled to indemnity from the
Company for any act performed by it within the scope of its duties as Tax
Matters Partner, except for the negligent or willful acts or failures to act as
Tax Matters Partner, provided that any indemnity under this Section shall be
provided out of and to the extent of Company Assets only and no Member shall
have any personal liability on account thereof.
(c) The Tax Matters Partner shall notify all Members of the commencement
of any administrative proceeding by the IRS and shall keep all Members currently
advised of developments in any such proceedings.
(d) Notwithstanding anything to the contrary contained in this Section
9.1, the Tax Matters Partner shall have no authority to bind any Member to any
settlement agreement entered into by the Tax Matters Partner and the IRS, unless
such Member has expressly notified the Tax Matters Partner in writing that the
Tax Matters Partner is so authorized. Within thirty (30) days after the Tax
Matters Partner has received notice from the IRS of a final Company
administrative adjustment, the Tax Matters Partner shall notify all of the
Members of such final administrative adjustment and the effect it will have on
their individual tax returns on a per Interest basis. Such notification shall
also include information concerning each Member's right to request the same
settlement terms from the IRS.
(e) All reasonable expenses incurred by the Tax Matters Partner in
connection with any administrative proceeding before the IRS and/or judicial
review of such proceeding, including reasonable attorney's fees, shall be deemed
a Company operating expense.
(f) Any Member other than the Tax Matters Partner who wishes to
participate in the administrative proceedings at the Company level may do so,
but any legal, accounting or other expenses incurred by the Member in connection
therewith shall not be deemed a Company expense but shall be paid by the Member.
(g) The provisions of this Section 9.1 shall survive the termination of
the Company or the termination of any Members's interest in the Company and
shall remain binding on the Members for a period of time necessary to resolve
with the IRS or the United States Treasury Department the income taxation of the
Company.
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9.2 Tax Returns. The Managers shall cause to be prepared all federal,
state and local income and other tax returns that the Company is required to
file. Within one hundred five (105) days after the end of each calendar year, or
as soon thereafter as practicable, the Company shall send or deliver to each
Person who was a Member at any time during such year such tax information as
shall be reasonably necessary for the preparation by such Person of his federal
income tax return and state income and other tax returns.
9.3 Tax Elections.
(a) The Company shall elect to use the Fiscal Year as its taxable year,
and to report profits and losses under the accrual method of accounting.
(b) The Company shall elect to deduct expenses incurred in organizing
the Company ratably over a 60-month period as provided in Section 709 of the
Code.
(c) The Company shall elect to treat all start-up expenditures as
deferred expenses and to deduct expenses over a 60-month period as provided in
Section 195 of the Code.
(d) The Managers may make the election (within in their discretion)
under Section 754 of the Code.
(e) Any other election under the Code shall be made on behalf of the
Company by the Managers.
9.4 Authority of Managers to Vary Allocations.
(a) Notwithstanding any other provision of this Agreement to the
contrary, if there is a final determination (as hereinafter defined) effecting
any material Company item of income, gain, loss, deduction or credit allocated
hereunder, the Managers, after consultation with the Members, are authorized and
directed to allocate any Company item in a manner consistent with such final
determination. Any such allocation made pursuant to this Section 9.4(a) shall be
deemed to be a complete substitute for any allocation otherwise provided for in
this Agreement and no amendment of this Agreement or approval of any Member
shall be required. The term "final determination" means either (i) the date that
a decision by a court of law becomes final and non-appealable or (ii) the date
that a decision is made by the Company not to further contest a determination by
the IRS. The provisions of this Section 9.4 shall survive the termination of the
Company.
(b) In making any allocation (the "new allocation") under Section
9.4(a), the Managers are authorized to act only after having been advised by the
Company's accountants that the new allocation is required under Section 9.4(a)
and that the new allocation is the minimum modification necessary in order to
assure that the allocations are consistent with the final determination
referenced above.
(c) In no event shall the new allocations ever effect the amount of any
distributions required under 12.2 and, to the extent necessary, a distribution
may be recharacterized.
(d) New allocations made by the Managers under this Section 9.4 in
reliance upon the advice of the Company's accountants shall be deemed to be made
pursuant to the fiduciary obligation of the Managers to the Company and the
Members, and no such allocation shall give rise to any claim or cause of action
by any Member against any other Member or any Manager.
