EXHIBIT 3.4
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
LEGACY RESERVES GP, LLC
DATED MARCH 15, 2006
TABLE OF CONTENTS
Page
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ARTICLE 1
DEFINITIONS
Section 1.1 Definitions................................................ 1
Section 1.2 Construction............................................... 9
ARTICLE 2
ORGANIZATION OF THE COMPANY
Section 2.1 Formation.................................................. 9
Section 2.2 Name....................................................... 9
Section 2.3 Term....................................................... 9
Section 2.4 Registered Office and Agent................................ 9
Section 2.5 Purposes and Permitted Activities.......................... 10
Section 2.6 No State Law Partnership................................... 10
Section 2.7 Certain Undertakings Relating to the Separateness of the
Company and the Partnership................................ 11
ARTICLE 3
MEMBERS
Section 3.1 Membership Interests; Additional Members................... 12
Section 3.2 Access to Information...................................... 12
Section 3.3 Liability.................................................. 12
Section 3.4 Withdrawal................................................. 13
ARTICLE 4
DISPOSITION OF MEMBERSHIP INTERESTS
Section 4.1 General Restriction........................................ 13
Section 4.2 Admission of Assignee as a Member.......................... 13
Section 4.3 Requirements Applicable to All Dispositions and
Admissions................................................. 13
ARTICLE 5
CAPITAL CONTRIBUTIONS
Section 5.1 Initial Capital Contributions.............................. 14
Section 5.2 Loans...................................................... 14
Section 5.3 Return of Contributions.................................... 14
Section 5.4 Capital Accounts........................................... 14
ARTICLE 6
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes................... 16
Section 6.2 Allocations for Tax Purposes............................... 20
Section 6.3 Distributions.............................................. 22
Section 6.4 Distributions on Dissolution and Winding Up................ 23
Section 6.5 Withheld Taxes............................................. 23
Section 6.6 Limitations on Distributions............................... 23
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ARTICLE 7
MANAGEMENT
Section 7.1 Management by Directors.................................... 23
Section 7.2 Board of Directors......................................... 24
Section 7.3 Adoption of Section 13.4(c) of the Partnership Agreement... 25
Section 7.4 Regular Meetings........................................... 26
Section 7.5 Special Meetings........................................... 26
Section 7.6 Notice..................................................... 26
Section 7.7 Action by Consent of Board................................. 27
Section 7.8 Conference Telephone Meetings.............................. 27
Section 7.9 Vacancies; Increases in the Number of Directors............ 27
Section 7.10 Committees................................................. 27
ARTICLE 8
OFFICERS
Section 8.1 Elected Officers........................................... 29
Section 8.2 Election and Term of Office................................ 29
Section 8.3 Chairman of the Board; Chief Executive Officer............. 29
Section 8.4 President; Chief Operating Officer......................... 29
Section 8.5 Vice Presidents............................................ 29
Section 8.6 Treasurer.................................................. 30
Section 8.7 Secretary.................................................. 30
Section 8.8 Removal.................................................... 30
Section 8.9 Vacancies.................................................. 31
ARTICLE 9
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 9.1 Indemnification............................................ 31
Section 9.2 Exculpation of Liability of Indemnitees.................... 34
Section 9.3 Resolution of Conflicts of Interest; Standards of Conduct
and Modification of Duties................................. 35
Section 9.4 Duties of Officers and Directors........................... 36
Section 9.5 Reliance by Third Parties.................................. 36
ARTICLE 10
TAXES
Section 10.1 Tax Returns................................................ 36
Section 10.2 Tax Elections.............................................. 37
Section 10.3 Tax Matters Member......................................... 37
ARTICLE 11
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
Section 11.1 Maintenance of Books....................................... 38
Section 11.2 Reports.................................................... 38
Section 11.3 Bank Accounts.............................................. 39
ARTICLE 12
DISSOLUTION, WINDING-UP, TERMINATION AND CONVERSION
Section 12.1 Dissolution................................................ 39
Section 12.2 Winding-Up and Termination................................. 39
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Section 12.3 Deficit Capital Accounts................................... 40
Section 12.4 Certificate of Cancellation................................ 40
ARTICLE 13
GENERAL PROVISIONS
Section 13.1 Offset..................................................... 41
Section 13.2 Notices.................................................... 41
Section 13.3 Entire Agreement; Superseding Effect....................... 41
Section 13.4 Effect of Waiver or Consent................................ 41
Section 13.5 Amendment or Restatement................................... 42
Section 13.6 Binding Effect............................................. 42
Section 13.7 Governing Law; Severability................................ 42
Section 13.8 Further Assurances......................................... 42
Section 13.9 Waiver of Certain Rights................................... 42
Section 13.10 Counterparts............................................... 43
Section 13.11 Jurisdiction............................................... 43
ARTICLE 14
MEMBER MEETINGS
Section 14.1 Meetings of the Members.................................... 43
Section 14.2 Additional Provisions Applicable to Meetings of Members.... 44
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
LEGACY RESERVES GP, LLC
This Amended and Restated Limited Liability Company Agreement (this
"Agreement") of Legacy Reserves GP, LLC (the "Company") is entered into by
MORIAH PROPERTIES, LTD., a Texas limited partnership ("Moriah"), DAB RESOURCES,
LTD., a Texas limited partnership ("DAB Resources"), BROTHERS PRODUCTION
PROPERTIES, LTD., a Texas limited partnership ("Brothers"), BROTHERS PRODUCTION
COMPANY, INC., a Texas corporation ("Brothers Production"), BROTHERS OPERATING
COMPANY, INC., a Texas corporation ("Brothers Operating"), J&W MCGRAW
PROPERTIES, LTD., a Texas limited partnership ("J&W Properties"), MBN PROPERTIES
LP, a Delaware limited partnership ("MBN Properties"), and H2K HOLDINGS, LTD., a
Texas limited partnership ("H2K," and with Moriah, DAB, Brothers, Brothers
Production, Brothers Operating, J&W Properties and MBN Properties, the "Initial
Members"),
PREAMBLE
WHEREAS, the Company was formed pursuant to a Certificate of Formation
filed with the Secretary of State of the State of Delaware on October 26,
2005 (the "Certificate") and certain of the Initial Members entered into a
Limited Liability Company Agreement (the "Original LLC Agreement");
WHEREAS, the Company is the sole general partner of Legacy Reserves
LP, a Delaware limited partnership (the "Partnership"); and
WHEREAS, in connection with the closing of the issuance of units
representing limited partner interests in the Partnership to the Initial
Members and other Persons as described in that certain Offering Memorandum
dated March 6, 2006, the Initial Members desire to enter into this
Agreement to set forth their agreement as to the conduct of the business of
the Company, including its governance, as set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Initial Members hereby amend the Original Agreement, and
as so amended restate it in its entirety to read as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS.
"Additional Member" means a Member admitted as a Member of the Company
pursuant to Section 3.1 and who is shown as such on the books and records of the
Company.
"Adjusted Capital Account" means the Capital Account maintained for each
Member as of the end of each fiscal year of the Company, (a) increased by any
amounts that such Member is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all deductions in respect of depletion
that, as of the end of such fiscal year are expected to be made to such Member's
Capital Account in respect of the oil and gas properties of the Company, (ii)
the amount of all losses and deductions that, as of the end of such fiscal year,
are reasonably expected to be allocated to such Member in subsequent years under
Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section
1.751-1(b)(2)(ii), and (iii) the amount of all distributions that, as of the end
of such fiscal year, are reasonably expected to be made to such Member in
subsequent years in accordance with the terms of this Agreement or otherwise to
the extent they exceed offsetting increases to such Member's Capital Account
that are reasonably expected to occur during (or prior to) the year in which
such distributions are reasonably expected to be made (other than increases as a
result of a minimum gain chargeback pursuant to Section 6.1(d)(i) or Section
6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith. The "Adjusted Capital Account"
of a Member in respect of an Interest shall be the amount that such Adjusted
Capital Account would be if such Interest were the only interest in the Company
held by such Member from and after the date on which such Interest was first
issued.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.4(d)(i) or Section 5.4(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, 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.
"Agreed Allocation" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the Board. The Board shall use such method as it determines to be appropriate
to allocate the aggregate Agreed Value of Contributed Properties contributed to
the Company in a single or integrated transaction among each separate property
on a basis proportional to the fair market value of each Contributed Property.
"Agreement" means this Amended and Restated Limited Liability Company
Agreement of Legacy Reserves GP, LLC, as it may be amended, supplemented or
restated from time to time.
"Assignee" means any Person that acquires a Member's share of the income,
gain, loss, deduction and credits of, and the right to receive distributions
from, the Company or any portion thereof through a Disposition; provided,
however, that, an Assignee shall have no right to be admitted to the Company as
a Member except in accordance with Section 4.2. The Assignee of a dissolved
Member is the shareholder, partner, member or other equity owner or owners of
the dissolved Member to whom such Member's Interest is assigned by the Person
conducting the liquidation or winding up of such Member.
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"Bankruptcy" or "Bankrupt" means, with respect to any Person, that (a) such
Person (i) makes a general assignment for the benefit of creditors; (ii) files a
voluntary bankruptcy petition; (iii) becomes the subject of an order for relief
or is declared insolvent in any federal or state bankruptcy or insolvency
proceedings; (iv) files a petition or answer seeking for such Person a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any applicable law; (v) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against such Person in a proceeding of the type described in
subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or
acquiesces in the appointment of a trustee, receiver, or liquidator of such
Person or of all or any substantial part of such Person's properties; or (b) a
proceeding seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any applicable law has been
commenced against such Person and 120 days have expired without dismissal
thereof or with respect to which, without such Person's consent or acquiescence,
a trustee, receiver, or liquidator of such Person or of all or any substantial
part of such Person's properties has been appointed and 90 days have expired
without the appointment's having been vacated or stayed, or 90 days have expired
after the date of expiration of a stay, if the appointment has not previously
been vacated. The foregoing definition of "Bankruptcy" is intended to replace
and shall supersede and replace the definition of "Bankruptcy" set forth in
Sections 18-101(1) and 18-304 of the Delaware Act.
"Board" has the meaning given such term in Section 7.1.
"Book-Tax Disparity" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Member's share of the Company's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Member's Capital Account balance as maintained pursuant to Section
5.4 and the hypothetical balance of such Member's Capital Account computed as if
it had been maintained strictly in accordance with federal income tax accounting
principles.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the State of Texas shall not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Member
pursuant to Section 5.4. The "Capital Account" of a Member in respect of an
Interest shall be the amount that such Capital Account would be if such Interest
were the only interest in the Company held by such Member from and after the
date on which such Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Member contributes to the Company pursuant
to this Agreement.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
depletion (including Simulated Depletion), amortization and cost recovery
deductions charged to the Members' Capital Accounts in respect of such
Contributed Property, and (b) with respect to any other Company property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Section 5.4(d)(i) and Section 5.4(d)(ii) and to
reflect changes, additions or
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other adjustments to the Carrying Value for dispositions and acquisitions of
Company properties, as deemed appropriate by the Board.
"Certificate" means the Certificate of Formation of the Company filed with
the Secretary of State of the State of Delaware as referenced in the Preamble,
as such Certificate of Formation may be amended, supplemented or restated from
time to time.
"Closing Date" means the first date on which the Units are sold by the
Partnership and the Selling Unitholders (as defined in the Purchase Agreement)
to the Initial Purchaser (as defined in the Purchase Agreement) pursuant to the
provisions of the Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
any successor law.
"Commission" means the United States Securities and Exchange Commission.
"Company Minimum Gain" means that amount determined in accordance with the
principles of Treasury Regulation Section 1.704-2(d).
"Conflicts Committee" has the meaning assigned to such term in Section
7.10(c).
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Company. Once the Carrying Value of a Contributed Property is adjusted pursuant
to Section 5.4(d), such property shall no longer constitute a Contributed
Property, but shall be deemed an Adjusted Property.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(x).
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del C.
Section 18-101, et seq., as amended, supplemented or restated from time to time,
and any successor to such statute.
"DGCL" means the Delaware General Corporation Law, as amended, supplemented
or restated from time to time, and any successor to such statute.
"Director" means a member of the Board.
"Dispose" or "Disposition" means a sale, assignment, transfer, exchange,
mortgage, pledge, grant of security interest or other disposition or encumbrance
(excluding, however, dispositions by operation of law through a merger or
consolidation or by share exchange or conversion involving a Member).
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Final Adjudication" has the meaning assigned to such term in Section
9.1(e).
"Group Member" means a member of the Partnership Group.
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"Group Member Agreement" means the partnership agreement of any Group
Member, other than the Partnership, that is a limited or general partnership,
the limited liability company agreement of any Group Member that is a limited
liability company, the certificate of incorporation and bylaws or similar
organizational documents of any Group Member that is a corporation, the joint
venture agreement or similar governing document of any Group Member that is a
joint venture and the governing or organizational or similar documents of any
other Group Member that is a Person other than a limited or general partnership,
limited liability company, corporation or joint venture, as such may be amended,
supplemented or restated from time to time.
