EXHIBIT 10.32
OPERATING AGREEMENT
FOR
NEG HOLDING LLC
Operating Agreement by and among National Energy Group, Inc., a
Delaware corporation ("NEG"), and Xxxxxx Partners, a New York general
partnership ("Xxxxxx), each a Member (as such term is hereinafter defined), and
each person who shall at any time become a Member under this Agreement by
executing a signature page hereof as a Member (such persons collectively
referred to as the "Members").
Dated as of May 1, 2001
WHEREAS, the Members wish to state the terms and conditions which shall
govern the operation of the Company (as hereinafter defined).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I shall, for the purposes of this
Operating Agreement, have the meaning herein specified. Certain other
capitalized terms used in this Operating Agreement are defined elsewhere herein.
Unless otherwise specified, all references herein to Articles or Sections are to
Articles or Sections of this Operating Agreement.
1.1 "ACCRUED XXXXXX AMOUNT" An amount equal to the aggregate of
interest that would be computed annually, if interest were imposed at a rate
equal to the Prime Rate plus 1/2%, as of the close of each Fiscal Year on the
excess of (a) the sum of (i) the cumulative Guaranteed Payments and (ii) the
aggregate of any Accrued Xxxxxx Amounts computed in prior years, over (b)
cumulative Distributions by the Company to Xxxxxx pursuant to Section 6.4(b) of
this Agreement.
1.2 "ACT" shall mean the Delaware Limited Liability Company Act, 6 Del.
C. 18-101 et seq., as in effect from time to time (the "Act").
1.3 "AFFILIATE" shall mean with respect to a specified Person, any
Person directly or indirectly controlling, controlled by, or under common
control with, the specified Person.
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1.4 "AGREEMENT" shall mean this Operating Agreement for NEG Holding
LLC, as may be amended from time to time.
1.5 "BANKRUPTCY" shall mean, and a Member shall be deemed "Bankrupt"
upon, (i) the entry of a decree or order for relief of such Member by a court of
competent jurisdiction in any involuntary case involving such Member under any
bankruptcy, insolvency, or other similar law now or hereafter in effect; (ii)
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or other similar agent for such Member or for any substantial part
of such Member's assets or property; (iii) the filing with respect to such
Member of a petition in any such involuntary bankruptcy case, which petition
remains undismissed for a period of 90 days or which is dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding
provision of any future United States bankruptcy law); (iv) the filing by such
Member of a petition in bankruptcy, or the voluntary commencement of any
insolvency proceeding; (v) the consent of such Member to the entry of an order
for relief in an involuntary case under any such law or to the appointment of or
the taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent for such Member or for any
substantial part of such Member's assets or property; or (vi) the making by such
Member of any general assignment for the benefit of creditors.
1.6 "BONDS" shall mean the following issued and outstanding
instruments: (i) registered 10 3/4% Series A/B Notes in the aggregate principal
amount of $100 million due 2006, consisting of registered Series A Notes issued
by NEG in 1996 and registered Series B Notes issued by NEG in 1997 in exchange
for Series A Notes; (ii) unregistered 10 3/4 Series C Notes in the aggregate
principal amount of $65 million due 2006 that were issued by NEG in August 1997;
and (iii) registered 10 3/4% Series D Notes due 2006 that were issued by NEG in
December 1997 in exchange for substantially all of the Series A/B Notes and the
Series C Notes. As of May 1, 2001, the aggregate principal amount of Bonds
outstanding was $165 million, before giving effect to the purchase by NEG of
Bonds which took place as of June 30, 2001.
1.7 "BUSINESS DAY" shall mean any day other than Saturday, Sunday or
any legal holiday observed in the State of Texas or the State of New York.
1.8 "CAPITAL ACCOUNT" shall mean the account maintained by the Company
for each Member in accordance with Section 5.3 of this Agreement.
1.9 "CAPITAL CONTRIBUTION" shall mean the amount of money and the fair
market value (determined as of the date of contribution) of property contributed
by each Member to the Company in accordance with Sections 5.1 and 5.2 hereof,
less any liabilities encumbering such property that the Company takes subject to
or assumes under Code Section 752.
1.10 "CERTIFICATE OF FORMATION" shall mean the Certificate of Formation
of the Company as filed with the Secretary of State of Delaware as the same may
be amended from time to time.
1.11 "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
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1.12 "COMPANY" shall mean NEG Holding LLC, a limited liability company
formed under the laws of the State of Delaware.
1.13 "DISTRIBUTIONS" shall mean the amount of money and the fair market
value (determined as of the date of distributions) of property distributed by
the Company to the Members from any source.
1.14 "ECONOMIC INTEREST" shall mean a Member's share of one or more of
the Company's Profits, Losses and distributions of the Company's assets pursuant
to this Agreement and the Act, but shall not include any right to participate in
the management or affairs of the Company, including the right to vote on,
consent to or otherwise participate in any decision of the Members.
1.15 "EFFECTIVE DATE" shall mean May 1, 2001.