ARTICLE X
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ISSUANCE OF CERTIFICATES
10.1 Issuance of Certificates.
(a) Upon each issuance of an Interest, the Managers shall cause the
Company to issue one or more Certificates for and in the name of each Member
which shall evidence the Interest owned by such Member. Unless the Member or
Assignee otherwise elects, it shall receive one Certificate in denomination
equal to all of such Member's Interests. A Member or Assignee may elect to
receive Certificates in such smaller denominations as it may designate.
(b) The Certificates shall be in such form as shall be approved by the
Managers in conformity with law and any applicable rule or regulation. The
Certificates shall be consecutively numbered, shall be entered as they are
issued in the transfer records and shall state the Member's or Assignee's name,
the Interest evidenced by the Certificate and such other matters as may be
required by law and any applicable rule or regulation. The Certificates shall be
signed by the President or any Vice President and the Secretary.
(c) Each Certificate shall bear legends substantially in the following
form, to the extent applicable:
THESE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT
OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION (SATISFACTORY TO
THE COMPANY) OF COUNSEL (SATISFACTORY TO THE COMPANY) THAT REGISTRATION IS
NOT REQUIRED.
THE INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE LIMITED
LIABILITY COMPANY AGREEMENT OF THE COMPANY, COPIES OF WHICH ARE ON FILE AT
THE PRINCIPAL OFFICE OF THE COMPANY, AND SUCH INTERESTS MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF
EXCEPT IN STRICT ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. A COPY OF
THE AGREEMENT WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER UPON WRITTEN
REQUEST FROM THE HOLDER REQUESTING SUCH A COPY.
10.2 Lost, Stolen or Destroyed Certificates. The Company shall issue a
new Certificate in place of any Certificate previously issued if the registered
owner of the Certificate:
(a) makes proof by affidavit, in form and substance satisfactory to the
Company, that a previously issued Certificate has been lost, destroyed or
stolen;
(b) requests the issuance of a new Certificate before the Company has
notice that the Certificate has been acquired by a purchaser for value in good
faith and without notice of an adverse claim;
(c) if requested by the Company, delivers to the Company a bond, in form
and substance satisfactory to the Company, with such surety or sureties and with
fixed or open penalty as the Company may direct, in its sole discretion, to
indemnify the Company against any claim that may be made on account of the
alleged loss, destruction or theft of the Certificate; and
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(d) satisfies any other reasonable requirements imposed by the Company.
If a Member or Assignee of record fails to notify the Company within a
reasonable time after it has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Interests represented by the Certificate is
registered before receiving such notification, the Member or Assignee of record
shall be precluded from making any claim against the Company for such transfer
or for a new Certificate.
10.3 Registered Owner. The Company shall be entitled to treat the Record
Holder as the Member or Assignee in fact of any Interest and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
Interest on the part of any other Person, whether or not the Company shall have
actual or other notice thereof. Without limiting the foregoing, when a Person is
acting as a nominee, agent or in some other representative capacity for another
Person in acquiring and/or holding an Interest, as between the Company on the
one hand and such other Person on the other hand, such representative Person (a)
shall be the Member or Assignee (as the case may be) of record and beneficially
and (b) shall be bound by this Agreement and shall have the obligations of a
Member or Assignee (as the case may be) hereunder and as provided for herein.
ARTICLE XI
TRANSFER OF INTERESTS
11.1 Transfer. The Company may require, as a condition to any transfer of
an Interest in the Company, evidence (including legal opinions) satisfactory to
the Company in its sole discretion that (i) the transfer will not violate any
law or regulation applicable to the Company's business, and (ii) the transfer
will not violate the registration requirements of applicable securities laws or
cause any prior offer and sale of interests in the Company to violate such
requirements.