"Indemnitee" has the meaning assigned to such term in Section 9.1(a).
"Independent Director" has the meaning assigned to such term in Section
7.10(b).
"Interest" means the ownership interest of a Member in the Company and
includes any and all benefits to which such Member is entitled as provided in
this Agreement, together with all obligations of such Member to comply with the
terms and provisions of this Agreement.
"Limited Partner" has the meaning assigned to such term in the Partnership
Agreement.
"Liquidation Date" means the date on which an event giving rise to the
dissolution of the Company occurs.
"Member" means, unless the context otherwise requires, each Initial Member
and each Additional Member, each in its capacity as a member of the Company.
"Member Nonrecourse Debt" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Member Nonrecourse Deductions" means any and all items of loss, deduction,
expenditure (including, without limitation, any expenditure described in Section
705(a)(2)(B) of the Code), Simulated Depletion or Simulated Loss that, in
accordance with the principles of Treasury Regulation Section 1.704-2(i), are
attributable to a Member Nonrecourse Debt.
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or The Nasdaq Stock Market or any successor thereto.
"Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Company upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Member by the
Company, the Company's Carrying Value of such property (as adjusted pursuant to
Section 5.4(d)(ii)) at the time such property is distributed, reduced by any
indebtedness either assumed by such Member upon such distribution or to which
such property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
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"Net Income" means, for any taxable year, the excess, if any, of the
Company's items of income and gain (other than those items taken into account in
the computation of Net Termination Gain or Net Termination Loss) for such
taxable year over the Company's items of loss and deduction (other than those
items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.4(b) and shall
include Simulated Gains, Simulated Losses, and Simulated Depletion, but shall
not include any items specially allocated under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of the
Company's items of loss and deduction (other than those items taken into account
in the computation of Net Termination Gain or Net Termination Loss) for such
taxable year over the Company's items of income and gain (other than those items
taken into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable year. The items included in the calculation of Net Loss
shall be determined in accordance with Section 5.4(b) and shall include
Simulated Gains, Simulated Losses, and Simulated Depletion, but shall not
include any items specially allocated under Section 6.1(d).
"Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Company after
the Liquidation Date. The items included in the determination of Net Termination
Gain shall be determined in accordance with Section 5.4(b) and shall include
Simulated Gains, Simulated Losses and Simulated Depletion, but shall not include
any items of income, gain or loss specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Company after
the Liquidation Date. The items included in the determination of Net Termination
Loss shall be determined in accordance with Section 5.4(b) and shall include
Simulated Gains, Simulated Losses and Simulated Depletion, but shall not include
any items of income, gain or loss specially allocated under Section 6.1(d).
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Members pursuant to Section 6.2(c)(iii), Section 6.2(d)(i)(A),
Section 6.2(d)(ii)(A) and Section 6.2(d)(iii) if such properties were disposed
of in a taxable transaction in full satisfaction of such liabilities and for no
other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction,
expenditure (including, without limitation, any expenditure described in Section
705(a)(2)(B) of the Code), Simulated Depletion or Simulated Loss that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b), are
attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"Omnibus Agreement" means that Omnibus Agreement, dated as of the Closing
Date, among the Company, the Partnership, the Operating Partnership GP, the
Operating Partnership and the other parties thereto.
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"Operating Partnership" means Legacy Reserves Operating LP, a Delaware
limited partnership, and any successors thereto.
"Operating Partnership GP" means Legacy Reserves Operating GP LLC, a
Delaware limited liability company, and any successors thereto.
"Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or the Company or any of its Affiliates) acceptable
to the Company.
"Partnership" means Legacy Reserves LP, a Delaware limited partnership, and
any successors thereto.
"Partnership Agreement" means the Amended and Restated Agreement of Limited
Partnership of the Partnership, as it may be amended, supplemented or restated
from time to time.
"Partnership Group" means the Partnership and its Subsidiaries treated as a
single consolidated entity.
"Partnership Interest" means an ownership interest in the Partnership,
which shall include the General Partner Interest and Limited Partner Interests
(each as defined in the Partnership Agreement).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to any equity interest in the Partnership), including Units.
"Percentage Interest" means, as of any date of determination as to any
Member, the percentage of the total Interests in the Company held by such
Member.
"Person" means an individual or a corporation, firm, limited liability
company, partnership, joint venture, trust, unincorporated organization or other
enterprise (including an employee benefit plan), association, governmental
agency or political subdivision thereof or other entity.
"Pro Rata" means (a) when modifying Interests or any class thereof,
apportioned equally among all designated Interests in accordance with their
relative Percentage Interests and (b) when modifying Members, apportioned among
all Members in accordance with their relative Percentage Interests.
"Purchase Agreement" has the meaning assigned to such term in the
Partnership Agreement.
"Recapture Income" means any gain recognized by the Company (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses under Section 6.1(b) and (b) any allocation of an item of income,
gain, loss, deduction,
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Simulated Gain, Simulated Depletion or Simulated Loss pursuant to Section
6.1(d)(i), Section 6.1(d)(ii), Section 6.1(d)(iv), Section 6.1(d)(vii) or
Section 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss or
Simulated Gain or Simulated Loss, as the case may be, of the Company recognized
for federal income tax purposes resulting from a sale, exchange or other
disposition of a Contributed Property or Adjusted Property, to the extent such
item of gain or loss or Simulated Gain or Simulated Loss is not allocated
pursuant to Section 6.2(d)(i)(A), Section 6.1(d)(ii)(A) or Section
6.2(d)(ii)(B), respectively, to eliminate Book-Tax Disparities.
"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Simulated Basis" means the Carrying Value of any oil and gas property (as
defined in Section 614 of the Code).
"Simulated Depletion" means, with respect to an oil and gas property (as
defined in Section 614 of the Code), a depletion allowance computed in
accordance with federal income tax principles (as if the Simulated Basis of the
property were its adjusted tax basis) and in the manner specified in Treasury
Regulation Section 1.704-1(b)(2)(iv)(k)(2). For purposes of computing Simulated
Depletion with respect to any property, the Simulated Basis of such property
shall be deemed to be the Carrying Value of such property, and in no event shall
such allowance for Simulated Depletion, in the aggregate, exceed such Simulated
Basis.
"Simulated Gain" means the excess of the amount realized from the sale or
other disposition of an oil or gas property over the Carrying Value of such
property.
"Simulated Loss" means the excess of the Carrying Value of an oil or gas
property over the amount realized from the sale or other disposition of such
property.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
"Tax Matters Member" has the meaning assigned to such term in Section
10.3(a).
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"Unit" means a Partnership Security representing a fractional part of the
Partnership Interests of all Limited Partners, and having the rights and
obligations specified with respect to Units in this Agreement.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date over (b) the Carrying Value of such
property as of such date (prior to any adjustment to be made pursuant to Section
5.4(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.4(d) as of such date) over (b) the fair market value of such property
as of such date.
SECTION 1.2 CONSTRUCTION.
Unless the context requires otherwise: (a) 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; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE 2
ORGANIZATION OF THE COMPANY
SECTION 2.1 FORMATION.
The Company is a limited liability company formed under the provisions of
the Delaware Act. Xxxxxx X. Xxxxxx is hereby designated as an "authorized
person" of the Company within the meaning of the Act, and has executed,
delivered and filed (such filing being hereby ratified and confirmed in all
respects) the Certificate of Formation of the Company with the Secretary of
State of the State of Delaware. Upon the filing of the Certificate of Formation
with the Secretary of State of the State of Delaware, his powers as an
"authorized person" of the Company ceased, and the Member thereupon became the
designated "authorized person" of the Company and shall continue as the
designated "authorized person" of the Company within the meaning of the Act.
SECTION 2.2 NAME.
The name of the Company is, and the business of the Company shall be
conducted under the name of, "Legacy Reserves GP, LLC."
SECTION 2.3 TERM.
The Company's term commenced on the effective date of the filing of the
Certificate and shall continue until the Company is dissolved pursuant to
Section 12.1.
SECTION 2.4 REGISTERED OFFICE AND AGENT.
The registered office of the Company required by the Delaware Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate,
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or such other place as the Members may designate in the manner provided by law.
The registered agent for service of process at such address shall be the initial
registered agent named in the Certificate, or such other person as the Members
may designate in the manner provided by law.
SECTION 2.5 PURPOSES AND PERMITTED ACTIVITIES.
(a) The Company may (i) act as the general partner of the Partnership (and
acquire, hold and dispose of Partnership Interests and related rights in the
Partnership) and only undertake activities that are ancillary or related thereto
and (ii) in connection with acting in such capacity, carry on any lawful
business or activity permitted by the Delaware Act.
(b) Subject to the limitations expressly set forth in this Agreement, the
Company shall have the power and authority to do any and all acts and things
deemed necessary or desirable by the Board to further the Company's purposes and
carry on its business, including, without limitation, the following:
(i) acting as the general partner of the Partnership;
(ii) entering into any kind of activity and performing contracts of
any kind necessary or desirable for the accomplishment of its business
(including the business of the Partnership and the Operating Partnership);
(iii) acquiring any property, real or personal, in fee or under lease
or license, or any rights therein or appurtenant thereto, necessary or
desirable for the accomplishment of its business;
(iv) borrowing money and issuing evidences of indebtedness and
securing any such indebtedness by mortgage or pledge of, or other lien on,
the assets of the Company;
(v) entering into any such instruments and agreements as the Board may
deem necessary or desirable for the ownership, management, operation,
leasing and sale of the Company's property; and
(vi) negotiating and concluding agreements for the sale, exchange or
other disposition of all or substantially all of the properties of the
Company, or for the refinancing of any loan or payment obtained by the
Company.
The purposes of the Company are to transact any and all lawful business for
which a limited liability company may be formed under the laws of the State of
Delaware and any activity necessary, convenient or incidental to the foregoing
purpose. Subject to the provisions of this Agreement, the Company, by and
through the Board (as defined in Section 7.1 herein) on behalf of the Company,
(i) shall have and exercise all powers necessary, convenient or incidental to
accomplish its purposes and (ii) shall have and exercise all of the powers and
rights conferred upon limited liability companies formed pursuant to the
Delaware Act.
SECTION 2.6 NO STATE LAW PARTNERSHIP.
The Members intend that the Company not be a partnership (including a
limited partnership) or joint venture, and that no Member be a partner or joint
venturer of any other
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Member, for any purposes other than (if the Company has more than one Member)
federal and state income tax purposes, and this Agreement may not be construed
to suggest otherwise.
SECTION 2.7 CERTAIN UNDERTAKINGS RELATING TO THE SEPARATENESS OF THE
COMPANY AND THE PARTNERSHIP.
(a) Separate Records. The Company shall, and shall cause the Partnership
to, maintain (i) its books and records, (ii) its accounts, and (iii) its
financial statements, separate from those of any other Person, except its
consolidated Subsidiaries.
(b) Separate Assets. The Company shall not, and shall not permit the
Partnership to, commingle or pool its funds or other assets with those of any
other Person, except its consolidated Subsidiaries, and shall, and shall cause
the Partnership to, maintain its assets in a manner that is not costly or
difficult to segregate, ascertain or otherwise identify as separate from those
of any other Person.
(c) Separate Name. The Company shall, and shall cause the Partnership to,
(i) conduct its business in its own name, (ii) use separate stationery,
invoices, and checks, (iii) correct any known misunderstanding regarding its
separate identity, and (iv) generally hold itself out as a separate entity.
(d) Separate Credit. The Company shall not, and shall not permit the
Partnership to, (i) pay its own liabilities from a source other than its own
funds, (ii) guarantee or become obligated for the debts of any other Person,
except its Subsidiaries and, in the case of the Company, the Partnership, (iii)
hold out its credit as being available to satisfy the obligations of any other
Person, except its Subsidiaries and, in the case of the Company, the
Partnership, (iv) acquire obligations or debt securities of any Group Member, or
(v) pledge its assets for the benefit of any Person or make loans or advances to
any Person, except its Subsidiaries and, in the case of the Company, the
Partnership; provided that the Company or the Partnership may engage in any
transaction described in clauses (ii)-(v) of this Section 2.7(d) if prior
Special Approval has been obtained for such transaction and either (A) in the
case of transactions described in clauses (ii) and (iii), the Conflicts
Committee has determined, or has obtained reasonable written assurance from a
nationally recognized firm of independent public accounts or a nationally
recognized investment banking or valuation firm, that the borrower or recipient
of the credit extension is not then insolvent and will not be rendered insolvent
as a result of such transaction or (B) in the case of transactions described in
clause (iv), such transaction is completed through a public auction or a
nationally recognized exchange.