1.16 "EXCESS ALLOCATION AMOUNT" shall mean an amount equal to the
excess of the Initial NEG Priority Amount over NEG's Initial Capital Account.
1.17 "FISCAL YEAR" shall mean (i) the period commencing on the
Effective Date of this Agreement and ending on December 31, 2001 (the "Initial
Fiscal Year"); (ii) any subsequent 12 month period commencing on January 1 and
ending on December 31; or (iii) any portion of the period described in clause
(ii) hereof for which the Company is required to allocate Profits, Losses and
other items of Company income, gain, loss or deduction pursuant to this
Agreement.
1.18 "GAIN FROM SALE" shall mean, in the event of a sale of all or
substantially all of the Company's assets, an amount equal to the Company's
taxable gain, as computed for federal income tax purposes, recognized pursuant
to such sale.
1.19 "XXXXXX" shall mean Xxxxxx Partners, a New York general
partnership.
1.20 "GUARANTEED PAYMENT" shall mean, with respect to any Semi-Annual
Period, 10.75% of the outstanding NEG Priority Amount, multiplied by a fraction,
the numerator of which is the number of days in the period with respect to which
the Guaranteed Payment is being computed and the denominator of which is 365,
commencing on the date of the initial Capital Contribution of NEG pursuant to
Section 5.1 hereof.
1.21 "INITIAL CAPITAL ACCOUNT" shall mean, with respect to each Member,
the Capital Account for such Member existing immediately after the Capital
Contributions described in Section 5.1 of this Agreement were made.
1.22 "INITIAL NEG PRIORITY AMOUNT" shall mean $202.2 million.
1.23 "INTEREST" shall mean, with respect to each Member, the Economic
Interest of such Member.
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1.24 "LAW" shall mean any applicable constitutional provision, statute,
act, code (including the Code), law, regulation, rule, ordinance, order, decree,
ruling, proclamation, resolution, judgment, decision, declaration, or
interpretative or advisory opinion or letter of a governmental authority.
1.25 "LIQUIDATING TRUSTEE" shall mean the individual or each of the
individuals designated pursuant to Section 10.2(a).
1.26 "LOSSES" shall have the meaning assigned to such term in Section
6.1(a) of this Agreement.
1.27 "MANAGING MEMBER" shall initially mean Xxxxxx or any assignee of
Xxxxxx'x membership interest in the Company, provided that such assignee is
admitted as a Member pursuant to this Agreement.
1.28 "MEMBER" shall mean each of Xxxxxx, NEG or any other Person who
may hereafter become a Member pursuant to Article IX.
1.29 "MEMBERSHIP INTEREST" shall mean a Member's entire interest in the
Company, including such Member's Economic Interest and such other rights and
privileges that the Member may enjoy by being a Member.
1.30 "NEG" shall mean National Energy Group, Inc., a Delaware
corporation.
1.31 "NEG PRIORITY AMOUNT" shall mean an amount equal to the Initial
NEG Priority Amount less cumulative Distributions to NEG designated by the
Company as a Distribution, in whole or in part, of the NEG Priority Amount.
1.32 "PERSON" shall mean any individual or entity, including, but not
limited to, a general partnership, limited partnership, limited liability
partnership, limited liability company, corporation, joint venture, joint stock
company, trust, business trust, cooperative or unincorporated association.
1.33 "PRIME RATE" shall mean a rate per annum equal to the lesser of
(a) a varying rate per annum that is equal to the interest rate publicly quoted
by Citibank, N.A., or any successor money center bank, from time to time as its
prime commercial or similar reference interest rate, with adjustments in that
varying rate to be made on the same date as any change in that rate, and (b) the
maximum rate permitted by Law.
1.34 "PROFITS" shall have the meaning assigned to such term in Section
6.1(a) of this Agreement.
1.35 "PROPERTY" shall mean any property real, personal or mixed,
tangible or intangible, exclusive of cash.
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1.36 "REDEMPTION AMOUNT" shall mean an amount equal to the excess of
(a) the sum of (i) the Initial NEG Priority Amount, (ii) any additional Capital
Contributions made by Xxxxxx pursuant to Section 5.2, (iii) the aggregate sum of
Guaranteed Payments, and (iv) an amount equal to the Accrued Xxxxxx Amount, over
(b) cumulative Distributions designated by the Company as a Distribution, in
whole or in part, of the Redemption Amount.
1.37 "RESERVES" shall mean, with respect to any fiscal period, funds
set aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the Liquidating Trustees for working
capital and to pay taxes, insurance, debt service or other costs or expenses
incident to the ownership or operation of the Company's business.
1.38 "SEMI-ANNUAL PERIOD" shall mean (i) the period commencing on the
Effective Date of this Agreement and ending on October 31 of the same calendar
year, (ii) any subsequent 6 month period commencing on November 1 and ending on
April 30, (iii) any subsequent 6 month period commencing on May 1 and ending on
October 31, or (iv) any portion of the period described in clauses (ii) or (iii)
hereof.
