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OPERATING AGREEMENT OF
EVERFLOW MANAGEMENT LIMITED, LLC
AN OHIO LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT (the "Agreement") is made and entered
into effective as of the 8th day of March, 1999, by and among Everflow
Management Corporation, an Ohio corporation ("EMC"), Xxxxxx X. Xxxxxx, an
individual ("Korner"), Xxxxx X. Xxxxx, an individual ("Matak"), Xxxxxxx X.
Xxxxxxxx, an individual ("Siskovic"), and Xxxxx Associates, a New York limited
partnership ("Xxxxx") (EMC, Korner, Matak, Siskovic and Xxxxx are collectively
referred to herein as the "Members").
RECITALS
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WHEREAS, the Members have organized Everflow Management
Limited, LLC, an Ohio limited liability company (the "Company"), to engage in
any lawful acts or activities for which limited liability companies can be
formed under the laws of the State of Ohio;
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Certain capitalized words and phrases used in
this Agreement shall have the meanings set forth on EXHIBIT 1 attached hereto
and incorporated herein by reference.
ARTICLE II
ORGANIZATION OF THE COMPANY
2.1 ORGANIZATION. On March 8, 1999, the Company was organized
upon the execution and delivery of Articles of Organization to the Secretary of
State of Ohio in accordance with and pursuant to the Ohio Act.
2.2 NAME. The name of the Company is Everflow Management
Limited, LLC.
2.3 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall be located at 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxx
00000 or at such other location as shall be determined from time to time by the
Manager.
2.4 STATUTORY AGENT. The name and address of the agent for
service of process in Ohio shall be Xxxxxxx X. Xxxxxxxx, 000 Xxxx Xxxx Xxxxxx,
Xxxxxxxx, XX 00000.
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2.5 TERM. The term of the Company shall commence on the date
of filing of the Articles of Organization with the Secretary of State of Ohio
and shall continue until terminated in accordance with the terms of this
Agreement.
ARTICLE III
PURPOSES OF THE COMPANY
The purpose for which the Company is organized and the powers
which it may exercise, all being in furtherance of and not in limitation of the
general powers conferred upon limited liability companies by the laws of the
State of Ohio, are to act as the general partner of Everflow Eastern Partners,
L.P., a Delaware limited partnership ("Everflow"), and manage the business and
affairs of Everflow; and to take all such actions which may be necessary,
appropriate or incidental thereto as the Manager may determine from time to
time. The Company shall have the power and authority to incur indebtedness, to
invest Company funds and to enter into joint ventures, partnerships and other
business arrangements to achieve the purposes of the Company, and shall have all
other rights and powers not expressly prohibited to limited liability companies
under the laws of the State of Ohio.
ARTICLE IV
NAMES AND ADDRESSES OF MEMBERS
The names and addresses of the Members are as set forth on
SCHEDULE A attached to this Agreement and incorporated herein by reference.
ARTICLE V
MANAGEMENT OF THE COMPANY
5.1 MANAGER. Everflow Management Corporation, an Ohio
corporation, is the initial Manager of the Company (the "Manager").
5.2 AUTHORITY OF THE MANAGER. Except as specifically reserved
to the Members in Section 6.7 or elsewhere in this Agreement, the Manager shall
have all power and authority to manage, and direct the management of, the
business and affairs of the Company. Any action taken by the Manager shall
constitute the act of and serve to bind the Company. In dealing with the Manager
acting on behalf of the Company, no person shall be required to inquire into the
authority of the Manager to bind the Company. Persons dealing with the Company
are entitled to rely conclusively on the power and authority of the Manager as
set forth in this Agreement.
5.3 POWERS OF THE MANAGER. Subject to the limitation imposed
by the Ohio Act and this Agreement, the Manager shall exercise all powers
necessary or convenient for the management and operation of the Company and
shall use its best efforts to further the interests of the Company.
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5.4 RESTRICTIONS ON AUTHORITY. With respect to the Company and
its property, the Manager shall have no authority to perform any act in
violation of the Ohio Act or any other applicable laws or regulations
thereunder, nor shall the Manager have any authority, except as expressly
provided in this Agreement, to:
(a) withdraw as the general partner of Everflow;
(b) take any action which could result in the
dissolution of Everflow;
(c) do any act in contravention of limited
partnership agreement of Everflow;
(d) do any act in contravention of this
Agreement;
(e) do any act which would make it impossible to
carry on the ordinary business of the
Company;
(f) possess Company property or assign the right
of the Company in specific Company property
for other than a Company purpose;
(g) guarantee in the name or on behalf of the
Company the payment of money or the
performance of any contract or other
obligation of any person; and
(h) without having received the prior written
consent of a Majority-in-Interest of the
Members, assign Company property in trust
for creditors or on the assignee's promise
to pay the debts of the Company, consent to
a judgment against the Company or submit a
Company claim or liability to arbitration.
5.5 STANDARD OF CARE. At all times the Manager will have a
fiduciary relationship to the Company and to each Member. In performing its
duties under this Agreement, the Manager shall act in good faith and on a fair
dealing basis with the Company and each of the Members.
5.6 TIME DEVOTED. The Manger shall devote such time to the
business of the Company as, in the Manager's sole discretion, the Manager deems
to be necessary to conduct the Company's affairs properly.
5.7 COMPENSATION. The Manager shall not be entitled to receive
any compensation for its services pursuant to this Agreement. The Company shall
reimburse the Manager for any expenses it incurs in connection with the business
and affairs of the Company and shall cause Everflow to reimburse the Manager for
any expenses it incurs in connection with the business and affairs of Everflow.