(e) Separate Formalities. The Company shall, and shall cause the
Partnership to, (i) observe all limited liability company or partnership
formalities, as the case may be, and other formalities required by its
organizational documents, the laws of the jurisdiction of its formation, or
other laws, rules, regulations and orders of governmental authorities exercising
jurisdiction over it, (ii) engage in transactions with any Group Member in
conformity with the requirements of Section 7.10(c), and (iii) subject to the
terms of the Omnibus Agreement, promptly pay, from its own funds, and on a
current basis, its allocable share of general and administrative expenses,
capital expenditures, and costs for shared services performed by any Group
Member. Each material contract between the Company or the Partnership, on the
one hand, and any other Group Member, on the other hand, shall be in writing.
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ARTICLE 3
MEMBERS
SECTION 3.1 MEMBERSHIP INTERESTS; ADDITIONAL MEMBERS.
The Members and the Interests in the Company owned by each Member on the
date hereof are as reflected in Exhibit A attached hereto. Exhibit A attached
hereto may be updated from time to time to reflect changes in the information
set forth therein accomplished in accordance with the terms of this Agreement.
Persons may be admitted to the Company as Members, on such terms and conditions
as the Members, without any approval of the Board, determine at the time of
admission. The terms of admission or issuance must specify the Percentage
Interest applicable thereto and may provide for the creation of different
classes or groups of Members having different rights, powers, and duties. The
Members may reflect the creation of any new class or group in an amendment to
this Agreement indicating the different rights, powers, and duties, and such an
amendment shall be approved and executed by the Members. Any such admission is
effective only after such new Member has executed and delivered to the Members
and the Company an instrument containing the notice address of the new Member,
the new Member's ratification of this Agreement and agreement to be bound by it.
SECTION 3.2 ACCESS TO INFORMATION.
Each Member shall be entitled to receive any information that it may
request concerning the Company; provided, however, that this Section 3.2 shall
not obligate the Company to create any information that does not already exist
at the time of such request (other than to convert existing information from one
medium to another, such as providing a printout of information that is stored in
a computer database). Each Member shall also have the right, upon reasonable
notice, and at all reasonable times during usual business hours to inspect the
properties of the Company and to audit, examine and make copies of the books of
account and other records of the Company. Such right may be exercised through
any agent or employee of such Member designated in writing by it or by an
independent public accountant, engineer, attorney or other consultant so
designated. All costs and expenses incurred in any inspection, examination or
audit made on such Member's behalf shall be borne by such Member.
SECTION 3.3 LIABILITY.
(a) Except as otherwise provided in the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Member or Director shall be obligated personally for the debts, obligations or
liabilities of the Company solely by reason of being a member or manager of the
Company.
(b) The Company and the Members agree that, to the fullest extent permitted
by law, the rights, duties and obligations of the Members in their capacities as
members of the Company are only as set forth in this Agreement and as otherwise
arise under the Delaware Act. Furthermore, the Members agree that the existence
of any rights of a Member, or the exercise or forbearance from exercise of any
such rights shall not, to the fullest extent permitted by law, create any duties
or obligations of the Member in their capacities as members of the Company, nor
shall such rights be construed to enlarge or otherwise alter in any manner the
duties and obligations of the Members.
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SECTION 3.4 WITHDRAWAL.
A Member does not have the right or power to resign as a member of the
Company.
ARTICLE 4
DISPOSITION OF MEMBERSHIP INTERESTS
SECTION 4.1 GENERAL RESTRICTION.
A Member may not Dispose of all or any portion of its Interest except in
strict accordance with this Article 4. References in this Article 4 to
Dispositions of an Interest shall also refer to Dispositions of a portion of an
Interest. To the fullest extent permitted by law, any attempted Disposition of
an Interest, other than in strict accordance with this Article 4, shall be, and
is hereby declared, null and void ab initio. The Members agree that a breach of
the provisions of this Article 4 may cause irreparable injury to the Company and
to the other Members for which monetary damages (or other remedy at law) are
inadequate in view of (a) the complexities and uncertainties in measuring the
actual damages that would be sustained by reason of the failure of a Member to
comply with such provision and (b) the uniqueness of the business of the Company
and the relationship among the Members. Accordingly, the Members agree that the
provisions of this Article 4 may be enforced by specific performance.
SECTION 4.2 ADMISSION OF ASSIGNEE AS A MEMBER.
An Assignee has the right to be admitted to the Company as a Member, with
the Interest (and attendant Percentage Interest) so transferred to such
Assignee, only if (a) the Member making the Disposition (a "Disposing Member")
has granted the Assignee either (i) all, but not less than all, of such
Disposing Member's Interest or (ii) the express right to be so admitted; and (b)
such Disposition is effected in strict compliance with this Article 4.
SECTION 4.3 REQUIREMENTS APPLICABLE TO ALL DISPOSITIONS AND
ADMISSIONS.
Any Disposition of an Interest and any admission of an Assignee as a Member
shall also be subject to the following requirements, and such Disposition (and
admission, if applicable) shall not be effective unless such requirements are
complied with:
(a) Payment of Expenses. The Disposing Member and its Assignee shall pay,
or reimburse the Company for, all reasonable costs and expenses incurred by the
Company in connection with the Disposition and admission of the Assignee as a
Member.
(b) No Release. No Disposition of an Interest shall effect a release of the
Disposing Member from any liabilities to the Company or the other Members
arising from events occurring prior to the Disposition, except as otherwise may
be provided in any instrument or agreement pursuant to which a Disposition of an
Interest is effected.
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ARTICLE 5
CAPITAL CONTRIBUTIONS
SECTION 5.1 INITIAL CAPITAL CONTRIBUTIONS.
At the time of the formation of the Company or contemporaneously with the
adoption by the Members of this Agreement, as appropriate, each Member shall be
deemed to have made Capital Contributions as set forth next to the Member's name
on Exhibit A.
SECTION 5.2 LOANS.
If the Company does not have sufficient cash to pay its obligations, any
Member(s) that may agree to do so with the consent of the Board may advance all
or part of the needed funds to or on behalf of the Company. An advance described
in this Section 5.2 constitutes a loan from the Member to the Company, bears
interest at a rate determined by the Board from the date of the advance until
the date of payment, and is not a Capital Contribution. The provisions of this
Section 5.2 are intended to benefit the Members and shall not be construed as
conferring any benefit upon any creditor of the Company, and the Members shall
not have any duty or obligation to any creditor of the Company to make any
contribution or loan to the Company.
SECTION 5.3 RETURN OF CONTRIBUTIONS.
Except as expressly provided herein, no Member is entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its Capital Account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the Company to enable
the Company to return any Member's Capital Contributions.
SECTION 5.4 CAPITAL ACCOUNTS.
(a) The Company shall maintain for each Member owning an Interest a
separate Capital Account with respect to such Interest in accordance with the
rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account
shall be increased by (i) the amount of all Capital Contributions made to the
Company with respect to such Interest pursuant to this Agreement and (ii) all
items of Company income and gain (including, without limitation, Simulated Gain
and income and gain exempt from tax) computed in accordance with Section 5.4(b)
and allocated with respect to such Interest pursuant to Section 6.1, and
decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Interest pursuant to
this Agreement and (y) all items of Company deduction and loss (including
Simulated Depletion and Simulated Loss) computed in accordance with Section
5.4(b) and allocated with respect to such Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction, Simulated Depletion, Simulated Gain or Simulated Loss which is to
be allocated pursuant to Article 6 and is to be reflected in the Members'
Capital Accounts, the determination, recognition and classification of any such
item shall be the same as its determination, recognition and classification for
federal income tax purposes (including, without limitation, any method of
depreciation, cost recovery or amortization used for that purpose), provided,
that:
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(i) Solely for purposes of this Section 5.4, the Company shall be
treated as owning directly its proportionate share (as determined by the
Board based upon the provisions of the applicable Group Member Agreement)
of all property owned by any other Group Member that is classified as a
partnership (or otherwise ignored) for federal income tax purposes.
(ii) All fees and other expenses incurred by the Company to promote
the sale of (or to sell) an Interest that can neither be deducted nor
amortized under Section 709 of the Code, if any, shall, for purposes of
Capital Account maintenance, be treated as an item of deduction at the time
such fees and other expenses are incurred and shall be allocated among the
Members pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss,
deduction, Simulated Depletion, Simulated Gain and Simulated Loss shall be
made without regard to any election under Section 754 of the Code which may
be made by the Company and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that
such items are not includable in gross income or are neither currently
deductible nor capitalized for federal income tax purposes. To the extent
an adjustment to the adjusted tax basis of any Company asset pursuant to
Section 734(b) or 743(b) of the Code is required, pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment in the Capital
Accounts shall be treated as an item of gain or loss.
(iv) Any income, gain, loss, Simulated Gain or Simulated Loss
attributable to the taxable disposition of any Company property shall be
determined as if the adjusted basis of such property as of such date of
disposition were equal in amount to the Company's Carrying Value with
respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery, amortization or Simulated
Depletion attributable to any Contributed Property shall be determined as
if the adjusted basis of such property on the date it was acquired by the
Company were equal to the Agreed Value of such property. Upon an adjustment
pursuant to Section 5.4(d) to the Carrying Value of any Company property
subject to depreciation, cost recovery or amortization, any further
deductions for such depreciation, cost recovery, amortization or Simulated
Depletion attributable to such property shall be determined (A) as if the
adjusted basis of such property were equal to the Carrying Value of such
property immediately following such adjustment and (B) using a rate of
depreciation, cost recovery, amortization or Simulated Depletion derived
from the same method and useful life (or, if applicable, the remaining
useful life) as is applied for federal income tax purposes; provided,
however, that, if the asset has a zero adjusted basis for federal income
tax purposes, depreciation, cost recovery, amortization or Simulated
Depletion deductions shall be determined using any method that the Board
may adopt.
(vi) If the Company's adjusted basis in a depreciable or cost recovery
property is reduced for federal income tax purposes pursuant to Section
48(q)(1) or 48(q)(3) of the Code, the amount of such reduction shall,
solely for purposes hereof, be deemed to be an additional depreciation or
cost recovery deduction in the year such property is placed in service and
shall be allocated among the Members pursuant to Section 6.1. Any
restoration of such basis pursuant to Section 48(q)(2) of the Code
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shall, to the extent possible, be allocated in the same manner to the
Members to whom such deemed deduction was allocated.
(c) A transferee of an Interest shall succeed to a pro rata portion of the
Capital Account of the transferor relating to the Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Interests for cash or
Contributed Property and the issuance of Interests as consideration for the
provision of services, the Capital Account of all Members and the Carrying Value
of each Company property immediately prior to such issuance shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company property, as if such Unrealized Gain or Unrealized
Loss had been recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Members at such time
pursuant to Section 6.1 in the same manner as any item of gain, loss, Simulated
Gain or Simulated Loss actually recognized during such period would have been
allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Company assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Interests shall be determined by the Board using such method of
valuation as it may adopt; provided, however, that the Board, in arriving at
such valuation, must take fully into account the fair market value of the
Interests of all Members at such time. The Board shall allocate such aggregate
value among the assets of the Company (in such manner as it determines) to
arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to
a Member of any Company property (other than a distribution of cash that is not
in redemption or retirement of an Interest), the Capital Accounts of all Members
and the Carrying Value of all Company property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to such
Company property, as if such Unrealized Gain or Unrealized Loss had been
recognized in a sale of such property immediately prior to such distribution for
an amount equal to its fair market value, and had been allocated to the Members,
at such time, pursuant to Section 6.1 in the same manner as any item of gain,
loss, Simulated Gain or Simulated Loss actually recognized during such period
would have been allocated. In determining such Unrealized Gain or Unrealized
Loss the aggregate cash amount and fair market value of all Company assets
(including, without limitation, cash or cash equivalents) immediately prior to a
distribution shall (A) in the case of an actual distribution that is not made
pursuant to Section 10.3 or in the case of a deemed distribution, be determined
and allocated in the same manner as that provided in Section 5.4(d)(i) or (B) in
the case of a liquidating distribution pursuant to Section 10.3, be determined
and allocated by the liquidator using such method of valuation as it may adopt.
ARTICLE 6
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Members among themselves, the Company's items of income, gain,
loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss
(computed in accordance with Section 5.4(b)) shall be allocated among the
Members in each taxable year (or portion thereof) as provided herein below.
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(a) Net Income. After giving effect to the special allocations set forth in
Section 6.1(d), Net Income for each taxable year and all items of income, gain,
loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss taken
into account in computing Net Income for such taxable year shall be allocated to
the Members in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set forth in
Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss
taken into account in computing Net Losses for such taxable period shall be
allocated to the Members in accordance with their respective Percentage
Interests; provided that Net Losses shall not be allocated to any Member
pursuant to this Section 6.1(b) to the extent that such allocation would cause
any Member to have a deficit balance in its Adjusted Capital Account at the end
of such taxable year (or increase any existing deficit balance in its Adjusted
Capital Account).