1.39 "SPECIAL DEDUCTIONS" shall mean items specially allocated pursuant
to Section 6.3 of this Agreement.
1.40 "TAX MATTERS PARTNER" shall have the meaning assigned to such term
in Section 7.2 herein.
1.41 "TREASURY REGULATIONS" shall mean the proposed, temporary and
final regulations promulgated under the Code in effect as of the date of filing
the Certificate of Formation and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
ARTICLE II
FORMATION AND TERM
2.1 FORMATION. The Company was formed by the execution and filing of a
certificate of formation of the Company with the Secretary of State of the State
of Delaware setting forth the information required by the Act (the
"Certificate"). The Company shall continue until dissolution and termination of
the Company in accordance with the provisions of Article X hereof.
2.2 AGREEMENT. For and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members executing this
Agreement hereby agree to the terms and conditions of this Agreement. It is the
express intention of the Members that this Agreement shall be the sole source of
agreement of the parties with respect to the matters herein contained.
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2.3 NAME. The name of the Company is NEG Holding LLC, and all business
of the Company shall be conducted under that name or under any other name but,
in any case, only to the extent permitted by applicable law.
2.4 TERM. The Company shall be dissolved and its affairs wound up in
accordance with the Act and this Agreement on December 31, 2024, unless the
Company shall be sooner dissolved and its affairs wound up in accordance with
the Act or this Agreement.
2.5 REGISTERED AGENT AND OFFICE. The registered agent for the service
of process and the registered office shall be that Person and location reflected
in the Certificate of Formation as filed in the office of the Secretary of State
of Delaware. The Managing Member may, from time to time, change the registered
agent or office through appropriate filings with the Secretary of State of
Delaware. In the event the registered agent ceases to act as such for any reason
or the registered office shall change, the Managing Member or the registered
agent, as appropriate, shall, within 30 days thereafter, designate a replacement
registered agent and make the appropriate filings with the Secretary of State of
Delaware or file a notice of change of address, as the case may be.
ARTICLE III
PURPOSES AND POWERS
3.1 PURPOSE. The purpose of the Company is to engage in any lawful act,
activity or business for which limited liability companies may be organized
under the Act. It is the present intention of the Company to manage NEG
Operating LLC in such a manner, subject to the Managing Member's discretion
based upon its views of business and financial conditions, that NEG Operating
LLC will continue to conduct drilling and exploration activities and will seek
additional reserves, all in the ordinary course of business.
3.2 POWERS. In furtherance of the purpose of the Company as set forth
in Section 3.1 and in addition to those powers provided in the Act, the Company
hereby has the additional power and authority to enter into any kind of activity
and to perform and carry out contracts of any kind necessary to, or in
connection with, or incidental to, the accomplishment of the purpose of the
Company, so long as said activities and contracts may be lawfully carried on or
performed by a limited-liability company under the Act.
ARTICLE IV
ADMINISTRATIVE PROVISIONS
4.1 AUTHORITY OF MEMBERS. The Managing Member shall have the exclusive
right to manage and control the ordinary day-to-day business of the Company,
except as provided in the
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Certificate of Formation, the Act or this Agreement. The Managing Member shall
diligently and faithfully devote such of its time to the business of the Company
as may be reasonably necessary to conduct its business and shall act at all
times in a fiduciary manner toward the Company and the Members.
4.2 PARTICIPATION OF OTHER MEMBERS IN BUSINESS AND AFFAIRS OF THE
COMPANY. No Member, other than the Managing Member, shall have any authority or
right to act for or bind the Company or to participate in or have any control
over Company business, except for such rights to consent to or approve of the
actions and decisions as are expressly provided for in this Agreement or in the
Act.
4.3 COMPENSATION OF MEMBERS.
(a) Except for the allocations and distributions with respect
to its Interest provided herein and the provisions of this Section 4.3, no
Member, in its capacity as such, shall receive any fee, salary, reimbursement or
other compensation for serving as a Member.
(b) The Managing Member shall be fully and entirely reimbursed
by the Company for any and all actual, reasonable and necessary out-of-pocket
expenses incurred by the Managing Member on behalf of the Company.
4.4 OTHER BUSINESS OF MEMBERS. Any Member (including the Managing
Member) and any affiliate of a Member may engage in or possess an interest in
other business ventures of any nature or description independently or with
others, and neither the Company nor any Member shall have any rights in or to
such independent ventures or the income or profits derived therefrom, and such
activities shall not be construed as a breach of any duty of loyalty or other
duty to the other Members, in their capacity as Members, or the Company.
4.5 INDEMNIFICATION OF MANAGING MEMBER.
(a) Each person who is or was a Managing Member of the
Company, and the heirs, executors, administrators or estate of each such person
as well as such employees or agents of the Company as determined by the Managing
Member, shall be indemnified, with respect to having acted in such capacity, by
the Company to the full extent permitted or authorized by the general
corporation laws of the State of Delaware now or hereafter in force, including
the advance of expenses under the procedures provided by such laws, applied as
if the Company were a corporation. No amendment of this Agreement shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal. The Company may, but
shall not be obligated to, maintain insurance, at its expense, for its benefit
in respect of such indemnification and that of any such person whether or not
the Company would otherwise have the power to indemnify such person. The
indemnification shall be payable solely to the extent of the assets of the
Company and no Member shall have any personal liability therefor.