5.8 TERMINATION OF MANAGER. The Members may terminate all
management powers, duties and responsibilities of the Manager by a vote of the
Members owning seventy-one percent (71%) or more of the aggregate Percentage
Interests. In the event the Members
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terminate and replace the Manager in accordance with the foregoing provision,
such Members owning such Percentage Interests shall have the right to elect and
name a replacement to the Manager who shall become the successor Manager and be
entitled to all powers, duties and responsibilities of the Manager as set forth
in this Agreement.
ARTICLE VI
RIGHTS AND POWERS OF THE MEMBERS
6.1 NO COMMITMENTS. In dealing with third parties with respect
to the Company's business or on behalf of the Company, the Members shall act in
accordance with the policies established by the Manager or by consent of the
Majority-in-Interest of the Members. No Member shall, in the name of or on
behalf of the Company, sign or execute any contract, instrument or document,
perform any other act, engage in any transaction, commit or bind the Company to
any act, contract, instrument or document, or incur any debt, except as
expressly permitted by this Agreement or with the written concurrence of a
Majority-in-Interest of the Members or the Manager.
6.2 NEW MEMBERS. Notwithstanding anything to the contrary
contained in this Agreement, no person shall be admitted as an additional Member
or Substituted Member of the Company without the prior written consent of all of
the Members.
6.3 MEETINGS OF THE MEMBERS. Any Member may call a meeting of
the Members upon fifteen (15) days notice in writing (which may be facsimile),
which notice shall specify the date, time and purpose or purposes of the
meeting. Meetings of the Members shall be held at the Company's principal
executive offices, unless a Majority-in-Interest of the Members agree to meet at
another location. Members may be present at any meeting of the Members by
telephone, provided that each Member can hear all other present Members. A
Majority-in-Interest of the Members shall constitute a quorum of the Members for
the transaction of business at any meeting.
6.4 DECISIONS OF THE MEMBERS. Except as expressly provided
otherwise herein, decisions of the Members shall be made by a
Majority-in-Interest of the Members.
6.5 ACTIONS OF THE MEMBERS WITHOUT A MEETING. Any action which
may be taken by the Members at a meeting may be taken by written action without
a meeting signed by all of the Members, provided that the writing setting forth
such action shall be kept with the minutes of the meetings of the Members.
6.6 WAIVER OF NOTICE. Notice of any meeting of the Members may
be waived by a Member by a waiver of the notice in writing, signed by the Member
entitled to the notice, whether before, at or after the time stated for the
meeting. Attendance of a Member at any meeting, whether in person, by proxy or
by telephone as provided above, shall constitute waiver of notice of such
meeting. Any waiver of notice of a meeting by a Member hereunder shall be
equivalent to the giving of such notice.
6.7 RIGHTS OF THE MEMBERS. Each Member shall be entitled to
(i) have the Company books kept at the principal place of business of the
Company, and at all times, during
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reasonable business hours, inspect and copy any of them; (ii) have a list of all
the Members kept at the principal place of business of the Company, and at all
times, during reasonable business hours, inspect and copy such list; (iii) have
on demand true and full information of all matters affecting the Company and a
formal account of Company affairs whenever circumstances render it just and
reasonable; (iv) have dissolution and winding up of the Company as provided by
this Agreement; and (v) have such additional rights as are elsewhere provided in
this Agreement.
Notwithstanding anything to the contrary elsewhere in
this Agreement, the Manager shall not have the right to undertake any of the
following actions without the prior written approval of Members owning at least
seventy-one percent (71%) of the aggregate Percentage Interests:
(a) admit a person or persons as Members;
(b) withdraw as general partner of Everflow;
(c) take any action which could result in the
dissolution of Eveflow;
(d) propose any amendment to the partnership
agreement of Everflow;
(e) vote its interest as a general partner of
Everflow on any matter put to a vote of the
limited partners of Everflow; and
(f) effect a dissolution of the Company.
6.8 LIMITATIONS ON THE RIGHTS OF MEMBERS. No Member shall have
the right:
(a) to have his capital contribution repaid
except to the extent provided in this
Agreement, to demand property other than
cash in payment of his capital contribution
or to receive interest on his capital
contribution;
(b) to require partition of Company property or
to compel any sale or appraisement of
Company assets or sale of a deceased
Member's Interest therein, notwithstanding
any provisions of law to the contrary;
(c) to sell or assign his Member Interest or to
constitute the vendee or assignee thereunder
a substituted Member, except as provided in
Article 11; or
(d) to withdraw as a Member except as provided
in Article 11.
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ARTICLE VII
LIMITATION OF LIABILITY; INDEMNIFICATION
7.1 PROOF OF FAILURE TO SATISFY STANDARD OF CONDUCT. A Member,
a Manager or an officer, director, shareholder, employee, agent or Affiliate of
the Manager shall not be deemed to have violated any standard of conduct under
this Article 7 unless such violation is proved by clear and convincing evidence,
in an action brought against such Person. The termination of any action, suit or
proceeding by judgment, order, settlement or upon a plea of nolo contendre or
its equivalent shall not of itself constitute proof or create a presumption that
the appropriate standard of conduct has been violated.
7.2 LIMITATION OF LIABILITY. Neither the Manager, nor any
officer, director, shareholder, employee, agent or Affiliate of the Manager, nor
any Member is to be held liable for damages to the Company or any Member with
respect to claims relating to his, her or its conduct for or on behalf of the
Company, except that any of the foregoing persons is to be liable to the Company
for damages to the extent that it is proved by clear and convincing evidence (i)
that his, her or its conduct was not taken (A) in good faith, (B) in a manner
reasonably believed to be in or not opposed to the best interests of the
Company, or (C) with the care that an ordinarily prudent person in a like
position would use under similar circumstances; or (ii) with respect to any
criminal action, proceeding, or investigation, that he, she, or it had no
reasonable cause to believe his, her or its conduct was unlawful.