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss,
deduction, Simulated Depletion, Simulated Gain and Simulated Loss taken into
account in computing Net Termination Gain or Net Termination Loss for such
taxable period shall be allocated in the same manner as such Net Termination
Gain or Net Termination Loss is allocated hereunder. All allocations under this
Section 6.1(c) shall be made after Capital Account balances have been adjusted
by all other allocations provided under this Section 6.1 and after all
distributions provided under Section 6.3 have been made; provided, however, that
solely for purposes of this Section 6.1(c), Capital Accounts shall not be
adjusted for distributions made pursuant to Section 6.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.4(d)), such Net Termination Gain shall be allocated
among the Members in the following manner (and the Capital Accounts of the
Members shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Member having a deficit balance in its Capital
Account, in the proportion that such deficit balance bears to the
total deficit balances in the Capital Accounts of all Members, until
each such Member has been allocated Net Termination Gain equal to any
such deficit balance in its Capital Account; and
(B) Second, 100% to all Members in accordance with their
respective Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.4(d)), such Net Termination Loss shall be allocated
among the Members in the following manner:
(A) First, to the Members, Pro Rata, until the Capital Account in
respect of each Unit then Outstanding has been reduced to zero; and
(B) Second, the balance, if any, 100% to all Members in
accordance with their respective percentage Interests.
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(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Company Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Company
Minimum Gain during any Company taxable period, each Member shall be
allocated items of Company income, gain and Simulated Gain for such period
(and, if necessary, subsequent periods) in the manner and amounts provided
in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Member's Adjusted Capital Account balance shall be determined,
and the allocation of income, gain and Simulated Gain required hereunder
shall be effected, prior to the application of any other allocations
pursuant to this Section 6.1(d) with respect to such taxable period (other
than an allocation pursuant to Section 6.1(d)(vi) and Section 6.1(d)(vii)).
This Section 6.1(d)(i) is intended to comply with the Company Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Member Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt
Minimum Gain during any Company taxable period, any Member with a share of
Member Nonrecourse Debt Minimum Gain at the beginning of such taxable
period shall be allocated items of Company income, gain and Simulated Gain
for such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 6.1(d), each Member's Adjusted Capital Account balance shall be
determined, and the allocation of income, gain and Simulated Gain required
hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(d), other than Section 6.1(d)(i)
and other than an allocation pursuant to Section 6.1(d)(vi) and Section
6.1(d)(vii), with respect to such taxable period. This Section 6.1(d)(ii)
is intended to comply with the chargeback of items of income and gain
requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(iii) Intentionally left blank.
(iv) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company
income, gain and Simulated Gain shall be specially allocated to such Member
in an amount and manner sufficient to eliminate, to the extent required by
the Treasury Regulations promulgated under Section 704(b) of the Code, the
deficit balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or Section 6.1(d)(ii).
(v) Gross Income Allocations. In the event any Member has a deficit
balance in its Capital Account at the end of any Company taxable period in
excess of the sum of (A) the amount such Member is required to restore
pursuant to the provisions of this Agreement and (B) the amount such Member
is deemed obligated to restore pursuant to Treasury Regulation Sections
1.704-2(g) and 1.704-2(i)(5), such Member shall be
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specially allocated items of Company gross income, gain and Simulated Gain
in the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(v) shall be made only if and to
the extent that such Member would have a deficit balance in its Capital
Account as adjusted after all other allocations provided for in this
Section 6.1 have been tentatively made as if this Section 6.1(d)(v) were
not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Members in accordance with their
respective Percentage Interests. If the Board determines that the Company's
Nonrecourse Deductions should be allocated in a different ratio to satisfy
the safe harbor requirements of the Treasury Regulations promulgated under
Section 704(b) of the Code, the Board is authorized, upon notice to the
other Members, to revise the prescribed ratio to the numerically closest
ratio that does satisfy such requirements.
(vii) Member Nonrecourse Deductions. Member Nonrecourse Deductions for
any taxable period shall be allocated 100% to the Member that bears the
Economic Risk of Loss with respect to the Member Nonrecourse Debt to which
such Member Nonrecourse Deductions are attributable in accordance with
Treasury Regulation Section 1.704-2(i). If more than one Member bears the
Economic Risk of Loss with respect to a Member Nonrecourse Debt, such
Member Nonrecourse Deductions attributable thereto shall be allocated
between or among such Members in accordance with the ratios in which they
share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Members agree that Nonrecourse Liabilities of
the Company in excess of the sum of (A) the amount of Company Minimum Gain
and (B) the total amount of Nonrecourse Built-in Gain shall be allocated
among the Members in accordance with their respective Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain or Simulated Gain (if the adjustment increases
the basis of the asset) or loss or Simulated Loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which
their Capital Accounts are required to be adjusted pursuant to such Section
of the Treasury Regulations.
(x) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations
shall be taken into account in making the Agreed Allocations so
that, to the extent possible, the net amount of items of income,
gain, loss, deduction, Simulated Depletion, Simulated Gain or
Simulated Loss allocated to each Member pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal
to the net amount of such items that would have been allocated to
each such Member under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise
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been provided in this Section 6.1. Notwithstanding the preceding
sentence, Required Allocations relating to (1) Nonrecourse
Deductions shall not be taken into account except to the extent
that there has been a decrease in Company Minimum Gain and (2)
Member Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Member
Nonrecourse Debt Minimum Gain. Allocations pursuant to this
Section 6.1(d)(x)(A) shall only be made with respect to Required
Allocations to the extent the Board reasonably determines that
such allocations will otherwise be inconsistent with the economic
agreement among the Members. Further, allocations pursuant to
this Section 6.1(d)(x)(A) shall be deferred with respect to
allocations pursuant to clauses (1) and (2) hereof to the extent
the Board determines that such allocations are likely to be
offset by subsequent Required Allocations.
(B) The Board shall, with respect to each taxable period,
(1) apply the provisions of Section 6.1(d)(x)(A) in whatever
order is most likely to minimize the economic distortions that
might otherwise result from the Required Allocations, and (2)
divide all allocations pursuant to Section 6.1(d)(x)(A) among the
Members in a manner that is likely to minimize such economic
distortions.
SECTION 6.2 ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Members in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to Section 6.1.
(b) The deduction for depletion with respect to each separate oil and gas
property (as defined in Section 614 of the Code) shall be computed for federal
income tax purposes separately by the Members rather than by the Company in
accordance with Section 613A(c)(7)(D) of the Code. Except as provided in Section
6.2(c)(iii), for purposes of such computation (before taking into account any
adjustments resulting from an election made by the Company under Section 754 of
the Code), the adjusted tax basis of each oil and gas property (as defined in
Section 614 of the Code) shall be allocated among the Members in accordance with
their respective Percentage Interests.
Each Member shall separately keep records of his share of the adjusted tax
basis in each oil and gas property, allocated as provided above, adjust such
share of the adjusted tax basis for any cost or percentage depletion allowable
with respect to such property, and use such adjusted tax basis in the
computation of its cost depletion or in the computation of his gain or loss on
the disposition of such property by the Company.
(c) Except as provided in Section 6.2(c)(iii), for the purposes of the
separate computation of gain or loss by each Member on the sale or disposition
of each separate oil and gas property (as defined in Section 614 of the Code),
the Company's allocable share of the "amount realized" (as such term is defined
in Section 1001(b) of the Code) from such sale or disposition shall be allocated
for federal income tax purposes among the Members as follows:
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(i) first, to the extent such amount realized constitutes a recovery
of the Simulated Basis of the property, to the Members in the same
proportion as the depletable basis of such property was allocated to the
Members pursuant to Section 6.2(b) (without regard to any special
allocation of basis under Section 6.2(c)(iii));
(ii) second, the remainder of such amount realized, if any, to the
Members so that, to the maximum extent possible, the amount realized
allocated to each Member under this Section 6.2(c)(ii) will equal such
Member's share of the Simulated Gain recognized by the Company from such
sale or disposition.
(iii) The Members recognize that with respect to Contributed Property
and Adjusted Property there will be a difference between the Carrying Value
of such property at the time of contribution or revaluation, as the case
may be, and the adjusted tax basis of such property at that time. All items
of tax depreciation, cost recovery, amortization, adjusted tax basis of
depletable properties, amount realized and gain or loss with respect to
such Contributed Property and Adjusted Property shall be allocated among
the Members to take into account the disparities between the Carrying
Values and the adjusted tax basis with respect to such properties in
accordance with the principles of Treasury Regulation Section 1.704-3(d).
(iv) Any elections or other decisions relating to such allocations
shall be made by the Board in any manner that reasonably reflects the
purpose and intention of the Agreement.
(d) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, other than an oil and gas property
pursuant to Section 6.2(c), items of income, gain, loss, depreciation,
amortization and cost recovery deductions shall be allocated for federal income
tax purposes among the Members as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Members in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the Members
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Members in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.4(d)(i) or Section 5.4(d)(ii),
and (2) second, in the event such property was originally a Contributed
Property, be allocated among the Members in a manner consistent with
Section 6.2(d)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Members
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The Board shall apply the principles of Treasury Regulation
Section 1.704-3(d) to eliminate Book-Tax Disparities.
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(e) For the proper administration of the Company, the Board shall (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or Section 704(c) of the Code. The Board may
adopt such conventions, make such allocations and make such amendments to this
Agreement as provided in this Section 6.2(e) only if such conventions,
allocations or amendments would not have a material adverse effect on the
Members, and if such allocations are consistent with the principles of Section
704 of the Code.
(f) The Board may determine to depreciate or amortize the portion of an
adjustment under Section 743(b) of the Code attributable to unrealized
appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax
Disparity) using a predetermined rate derived from the depreciation or
amortization method and useful life applied to the Company's common basis of
such property, despite any inconsistency of such approach with Treasury
Regulation Section 1.167(c)-l(a)(6) or any successor regulations thereto. If the
Board determines that such reporting position cannot be taken, the Board may
adopt depreciation and amortization conventions under which all purchasers
acquiring Units in the same month would receive depreciation and amortization
deductions, based upon the same applicable rate as if they had purchased a
direct interest in the Company's property. If the Board chooses not to utilize
such aggregate method, the Board may use any other depreciation and amortization
conventions to preserve the uniformity of the intrinsic tax characteristics of
any Interests, so long as such conventions would not have a material adverse
effect on the Members.
(g) Any gain allocated to the Members upon the sale or other taxable
disposition of any Company asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Members (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(h) All items of income, gain, loss, deduction and credit recognized by the
Company for federal income tax purposes and allocated to the Members in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code that may be made by the Company;
provided, however, that such allocations, once made, shall be adjusted (in the
manner determined by the Board) to take into account those adjustments permitted
or required by Sections 734 and 743 of the Code.
SECTION 6.3 DISTRIBUTIONS.
Except as otherwise provided in Section 6.4, distributions to the Members
shall be made only to all Members simultaneously in proportion to their
respective Percentage Interests (at the time the amounts of such distributions
are determined) and in such aggregate amounts and at such times as shall be
determined by the Board; provided, however, that any loans from Members pursuant
to Section 5.2 shall be repaid prior to any distributions to Members pursuant to
this Section 6.3.
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SECTION 6.4 DISTRIBUTIONS ON DISSOLUTION AND WINDING UP.
Upon the dissolution and winding up of the Company, after adjusting the
Capital Accounts, if any, for all distributions made under Section 6.3 and all
allocations under Article 6, all available proceeds distributable to the Members
as determined under Section 12.2 shall be distributed to all of the Members in
amounts equal to the Members' positive Capital Account balances.
SECTION 6.5 WITHHELD TAXES.
All amounts withheld pursuant to the Code or any provision of any state or
local tax law with respect to any payment, distribution or allocation to the
Company or the Members shall be treated as amounts distributed to the Members
pursuant to this Article 6 for all purposes of this Agreement. The Board is
authorized to withhold from distributions, or with respect to allocations, to
the Members and to pay over to any federal, state or local government any
amounts required to be so withheld pursuant to the Code or any provision of any
other federal, state or local law and shall allocate such amounts to those
Members with respect to which such amounts were withheld.
SECTION 6.6 LIMITATIONS ON DISTRIBUTIONS.
Notwithstanding any provision to the contrary contained in this Agreement,
the Company shall not make a distribution to any Member on account of its
interest in the Company if such distribution would violate Section 18-607 of the
Delaware Act or other applicable law.
ARTICLE 7
MANAGEMENT
SECTION 7.1 MANAGEMENT BY DIRECTORS.