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(b) To the fullest extent permitted by Delaware statutory or
decisional law, as amended or interpreted, to the extent not prohibited by
Delaware law, as applied as if the Company were a corporation, the Managing
Member shall not be personally liable to the Company or the other Members for
money damages. No amendment of this Agreement shall limit or eliminate the
benefits provided to the Managing Member under this provision with respect to
any act or omission that occurred prior to such amendment.
4.6 COMPANY DEBT LIABILITY. A Member will not be personally liable for
any debts, obligations or liabilities of the Company beyond the amount of the
Capital Contribution(s) of such Member, except as otherwise required by law;
provided, however, that Xxxxxx shall be personally obligated for the debts,
obligations or liabilities of the Company to the extent that same are
attributable to any working interest in any oil or gas property owned by the
Company or NEG Operating LLC, including Xxxxx National LLC, its wholly owned
subsidiary, and are incurred while the Company is the Managing Member thereof.
4.7 DISTRIBUTION LIABILITY. A Member who receives a distribution
pursuant to Section 6.4 is liable to the Company only to the extent now or
hereafter provided by the Act.
ARTICLE V
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
5.1 MEMBERS' CAPITAL CONTRIBUTIONS. As of the Effective Date, (i) NEG
has made the Capital Contribution described for that Member in Exhibit 5.1, and
(ii) the Managing Member has contributed the Capital Contribution at the time
and on the terms specified in Exhibit 5.1.
5.2 ADDITIONAL CONTRIBUTIONS. Notwithstanding any other provision in
this Agreement, Xxxxxx or its Affiliates shall have the right to make additional
Capital Contributions to be valued at their then current fair market value and
if not then a Member to be admitted as a Member.
5.3 CAPITAL ACCOUNTS.
(a) The Company shall establish and maintain a separate
Capital Account for each Member. Each Member's Capital Account will be increased
by (i) the amount of all Capital Contributions permitted to be made and made by
such Member to the Company, (ii) allocations to such Member of Profits, and
(iii) the amount of any Company liabilities assumed by such Member or which are
secured by any Property distributed to such Member. Each Member's Capital
Account will be decreased by (i) the amount of all Distributions made to such
Member, (ii) allocations to such Member of Losses, and (iii) the amount of any
liabilities of such Member assumed by the Company or which are secured by any
property contributed by such Member to the Company.
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(b) Upon a distribution of cash or Property by the Company to
a Member as consideration for an interest in the Company, Capital Accounts will
be adjusted to reflect a revaluation of the Company's Property to fair market
value pursuant to the principles set forth in Sections 1.704-1(b) (2) (iv) (f)
and (g) of the Treasury Regulations.
(c) Upon the distribution by the Company of Property to
Members (whether in connection with the liquidation of the Company or
otherwise), Capital Accounts shall be adjusted pursuant to the principles of
Section 1.704-1(b)(2)(iv)(e) of the Treasury Regulations to reflect the manner
in which the unrealized income, gain, loss and deduction inherent in such
Property (that has not been reflected in Capital Accounts previously) would be
allocated among the Members if such Property were sold for its fair market value
(as determined by the Members or, in the case of the liquidation of the Company,
as determined by the Liquidating Trustees).
(d) Subject to Section 10.2, upon liquidation of the Company,
liquidating distributions will be made in accordance with the positive Capital
Account balances of the Members as determined after taking into account all
Capital Account adjustments for the Company's taxable year during which the
liquidation occurs. Liquidation proceeds will be paid in accordance with Section
10.2.
(e) Except as otherwise required in the Act (and subject to
Sections 5.1 and 5.2), no Member shall have any liability to restore all or any
portion of a deficit balance in such Member's Capital Account.
(f) The manner in which Capital Accounts are to be maintained
pursuant to this Section 5.3 is intended to comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations promulgated thereunder
and is intended to properly reflect each Member's "interest in the partnership"
pursuant to such Treasury Regulations. If, in the opinion of the Company's
accountants or the Tax Matters Partner, the manner in which Capital Accounts are
to be maintained pursuant to the preceding provisions of this Section 5.3 should
be modified in order to comply with Section 704(b) of the Code and the Treasury
Regulations promulgated thereunder and in order to properly reflect each
Member's "interest in the partnership" then, notwithstanding anything to the
contrary contained in the preceding provisions of this Section 5.3, the method
in which Capital Accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining Capital Accounts shall not
materially alter the economic agreement between or among the Members.
5.4 REDEMPTION. Xxxxxx shall, in it sole discretion, have the right at
any time to purchase, or to cause the Company to purchase, NEG's Interest in the
Company for an amount equal to the fair market value of NEG's Interest
determined as if the Company had sold all of its assets for fair market value
and liquidated.