7.3 INDEMNIFICATION OF MEMBERS AND THE MANAGER. The Company
agrees to indemnify each Member and the Manager, its officers, directors,
shareholders, employees, agents and Affiliates acting in good faith (each an
"Indemnified Party"), to the fullest extent permitted by law, and to save and
hold each Indemnified Party harmless from, and in respect of, all (1) fees,
costs and expenses incurred in connection with or resulting from any claim,
action or demand against such Indemnified Party or the Company that arise out of
or in any way relate to the Company, its properties, business or affairs, and
(2) such claims, actions or demands, and any losses or damages resulting from
such claims, actions and demands, including amounts paid in settlement or
compromise (if recommended by attorneys for the Company) of any such claim,
action or demand; PROVIDED, however, that this indemnification shall apply only
so long as the Indemnified Party has acted in good faith on behalf of the
Company, in a manner reasonably believed by him or her to be within the scope of
his or her authority under this Agreement and in the best interests of the
Company, and only if such action or failure to act did not constitute willful
misconduct, fraud or gross negligence. Expenses, including attorneys' fees,
incurred by an Indemnified Party in defending any proceeding referred to in this
Section 7.3, shall be paid by the Company, in advance of the final disposition
of such proceeding, upon receipt of an undertaking by or on behalf of the
Indemnified Party to repay such amount, if it shall ultimately be determined
that he or she is not entitled to be indemnified by the Company as authorized in
this Section 7.3.
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ARTICLE VIII
CAPITAL CONTRIBUTION
8.1 INITIAL CAPITAL CONTRIBUTION. Upon the execution of this
Operating Agreement, the Members shall contribute initially to the capital of
the Company the sum of money or the gross fair market value of property set
forth opposite each Member's name on Exhibit A attached hereto in full payment
of his Initial Capital Contribution.
8.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as otherwise
specifically provided in this Operating Agreement, no Member shall be required
to make any other contributions to the capital of the Company.
8.3 INTEREST. No Member shall be entitled to receive any
interest on the Member's Capital Account.
8.4 CAPITAL ACCOUNTS
(a) A separate capital account ("Capital Account")
for each Member shall be established on the books of the Company and maintained
throughout the term of the Company. As funded and adjusted in accordance with
this Agreement, the Capital Accounts of the Members shall reflect the underlying
economic arrangements of the Members.
(b) In the event any Interest is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
Interest.
(c) The foregoing provisions and the other provisions
of this Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the Manager
shall determine that it is prudent to modify the manner in which the Capital
Accounts (or any debits or credits thereto) are computed in order to comply with
such Regulations, the Manager may make such modification, provided that it shall
not have a material effect on the amounts distributable to any Member pursuant
to Article 9 or Article 12 hereof.
ARTICLE IX
ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS
9.1 PROFITS AND LOSSES. Except as provided in Section 9.2
below, Profits and Losses shall be allocated among the Members in proportion to
each Member's respective Interest in the Company. All Profits and Losses
allocated to the Members shall be credited or charged, as the case may be, to
their respective Capital Accounts.
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9.2 TAX ALLOCATION.
(a) In accordance with Code Section 704(c) and the
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial gross fair market value (as reflected on Exhibit A
attached hereto).
(b) Any elections or other decisions relating to such
allocations shall be made by the Manger in any manner that reasonably reflects
the purpose and intention of this Agreement. Allocations pursuant to this
Section 9.2 are solely for the purposes of federal, state and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, or other items or distributions pursuant to
any provision of this Agreement.
9.3 OTHER ALLOCATION RULES
(a) For purposes of determining Profits, Losses or
any other items allocable to any period, Profits, Losses and any such other item
shall be determined on a daily, monthly or other basis, as determined by the
Manager using any permissible method under Code Section 706 and the Regulations
thereunder.
(b) Except as otherwise provided in this Agreement,
all items of Company income, gain, loss, deduction and any other allocations not
otherwise provided for shall be among the Members in the same proportions as
they share Profits and Losses, as the case may be, for each fiscal year.
9.4 DISTRIBUTIONS
(a) GENERAL. From time to time, the Manager may
determine the amount of Cash Flow, if any, of the Company available for
distribution to the Members. Distributions of Cash Flow shall be made to the
Members, when, as, and if determined by the Manager; PROVIDED, HOWEVER, that the
Company shall distribute Cash Flow to the Members in amounts and at the times
necessary to cover the Members' Federal, state and local income and franchise
taxes attributable to the Company's operations.
(b) DISTRIBUTION OF CASH FLOW. All Cash Flow
distributable other than in connection with the dissolution of the Company (as
to any Member) or the termination and winding up of the Company (as to all of
the Members) shall be distributed in proportion to their respective aggregate
Capital Contribution to the Company.
(c) DISTRIBUTIONS UPON WINDING UP. Cash available for
distribution in connection with the liquidation, termination and winding up of
the Company shall be distributed in accordance with the provisions of Article
12.
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(d) NO WITHDRAWAL. No Member shall be entitled to
withdraw or obtain a return of all or any part of his Capital Contribution,
except upon liquidation, termination and winding up of the Company or upon
unanimous prior approval of the other Members.