The Company shall be managed by a board of Directors (the "Board") who
shall be "managers" (as such term is defined in the Delaware Act) according to
this Article 7 and, except with respect to certain consent or approval
requirements provided in this Agreement, no Member, by virtue of having the
status of a Member, shall have any management power over the business and
affairs of the Company or actual or apparent authority to enter into contracts
on behalf of, or to otherwise bind, the Company. Except as described in the
preceding sentence, the business and affairs of the Company shall be managed by
the Directors elected in accordance with Section 7.2 acting exclusively through
the Board in accordance with this Agreement. Under the direction of the Board,
the day-to-day activities of the Company shall be conducted on the Company's
behalf by the executive officers, who shall be agents of the Company. In
addition to the powers that now or hereafter can be granted under the Delaware
Act and to all other powers granted under any other provision of this Agreement,
the Board and the executive officers (subject to Article 8 and the direction of
the Board) shall have full power and authority to do all things on such terms as
they may deem necessary or appropriate to conduct, or cause to be conducted, the
business and affairs of the Company, including, without limitation, (i) the
making of any expenditures, the lending or borrowing of money, the assumption or
guarantee of, or other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness and the incurring of any other
obligations; (ii) 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; (iii) the merger or
other combination or conversion of the Company with or into another person; (iv)
the use of
-23-
the assets of the Company (including cash on hand) for any purpose consistent
with the terms of this Agreement and the repayment of obligations of the
Company; (v) the negotiation, execution and performance of any contracts,
conveyances or other instruments; (vi) the distribution of Company cash; (vii)
the selection, engagement and dismissal of executive officers, employees and
agents, outside attorneys, accountants, engineers, consultants and contractors
and the determination of their compensation and other terms of employment or
hiring; (viii) the maintenance of such insurance for the benefit of the Company
as it deems necessary or appropriate; (ix) the acquisition or disposition of
assets; (x) the formation of, or acquisition of assets of or an interest in, or
the contribution of property to, any person; (xi) the control of any matters
affecting the rights and obligations of the Company, including the commencement,
prosecution and defense 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; (xii) the indemnification of any person against
liabilities and contingencies to the extent permitted by law and this Agreement
and (xiii) issue additional Interests, as provided herein.
SECTION 7.2 BOARD OF DIRECTORS.
(a) Composition; Initial Directors. The Board shall initially consist of
four (4) natural persons who need not be Members. The initial Board shall
consist of the persons listed on Schedule I. Following the Closing Date, the
Board will be increased to up to seven (7) natural persons with the vacancies to
be filled by the existing Directors as follows:
(i) one Independent Director will be appointed promptly following the
Closing Date;
(ii) one Independent Director will be appointed on or before ninety
(90) days following the Closing Date; and
(iii) one Independent Director will be appointed on or before the
first anniversary of the Closing Date.
(b) Subject to any limitations specified by law or in this Agreement, prior
to the closing of an Initial Public Offering (as defined in the Partnership
Agreement) the number of Directors may be increased to up to nine (9) Directors
or decreased to as few as seven (7) Directors by resolution adopted by a
majority in interest of the Members. No decrease in the number of Directors
shall have the effect of shortening the term of any incumbent Director.
(c) Election and Term of Office. Except as provided in this Section 7.2 or
Section 7.3, the Directors shall be elected by a majority in interest of the
Members. The Directors shall be elected at the annual or any special meeting of
the Members (except as otherwise provided in this Agreement). Each Director
elected shall hold office until his successor shall be elected and shall
qualify, or until his death, resignation or removal in the manner hereinafter
provided.
(d) Quorum; Required Vote for Board Action. At all meetings of the
Directors, the participation, either in person or telephonically, of all of the
Directors fixed by or in accordance with this Agreement shall be necessary and
sufficient to constitute a quorum for the transaction of business. Except as
provided in Section 9.1, the act of a majority of the Directors will be the act
of the Board. If a quorum shall not be present at any meeting of Directors, the
Directors present may adjourn the meeting from time to time without notice other
than announcement at the meeting until a quorum shall be present.
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(e) No Compensation; Reimbursement. Directors, in their capacity as such,
shall not receive any compensation from the Company for their services; provided
that Independent Directors may be compensated. The Directors may be reimbursed
by the Company for their respective reasonable out-of-pocket costs and expenses
incurred in the course of their services as the Members shall determine.
The business and affairs of the Company shall be fully vested in, and
managed by, the Board and any executive officers elected pursuant to Article 8
hereof. The Directors and executive officers shall collectively constitute
"managers" of the Company within the meaning of the Delaware Act. Except as
otherwise specifically provided in this Agreement, the authority and functions
of the Board, on the one hand, and the executive officers, on the other hand,
shall be identical to the authority and functions of the board of directors and
officers, respectively, of a corporation organized under the General Corporation
Law of the State of Delaware. The executive officers shall be vested with such
powers and duties as are set forth in Article 8 hereof and as are specified by
the Board. Accordingly, except as otherwise specifically provided in this
Agreement, the business and affairs of the Company shall be managed under the
direction of the Board, and the day-to-day activities of the Company shall be
conducted on the Company's behalf by the executive officers who shall be agents
of the Company.
In addition to the powers and authorities expressly conferred on the Board
by this Agreement, the Board may exercise all such powers of the Company and do
all such acts and things as are not restricted by this Agreement, the Delaware
Act or other applicable law.
Notwithstanding anything above seeming to the contrary, the Board will not
take any action, without approval of the Members with respect to an
extraordinary matter that would have, or would reasonably be expected to have, a
material effect, directly or indirectly, on the Members' interests in the
Company. The type of extraordinary matter referred to in the prior sentence
which requires approval of the Members shall include, but not be limited to the
following: (i) commencement of any action relating to bankruptcy, insolvency,
reorganization or relief of debtors by the Company, the Partnership or a
material subsidiary of either; (ii) a merger, consolidation, recapitalization or
similar transaction involving the Company, the Partnership or a material
subsidiary of either; (iii) a sale, exchange or other transfer not in the
ordinary course of business of a substantial portion of the assets of the
Company or the Partnership, viewed in each case on a consolidated basis, in one
or a series of related transactions; (iv) to the fullest extent permitted by
law, dissolution or liquidation of the Company or the Partnership; (v) a
material amendment of this Agreement or the Partnership Agreement; and (vi) a
material change in the amount of the quarterly distribution made on the Units of
the Partnership or the payment of a material extraordinary distribution. An
extraordinary matter will be deemed approved by a Member if the Board receives a
written, facsimile or electronic instruction evidencing such approval from the
Member or if a majority of the Directors on the Board affiliated with the Member
approve such matter. To the fullest extent permitted by law, a Director, acting
as such, shall have no duty, responsibility or liability to the Members with
respect to any action by the Board approved as required above by the Members.
SECTION 7.3 ADOPTION OF SECTION 13.4(C) OF THE PARTNERSHIP AGREEMENT.
(a) The Members and the Company hereby adopt as part of the terms of this
Agreement, and agree to be bound by, Section 13.4(c) of the Partnership
Agreement as if such section were set forth in full herein and hereby delegate
to the Limited Partners the right to elect the number of Directors constituting
the Board in accordance with Section 13.4(c) of the Partnership Agreement. Such
delegation shall not cause any Member to cease to be a member
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of the Company and shall not constitute a delegation of any other rights,
powers, privileges or duties of the Members with respect to the Company. A
Director need not be a Member or a Limited Partner.
(b) The Limited Partners shall not be deemed to be Members or holders of
Interests as such terms are defined in this Agreement or to be "members",
"managers" or holders of "limited liability company interests" as such terms are
defined in the Delaware Act. The exercise by a Limited Partner of the right to
elect Directors and any other rights afforded to such Limited Partner hereunder
and under Section 13.4(c) of the Partnership Agreement shall be in such Limited
Partner's capacity as a limited partner of the Partnership, and no Limited
Partner shall be liable for any debts, obligations or liabilities of the Company
by reason of the foregoing.
(c) The Members and the Company agree to use their commercially reasonable
best efforts to take such action as shall be necessary or appropriate to give
effect to and implement the provisions of Section 13.4(c) of the Partnership
Agreement as adopted in this Section 7.3.
(d) Notwithstanding anything to the contrary in this Agreement, including
Section 13.5, the foregoing clauses in this Section 7.3 shall not be amended
except as expressly provided in Section 7.2(b) or upon the requisite approval of
Limited Partners set forth in Section 13.4(c)(x) of the Partnership Agreement.
(e) If the Company delegates to an existing or newly formed wholly-owned
subsidiary the power and authority to manage and control the business and
affairs of the Partnership Group, the foregoing provisions of this Section 7.3
shall be applicable with respect to the board of directors or other governing
body of such Subsidiary and the Members and the Company agree to use their
commercially reasonable best efforts to take such action as shall be necessary
or appropriate to give effect to and implement such provisions with respect to
such subsidiary.
SECTION 7.4 REGULAR MEETINGS.
The Board shall meet at least quarterly, and a regular meeting of the Board
shall be held without notice other than this Section 7.4 at such time and place
as the Board may determine. The Board may, by resolution, provide the time and
place for the holding of additional regular meetings without other notice than
such resolution.
SECTION 7.5 SPECIAL MEETINGS.
A special meeting of the Board may be called at any time at the request of
(a) the Chairman of the Board or (b) a majority of the Directors then in office.
SECTION 7.6 NOTICE.
Written notice of all regular meetings of the Board, except for regular
meetings scheduled by resolution as set forth in Section 7.4, must be given to
all Directors at least 5 days prior to the regular meeting of the Board and one
Business Day prior to any special meeting of the Board. All notices and other
communications to be given to Directors shall be sufficiently given for all
purposes hereunder if in writing and delivered by hand, courier or overnight
delivery service or three days after being mailed by certified or registered
mail, return receipt requested, with appropriate postage prepaid, or when
received in the form of a telegram or facsimile, and shall be directed to the
address or facsimile number as such Director shall designate by notice
-26-
to the Company. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board need be specified in the notice of
such meeting, except for amendments to this Agreement, as provided herein. A
meeting may be held at any time without notice if all the Directors are present
or if those not present waive notice of the meeting either before or after such
meeting.
SECTION 7.7 ACTION BY CONSENT OF BOARD.
To the extent permitted by applicable law, the Board may act without a
meeting, without prior notice and without a vote so long as the number of
Directors who would be required to take such action at a duly held meeting shall
have executed a written consent with respect to any Board action taken in lieu
of a meeting.
SECTION 7.8 CONFERENCE TELEPHONE MEETINGS.
Directors or members of any committee of the Board may participate in a
meeting of the Board or such committee by means of conference telephone
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at such meeting.
SECTION 7.9 VACANCIES; INCREASES IN THE NUMBER OF DIRECTORS.
Unless otherwise provided in this Agreement, vacancies and newly created
directorships resulting from any increase in the authorized number of Directors
may be filled by a majority of the Directors then in office, although less than
a quorum, or a sole remaining Director; and any Director so chosen shall hold
office until the next annual meeting and until his successor shall be duly
elected and shall qualify, unless sooner displaced.
SECTION 7.10 COMMITTEES.
(a) The Board may establish committees of the Board and may delegate
certain of its responsibilities to such committees.
(b) Following the Closing Date, the Board shall have an audit committee
comprised of three Directors, all of whom shall be Independent Directors. Such
audit committee shall establish a written audit committee charter in accordance
with the rules of the National Securities Exchange on which the Units are
traded. "Independent Director" shall mean a Director meeting the independence
and experience requirements as set forth in the rules of the National Securities
Exchange on which the Units are traded.
(c) Following the Closing Date, the Board shall have a conflicts committee
comprised of two or more Directors, all of whom shall be Independent Directors
(the "Conflicts Committee"). Any matter approved by the Conflicts Committee in
the manner provided for in the Partnership Agreement shall be conclusively
deemed to be fair and reasonable to the Partnership, and not a breach by the
Company of the Partnership Agreement or any fiduciary or other duties thereunder
or at law, in equity or otherwise owed to the Partnership by the Company.
(i) Special Approval of the Conflicts Committee shall be required for
the acquisition of any assets or business (including any equity interest in
an entity) by the Partnership or any of its subsidiaries from the Company
or any member of the
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Partnership Group if the purchase price of such assets or business will
exceed 5% of the gross (undepreciated) book value of property, plant and
equipment as reflected on the Partnership's consolidated balance sheet as
of the end of the calendar three-month or annual period next preceding the
date of any such acquisition.
(ii) Special Approval of the Conflicts Committee shall be required for
any action to cause the Company, or for the Company to cause the
Partnership, to (1) make or consent to a general assignment for the benefit
of the Company's or the Partnership's, as applicable, creditors; (2) file
or consent to the filing of any bankruptcy, insolvency or reorganization
petition for relief under the United States Bankruptcy Code naming the
Company or the Partnership, as applicable, as debtor or otherwise institute
bankruptcy or insolvency proceedings by or against the Company or the
Partnership, as applicable, or otherwise seek, with respect to the Company
or the Partnership, as applicable, relief from debts or protection from
creditors generally; (3) file or consent to the filing of a petition or
answer seeking for the Company or the Partnership, as applicable, a
liquidation, dissolution (to the fullest extent permitted by law),
arrangement or similar relief under any law; (4) file an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the Company or the Partnership, as applicable, in a
proceeding of the type described in clauses (1) - (3) of this Section
7.10(c)(ii); (5) seek, consent to or acquiesce in the appointment of a
receiver, liquidator, conservator, assignee, trustee, sequestrator,
custodian or any similar official for the Company or the Partnership, as
applicable, or for all or any substantial portion of its properties; or (6)
dissolve (to the fullest extent permitted by law), liquidate, consolidate,
merge, or sell all or substantially all of the assets of the Company or the
Partnership, as applicable. In acting or otherwise voting on the matters
referred to in this Section 7.10(c)(ii), to the fullest extent permitted by
law, including Section 18-1101(c) of the Delaware Act and Section
17-1101(d) of the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time, the Directors constituting the Conflicts
Committee shall consider only the interest of the Company or the
Partnership, as applicable, including its respective creditors.
