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EXHIBIT 99.4
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is entered into as of May 1, 2001
by and between National Energy Group, Inc. ("NEG") and NEG Operating LLC, a
Delaware Limited Liability Company, ("LLC").
RECITALS
WHEREAS, LLC is together with Xxxxx National LLC, a Delaware Limited
Liability Company ("Xxxxx LLC"), of which LLC is the sole member, (LLC and Xxxxx
LLC being together referred to as "Operating LLC") is the owner of certain oil
and gas properties formerly owned by NEG and Xxxxx Petroleum Company. and
anticipates acquiring other oil and gas properties from time to time;
WHEREAS, LLC is a single member LLC whose single member is NEG Holding LLC,
whose members are NEG and Xxxxxx Partners, an affiliate of Arnos Corp.;
WHEREAS, pursuant to the terms of the Plan of Reorganization for NEG
effective as of August 4, 2000, provision was made for the creation and
operation of an LLC that would own properties formerly owned by NEG and which
would receive assets and cash from Arnos Corp. or an affiliate thereof;
WHEREAS, the member of the LLC and its members desire that the assets of
the Operating LLC be managed by management familiar with the oil and gas
business and have determined that NEG can provide such management;
WHEREAS, as Operating LLC desires that NEG be engaged to manage the
properties owned by the Operating LLC;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
AGREEMENTS
1 APPOINTMENT; COMMENCEMENT DATE; AND TERM
1.1 APPOINTMENT. LLC appoints and employs NEG as its agent to manage and
operate the Operating LLC's oil and gas assets wherever found and howsoever
constituted ("Managed Properties"). By acting within the scope of the authority
granted by this Agreement, NEG shall be acting only as the appointed agent and
representative of LLC with respect to only the Managed Properties, and nothing
in this Agreement shall be construed as creating a tenancy, partnership, joint
venture, or any other relationship between the NEG and LLC, other than as exists
independently of this Agreement.
1.2 COMMENCEMENT DATE. This Agreement and NEG's appointment pursuant to
paragraph 1.1 shall be effective on May 1, 2001 (the "Commencement Date").
1.3 TERM. Subject to earlier termination pursuant to paragraphs 5.1 and
5.2, this Agreement shall be in effect until the earlier of (a) November 1,
2006, and (b) such time as the Operating LLC no longer owns any Managed
Properties.
2 OPERATIONS
2.1 GENERAL. NEG shall supervise and direct the general day-to-day
operations of the Managed Properties. In performing its duties, NEG shall
operate the Managed Properties using operational practices and procedures that
are consistent with those of other Managed Properties of similar type, size and
quality and with the operational practices and procedures which NEG employed
with respect to its own properties from time to time.
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2.2 EMPLOYEES. All personnel of the Managed Properties, except for
directors of NEG, shall be employees of or consultants to NEG. NEG shall have
the authority to hire, supervise, direct and discharge all personnel working in
the Managed Properties.
2.3 LICENSES AND PERMITS. All fees and expenses relating to such licenses,
approvals and permits, as are necessary to operate the Managed Properties, shall
be the paid by LLC.
2.4 INSURANCE. NEG shall obtain for LLC and LLC shall maintain and pay all
premiums relating to insurance coverage with respect to the Managed Properties.
2.5 OPERATING EXPENSES. All costs and expenses of operating the Managed
Properties in the ordinary course of business, including without limitation,
costs of insurance coverage, repairs and maintenance to the Managed Properties
shall be the obligation of and paid by LLC. All debts and liabilities incurred
by NEG within the scope of the authority granted and permitted herein in the
course of its management and operation of the Managed Properties shall be the
debts and liabilities of Operating LLC only, and, subject to the provisions of
Paragraph 4 hereof, NEG shall not be liable therefor for its own account. NEG
shall not, however, without the prior written consent of LLC, which consent may
be withheld by LLC at its absolute discretion: (a) incur any capital
expenditures at the Managed Properties in excess of those amounts approved
pursuant to an operating budget adopted by LLC, (b) incur any indebtedness on
the part of LLC other than in the ordinary course of business of the Managed
Properties, or (c) permit any lien or other encumbrance to be placed on any
Managed Properties assets as a result of NEG's failure to perform its
obligations hereunder.