ARTICLE X
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
10.1 BOOKS AND RECORDS. The Manager shall maintain full and
accurate books at its principal office or such office as shall be designated for
such purpose by the Members with respect to the operations of the Company. The
books shall be closed and balanced at the end of each calendar year and annual
statements showing (i) cash, receipts and disbursements; (ii) Company profits
and losses for the calendar year, and (iii) profits and losses for each Member
for income tax purposes shall be prepared by the accountants for the Company and
distributed to all Members within a reasonable time after the close of each
calendar year. Accounts shall also be maintained showing the basis for federal
income tax purposes of each Member's Interest and the Members shall be advised
of such basis annually.
10.2 REPORTS. The Manager shall deliver to each Member within
ninety (90) days after the end of its fiscal year, tax information necessary for
the preparation of the Members' Federal income tax returns.
10.3 TAX MATTERS MEMBER. The Manager shall be the designated
party to receive all notices from the Internal Revenue Service which pertain to
the tax affairs of the Company. The Manager shall be the "tax matters partner"
as such term is defined in Section 6231(a)(7) of the Code with respect to
operations conducted by the Company pursuant hereto and in accordance therewith
take such actions and execute and file all statements and forms on behalf of the
Company which may be permitted or required by the applicable provisions of the
Code or Regulations.
10.4 BANK ACCOUNTS. The Manager shall cause one or more
accounts to be maintained in a bank (or banks) which is (are) a member(s) of the
Federal Deposit Insurance Corporation, which accounts shall be used for the
payment of the expenditures incurred by the Company in connection with its
business and in which shall be deposited any and all Company monies. All such
amounts shall be and remain the property of the Company and will be received,
held and disbursed by the Manager for only such purposes as are specified in
this Agreement. There shall not be deposited in any of such accounts any funds
other than funds belonging to the Company, and no other funds shall in any way
be commingled with such funds. The Manager may invest such funds, as it may deem
appropriate, in short term certificates of deposit, government obligations, or
prime grade commercial paper. All Company checks written upon and any
withdrawals from any such bank account or accounts may be made by the Manager.
10.5 FISCAL YEAR. The fiscal year of the Company shall be the
calendar year.
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ARTICLE XI
TRANSFER OF INTERESTS; EFFECT OF WITHDRAWAL EVENTS
11.l TRANSFER OF INTERESTS. No Member shall be entitled to
sell, mortgage, hypothecate, transfer, pledge, assign, donate, create a security
interest in or lien on, encumber, give, place in trust (voting or other) or
otherwise dispose of, including any involuntary transfer or transfer by
operation of law upon divorce, in bankruptcy or by way of execution, seizure or
sale by legal process (hereinafter "transfer"), all or any portion of his, her
or its Interest or any portion thereof unless the applicable provisions of this
Article 11 are complied with in full. Any attempted transfer of a Member's
Interest other than in accordance with the preceding sentence shall be null and
void and be of no force or effect. Each Member hereby further agrees to hold the
Company and each Member (and each Member's successors and assigns) wholly and
completely harmless from any cost, liability or damage (including without
limitation liabilities for income taxes and costs of enforcing this indemnity)
incurred by any such indemnified persons as a result of a transfer or an
attempted transfer in violation of this Agreement.
11.2 REQUIREMENTS OF TRANSFER.
(a) In the event a Member seeks to withdraw from the
Company and transfer his Interest ("Withdrawing Member"), he shall first be
required to obtain the approval of a majority of the then-remaining Members (on
a PER CAPITA basis). If such approval is granted, the Withdrawing Member shall
then be required to transfer such Interest PRO RATA to all of the then-remaining
Members. Each such remaining Member shall be obligated to acquire from such
Withdrawing Member that portion of such Withdrawing Member's Interest equal to
the amount obtained by multiplying such Withdrawing Member's Interest by a
fraction, the numerator of which is the Interest of the Member acquiring the
Withdrawing Member's Interest and the denominator of which is all of the
Interests in the Company less the Withdrawing Member's Interest.
(b) The consideration to be paid by the
then-remaining Members to the Withdrawing Member for such Interest shall be
Units of Everflow. The value of the Withdrawing Member's Interest shall be equal
to the percentage interest such Withdrawing Member's Interest represents in
Everflow. Accordingly, such value shall be calculated as a percentage interest
in Everflow and be paid to the Withdrawing Member in such number of Units (which
also represent a percentage interest in Everflow) as shall equal the indirect
percentage interest of the Withdrawing Member in Everflow.
(c) The provisions of Subsection 11.2(a) and (b)
notwithstanding, no Member shall be able to withdraw and transfer his Interest
to another Original Member pursuant to this Agreement, if the effect of any such
withdrawal or transfer would be to reduce the number of Original Members to
fewer than three (3) Original Members. In such event, a Member shall only be
able to withdraw as a Member and transfer his Interest to a substitute Member
acceptable to all of the then remaining Members in their absolute discretion and
otherwise comply with the provisions of Section 11.2(e).
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(d) In the event the provisions of Section 11.2(c)
prevent a Member from withdrawing from the Company, such a Member shall be
entitled to withdraw from the Company only upon compliance with the provisions
of Section 11.2(e).