11.2 Substituted Members. A permitted Assignee of a Member shall be
entitled to receive the share of Company income, gains, losses, deductions,
credits and distributions to which its immediate predecessor would have been
entitled. The Assignee of any Interest shall not, however, become a Substituted
Member of the Company unless: (i) it is evident from the instrument of
assignment or otherwise that the parties to the assignment so intended; (ii) all
Members, in their sole discretion, consent to the admission of such person as a
Substituted Member; and (iii) the Assignee executes with reasonable promptness
instruments in form and substance satisfactory to the Company substituting the
Assignee as a Member, and the Assignee agrees to be bound as a Member by the
terms of this Agreement, including without limitation, the power of attorney
granted in Section 1.4. Upon becoming a Substituted Member, such Assignee shall
have all of the rights and powers of, shall be subject to all of the
restrictions applicable to, shall assume all of the obligations of, and shall
succeed to the status of, its predecessor, and shall in all respects be a Member
under this Agreement. The use of the term "Member" in this Agreement shall be
deemed to include a Substituted Member.
11.3 Admission of Additional Members.
(a) A Person (other than the Initial Members or a Substituted Member)
who makes a Capital Contribution to the Company in accordance with this
Agreement shall be admitted to the Company as an Additional Member only (i)
after approval by all Members as provided in Section 4.2(a); and (ii) upon
furnishing to the Company (a) evidence of acceptance in form satisfactory to the
Company of all of the terms and conditions of this Agreement, including without
limitation, the power of attorney granted in Section 1.4, and (b) such other
documents or instruments as may be required in the discretion of the
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Company to effect such Person's admission as an Additional Member.
(b) The admission of any Person as an Additional Member shall become
effective on the date upon which the name of such Person is recorded on the
books and records of the Company.
11.4 Amendment of Agreement and Limited Liability Company Certificate. To
effect the admission to the Company of any Member, the Company shall take all
steps necessary and appropriate under the Delaware Act to amend the records of
the Company and, if necessary, to prepare an amendment of this Agreement, and if
required by law, to prepare and file an amendment to the Limited Liability
Company Certificate and may for this purpose, among others, exercise the power
of attorney granted pursuant to Section 1.4.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the approval of a Majority Interest of the Members;
(b) the sale or disposition of all or substantially all of the Company
Assets; or
(c) the entry of a decree of judicial dissolution under the Delaware
Act.
The death, insanity, insolvency, bankruptcy, dissolution or other
termination of existence or capacity of a Member shall not dissolve or terminate
the Company. No estate or personal representative or any other successor to a
Member's Interest shall have the right to withdraw any part of such Member's
Capital Contribution or Capital Account prior to the termination of the Company.
12.2 Liquidation.
(a) Except as otherwise provided herein, upon dissolution of the
Company, no further business shall be conducted except for the taking of such
action as shall be necessary for the winding up of the affairs of the Company
and the distribution of its assets to the Members pursuant to the provisions of
this Section. The Managers collectively shall act as liquidating trustee or may
appoint in writing one or more liquidators who shall have full authority to wind
up the affairs of the Company and to make final distribution as provided herein.
(b) Upon dissolution of the Company, the liquidator may sell the Company
Assets at the best price available or it may distribute such assets in kind. All
of the Company Assets shall be applied and distributed, according to the fair
market value thereof, by the liquidator in the following order: (i) to the
creditors of the Company, including Members; (ii) to establishing reserves which
the liquidator may deem necessary for contingent or unforeseen liabilities or
obligations of the Company; and (iii) to the Members (and Assignees, if any) in
accordance with their respective Interests.
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(c) Notwithstanding the provisions of paragraph (b), which require the
liquidation of the Company Assets in the order of priorities set forth therein,
if upon dissolution of the Company the liquidator determines that an immediate
sale of part or all of the Company Assets would be impractical or would cause
undue loss to the Members, the liquidator may, in its absolute discretion, defer
for a reasonable time the liquidation of any assets except those necessary to
satisfy liabilities of the Company (other than those to Members) and/or may in
its absolute discretion, distribute to the Members, in lieu of cash, as tenants
in common and in accordance with the provisions of paragraph (b), undivided
interests in the Company Assets as the liquidator deems not suitable for
liquidation. Any such distributions in kind shall be subject to such conditions
relating to the disposition and management of such properties as the liquidator
deems reasonable and equitable and to any agreements governing the management or
operation of such properties at such time. The liquidator shall determine the
fair market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
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 under Section 5.1 if there were a taxable disposition of that property
for the fair market value of that property on the date of distribution.