2.6 OPERATING REVENUES. All revenues generated at the Managed Properties
shall be the sole property of Operating LLC and all such revenues shall be
accounted for and deposited by NEG into Operating LLC's designated bank
accounts.
2.7 NEG HOLDING LLC'S RIGHTS TO ACCESS. Notwithstanding any provision
herein to the contrary, NEG Holding LLC shall have the right to have its
representatives on the premises of the Managed Properties at all times and such
representatives shall have full access to all areas of the Managed Properties at
all times and shall be entitled to inspect, observe and audit all aspects of the
operations of the Managed Properties; provided that such activities do not
interfere with the orderly operation of the Managed Properties by NEG.
3 MANAGEMENT FEE
3.1 MANAGEMENT FEE. As consideration for the performance of its obligations
hereunder, LLC will pay to NEG a fee which shall be payable monthly in arrears
initially equal to 115% ("Fee") of the actual direct and indirect administrative
and reasonable overhead costs incurred by NEG in operating the Managed
Properties pursuant hereto, it being agreed that for the purposes of this
provision, the salaries of the Chief Executive Officer of NEG shall be 70%
attributable to the Managed Properties, the salaries of the Vice-President and
General Counsel and of the Chief Financial Officer shall be 20% attributable to
the Managed Properties. The fee shall be set forth with specificity and shall be
billed to LLC on a monthly basis and paid within 30 days thereafter, and
interest or any unpaid amounts shall accrue at the prime rate per annum as
published by Citibank New York, New York. No xxxx shall be deemed to have been
rendered unless a copy thereof has been delivered to NEG Holding LLC.
Notwithstanding the foregoing, either LLC or NEG may, at any time and from time
to time, seek to change the amount of the Fee to any other number within the
range of 110% to 115% and the parties shall make such change if they agree it is
warranted, but, absent such agreement, the Fee shall remain as it was prior to
time the change was sought. In addition, such parties will consult with each
other with a view to ensuring that the actual overhead costs attributable to the
managed properties be properly reflected in the Fee which is paid to NEG.
3.2 COMPENSATION OF NEG DIRECTORS AND OFFICERS. Any compensation due and
owing from NEG to any director, officer or employee or consultant of NEG shall
be paid solely by NEG, provided, however, that to the extent that any such
compensation is part of the actual administrative and reasonable overhead costs
incurred by NEG as specified in Paragraph 3.1 hereof, then LLC shall comply with
Paragraph 3.1 with respect thereto.
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4 INDEMNIFICATION
4.1 INDEMNIFICATION OF NEG.
4.1.1 LLC shall indemnify and hold NEG free and harmless from any
liability for injury or death to persons or damage or destruction of property
due to any cause whatsoever, either in or about the Managed Properties or
elsewhere, as a result of the performance of this Agreement by NEG, its agents,
officers, directors, employees or consultants, irrespective of whether alleged
to be caused, wholly or partially, by NEG, its agents, officers, directors, or
employees.
4.1.2 LLC shall reimburse NEG upon demand for any money or other
property that NEG is required to pay out for judgments, settlements, or expenses
in defense of any claim, civil or criminal action, proceeding, charge, or
prosecution made, instituted, or maintained against NEG or LLC, jointly or
severally, because of the condition or use of the Managed Properties or arising
out of or based upon any law, regulation, requirement, contract, or award.
4.1.3 LLC shall defend any claim, action, suit, or proceeding brought
against NEG or LLC, jointly or severally, arising out of or connected with any
of the foregoing, and shall hold harmless and fully indemnify NEG from any
judgment, loss, or settlement on account thereof, regardless of the jurisdiction
in which any such claims, actions, suits or proceedings may be brought.