(e) Upon the prior written approval of all
then-remaining Members, a substitute Member may acquire such Withdrawing
Member's Interest pursuant to the provisions of Section 11.2(b) (i.e. such
substitute Member shall pay the Withdrawing Member for such Withdrawing Member's
Interest in Units of Everflow and such Interest shall be valued equal to such
Interest's indirect percentage in Everflow). In the event such substitute Member
does not own any Units or sufficient Units to acquire such Withdrawing Member's
Interest, the then-remaining Members, on a PRO RATA basis, shall be obligated to
acquire such Withdrawing Member's Interest by payment to such Withdrawing Member
of such number of Units as shall be equal to such Interest's indirect percentage
interest in Everflow. Upon the occurrence of the events described in the
previous sentence, the substitute Member shall still be admitted to the Company
but shall be obligated to make such capital contribution to Everflow as the
Manager shall determine (any such transfer as heretofore described in this
Section 11.2(e) shall also be deemed a "Permitted Transfer" for purposes of this
Article VIII). In addition, such proposed substitute Member shall have agreed to
assume, perform and discharge all of the duties and obligations of a Member
hereunder.
(f) In addition to the requirements of subsections
11.2(a) through (e), no sale, exchange, assignment or transfer by a Member may
be made (i) if the Interests sought to be sold, exchanged, assigned or
transferred, when added to the total of all other Interests sold, exchanged,
assigned or transferred within the period of twelve (12) months prior thereto,
would result in the termination of the Company under Section 708 of the Code, or
any successor section thereto; (ii) except pursuant to an effective registration
statement under all applicable federal and state securities laws or in a
transaction which is exempt from registration under such laws; and (iii) (if the
Manger shall request) unless the transferor Member delivers to the Manager an
opinion, in form and substance and issued by counsel acceptable to the Manager,
covering such securities laws, tax and other aspects of the proposed transfer as
the Manager may request.
(g) Any Member who sells, assigns or otherwise
transfers all or any portion of his Interest in strict compliance with the terms
and provisions of this Agreement shall promptly notify the Manager of such
transfer and furnish the Manager the name and address of the transferee and such
other information as might be required under Section 650K of the Code and the
Regulations.
11.3 EFFECT OF EMPLOYMENT TERMINATION, DEATH OR DISABILITY.
Notwithstanding anything to the contrary herein, in the event any Member (i) who
is an employee of the Company, Everflow, EEI or EMC, has such employment
involuntarily terminated by the Company, Everflow, EEI or EMC, as the case may
be, (ii) dies or (iii) becomes permanently disabled, any such Member shall be
obligated to sell and all the then-remaining Members shall be obligated to
acquire, the Interest of such Member as if such purchase and sale were a
Permitted Transfer pursuant to the provisions of Section 11.2, and all the terms
and conditions of Section 11.2 shall apply to such purchase and sale. For
purposes of this Section 11.3, the death or disability of Xxxxxx X. Xxxxx,
Managing General Partner of Xxxxx Associates, one of the Members, shall be
deemed a "death" or "disability" as applicable of
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Member pursuant to subclause (ii) or (iii) hereof, and the Interests of Xxxxx
Associates shall thereupon be sold pursuant to the provisions of this Section
11.3.
11.4 SUBSTITUTE MEMBER. The assignee or successor in interest
of a Member in a Permitted Transfer may become a substitute Member only when:
(a) the Manager shall have consented thereto, and
such consent may be withheld by the Manager in its sole discretion;
(b) the assignee shall have expressed his intention
to become a substitute Member and accepts and adopts all of the terms and
provisions of this Agreement and any amendments hereto (including, without
limitation, the restrictions imposed under this Article VIII) by becoming a
party to this Agreement by executing a Substitute Member Counterpart Signature
Page;
(c) such certificates or instruments as are required
by law shall have been executed and filed; and
(d) the assignor or the assignee shall have paid or
obligated himself to pay all reasonable expenses (as the Manger may determine)
connected with such admission or substitution.
11.5 RESTRICTIONS OF SUBSTITUTE MEMBER. Notwithstanding
anything to the contrary herein, a Member's Interest or any portion thereof
shall not be assigned or transferred to any person who is insane, incompetent or
has not attained the age of majority, or to a person or entity not lawfully
empowered to own such Interest, and any assignment or transfer directly to a
person or entity under such disability may be disregarded by the Company, in its
discretion.
11.6 TIME OF TRANSFER. Any transfer of an Interest to a third
party by a Member permitted under this Article 11 shall be effective as of
midnight of the last day of the calendar month in which it is made, or, at the
election of a Majority-in-Interest of the remaining Members, as of 7:00 A.M. the
day following the date of the transfer (the "Effective Transfer Date.")
11.7 DISTRIBUTIONS AND ALLOCATIONS IN RESPECT OF TRANSFERRED
INTEREST. If any Interest is transferred during any accounting period to a third
party or to a Member in compliance with the provisions of this Article 11,
Profits, Losses and each item thereof and all other items attributable to such
Interest for such period, shall be divided and allocated between the transferor
and the transferee by taking into account their varying interests during the
period in accordance with Article 9 hereof and Code Section 706(d), using the
Effective Transfer Date as the date upon which the change in ownership of the
Interest occurred, and using any conventions permitted by law and selected by a
Majority-in-Interest of the remaining Members. All distributions on or before
the Effective Transfer Date shall be made by the transferor and all
distributions thereafter shall be made to the transferee. Neither the Company
nor any Manager or Member shall incur any liability for making allocations and
distributions in accordance with the provisions of this Section 11.7, whether or
not any of them has knowledge of any transfer of ownership of any Interest.
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11.8 EFFECT OF WITHDRAWAL EVENTS
(A) NO RESIGNATION. No Member shall be entitled to
resign as a Member, except in connection with a transfer of such Member's entire
Member's Interest in the Company in compliance with the terms and conditions of
this Article 11 and, in the case of a resigning Member, with respect to which
his or her transferee has been admitted as a substitute Member in accordance
with Section 11.4.
(B) DEATH, DISSOLUTION, ADJUDICATION OF INCOMPETENCY.