All distributions in kind to the Members shall be valued for purposes of
determining each Member's interest therein at its fair market value at the time
of such distribution, and such distributions shall be made subject to the
liability of each distributes 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 distributees pursuant to this Section 12.2. It is intended that the
foregoing distributions to each Member will be equal to each Member's respective
positive capital account balance as determined after giving effect to the
foregoing adjustments and to all adjustments attributable to allocations of
items of income, gain, loss and deduction realized by the Company during the
taxable year in question and all adjustments attributable to contributions and
distributions of money and property effected prior to such distribution. To the
extent that any such Member's positive capital account balance does not
correspond to such distribution, the allocations provided for in Section 5.1
shall be adjusted, to the least extent necessary, to produce a capital account
balance for the Partner which corresponds to the amount of such distribution.
Any distribution to the Members in liquidation of the Company shall be made by
the later of the end of the taxable year in which the liquidation occurs or 90
days after the date of such liquidation. For purposes of the preceding sentence,
the term "liquidation" shall have the same meaning as set forth in Treasury
Regulation Section 1.704l(b)(2)(ii). 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 Contribution and a complete
distribution to the Member of its Units and all the Company's property and
constitutes a compromise to which all Members have consented within the meaning
of Art. 5.02.D 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.
(d) The liquidator shall comply with any requirements of the Delaware
Act or other applicable law, except as modified by this Agreement, pertaining to
the dissolution, winding up and liquidation of the Company, at which time the
existence of the Company shall be terminated.
(e) No Member or Assignee shall have any obligation to restore any
negative balance in its Capital Account upon dissolution and liquidation of the
Company.
12.3 Dissolution of Limited Liability Company Certificate. Upon the
completion of the distribution of Company cash and property as provided in
Section 12.2, the Company shall be
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terminated and the Limited Liability Company Certificate and all qualifications
of the Company as a foreign limited liability company in jurisdictions other
than the State of Delaware shall be dissolved and canceled and such other
actions as may be necessary to terminate the Company shall be taken.
12.4 Reasonable Time for Winding Up. A reasonable time shall be allowed
for the orderly winding up of the business and affairs of the Company and the
liquidation of its assets pursuant to Section 12.2 in order to minimize any
losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect among the Members during the period of
liquidation.
12.5 Return of Capital. The liquidator shall not be personally liable for
the return of the Capital Contributions of the Members, or any portion thereof,
it being expressly understood that any such return, if any, shall be made solely
from Company Assets.
12.6 Waiver of Partition. Each Member hereby waives any right to
partition of the Company Assets.
ARTICLE XIII
AMENDMENT OF AGREEMENT; MEETINGS OF MEMBERS
13.1 Amendments to be Adopted Solely by Managers. Each Member agrees that
the Managers, without the approval of any Member or Assignee, may amend any
provision of this Agreement, and cause to be executed, sworn to, acknowledged,
delivered, filed and recorded whatever documents may be required in connection
therewith, but only to the extent necessary to reflect any changes required by
this Section 13.1. If the Managers amend any provision of this Agreement as
provided in this Section 13.1, the Company shall, within a reasonable period of
time, send a notice to the Members attaching or summarizing such amendment. The
changes permitted by this Section 13.1 are:
(a) a change in the name of the Company, the location of the principal
place of business of the Company, the registered agent of the Company or the
registered office of the Company;
(b) admission, substitution, withdrawal or removal of Members in
accordance with this Agreement;
(c) a change that is reasonable and necessary or appropriate to qualify
or continue the qualification of the Company as a limited liability company in
which the Members have limited liability under the laws of any state or that is
necessary or advisable in the opinion of the Managers to ensure that the Company
will not be taxable as a corporation for federal income tax purposes;
(d) a change (i) that, in the discretion of the Managers, does not
adversely affect the Members in any material respect, or (ii) that is necessary
or appropriate to satisfy any requirements, conditions, guidelines or
interpretations contained in any opinion, interpretative release, directive,
order, ruling or regulation of any federal or state agency or judicial authority
or contained in any federal or state statute (including the Delaware Act),
compliance with any of which the Managers determine in their discretion to be in
the best interests of the Company and the Members, or (iii) that is required by
this Agreement;
(e) subject to the terms of Section 4.2, an amendment that the Managers
determine in their sole discretion to be necessary or appropriate in connection
with the authorization for issuance of Interests; or
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(f) any amendment expressly permitted in this Agreement to be made by
the Managers acting alone.