5.5 INTEREST ON CAPITAL CONTRIBUTIONS. Except as otherwise provided
herein, no Member shall be entitled to interest on its Capital Contributions.
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ARTICLE VI
ALLOCATIONS, DISTRIBUTIONS AND GUARANTEED PAYMENTS
6.1 ALLOCATIONS OF PROFITS AND LOSSES.
(a) For purposes of this Agreement, "Profits" and "Losses"
mean, for each Fiscal Year, an amount equal to the Company's taxable income or
loss, respectively, for such Fiscal Year 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:
(i) Any income of the Company that is exempt from
Federal income tax and not otherwise taken into account in computing
Profits and Losses pursuant to this definition shall increase such
taxable income or decrease such losses, as the case may be;
(ii) Any expenditure of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits and Losses pursuant to this definition, shall reduce such
taxable income or increase such taxable loss, as the case may be;
(iii) In the case of property contributed to the
Company by a Member, items of depreciation, cost recovery, amortization
and gain or loss with respect to such property shall be computed and
included in the computation of Profits and Losses in the same manner as
such items would be computed if the adjusted tax basis of such property
were equal to its fair market value on the date of its contribution to
the Company, all in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(g); and
(iv) For each Fiscal Year of the Company, Special
Deductions shall not be taken into account in computing Profits and
Losses.
(b) For each Fiscal Year of the Company Profits shall be
allocated as follows:
(i) First, to NEG in accordance with the aggregate
Losses previously allocated to NEG under Section 6.1(c)(ii) of this
Agreement, in an amount equal to the excess of such previously
allocated Losses over any Profits previously allocated under this
Section 6.1(b)(i);
(ii) Second, to Xxxxxx in accordance with the
aggregate Losses previously allocated to Xxxxxx under Section 6.1
(c)(i). of this Agreement, in an amount equal to the excess of such
previously allocated Losses over any Profits previously allocated under
this Section 6.1(b)(ii);
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(iii) Third, Profits shall be allocated 5% to Xxxxxx
and 95% to NEG until the aggregate amount of Profits allocated to NEG
pursuant to this Section 6.1(b)(iii) is equal to the Excess Allocation
Amount;
(iv) Fourth, to Xxxxxx in the amount equal to the
aggregate amount of Special Deductions, reduced by any Profits
previously allocated to Xxxxxx under this Section 6.1(b)(iv);
(v) Fifth, to Xxxxxx in the amount equal to the sum
of the aggregate amount of Guaranteed Payments and the Accrued Xxxxxx
Amount, reduced by any Profits previously allocated to Xxxxxx under
this Section 6.1(b)(v);
(vi) Sixth, Profits shall be allocated 95% to Xxxxxx
and 5% to NEG until the aggregate amount allocated to Xxxxxx pursuant
to this Section 6.1(b)(vi) is equal to the Excess Allocation Amount;
(vii) Seventh, Profits shall be allocated to Xxxxxx
and NEG in accordance with the ratio of their respective Capital
Contributions.
(c) For each Fiscal Year of the Company Losses shall be
allocated as follows:
(i) First, to Xxxxxx until the Capital Account of
Xxxxxx is reduced to zero;
(ii) Second, to NEG until the Capital Account of NEG
is reduced to zero.
(d) For purposes of this Agreement, the Company shall treat
the accrual of each Guaranteed Payment as a deductible "guaranteed payment"
within the meaning of Section 707(c) of the Code.
(e) Upon the liquidation or dissolution of the Company, the
admission of a Member in connection with the Capital Contribution of money or
other property to the Company in exchange for an interest in the Company, a
Distribution of money or other property by the Company to a Member in exchange
for an interest in the Company, or as determined by the Company in accordance
with generally accepted industry accounting practices, the following shall be
deemed to occur:
(i) The Company shall be deemed to have sold its
remaining assets immediately before such liquidation, dissolution,
Capital Contribution, Distribution or determination for their fair
market value;
(ii) The resulting Profit or Loss shall be allocated
to the Capital Accounts of the Members in accordance with this Section
6.1; and
(iii) For purposes of Section 6.1(b) and Section
6.1(c) hereof, the Fiscal Year of the Company shall close and a new
Fiscal Year of the Company shall commence.
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(f) Except as otherwise provided in this Section 6.1(f) or as
required by the Code, the Company's taxable income or loss (or items of income,
gain, loss or deduction) as determined for federal income tax purposes shall be
allocated in accordance with the allocation of Profits and Losses (or items of
income, gain, loss or deduction). Solely for federal, state and local income tax
purposes, a Member's distributive share of depreciation, depletion,
amortization, gain or loss with respect to the assets of the Company, subject to
revaluation pursuant to Section 6.1(e) hereof or assets contributed to the
Company, shall be determined so as to take into account the difference between
adjusted tax basis and book value of such assets in the same manner as under
Section 704(c) of the Code.