(d) Special Approval of the Conflicts Committee shall be required for any
amendment to Section 7.10(c), or this subsection (d), to the definition of
"Independent Director" in Section 7.10(b), and to Section 2.7.
(e) Following the Closing Date, the Board shall have a compensation
committee comprised of those Directors appointed thereto from time to time by
the Board; provided, however, that if no Directors have been so appointed to the
compensation committee, then the entire Board shall serve as the compensation
committee (the "Compensation Committee"). The Compensation Committee shall be
charged with setting compensation for officers of the Company and the
Partnership, as well as administering any employee benefit, incentive or similar
plans put in place by the Company or the Partnership.
(f) A majority of any committee may determine its action and fix the time
and place of its meetings unless the Board shall otherwise provide. Notice of
such meetings shall be given to each member of the committee in the manner
provided for in Section 7.6. The Board shall have power at any time to fill
vacancies in, or to change the membership of, any committee, or to dissolve any
such committee other than the Conflicts Committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not Directors; provided, however, that no
such committee shall have or may exercise any authority of the Board.
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ARTICLE 8
OFFICERS
SECTION 8.1 ELECTED OFFICERS.
The executive officers of the Company shall serve at the pleasure of the
Board. Such officers shall have the authority and duties delegated to each of
them, respectively, by the Board from time to time or hereunder. The elected
officers of the Company shall be a Chairman of the Board, a President, a
Secretary, a Treasurer, and such other officers (including, without limitation,
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents) as the
Board from time to time may deem proper. The Chairman of the Board shall be
chosen from among the Directors. All officers elected by the Board shall each
have such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article 8. The Board or any committee
thereof may from time to time elect such other officers (including one or more
Vice Presidents, Controllers, Assistant Secretaries and Assistant Treasurers) as
may be necessary or desirable for the conduct of the business of the Company.
Such other officers and agents shall have such duties and shall hold their
offices for such terms as shall be provided in this Agreement or as may be
prescribed by the Board or such committee, as the case may be.
SECTION 8.2 ELECTION AND TERM OF OFFICE.
The names and titles of the officers of the Company as of the Closing Date
are set forth on Exhibit B hereto. Thereafter, the Officers of the Company shall
be elected annually by the Board at the first regular meeting of the Board of a
calendar year. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Each officer shall
hold office until such person's successor shall have been duly elected and shall
have qualified or until such person's death or until he shall resign or be
removed pursuant to Section 8.8.
SECTION 8.3 CHAIRMAN OF THE BOARD; CHIEF EXECUTIVE OFFICER.
The Chairman of the Board shall preside at all meetings of the Limited
Partners, the Members and the Board and shall be the Chief Executive Officer of
the Company. The Chairman of the Board shall be responsible for the general
management of the affairs of the Company and shall perform all duties incidental
to such person's office which may be required by law and all such other duties
as are properly required of him by the Board. He shall make reports to the Board
and the Members and shall see that all orders and resolutions of the Board and
of any committee thereof are carried into effect.
SECTION 8.4 PRESIDENT; CHIEF OPERATING OFFICER.
The President shall act as the Chief Operating Officer of the Company and
shall assist the Chairman of the Board in the administration and operation of
the Company's business and general supervision of its policies and affairs.
SECTION 8.5 VICE PRESIDENTS.
Each Executive Vice President and Senior Vice President and any Vice
President shall have such powers and shall perform such duties as shall be
assigned to him by the Board.
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SECTION 8.6 TREASURER.
(a) The Treasurer shall exercise general supervision over the receipt,
custody and disbursement of corporate funds. The Treasurer shall cause the funds
of the Company to be deposited in such banks as may be authorized by the Board,
or in such banks as may be designated as depositories in the manner provided by
resolution of the Board. The Treasurer shall, in general, perform all duties
incident to the office of the Treasurer and shall have such further powers and
duties and shall be subject to such directions as may be granted or imposed from
time to time by the Board.
(b) Assistant Treasurers shall have such of the authority and perform such
of the duties of the Treasurer as may be provided in this Agreement or assigned
to them by the Board or the Treasurer. Assistant Treasurers shall assist the
Treasurer in the performance of the duties assigned to the Treasurer, and in
assisting the Treasurer, each Assistant Treasurer shall for such purpose have
the powers of the Treasurer. During the Treasurer's absence or inability, the
Secretary's authority and duties shall be possessed by such Assistant Treasurer
or Assistant Treasurers as the Board may designate.
SECTION 8.7 SECRETARY.
(a) The Secretary shall keep or cause to be kept, in one or more books
provided for that purpose, the minutes of all meetings of the Board, the
committees of the Board and the Members and of the Limited Partners. The
Secretary shall see that all notices are duly given in accordance with the
provisions of this Agreement and as required by law; shall be custodian of the
records and the seal of the Company and affix and attest the seal to all
documents to be executed on behalf of the Company under its seal; and shall see
that the books, reports, statements, certificates and other documents and
records required by law to be kept and filed are properly kept and filed; and in
general, shall perform all the duties incident to the office of Secretary and
such other duties as from time to time may be assigned to the Secretary by the
Board.
(b) Assistant Secretaries shall have such of the authority and perform such
of the duties of the Secretary as may be provided in this Agreement or assigned
to them by the Board or the Secretary. Assistant Secretaries shall assist the
Secretary in the performance of the duties assigned to the Secretary, and in
assisting the Secretary, each Assistant Secretary shall for such purpose have
the powers of the Secretary. During the Secretary's absence or inability, the
Secretary's authority and duties shall be possessed by such Assistant Secretary
or Assistant Secretaries as the Board may designate.
SECTION 8.8 REMOVAL.
Any officer elected, or agent appointed, by the Board may be removed by the
affirmative vote of a majority of the Board whenever, in their judgment, the
best interests of the Company would be served thereby. No elected officer shall
have any contractual rights against the Company for compensation by virtue of
such election beyond the date of the election of such person's successor, such
person's death, such person's resignation or such person's removal, whichever
event shall first occur, except as otherwise provided in an employment contract
or under an employee deferred compensation plan.
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SECTION 8.9 VACANCIES.
A newly created elected office and a vacancy in any elected office because
of death, resignation or removal may be filled by the Board for the unexpired
portion of the term at any meeting of the Board.
ARTICLE 9
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
SECTION 9.1 INDEMNIFICATION.
(a) To the fullest extent permitted by law as it currently exists and to
such greater extent as applicable law hereafter may permit, but subject to the
limitations expressly provided in this Agreement, the Company shall indemnify
any Person who was or is a party or is threatened to be made a party to, or
otherwise requires representation of counsel in connection with, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that such Person is or was a Director or officer
of the Company, or, while serving as a Director or officer of the Company, is or
was serving as a Tax Matters Member or, at the request of the Company, as a
director, officer, tax matters partner, employee, partner, manager, fiduciary or
trustee of any Group Member or any other Person (each an "Indemnitee") or by
reason of any action alleged to have been taken or omitted in such capacity,
against losses, expenses (including attorneys' fees), judgments, fines, damages,
penalties, interest, liabilities and amounts paid in settlement actually and
reasonably incurred by the Person in connection with such action, suit or
proceeding if the Person acted in good faith and in a manner the Person
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that such Person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the Person did not act in good faith and in a
manner which the Person reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the Person's conduct was
unlawful.
(b) To the fullest extent permitted by law, but subject to the limitations
expressly provided in this Agreement, the Company shall indemnify any Person who
was or is a party or is threatened to be made a party to, or otherwise requires
representation of counsel in connection with, any threatened, pending or
completed action, suit or proceeding, by or in the right of the Company to
procure a judgment in its favor by reason of the fact that such Person was
serving as an Indemnitee, or by reason of any action alleged to have been taken
or omitted in such capacity, against losses, expenses (including attorneys'
fees), judgments, fines, damages, penalties, interest, liabilities and amounts
paid in settlement actually and reasonably incurred by the Person in connection
with such action, suit or proceeding if the Person acted in good faith and in a
manner the Person reasonably believed to be in or not opposed to the best
interests of the Company and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such Person shall have been
adjudged to be liable to the Company unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such Person is fairly and
reasonably entitled to
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indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
(c) To the extent an Indemnitee has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
9.1(a) or Section 9.1(b), or in the defense of any claim, issue or matter
therein, such Person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such Person in connection therewith.
(d) Any indemnification under Section 9.1(a) or Section 9.1(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee is
proper in the circumstances because the Person has met the applicable standard
of conduct set forth in such section. Such determination shall be made, with
respect to a Person who is a Director or officer at the time of such
determination, (i) by a majority vote of the Directors who are not parties to
such action, suit or proceeding, even though less than a quorum, (ii) by a
committee of such Directors designated by majority vote of such Directors, even
though less than a quorum, (iii) if there are no such Directors, or if such
Directors so direct, by independent legal counsel in an Opinion of Counsel, or
(iv) by the Members.
(e) Expenses (including reasonable attorneys' fees) incurred by an
Indemnitee in defending any action, suit or proceeding referred to in Section
9.1(a) or Section 9.1(b) shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding and in advance of any
determination that such Indemnitee is not entitled to be indemnified, upon
receipt of an undertaking by or on behalf of such Indemnitee to repay such
amount if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (a "Final Adjudication") that such
Person is not entitled to be indemnified by the Company as authorized in this
Section 9.1.
(f) The indemnification, advancement of expenses and other provisions of
this Section 9.1 shall be in addition to any other rights to which an Indemnitee
may be entitled under any agreement, pursuant to any vote of the Members, as a
matter of law or otherwise, both as to actions in the Indemnitee's capacity as
an Indemnitee and as to actions in any other capacity (including any capacity
under the Purchase Agreement), and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(g) The Company may purchase and maintain insurance, on behalf of its
Directors and officers, and such other Persons as the Board 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 or such
Person's activities on behalf of the Company, regardless of whether the Company
would have the power to indemnify such Person against such liability under the
provisions of this Agreement.
(h) For purposes of the definition of Indemnitee in Section 9.1(a), the
Company shall be deemed to have requested a Person to serve as fiduciary of an
employee benefit plan whenever the performance by such Person of his duties to
the Company also imposes duties on, or otherwise involves services by, such
Person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an Indemnitee with respect to an employee benefit plan pursuant to
applicable law shall constitute "fines" within the meaning of Section 9.1(a);
and action taken or omitted by such Person with respect to any employee benefit
plan in the
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performance of such Person's duties for a purpose reasonably believed by him to
be in the interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose that is in, or not opposed to, the best interests of
the Company.
(i) Any indemnification pursuant to this Section 9.1 shall be made only out
of the assets of the Company, it being agreed that the Members shall not be
personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Company to enable it to
effectuate such indemnification.
(j) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 9.1 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.
(k) If a claim under Section 9.1 of this Agreement is not paid in full by
the Company within 60 days after a written claim has been received by the
Company, except in the case of a claim for an advancement of expenses, in which
case the applicable period shall be 20 days, the Indemnitee may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit, or in a suit brought
by the Company to recover an advancement of expenses pursuant to the terms of an
undertaking, the Indemnitee shall be entitled to be paid also the reasonable
expenses of prosecuting or defending such suit. In (i) any suit brought by the
Indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the Indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Company to recover
an advancement of expenses pursuant to the terms of an undertaking, the Company
shall be entitled to recover such expenses upon a Final Adjudication that, the
Indemnitee has not met any applicable standard for indemnification set forth in
this Agreement. Neither the failure of the Company (including its Directors who
are not parties to such action, a committee of such Directors, independent legal
counsel, or its Members) to have made a determination prior to the commencement
of such suit that indemnification of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standard of conduct
set forth in this Agreement, nor an actual determination by the Company
(including its Directors who are not parties to such action, a committee of such
Directors, independent legal counsel, or its Members) that the Indemnitee has
not met the applicable standard of conduct shall create a presumption that the
Indemnitee has not met the applicable standard of conduct, or, in the case of
such a suit brought by the Indemnitee, be a defense to such suit. In any suit
brought by the Indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Company to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the Indemnitee is not entitled to be indemnified or to such
advancement of expenses, under this Section 9.1 or otherwise shall be on the
Company.