13.2 Amendment Procedures. Except as provided in Section 13.1, all
amendments to this Agreement shall be made in accordance with the following
requirements. Amendments to this Agreement may be proposed solely by the
Managers. Each such proposal shall contain the text of the proposed amendment.
If an amendment is proposed, the Company shall seek the written approval of the
Members or call a meeting of the Members to consider and vote on such proposed
amendment. Any proposed amendment shall be effective only upon its approval by
all Members.
13.3 Meetings.
(a) The Company shall hold an annual meeting of the Members called by
the Managers for the purpose of electing Managers and conducting such other
business as the Managers shall determine. Such annual meeting shall be held at
such time and place as determined in the discretion of the Managers on a date
not less than ten (10) nor more than sixty (60) days after the mailing of a
notice of the meeting to the Members. Failure to hold an annual meeting shall
not cause a dissolution of the Company or constitute a violation of this
Agreement.
(b) The Company may hold special meetings of the Members from time to
time to vote upon matters to be submitted to a vote of the Members or to inform
and consult with the Members with respect to such matters as the Managers deem
appropriate. Such meetings shall be held at such times and places, as often and
in such manner as shall be determined by the Managers. Except as otherwise
provided in Section 6.1(i), special meetings of the Members will be called by
the Managers or by Members having among them at least ten percent (10.00%) of
all outstanding Interests.
13.4 Notice of Meeting. Notice of a meeting called pursuant to Section
13.3 shall be given to the Members in writing either personally or by mail or
other means of written communication in accordance with Section 14.1. The notice
shall be deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication.
13.5 Record Date. For purposes of determining the Members entitled to
notice of or to vote at a meeting of the Members or to give approvals without a
meeting as provided in Section 13.10, the Managers may set a Record Date.
13.6 Adjournment. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting and a new Record Date need not
be fixed, if the time and place thereof are announced at the meeting at which
the adjournment is taken, unless such adjournment shall be for more than 60
days. At the adjourned meeting, the Company may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 60 days or if a new Record Date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given in accordance with this Article
XIII.
13.7 Waiver of Notice, Approval of Meeting; Approval of Minutes. The
transactions of any meeting of Members, however called and noticed, and whenever
held, are as valid as though had at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the Members entitled to vote, not present
in person or by proxy, signs a written waiver of notice or an approval of the
holding of the meeting or an approval of the minutes thereof. All waivers,
consents and approvals shall be filed with the Company records or made a part of
the minutes of the meeting. Attendance of a Member at a meeting shall constitute
a waiver of notice of the meeting, except when the Member objects, at the
beginning of the meeting, to the
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transaction of any business because the meeting is not lawfully called or
convened; and except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters required to be included in the notice
of the meeting, but not so included, if the objection is expressly made at the
meeting.
13.8 Quorum. A Majority Interest of Members represented in person or by
proxy shall constitute a quorum at a meeting of Members. At any meeting of the
Members duly called and held in accordance with this Agreement at which a quorum
is present, the act of Members whose Interests constitute a majority of the
Interests represented in person or by proxy at such meeting and entitled to vote
shall be deemed to constitute the act of all Members, unless a higher percentage
is required with respect to such action under the provisions of the Delaware Act
or this Agreement, in which case the act of the Members owning such higher
percentage shall be required. The Members present at a duly called or held
meeting at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Members to leave less than
a quorum, if any action taken (other than adjournment) is approved by the
requisite percentage of interests of Members specified in this Agreement. In the
absence of a quorum, any meeting of Members may be adjourned from time to time
by the affirmative vote of a majority of the Interests represented either in
person or by proxy, but no other business may be transacted, except as provided
in Section 13.6.
13.9 Conduct of Meeting. The president shall have full power and
authority concerning the manner of conducting any meeting of the Members or
solicitation of approvals in writing including the determination of Persons
entitled to vote, the conduct of voting, the validity and effect of any proxies
and the determination of any controversies, votes or challenges arising in
connection with or during the meeting or voting. The Managers shall designate a
Person to serve as chairman of any meeting and shall further designate a Person
to take the minutes of any meeting, in either case including a Member or a
Manager or officer of the Company. All minutes shall be kept with the records of
the Company. The Managers may make such other regulations consistent with
applicable law and this Agreement as they may deem advisable concerning the
conduct of any meeting of the Members or solicitation of approvals in writing,
including without limitation, regulations with regard to the appointment of
proxies, the appointment and duties of inspectors of votes and approvals, the
submission and examination of proxies and other evidence of the right to vote,
and the revocation of approvals in writing.