6.2 SPECIAL ALLOCATION PROVISIONS. The following special allocations
shall be made in the following order:
(a) Qualified Income Offset. A Member who unexpectedly
receives any adjustment, allocation or distribution described in Treasury
Regulation Section 1.704-1 (b)(2)(ii)(d)(4), (5) or (6) will be specially
allocated items of income or gain (consisting of a pro rata portion of each item
of Company income, including gross income, and gain for such year) in an amount
and manner sufficient to eliminate any resulting deficit balance in its Capital
Account as quickly as possible. This Section 6.2 is intended to satisfy the
provisions of Treasury Regulation Section 1 .704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(b) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year, each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible; provided that an allocation pursuant to this
Section 6.2 shall be made only if and to the extent that such Member would have
a deficit Capital Account in excess of such sum after all other allocations
provided for in this Agreement have been made as if Section 6.2(a) hereof and
this Section 6.2(b) were not in the Agreement.
(c) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company asset pursuant to Sections 734(b) or
743(b) of the Code is required, pursuant to Sections 1.704-1 (b)(2)(iv)(m)(2) or
1.704-1 (b)(2)(iv)(m)(4) of the Treasury Regulations, to be taken into account
in determining Capital Accounts as the result of a Distribution to a Member in
complete liquidation of its interest in the Company, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event Treasury
Regulation Section 1.7O4-1(b)(2)(iv)(m)(2) applies, or to the Member to whom
such Distribution was made in the event Treasury Regulation Section 1.704-1
(b)(2)(iv)(m)(4) applies.
(d) Nonrecourse Debt. If the Company directly or indirectly
incurs nonrecourse liabilities within the meaning of Treasury Regulation Section
1.704-2, the Managing Member shall have the right, in its reasonable discretion,
to amend this Agreement to the extent necessary to comply with the requirements
of Treasury Regulation Section 1.704-2, including the requirement that the
Agreement contain a minimum gain chargeback requirement pursuant to
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Treasury Regulation Section 1.704-2(e)(3). In making any such amendment, the
Managing Member shall, to the extent possible, not distort the economic
arrangement of the Members.
(e) Curative Allocations. The allocations set forth in
Sections 6.2(a), 6.2(b), 6.2(c), and 6.2(d) hereof (the "Regulatory
Allocations") are intended to comply with certain requirements of Section
1.704-1(b) of the Treasury Regulations. The Regulatory Allocations may not be
consistent with the manner in which the Members intend to allocate Profits and
Losses or to make Company Distributions. Accordingly, notwithstanding the
provisions of Sections 6.1 and 6.4 herein, but subject to the Regulatory
Allocations, the Managing Member is hereby directed to reallocate, in its
discretion in any reasonable manner and taking into account likely future
offsetting Regulatory Allocations, items of income, gain, deduction and loss, or
Code Section 705(a)(2)(B) expenditures, or Profits or Losses, among the Members
so as to eliminate the effect of the Regulatory Allocations and thereby to cause
the Members' respective Capital Accounts to be in the amounts (or as close
thereto as possible) they would be if Profits and Losses and all other items of
income, gain, deduction or loss were allocated without reference to the
Regulatory Allocations. The Members intend that the allocation provisions of
this Section 6.2 will produce Capital Account balances of the Members that will
cause liquidating distributions made in accordance with such Capital Account
balances to conform with the Distribution scheme set forth in Section 6.4. To
the extent this does not happen, such allocation provisions shall be amended,
and items of income and loss of the Company for prior open years may be
reallocated, by the Managing Member if and to the extent necessary to produce
this result.
(f) Notwithstanding any other provision of this Article 6,
income, gain, loss and deduction with respect to Property contributed to the
Company by a Member shall be shared among the Members pursuant to Section 704(c)
of the Code so as to take account of any variation between the tax basis of the
Property so contributed and its fair market value at the time of contribution.
In the event that Capital Accounts are adjusted to reflect a revaluation of the
Company's Property to fair market value in accordance with Section 5.3(b),
income, gain, loss and deduction shall be shared among the Members pursuant to
the principles set forth in Section 704(c) of the Code so as to take account of
any variation between the tax basis of the Company's Property and the fair
market value of such Property at the time that Capital Accounts are adjusted.
6.3 SPECIAL DEDUCTIONS. For each Fiscal Year the Company's deductions
for the Guaranteed Payments, intangible drilling and development costs and the
management fee paid to NEG by NEG Operating LLC shall be specially allocated to
Xxxxxx, provided, however, that no special allocation shall be made pursuant to
this Section 6.3 to the extent such allocation would cause Xxxxxx to have a
negative Capital Account. The Managing Member shall, in its sole discretion (i)
allocate the adjusted basis of each Company oil and gas property to the members
in accordance with Section 613A(c)(7)(D) of the Code and Treasury Regulation
Sections 1.613A-3(e)(5) and 1.704-1(b)(4)(v) and (ii) choose the depletion
method for purposes of computing Capital Accounts. The excess of (i) the
depletion deductions that reduce Xxxxxx'x Capital Account for the Fiscal Year,
over (ii) the depletion deductions that would have reduced Xxxxxx'x Capital
Account had the adjusted basis of the Company's oil and gas properties been
allocated in
13
accordance with the Members' percentage interest in Profits for such year, shall
be treated as an item specially allocated to Xxxxxx.