(l) The Company may indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(whether or not an action by or in the right of the Company) by reason of the
fact that the Person is or was an employee (other than an officer) or agent of
the Company, or, while serving as an employee (other than an officer) or agent
of the Company is or was serving at the request of the Company as a director,
officer, employee, partner, fiduciary, trustee or agent of another Group Member
or another Person to the extent (i) permitted by the laws of the State of
Delaware as from time to time in effect, and (ii) authorized by the Board. The
Company may, to the extent permitted by Delaware law and
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authorized by the Board, pay expenses (including attorneys' fees) reasonably
incurred by any such employee or agent in defending any civil, criminal,
administrative or investigative action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding, upon such terms and
conditions as the Board determine. The provisions of this Section 9.1(l) shall
not constitute a contract right for any such employee or agent.
(m) The indemnification, advancement of expenses and other provisions of
this Section 9.1 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 Persons.
(n) Except to the extent otherwise provided in Section 9.1(l), the right to
be indemnified and to receive advancement of expenses in this Section 9.1 shall
be a contract right. No amendment, modification or repeal of this Section 9.1 or
any provision hereof shall in any manner terminate, reduce or impair the right
of any past, present or future Indemnitee to be indemnified by the Company, nor
the obligations of the Company to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 9.1 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 asserted.
SECTION 9.2 EXCULPATION OF LIABILITY OF INDEMNITEES.
(a) Notwithstanding anything to the contrary set forth in this Agreement,
no Director shall be liable to the Company or the Members for monetary damages
for breach of fiduciary duty as a Director, except
(A) for a breach of the Director's duty of loyalty to the Company or
the Members;
(B) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or
(C) for any transaction from which the Director derived an improper
personal benefit.
If the DGCL is amended after the date of this Agreement to authorize
Delaware corporations to further eliminate or limit the personal liability of
directors of Delaware corporations beyond that permitted under current Section
102(b)(7) of the DGCL, then the liability of a Director to the Company or the
Members, in addition to the personal liability limitation provided herein, shall
be further limited to the fullest extent permitted for directors of a Delaware
corporation under the DGCL as so amended, to the extent permitted by the
Delaware Act.
(b) Subject to its obligations and duties as Board set forth in this
Article 9, the Board may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the Board shall not be responsible for
any misconduct or negligence on the part of any such agent appointed by the
Board in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Company or
to the Members, the Directors
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and any other Indemnitee acting in connection with the Company's business or
affairs shall not be liable to the Company or to any Member for its good faith
reliance on the provisions of this Agreement. The provisions of this Agreement,
to the extent that they restrict or eliminate or otherwise modify the duties
(including fiduciary duties) and liabilities of an Indemnitee otherwise existing
at law or in equity, are agreed by the Members to replace such other duties and
liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 9.2 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability of any Indemnitee under this Section 9.2 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 asserted.
SECTION 9.3 RESOLUTION OF CONFLICTS OF INTEREST; STANDARDS OF CONDUCT
AND MODIFICATION OF DUTIES.
(a) Unless otherwise expressly provided in this Agreement or any Group
Member Agreement, whenever a potential conflict of interest exists or arises
between one or more Directors or their respective Affiliates, on the one hand,
and the Company or any Group Member, on the other, any resolution or course of
action by the Board or its Affiliates in respect of such conflict of interest
shall be permitted and, to the fullest extent permitted by law, deemed approved
by all Members, and shall not constitute a breach of this Agreement, of any
Group Member Agreement, of any agreement contemplated herein or therein, or of
any duty stated or implied by law or equity, including any fiduciary duty, if
the resolution or course of action in respect of such conflict of interest is
(i) approved by Special Approval, (ii) approved by the vote of a majority of the
Interests held by disinterested parties, (iii) on terms no less favorable to the
Company than those generally being provided to or available from unrelated third
parties or (iv) fair and reasonable 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 Board shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution, and
the Board may also adopt a resolution or course of action that has not received
Special Approval. If Special Approval is not sought and the Board determines
that the resolution or course of action taken with respect to a conflict of
interest is on terms no less favorable to the Company than those generally being
provided to or available from unrelated third parties or that the resolution or
course of action taken with respect to a conflict of interest is fair and
reasonable to the Company, then such resolution or course of action shall be
permitted and, to the fullest extent permitted by law, deemed approved by all
the Members, and shall not constitute a breach of this Agreement, of any Group
Member Agreement, of any agreement contemplated herein or therein, or of any
duty stated or implied by law or equity, including any fiduciary duty. In
connection with any such approval by the Board, it shall be presumed that, in
making its decision, the Board acted in good faith, and in any proceeding
brought by any Member or by or on behalf of such Member or any other Member or
the Company challenging such approval, the Person bringing or prosecuting such
proceeding shall have the burden of overcoming such presumption.
(b) The Members hereby authorize the Board, on behalf of the Company as a
partner of a Group Member, to approve of actions by the Board of such Group
Member similar to those actions permitted to be taken by the Board pursuant to
this Section 9.3.
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SECTION 9.4 DUTIES OF OFFICERS AND DIRECTORS.
(a) Except as otherwise expressly provided in Section 7.10(c), Section 9.1,
Section 9.2 or Section 9.3 or elsewhere in this Agreement, the duties and
obligations owed to the Company and to the Members by the officers and
Directors, shall be the same as the respective duties and obligations owed to a
corporation organized under DGCL by its officers and directors, respectively.
(b) A Director shall, in the performance of his duties, be fully protected
in relying in good faith upon the records of the Company and on such
information, opinions, reports or statements presented to the Company by any of
the Company's officers or employees, or committees of the Board, or by any other
Person as to matters the Director reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company.
(c) The Board shall have the right, in respect of any of its powers or
obligations hereunder, to act through a duly appointed attorney or
attorneys-in-fact or the duly authorized Officers of the Company.
SECTION 9.5 RELIANCE BY THIRD PARTIES.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Company shall be entitled to assume that the Board and any
officer authorized by the Board 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 authorized
contracts on behalf of the Company, and such Person shall be entitled to deal
with the Board or any officer as if it were the Company's sole party in
interest, both legally and beneficially. Each Member hereby waives, to the
fullest extent permitted by law, any and all defenses or other remedies that may
be available against such Person to contest, negate or disaffirm any action of
the Board or any officer in connection with any such dealing. In no event shall
any Person dealing with the Board or any officer or its representatives 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 Board
or any officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Company by the Board or any officer
or its representatives 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 was 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.
ARTICLE 10
TAXES
SECTION 10.1 TAX RETURNS.
The Tax Matters Member of the Company shall prepare and timely file (on
behalf of the Company) all federal, state and local tax returns required to be
filed by the Company. Each Member shall furnish to the Company all pertinent
information in its possession relating to the
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Company's operations that is necessary to enable the Company's tax returns to be
timely prepared and filed. The Company shall bear the costs of the preparation
and filing of its returns.
SECTION 10.2 TAX ELECTIONS.
(a) The Company shall make the following elections on the appropriate tax
returns:
(i) to adopt as the Company's fiscal year the calendar year;
(ii) to adopt the accrual method of accounting;
(iii) if a distribution of the Company's property as described in
Section 734 of the Code occurs or upon a transfer of an Interest as
described in Section 743 of the Code occurs, on request by notice from any
Member, to elect, pursuant to Section 754 of the Code, to adjust the basis
of the Company's properties;
(iv) to elect to amortize or deduct the organizational expenses of the
Company as permitted by Section 709(b) of the Code; and
(v) any other election the Board may deem appropriate.
(b) Neither the Company nor any Member shall make an election for the
Company to be excluded from the application of the provisions of subchapter K of
chapter 1 of subtitle A of the Code or any similar provisions of applicable
state law and no provision of this Agreement (including Section 2.6) shall be
construed to sanction or approve such an election.
SECTION 10.3 TAX MATTERS MEMBER.
(a) The Board shall select the President or the Chief Financial Officer
(or, if there are no officers serving under such titles, such other officer in a
comparable position), of the Company to act as the "tax matters partner" of the
Company pursuant to Section 6231(a)(7) of the Code (the "Tax Matters Member").
The Tax Matters Member shall take such action as may be necessary to cause to
the extent possible each Member to become a "notice partner" within the meaning
of Section 6223 of the Code. The Tax Matters Member shall inform each Member of
all significant matters that may come to its attention in its capacity as Tax
Matters Member by giving notice thereof on or before the fifth Business Day
after becoming aware thereof and, within that time, shall forward to each Member
copies of all significant written communications it may receive in that
capacity.
(b) The Tax Matters Member shall take no action without the authorization
of the Board, other than such action as may be required by applicable law. Any
cost or expense incurred by the Tax Matters Member in connection with its
duties, including the preparation for or pursuance of administrative or judicial
proceedings, shall be paid by the Company.
(c) The Tax Matters Member shall not enter into any extension of the period
of limitations for making assessments on behalf of the Members without first
obtaining the consent of the Board. The Tax Matters Member shall not bind any
Member to a settlement agreement without obtaining the consent of such Member.
Any Member that enters into a settlement agreement with respect to any Company
item (as described in Section 6231(a)(3) of the Code) shall notify the other
Members of such settlement agreement and its terms within 90 days from the date
of the settlement.
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(d) No Member shall file a request pursuant to Section 6227 of the Code for
an administrative adjustment of Company items for any taxable year without first
notifying the other Members. If the Board consents to the requested adjustment,
the Tax Matters Member shall file the request for the administrative adjustment
on behalf of the Members. If such consent is not obtained within 30 days from
such notice, or within the period required to timely file the request for
administrative adjustment, if shorter, any Member may file a request for
administrative adjustment on its own behalf. Any Member intending to file a
petition under Sections 6226, 6228 or other Section of the Code with respect to
any item involving the Company shall notify the other Members of such intention
and the nature of the contemplated proceeding. In the case where the Tax Matters
Member is intending to file such petition on behalf of the Company, such notice
shall be given within a reasonable period of time to allow the Members to
participate in the choosing of the forum in which such petition will be filed.
(e) If any Member intends to file a notice of inconsistent treatment under
Section 6222(b) of the Code, such Member shall give reasonable notice under the
circumstances to the other Members of such intent and the manner in which the
Member's intended treatment of an item is (or may be) inconsistent with the
treatment of that item by the other Members.
ARTICLE 11
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
SECTION 11.1 MAINTENANCE OF BOOKS.
(a) The Board shall cause to be kept a record containing the minutes of the
proceedings of the meetings of the Board and of the Members and of the Limited
Partners, appropriate registers and such books of records and accounts as may be
necessary for the proper conduct of the business of the Company.
(b) The books of account of the Company shall be (i) maintained on the
basis of a fiscal year that is the calendar year, (ii) maintained on an accrual
basis in accordance with GAAP, consistently applied and (iii) audited by the
certified public accountants of the Company at the end of each calendar year.
SECTION 11.2 REPORTS.
With respect to each calendar year, the Board shall prepare, or cause to be
prepared, and deliver, or cause to be delivered, to each Member:
(a) Within 120 days after the end of such calendar year, a profit and loss
statement and a statement of cash flows for such year, a balance sheet and a
statement of each Member's Capital Account as of the end of such year, together
with a report thereon of the certified public accountants of the Company; and
(b) Such federal, state and local income tax returns and such other
accounting, tax information and schedules as shall be necessary for the
preparation by each Member on or before June 15 following the end of each
calendar year of its income tax return with respect to such year.
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SECTION 11.3 BANK ACCOUNTS.
Funds of the Company shall be deposited in such banks or other depositories
as shall be designated from time to time by the Board. All withdrawals from any
such depository shall be made only as authorized by the Board and shall be made
only by check, wire transfer, debit memorandum or other written instruction.
ARTICLE 12
DISSOLUTION, WINDING-UP, TERMINATION AND CONVERSION
SECTION 12.1 DISSOLUTION.
(a) The Company shall dissolve and its affairs shall be wound up on the
first to occur of the following events (each a "Dissolution Event"):
(i) the unanimous consent of the Members; or
(ii) entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Delaware Act; or
(iii) at any time there are no Members of the Company, unless the
Company is continued in accordance with the Delaware Act or this Agreement.
(b) No other event shall cause a dissolution of the Company.
(c) Upon the occurrence of any event that causes there to be no Members of
the Company, to the fullest extent permitted by law, the personal representative
of the last remaining Member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such Member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute Member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such Member
in the Company.
(d) Notwithstanding any other provision of this Agreement, the Bankruptcy
of a Member shall not cause such Member to cease to be a member of the Company
and, upon the occurrence of such an event, the Company shall continue without
dissolution.
SECTION 12.2 WINDING-UP AND TERMINATION.