13.10 Action Without a Meeting. Any action that may be taken at a meeting
of the Members may be taken by written consent without a meeting if an approval
in writing setting forth the action so taken is signed by the Members holding
the percentage of Interests required to approve such actions under the
provisions of this Agreement. The Managers may specify that any written consent
submitted to Members for the purpose of taking any action without a meeting
shall be returned to the Company within the time period, which shall be not less
than 10 days, specified by the Managers. If a consent returned to the Company
does not vote all of the Interests held by the Member, the Company shall be
deemed to have failed to receive a consent for the Interests that were not
voted.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Addresses and Notices. Any notice, demand, request or report
required or permitted to be given or made to a Member or Assignee under this
Agreement shall be in writing and shall be deemed given or made when delivered
in Person or when sent by first-class United States mail or by other means of
written communication to the Member or Assignee at the address as shown on the
records of the Company. Any notice, payment or report to be given or made to a
Member or Assignee hereunder shall be deemed conclusively to have been given or
made, and the obligation to give such notice or report or
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to make such payment shall be deemed conclusively to have been fully satisfied,
upon sending of such notice, payment or report to the Member or Assignee at his
address as shown on the records of the Company, regardless of any claim of any
Person who may claim an interest in the Interests held by the Member or Assignee
to whom such notice, payment or report is sent by reason of any assignment or
otherwise. An affidavit or certificate of making any notice, payment or report
in accordance with the provisions of this Section 14.1 executed by an officer of
the Company or the mailing organization shall be prima facie evidence of the
giving or making of such notice, payment or report. If any notice, payment or
report addressed to a Member or Assignee at the address of the Member or
Assignee appearing on the books and records of the Company is returned by the
United States Post Office marked to indicate that the United States Postal
Service is unable to deliver it, such notice, payment or report and any
subsequent notices, payments and reports shall be deemed to have been duly given
or made without further mailing (until such time as the Member or Assignee or
another Person notifies the Company of a change in his address) if they are
available for the Member or Assignee at the principal office of the Company for
a period of one year from the date of the giving or making of such notice,
payment or report to the other Members and Assignees. Any notice to the Company
shall be deemed given if received by the Secretary at the principal office of
the Company designated pursuant to Section 1.3. The Company may rely and shall
be protected in relying on any notice or other document from a Member, Assignee
or other Person if believed by it to be genuine.
14.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit or extend the scope or intent of any
provisions. Except as specifically provided otherwise, references to "Articles"
and "Sections" are to Articles and Sections of this Agreement.
14.3 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.
14.4 Further Action. The Members 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.
14.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
14.6 Creditors. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Company.
14.7 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 arising upon a breach thereof shall constitute a
waiver of any such breach or any other covenant, duty, agreement or condition.
14.8 Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
14.9 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.
14.10 Third Party Beneficiaries. Except as specifically set forth in this
Agreement, nothing in
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this Agreement is intended to confer upon any Person other than the Members and
Assignees any rights, remedies or benefits.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
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MEMBER SIGNATURE PAGE
The undersigned, being the sole Member of PARALLEL, L.L.C. (the
"Company"), hereby agrees to all of the terms and provisions of the Agreement of
the Company and agrees to be bound by the terms and provisions of such
Agreement. The undersigned hereby executes the Agreement, and authorizes this
Member Signature Page to be attached thereto.
IN WITNESS WHEREOF, the undersigned has executed this Member Signature
Page to the Agreement of Parallel, L.L.C. as of the date set forth in the
Agreement.
MEMBER:
PARALLEL PETROLEUM CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, President
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SCHEDULE 1
ADDRESS FOR CAPITAL
MEMBERS NOTICE PURPOSES CONTRIBUTION INTERESTS
------------------- -------------------- ------------ ---------
Parallel Petroleum 000 X. Xxxxxxxxxx
Xxxxxxxxxxx Xxxxx 000 $17,000.00 100%
Xxxxxxx, Xxxxx 00000
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