6.4 DISTRIBUTIONS. Provided that full payment of all outstanding
Guaranteed Payments (including the annual return on any unpaid Guaranteed
Payments pursuant to Section 6.5 of this Agreement) has been made, Distributions
shall be made to the Members as follows:
(a) Distributions of an aggregate amount equal to the NEG
Priority Amount shall be made to NEG on or before November 1, 2006;
(b) After the Company has distributed the full amount of
Distributions required by Section 6.4(a) hereof, Distributions equal to the
Redemption Amount shall be made to Xxxxxx;
(c) After the Company has distributed the full amount of
Distributions required by Section 6.4(a) and Section 6.4(b) hereof,
Distributions shall be made to the Members in accordance with their respective
Capital Accounts after taking into account the allocation of Profits and Losses
under this Agreement.
6.5 GUARANTEED PAYMENTS. No later than three (3) days before the end of
any Semi-Annual Period, the Company shall pay NEG an amount equal to the
Guaranteed Payment for such Semi-Annual Period. Such payment shall be paid in
cash. If the Company does not have a sufficient amount of cash with which to pay
NEG the amount of the Guaranteed Payment, the Company shall pay NEG in the form
of property (or a mixture of cash and property) with a fair market value equal
to the amount of the Guaranteed Payment. In the event that, in the reasonable
discretion of the Managing Member, the Company is unable to pay a portion, or
all, of a Guaranteed Payment pursuant to this Section 6.5, the Company shall
accrue the Guaranteed Payment, or unpaid portion thereof, in which case the
right of NEG to receive the Guaranteed Payment shall be cumulative. Any amount
of Guaranteed Payments not paid to NEG at least ten days before the end of the
Semi-Annual Period with respect to which the Guaranteed Payment is computed
shall bear an annual return of 10.75%, compounded semi-annually. The Company
shall pay such annual return to NEG in the same manner as other amounts paid
pursuant to this Section 6.5. Amounts paid pursuant to this Section 6.5,
including the annual return on unpaid Guaranteed Payments, are intended to
constitute "guaranteed payments" within the meaning of Code Section 707(c) and
shall not be treated as Distributions for purposes of computing the recipient's
Capital Accounts.
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ARTICLE VII
TAXES
7.1 ELECTIONS. The Tax Matters Partner is authorized and required to
represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including resulting
judicial and administrative proceedings, and to expend Company funds for
professional services and costs associated therewith. In its capacity as Tax
Matters Partner, the Tax Matters Partner shall oversee the Company tax affairs
in the overall best interests of the Company. The Tax Matters Partner may make
any tax elections for the Company allowed under the Code, the Treasury
Regulations or any Law of any state or other jurisdiction having taxing
jurisdiction over the Company. Accordingly, the Tax Matters Partner is
authorized to select among the reasonable methods described in Treasury
Regulation Section 1.704-3 by which the Company will allocate income, gain, loss
and deduction with respect to property contributed by a Member to the Company so
as to take into account any variation between the adjusted tax basis of the
property and its fair market value at the time of contribution.
7.2 TAX MATTERS PARTNER. The Managing Member shall be designated as the
Tax Matters Partner pursuant to Section 6231(a)(7) of the Code. The Member
designated as Tax Matters Partner shall take such action as may be necessary to
cause each such other Member to become a notice partner within the meaning of
Section 6223 of the Code.
7.3 TAXABLE YEAR. The taxable year of the Company shall be the calendar
year.
ARTICLE VIII
TRANSFERABILITY
8.1 MEMBERSHIP INTEREST. No Member shall have the right to, directly or
indirectly, sell, assign, transfer, exchange or otherwise dispose of for
consideration; gift, bequeath or otherwise dispose of for no consideration; or
mortgage, pledge, hypothecate, create a lien on or security interest in, or
otherwise encumber (collectively, "Transfer") all or any part of its Membership
Interest absent the unanimous written consent of the Members, which consent may
be withheld by any Member in its sole and absolute discretion, except for a
transfer of all or a part of such Membership Interest to any of such Member's
Affiliates, in which case Article IX hereof shall be inapplicable as a Member to
the admission of such Affiliate which shall be so admitted. Each Member hereby
acknowledges the reasonableness of the restrictions on Transfer of Membership
Interests imposed by this Section 8.1 in view of the Company's purpose and the
relationship of the Members. Accordingly, the restrictions on Transfer of
Membership Interests contained in this Section 8.1 shall be specifically
enforceable. Any purported or attempted Transfer of a Membership Interest not
made in accordance with the terms and provisions of this Section 8.1 shall be
null and void and of no effect.