If the Company is continued in accordance with Section 12.1 below following the
death, dissolution or adjudication of incompetency of a Member, such Member's
Interest shall not be terminated or repurchased and the successor-in-interest or
legal representative of such Member shall be substituted as a Member upon
compliance with the terms and conditions of Section 11.4.
(C) BANKRUPTCY EVENT. If the Company is continued in
accordance with Section 12.1 below following the occurrence of a Bankruptcy
Event with respect to a Member, then (1) his or her Member Interest shall be
immediately converted into an Economic Interest only and such Member shall be
immediately removed as a Member and shall thereafter have only the rights of an
Economic Interest Owner; (2) unless the call option provided under clause (3)
below is exercised by the Company, such Member shall not withdraw or resign from
the Company, have his or her Member Interest repurchased or have any right to
compel any payment by the Company for his or her Member Interest; and (3) the
Company shall have the option, but not the obligation, to repurchase such
Member's Interest in its entirety, which such option shall be exercisable by the
delivery to such Member of written notice to such effect within 180 days after a
Majority-in-Interest of the remaining Members have elected to continue the
Company. The price for such Member's Interest in connection with a purchase and
sale hereunder shall be the Appraised Price. Such purchase and sale shall be
consummated not more than ninety (90) days after the date the Company elects to
exercise its option hereunder, by the payment of the purchase price by the
Company in cash or by certified check against the delivery by such Member (or
its successors) of written representations and warranties with respect to his or
its good and marketable title to the Member Interest, free and clear of adverse
claims, his or its full capacity and legal right to transfer the Interest to the
Company and his or its right to transfer the Member Interest to the Company
without the consent or action of any third party.
(D) NO OTHER WITHDRAWAL. Except as expressly provided
in this Section 11.8 and in Section 12.2 in connection with the termination and
winding up of the Company, the Company shall not be obligated to repurchase the
Member's Interest of any Member, nor shall a Member be entitled to receive any
other payment or distribution in connection with his or her withdrawal from the
Company.
ARTICLE XII
TERMINATION, LIQUIDATION AND WINDING UP
12.1 TERMINATION OF THE COMPANY. The Company shall terminate
upon the first to occur of: (a) the unanimous written agreement of the Members;
(b) the occurrence of a Withdrawal Event as to any Member, unless a
Majority-in-Interest of the remaining Members
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agree to continue the Company within ninety (90) days after the occurrence of
such Withdrawal Event. Except as specifically stated in this Section 12.1, no
event that would cause a dissolution under the Act causes a dissolution of the
Company.
12.2 METHOD OF DISTRIBUTION UPON WINDING UP. Upon termination
of the Company pursuant to Section 12.1 above, the assets of the Company and
proceeds of any liquidation shall be applied and distributed in the following
manner and order of priority:
(a) to the payment and discharge of all of the
Company's debts and liabilities and expenses of liquidation and dissolution;
(b) to the setting up of any reserves reasonably
necessary for any contingent or unforeseen liabilities or obligations of the
Company;
(c) to the payment of the balance, if any, of the
respective Capital Accounts of the Members (after making the allocations
required under the provisions of Article IX), but if the amount available for
such payment shall be insufficient, then PRO RATA among all of the Members
according to the respective positive balances of their Capital Accounts at such
time; and
(d) the remainder, if any, to the Members in
accordance with their respective balances.
12.3 WINDING UP AND LIQUIDATION. As soon as possible following
the occurrence of any event of termination, the Company shall execute and file
as provided in the Ohio Act a statement of intent to dissolve in such form as
shall be prescribed by the Secretary of State of Ohio or which otherwise
complies with the Act. Upon the filing of such statement of intent to dissolve
with the Secretary of State of Ohio, the Company shall cease to carry on its
business, except insofar as may be necessary for the winding up of its affairs,
but its separate existence shall continue until a certificate of dissolution has
been filed with the Secretary of State of Ohio or until a decree dissolving the
Company has been entered by a court of competent jurisdiction. The filing of the
statement of intent to dissolve shall not affect the limited liability of the
Members. A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
enable the Members to minimize the normal losses attendant upon a liquidation.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 NOTICES. Any notice or communication required or
permitted to be given by any provision of this Agreement shall be deemed to have
been given and received for all purposes when delivered personally to the party
to whom the same is directed or when mailed or sent by overnight delivery
service, charges prepaid, addressed to the party to whom the same is directed at
the address set forth in this Agreement, or such other address as the Company
has received written notice from time to time.
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13.2 GOVERNING LAW. The Company, this Agreement and the rights
of the Members hereunder shall be governed by the laws of the State of Ohio.
13.3 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably
waives any right that he, she or it may have to maintain any action for
partition with respect to the property of the Company.
13.4 AMENDMENTS. The Agreement may be amended from time to
time by a writing executed by the Majority-in-Interest of the Members; PROVIDED,
HOWEVER, that (i) Schedule A may be modified from time to time by the Manager to
reflect any change in the Members or in their respective interests, (ii) no
amendment shall reduce a Member's percentage interest unless the writing is
executed by him, (iii) no amendment shall effect any change in this section
unless the writing is executed by all of the Members, and (iv) no amendment
shall effect any change in any provision of this Agreement providing for action
to be taken by a specified percentage of Interests in the Company unless the
writing is executed by Members whose aggregate Interests at least equal the
percentage specified in the provision to be changed.
13.5 CONSTRUCTION. Whenever the singular is used in this
Agreement and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine and neuter
genders and vice versa. The headings in this Agreement are for convenience only
and are in no way intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any of its provisions.