(a) On the occurrence of a Dissolution Event, the Board shall act as
liquidator. The liquidator shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Delaware
Act. The costs of winding up shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties
with all of the power and authority of the Members. The steps to be accomplished
by the liquidator are as follows:
(i) as promptly as possible after dissolution and again after final
winding up, the liquidator shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through
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the last Day of the month in which the dissolution occurs or the final
winding up is completed, as applicable;
(ii) the liquidator shall discharge from Company funds all of the
debts, liabilities and obligations of the Company (including all expenses
incurred in winding up or otherwise make adequate provision for payment and
discharge thereof (including the establishment of a cash escrow fund for
contingent, conditional and unmatured liabilities in such amount and for
such term as the liquidator may reasonably determine)); and
(iii) all remaining assets of the Company shall be distributed to the
Members as follows:
(A) the liquidator may sell any or all Company property,
including to Members, and any resulting gain or loss from each
sale shall be computed and allocated to the Capital Accounts of
the Members in accordance with the provisions of Article 6;
(B) with respect to all Company property that has not been
sold, the fair market value of that property shall be determined
and the Capital Accounts of the Members shall be adjusted to
reflect the manner in which the unrealized income, gain, loss,
and deduction inherent in property that has not been reflected in
the Capital Accounts previously would be allocated among the
Members if there were a taxable disposition of that property for
the fair market value of that property on the date of
distribution; and
(C) Company property (including cash) shall be distributed
among the Members in accordance with Section 6.4; and, to the
extent practicable, those distributions shall be made by the end
of the taxable year of the Company during which the liquidation
of the Company occurs (or, if later, 90 days after the date of
the liquidation).
(b) The distribution of cash or property to a Member in accordance with the
provisions of this Section 12.2 constitutes a complete return to the Member of
its Capital Contributions and a complete distribution to the Member of its
Interest and all the Company's property and constitutes a compromise to which
all Members have consented pursuant to Section 18-502(b) of the Delaware Act. To
the extent that a Member returns funds to the Company, it has no claim against
any other Member for those funds.
SECTION 12.3 DEFICIT CAPITAL ACCOUNTS.
No Member will be required to pay to the Company, to any other Member or to
any third party any deficit balance that may exist from time to time in the
Member's Capital Account.
SECTION 12.4 CERTIFICATE OF CANCELLATION.
On completion of the distribution of Company assets as provided herein, the
Members (or such other Person or Persons as the Delaware Act may require or
permit) shall file a certificate of cancellation with the Secretary of State of
Delaware, cancel any other filings made pursuant to Section 2.5, and take such
other actions as may be necessary to terminate the existence of the Company.
Upon the filing of such certificate of cancellation, the existence of
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the Company shall terminate, except as may be otherwise provided by the Delaware
Act or by applicable law.
ARTICLE 13
GENERAL PROVISIONS
SECTION 13.1 OFFSET.
Whenever the Company is to pay any sum to any Member, any amounts that
Member owes the Company may be deducted from that sum before payment.
SECTION 13.2 NOTICES.
Except as otherwise provided herein, all notices, demands, requests,
consents, approvals or other communications (collectively, "Notices") required
or permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served, delivered by
reputable air courier service with charges prepaid, or transmitted by hand
delivery, telegram, telex or facsimile, addressed as set forth below, or to such
other address as such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given upon delivery of such
notice:
To the Company:
Legacy Reserves GP, LLC
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: President
Telephone: (000) 000-0000
Fax: (000) 000-0000
SECTION 13.3 ENTIRE AGREEMENT; SUPERSEDING EFFECT.
This Agreement constitutes the entire agreement of the Members relating to
the Company and the transactions contemplated hereby, and supersedes all
provisions and concepts contained in all prior contracts or agreements between
the Members with respect to the Company, whether oral or written.
SECTION 13.4 EFFECT OF WAIVER OR CONSENT.
Except as otherwise provided in this Agreement, a waiver or consent,
express or implied, to or of any breach or default by any Member in the
performance by that Member of its obligations with respect to the Company is not
a consent or waiver to or of any other breach or default in the performance by
that Member of the same or any other obligations of that Member with respect to
the Company. Except as otherwise provided in this Agreement, failure on the part
of a Member to complain of any act of any Member or to declare any Member in
default with respect to the Company, irrespective of how long that failure
continues, does not constitute a waiver by that Member of its rights with
respect to that default until the applicable statute-of-limitations period has
run.
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SECTION 13.5 AMENDMENT OR RESTATEMENT.
Subject to the provisions hereof, this Agreement or the Certificate may be
amended or restated only by a written instrument executed (or, in the case of
the Certificate, approved) by the Members; provided, however, that, subject to
the provisions of Section 7.2(d) and Section 7.10(d), any amendment to the
provisions of Article 7 shall be approved by the Board; provided further, that,
Section 7.1 may be amended or restated only by approval of the Board and the
Members.
SECTION 13.6 BINDING EFFECT.
Subject to the restrictions on Dispositions set forth in this Agreement,
this Agreement is binding on and shall inure to the benefit of the Members and
their respective successors and permitted assigns.
SECTION 13.7 GOVERNING LAW; SEVERABILITY.
THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE
THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW
OF ANOTHER JURISDICTION. In the event of a direct conflict between the
provisions of this Agreement and any mandatory, non-waivable provision of the
Delaware Act, such provision of the Delaware Act shall control. If any provision
of the Delaware Act may be varied or superseded in a limited liability company
agreement (or otherwise by agreement of the members or managers of a limited
liability company), such provision shall be deemed superseded and waived in its
entirety if this Agreement contains a provision addressing the same issue or
subject matter. If any provision of this Agreement or the application thereof to
any Member or circumstance is held invalid or unenforceable to any extent, (a)
the remainder of this Agreement and the application of that provision to other
Members or circumstances is not affected thereby, and (b) the Members shall
negotiate in good faith to replace that provision with a new provision that is
valid and enforceable and that puts the Members in substantially the same
economic, business and legal position as they would have been in if the original
provision had been valid and enforceable.
SECTION 13.8 FURTHER ASSURANCES.
In connection with this Agreement and the transactions contemplated hereby,
each Member shall execute and deliver any additional documents and instruments
and perform any additional acts that may be necessary or appropriate to
effectuate and perform the provisions of this Agreement and those transactions.
SECTION 13.9 WAIVER OF CERTAIN RIGHTS.
Each Member irrevocably waives, to the fullest extent permitted by law, any
right it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
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SECTION 13.10 COUNTERPARTS.
This Agreement may be executed in any number of counterparts with the same
effect as if all signing parties had signed the same document. All counterparts
shall be construed together and constitute the same instrument.
SECTION 13.11 JURISDICTION.
Any and all claims arising out of, in connection with or in relation to (i)
the interpretation, performance or breach of this Agreement, or (ii) any
relationship before, at the time of entering into, during the term of, or upon
or after expiration or termination of this Agreement, between the parties
hereto, shall be brought in any court of competent jurisdiction in the State of
Delaware. Each party hereto unconditionally and irrevocably consents to the
jurisdiction of any such court over any claims and waives any objection that
such party may have to the laying of venue of any claims in any such court.
ARTICLE 14
MEMBER MEETINGS
SECTION 14.1 MEETINGS OF THE MEMBERS.
(a) Place of Meetings. All meetings of the Members shall be held at the
principal office of the Company, or at such other place within or without the
State of Delaware as shall be specified or fixed in the notices (or waivers of
notice) thereof.
(b) Quorum; Required Vote for Member Action; Adjournment of Meetings.
(i) Except as expressly provided otherwise by this Agreement, all
Members, present in person or telephonically or represented by proxy, shall
constitute a quorum at any such meeting for the transaction of business,
and the affirmative vote of all of the Members shall constitute the act of
the Members.
(ii) Notwithstanding any other provision in this Agreement to the
contrary, the chairman of the meeting of Members, present in person or
telephonically or represented by proxy and entitled to vote thereat, shall
have the power to adjourn such meeting from time to time, without any
notice other than announcement at the meeting of the time and place of the
holding of the adjourned meeting. If the adjournment is for more than
thirty days, or if subsequent to the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given
to each Member of record entitled to vote at such meeting. At such
adjourned meeting at which a quorum shall be present or represented by
proxy, any business may be transacted which might have been transacted at
the meeting as originally called.
(c) Annual Meetings. Subject to Section 7.3, an annual meeting of the
Members for the election of Directors to succeed those Directors serving on the
Board whose terms expire and for the transaction of such other business as may
properly be considered at the meeting, shall be held at such place, within or
without the State of Delaware, on such date, and at such time as the Board shall
fix and set forth in the notice of the meeting, which date shall be within
thirteen (13) months subsequent to the later of the date of formation of the
Company or the most recent annual meeting of Members. If the Board has not fixed
a place for the holding of
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the annual meeting of Members in accordance with this Section 14.1(c), such
annual meeting shall be held at the principal place of business of the Company.
(d) Special Meetings.
(i) Special meetings of the Members for any proper purpose or purposes
may be called at any time by the Chairman of the Board (if any), the Board,
the President or a Member with a Percentage Interest of at least 10%.
(ii) If not otherwise stated in or fixed in accordance with the
remaining provisions hereof, the record date for determining Members
entitled to call a special meeting shall be the date any Member first signs
the notice of that meeting. Only business within the proper purpose or
purposes described in the notice (or waiver thereof) required by this
Agreement may be conducted at a special meeting of the Members.
SECTION 14.2 ADDITIONAL PROVISIONS APPLICABLE TO MEETINGS OF MEMBERS.
In connection with any meeting of the Members, the following provisions
shall apply:
(a) Waiver of Notice Through Attendance. Attendance of a person at such
meeting (including pursuant to Section 14.2(d)) shall constitute a waiver of
notice of such meeting, except where such person attends 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.
(b) Proxies. A person may vote at such meeting by a written proxy executed
by that person and delivered to another Member or to the Secretary. A proxy
shall be revocable unless it is stated to be irrevocable.
(c) Action by Written Consent. Any action required or permitted to be taken
at such a meeting may be taken without a meeting, without a vote and without
prior notice if a consent or consents in writing, setting forth the action so
taken, is signed by the Members having not fewer than the minimum number of
votes that would be necessary to take the action at a meeting at which all
Members entitled to vote on the action were present and voted.
(d) Meetings by Telephone. The Members may participate in and hold meetings
by means of conference telephone, video conference or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
[Signature pages follow]
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IN WITNESS WHEREOF, the Members have executed and delivered this Agreement
effective as of the date first written above.
MEMBERS:
BROTHERS PRODUCTION PROPERTIES, LTD
By: Brothers Production Company
its general partner
By: /s/ Xxxx X. XxXxxx
------------------------------------
Xxxx X. XxXxxx, President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
BROTHERS PRODUCTION COMPANY, INC.
By: /s/ Xxxx X. XxXxxx
------------------------------------
Xxxx X. XxXxxx, President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
BROTHERS OPERATING COMPANY, INC.
By: /s/ Xxxx X. XxXxxx
------------------------------------
Xxxx X. XxXxxx, President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
J&W MCGRAW PROPERTIES, LTD.
BY: Brothers Production Company, Inc.
its general partner
By: /s/ Xxxx X. XxXxxx
------------------------------------
Xxxx X. XxXxxx, President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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MORIAH PROPERTIES, LTD.
By: Moriah Resources, Inc.
its general partner
By: /s/ Xxxx Xxxxx
------------------------------------
Xxxx Xxxxx, Vice President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
DAB RESOURCES, LTD.
BY: DAB 1999 Corp.
its general partner
By: /s/ Xxxx X. Xxxxx
------------------------------------
Xxxx X. Xxxxx, President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
H2K HOLDINGS, LTD.
BY: H2K Management, L.L.C.
its general partner
By: /s/ Xxxx X. Xxxxx
------------------------------------
Xxxx X. Xxxxx, President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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MBN PROPERTIES LP
By: MBN Management, LLC,
its general partner
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx, President
Address for Notice:
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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EXHIBIT A
CAPITAL CONTRIBUTION
MEMBER PERCENTAGE INTEREST INITIAL CAPITAL CONTRIBUTION
------ ------------------- ----------------------------
Moriah Properties, Ltd. 44.5% $1,005,385
DAB Resources, Ltd. 4.0% $ 90,372
Brothers Production Properties, Ltd. 22.5% $ 508,341
Brothers Production Company, Inc. 1.2% $ 27,112
Brothers Operating Company, Inc. 0.2% $ 4,518
J&W McGraw Properties, Ltd. 4.1% $ 92,631
MBN Properties LP 23.1% $ 521,896
H2K Holdings, Ltd. 0.4% $ 9,037
EXHIBIT B
OFFICERS
Officer Title
------- -----
Xxxx X. Xxxxx Chairman and Chief Executive Officer
Xxxxxx X. Xxxxxx President, Chief Financial Officer and Secretary
Xxxx X. XxXxxx Executive Vice President- Business Development and Land
Xxxx X. Xxxxx Vice President-Operations
Xxxxxxx X. Xxxxxx Controller
SCHEDULE I
INITIAL DIRECTORS
Xxxx X. Xxxxx
Xxxx X. Xxxxx
Xxxx X. XxXxxx
S. Xxx XxxXxx, Xx.