4.1.4 Notwithstanding the provisions of paragraphs 4.1.1, 4.1.2, and
4.1.3, LLC shall not be liable to indemnify and hold NEG harmless from any
liability resulting from the gross negligence, misconduct or willful misconduct
of NEG, its agents, employees, consultants, officers, or directors, including
employees selected and supervised by NEG under this Agreement in connection with
NEG's management and/or operation of the Managed Properties.
4.2 INDEMNIFICATION OF LLC.
4.2.1 NEG agrees to indemnify and hold LLC free and harmless from any
liability for injury or death to any person or damage or destruction of property
due to the gross negligence, misconduct or willful misconduct of NEG, its
agents, employees, consultants, officers, or directors in connection with NEG's
management and/or operation of the Managed Properties.
4.2.2 NEG agrees to reimburse LLC on demand for any money or other
property that LLC is required to pay out by reason of the negligence, gross
negligence, misconduct or willful misconduct of NEG.
4.2.3 NEG agrees to defend any claim, action, suit or proceeding
brought against LLC arising out of or in connection with the gross negligence,
misconduct or willful misconduct of NEG, and to hold harmless and fully
indemnify LLC from any judgment, loss, or settlement on account thereof,
regardless of the jurisdiction in which any such claims, actions, suits, or
proceedings may be brought.
4.3 GENERAL. As used in this paragraph, the party or parties required to
indemnify shall be referred to as the "Indemnitor," and the party or parties
entitled to be indemnified shall be referred to as the "Indemnitee." If the
Indemnitor becomes obligated to the Indemnitee, or if a suit, action,
investigation, claim, or proceeding is instituted as a result of which the
Indemnitor may become obligated to the Indemnitee, the Indemnitee shall promptly
give written notice to the Indemnitor. The Indemnitor shall defend, contest, and
otherwise protect against any such suit, action, investigation, claim, or
proceeding at the Indemnitor's own cost and expense. The Indemnitee shall have
the right but not the obligation to participate at its own expense in the
defense thereof by counsel of its own choice. If the Indemnitor fails timely to
defend, contest, or otherwise protect against any such suit, action,
investigation, claim, or proceeding, the Indemnitee shall have the right to
defend, contest, or otherwise protect against the same and may make any
compromise or settlement thereof consented to in writing by the Indemnitor and
recover the entire cost thereof from the Indemnitor including, but not limited
to, reasonable attorneys' fees, disbursements, and all amounts paid as a result
of such suit, action, investigation, claim, or proceeding, or the compromise or
settlement thereof.
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5 TERMINATION
5.1 TERMINATION BY LLC. LLC may at its sole option, without prior notice
except as set forth in this Paragraph 5.1, terminate this Agreement if NEG
fails, in the opinion of LLC, to correct, on a continuing basis, any actions or
failure to take action with respect to the Managed Properties in accordance with
the standards set forth in this Agreement after NEG has been given, at least 90
days prior to the termination, written notice of LLC's intent to terminate this
Agreement.
5.2 TERMINATION BY NEG. NEG may terminate this Agreement at any time upon
giving LLC 60 days written notice of such termination.
6 MISCELLANEOUS PROVISIONS
6.1 FURTHER ACTS. Each party shall execute all documents and take all other
actions necessary to effectuate the provisions and purposes of this Agreement.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
oral and written agreements between the parties concerning the subject matter
hereof.
6.3 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.
Notices shall be given in writing and are deemed given when received
and shall be given to the following addresses and/or telecopy numbers:
(a) If to NEG: National Energy Group, Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
(000) 000-0000 - Facsimile
(b) If to LLC: NEG Operating LLC
c/o Icahn Associates Corp.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
(000) 000-0000 - Facsimile
6.4 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which, taken together, shall
constitute one and the same instrument.
DATED this ____ day of September, 2001
LLC NEG
NEG Operating LLC National Energy Group, Inc.
By NEG Holding LLC, Member
By Xxxxxx Partners, Member
By Astral Gas Corp., General Partner By:
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By:
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Xxxxxx X. Xxxxxxx, President
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