13.6 ENTIRE AGREEMENT. This Agreement contains the entire
understanding among the parties with respect to the subject matter hereof and
supersedes any prior understandings and agreements, whether written or oral,
with respect to such subject matter.
13.7 SEVERABILITY. If any provision of this Agreement or its
application to any person or circumstance shall, for any reason and to any
extent, be invalid, illegal or unenforceable, the remainder of this Agreement
and the application of such provision to other persons or circumstances shall
not be affected thereby, but rather shall be enforceable to the fullest extent
permitted by law.
13.8 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the
covenants, terms, provisions and agreements contained in this Agreement shall be
binding upon and inure to the benefit of the parties hereto and, to the extent
permitted by this Agreement, their respective heirs, legal representatives,
successors and assigns.
13.9 CREDITORS. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditors of the Company.
13.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
13.11 FEDERAL INCOME TAX ELECTION. In the event of a transfer
of all or any portion of the Interest of any Member, the Company shall elect
pursuant to Section 754 of the Code to adjust the basis of assets of the Company
upon written request of the transferee.
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13.12 INJUNCTIVE RELIEF. Each Member acknowledges that it will
be impossible to measure in money the damage to the Company and to the other
Members if there is a failure to comply with this Agreement. It is therefore
agreed that the Company or any other Member, in addition to any other rights or
remedies which they may have, shall be entitled to immediate injunctive relied
and to specific performance to enforce this Agreement and that if any action or
proceeding is brought in equity to enforce it, no party will urge, as a defense,
that there is an adequate remedy at law.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the date first above written.
EVERFLOW MANAGEMENT CORPORATION
By: /s/Xxxxxxx X. Xxxxxxxx
--------------------------------------
Its: Vice President
--------------------------------------
XXXXX ASSOCIATES
By: /s/Xxxxxx X. Xxxxx
--------------------------------------
Xxxxxx X. Xxxxx, general partner
/s/Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx
/s/Xxxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/Xxxxx X. Xxxxx
--------------------------------------
Xxxxx X. Xxxxx
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SCHEDULE A
----------
MEMBERS' NAMES, CAPITAL CONTRIBUTION
------------------------------------
AND PERCENTAGE INTERESTS
------------------------
Capital Percentage
Account Interest
------- --------
Everflow Management Corporation $ 4,916 1%
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Xxxxx Associates $ 278,131 56.571471%
00 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxxx X. Xxxxxx $ 69,533 14.142843%
0000 X. Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Xxxxxxx X. Xxxxxxxx $ 69,533 14.142843%
0000 Xxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Xxxxx X. Xxxxx $ 69,533 14.142843%
0000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
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EXHIBIT 1
---------
DEFINITIONS
-----------
Certain capitalized words and phrases used in this Agreement shall have the
following meanings:
(A) "AFFILIATE" means with respect to another person, (i) any
person who directly or indirectly owns, controls or holds, with power
to vote, five percent (5%) or more of the outstanding voting securities
of such other person, (ii) any person with respect to which five
percent (5%) or more of the outstanding voting securities are directly
or indirectly owned, controlled or held, with power to vote, by such
other person, (iii) any person directly or indirectly controlling,
controlled by or under common control with such other person, (iv) any
officer, director or partner of such other person, and (v) if such
other person is an officer, director or partner, any company,
partnership, association or other entity or organization for which such
person acts in any such capacity.
(B) "AGREEMENT" means this Operating Agreement of Everflow
Management Limited, LLC, as originally executed and as amended from
time to time in accordance with Section 13.4 hereof.
(C) "APPRAISED PRICE" means the price determined by a
qualified appraiser selected by the Manager.
(D) "ARTICLES OF ORGANIZATION" mean the Articles of
Organization of the Company as filed with the Secretary of State of
Ohio on March 8, 1999, as the same may be amended from time to time in
accordance with the Ohio Act.
(E) "BANKRUPTCY EVENT" means, with respect to any Member:
(1) the making of an assignment for the benefit
of creditors;
(2) the filing of a voluntary petition in
bankruptcy;
(3) the adjudication of bankruptcy or
insolvency, or the entry of an order for
relief, in any bankruptcy or insolvency
proceeding;
(4) the filing of a petition or answer seeking
for the Member any reorganization,
arrangement, composition, readjustment,
liquidation, dissolution or similar relief
under any statute, law or regulation;
(5) the filing of an answer or other pleading
admitting or failing to contest the material
allegations of a petition filed against the
Member in any proceeding of a nature
described in (1) - (4) above;
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(6) seeking, consenting to or acquiescing in the
appointment of a trustee, receiver or
liquidator of the Member or of all or any
substantial part of his or its properties;
or
(7) the passage of 120 days after the
commencement of any proceeding against the
Member seeking reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under any
statute, law or regulations, if the
proceeding has not been dismissed, or the
passage of 90 days after the appointment
without his or its consent or acquiescence
of a trustee, receiver or liquidator of the
Member or of all or any substantial part of
his or its properties, if the appointment is
not vacated or stayed, or the passage of 90
days after the expiration of any such stay,
if the appointment is not vacated.
(F) "CAPITAL ACCOUNT" means, with respect to any Member, the
Capital Account maintained for such Person pursuant to the provisions
of Section 8.4 of this Agreement, which shall be determined and
adjusted as follows:
(1) To each Member's Capital Account, there
shall be credited the following: (a) such
Member's Capital Contributions; and (b) such
Member's allocations of Profits; and
(2) To each Member's Capital Account there shall
be debited the following: (a) the amount of
cash distributed to such Member pursuant to
any provision of this Agreement; and (b)
such Member's allocation of Losses.
(G) "CAPITAL CONTRIBUTION" means the amount in cash or
agreed-upon value of property contributed by each Member (or its or
his/her predecessors in interest) to the capital of the Company for its
or his/her Interest, as set forth on SCHEDULE A attached hereto.
(H) "CASH FLOW" means the excess of all cash received by the
Company (whether from the sale of Company assets or otherwise), over
amounts applied to the payment of the obligations and expenses incurred
by the Company and any reserves deemed necessary and prudent by the
Manager for future operations of the Company.
(I) "CODE" means the Internal Revenue Code of 1986, as
amended, or corresponding provisions of succeeding federal revenue
laws.
(J) "COMPANY" means Everflow Management Limited, LLC.
(K) "ECONOMIC INTEREST" means the interest in the Company's
Profits, Losses and distributions owned by a Person who is not a
Member.
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(L) "ECONOMIC INTEREST OWNER" means any Person who owns an
Economic Interest but who is not a Member.
(M) "EFFECTIVE TRANSFER DATE" is defined in Section 11.6.
(N) "EVERFLOW" means Everflow Eastern Partners, L.P., a
Delaware limited partnership.
(O) "GROSS ASSET VALUE" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(1) The Gross Asset Values of all Company assets
shall be adjusted to equal their respective
gross fair market values as of the following
times: (a) the acquisition of an additional
Member's Interest or Economic Interest
(other than pursuant to Section 8.1 hereof)
by any new or existing Member in exchange
for more than a DE MINIMIS Capital
Contribution; (b) the distribution by the
Company to a Member of more than a DE
MINIMIS amount of Company property
(including cash) as consideration for an
Interest, if the Manager reasonably
determines that such adjustment is necessary
or appropriate to reflect the relative
economic interests of the Members in the
Company; and (iii) the liquidation of the
Company within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g).
(2) The Gross Asset Values of Company assets
shall be increased (or decreased) to reflect
any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the
extent that such adjustments are taken into
account in determining Capital Accounts
pursuant to Regulation Section
1.704-1(b)(2)(iv)(m); PROVIDED, HOWEVER,
that Gross Asset Values shall not be
adjusted pursuant to this paragraph (O)(2)
to the extent the Manager shall determine
that an adjustment pursuant to paragraph
(O)(1) is necessary or appropriate in
connection with a transaction that would
otherwise result in an adjustment pursuant
to this paragraph (O)(2).
(P) "INTERESTS" means the interest in the Company's Profits,
Losses and distributions owned by a Member.
(Q) "MAJORITY-IN-INTEREST", when used with respect to the
Members, means Members holding more than 71% of the Percentage
Interests held in the aggregate by all Members.
(R) "MANAGER" means Everflow Management Corporation, an Ohio
corporation.
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(S) "MEMBER" means (1) any Person whose name is set forth on
SCHEDULE A attached hereto under the caption "Member," or (2) any
Person who has been admitted as a additional or substituted Member
pursuant to the terms of this Agreement; PROVIDED, that, if a Member
transfers all of his or its interest in the Company's Profits, Losses
and distributions, from and after the date of such transfer such
transferor shall no longer be a Member and shall thereafter have none
of the other rights associated with his or its Member's Interest.
"Members" means all such Persons.
(T) "MEMBER'S INTEREST" means the entire interest in the
Company owned by a Member, including such Member's (1) interest in the
Company's Profits, Losses and distributions, (2) rights with respect to
the management and administration of the Company, (3) access to or
rights to demand or require any information or account of the Company
or its affairs, and (4) rights to inspect the books and records of the
Company.
(U) "OHIO ACT" means the Ohio Limited Liability Company Act,
Ohio Revised Code Sections 1705.01 et seq., as amended from time to
time (or any corresponding provisions of succeeding law).
(V) "PERCENTAGE INTEREST" means the Members' relative shares
of the Company's Profits, Losses and interim distributions, as set
forth from time to time on SCHEDULE A attached hereto.
(W) "PERSON" has the meaning set forth in Section 1705.01(K)
of the Ohio Revised Code, as amended from time to time (or any
corresponding provisions of succeeding law).
(X) "PROFITS" and "LOSSES" means, for each fiscal year or
other period, an amount equal to the Company's taxable income or loss
for such year or period, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following
adjustments:
(1) Any income of the Company that is exempt
from federal income tax and not otherwise
taken into account in computing Profits or
Losses pursuant to this paragraph (X) shall
be added to such taxable income or loss.
(2) Any expenditures of the Company described in
Code Section 705(a)(2)(B) or treated as Code
Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in
computing Profits or Losses pursuant to this
paragraph (X), shall be subtracted from such
taxable income or loss.
(3) At any time the Gross Asset Value of any
Company property is adjusted pursuant to
paragraph (O)(1), the amount of such
23
adjustment shall be taken into account as
gain or loss from the disposition of such
property for purposes of computing Profits
or Losses.
(4) Gain or loss resulting from the disposition
of any Company asset with respect to which
gain or loss is recognized for federal
income tax purposes shall be computed by
reference to the Gross Asset Value of the
property disposed of, notwithstanding that
the adjusted tax basis of such property
differs from its Gross Asset Value.
(Y) "REGULATIONS" means the regulations promulgated under the
Code, as the same may be amended from time to time, including
corresponding provisions of any succeeding regulations.
(Z) "WITHDRAWAL EVENT" means the death, dissolution,
adjudication of incompetency, occurrence of a Bankruptcy Event or
resignation (except as expressly permitted by this Agreement) of or
with respect to a Member.