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8.2 ECONOMIC INTEREST. No Member shall have the right to, directly or
indirectly, Transfer all or any part of its Economic Interest absent the
unanimous written consent of the Members, which consent may be withheld by any
Member in its sole and absolute discretion, except for a transfer of all or a
part of such Economic Interest to any of such Member's Affiliates. Each Member
hereby acknowledges the reasonableness of the restrictions on Transfer of
Economic Interests imposed by this Section 8.2 in view of the Company's purpose
and the relationship of the Members. Accordingly, the restrictions on Transfer
of Economic Interests contained in this Section 8.2 shall be specifically
enforceable. Any purported or attempted Transfer of an Economic Interest not
made in accordance with the terms and provisions of this Section 8.2 shall be
null and void and of no effect.
ARTICLE IX
ADMISSION OF NEW MEMBERS;
MANAGING MEMBER
9.1 ADMISSION. The Members shall have the right, and, unless otherwise
permitted by this Agreement, upon the unanimous written consent of the Members
and by delivery of a written notice to the Company (the "New Member Notice"), to
cause the Company to admit as a Member any Person (the "New Member") the Members
so designate. The Company, upon its receipt of the New Member Notice, shall
promptly admit the New Member as a Member by issuing the New Member a Membership
Interest for such consideration paid to the Company as the Members shall specify
in the New Member Notice. The Company's obligation to admit the New Member as a
Member shall be conditioned upon the New Member having executed and delivered to
the Company an agreement whereby the New Member agrees to be bound by all of the
terms and provisions of this Agreement relating to Members.
9.2 MANAGING MEMBER There shall be a Managing Member of the Company,
which Managing Member shall have the power and duties equivalent to the power
and duties of a corporate board of directors. At anytime, but in no event less
frequently than once each calendar year, the members shall vote upon whether the
Managing Member shall be replaced and if so to select a new Managing Member.
It shall require the vote of the holders of more than 50% of the votes which can
be cast by all members to replace the Managing Member (and to elect a successor
Managing Member), who shall cease being the Managing Member once the successor
has been elected, but not before then. The Members shall vote in proportion to
their Membership interests, except that so long as NEG has a Membership interest
in the Company, it shall have a vote of not less than 50% of all Membership
interests entitled to vote on such selection.
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ARTICLE X
DISSOLUTION AND LIQUIDATION
10.1 DISSOLUTION.
(a) The Company shall be dissolved and its affairs wound up
upon the earliest to occur of the following events:
(i) the expiration of the period fixed for the
duration of the Company pursuant to Section 2.4;
(ii) the unanimous written consent of all Members;
(iii) the disability, death, retirement, resignation,
expulsion, Bankruptcy or dissolution of any Member or the occurrence of
any other event which terminates such Member's continued membership in
the Company; or
(iv) the occurrence of any other event that, under
the Act, would cause the dissolution of the Company or that would make
it unlawful for the business of the Company to be continued.
(b) Upon the occurrence of any event causing dissolution under
Section 10.1(a)(iii), the Membership Interest of the applicable Member shall
automatically convert to solely an Interest and shall remain as solely an
Economic Interest throughout the liquidation and winding up process of the
Company.
(c) As soon as possible after the occurrence of an event
causing dissolution under Section 10.1(a), the Company shall make all
appropriate filings with the Secretary of State of Delaware.
10.2 LIQUIDATION.
(a) Upon the occurrence of an event causing dissolution under
Section 10.1 and subsequent to any conversion under Section 10.1(b), each Member
maintaining a Membership Interest shall act as a Liquidating Trustee.
(b) As soon as possible after the occurrence of an event
causing dissolution under Section 10.1, an accounting shall be made by the
Company's independent accountants of the accounts of the Company and of the
Company's assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Liquidating Trustees shall then
proceed without any unnecessary delay to wind up the affairs of the Company.
(c) If the Company is being dissolved and its affairs are
being wound up, the Liquidating Trustees shall:
17
(i) Sell or otherwise liquidate all of the Company's
assets as promptly as practicable (except to the extent the Liquidating
Trustees may determine to distribute any Property to the Members in
kind);
(ii) Allocate any Profit, Gain from Sale, or Loss
resulting from such sales to the Members' Capital Accounts in
accordance with Article V;
(iii) Discharge all liabilities of the Company,
including liabilities to Members who are also creditors, to the extent
otherwise permitted by law, other than liabilities to Members for
distributions and the return of capital, and establish such Reserves as
may be reasonably necessary to provide for contingent liabilities of
the Company (for purposes of determining the Capital Accounts of the
Members, the amounts of such Reserves shall be deemed to be an expense
of the Company); and
(iv) Distribute the remaining assets in accordance
with the positive balance (if any) of each Member's Capital Account (as
determined after taking into account all Capital Account adjustments
for the Company's taxable year during which the liquidation occurs).
Any such distributions shall be made either in cash or in Property, as
determined by the Liquidating Trustees, with any assets distributed in
Property being valued for this purpose at their fair market value.
(d) The Liquidating Trustees shall have and may exercise all
of the powers conferred upon the Members under the terms of this Agreement to
the extent necessary or desirable in the good faith judgment of the Liquidating
Trustees to carry out the duties and functions of the Liquidating Trustees
hereunder.
10.3 REASONABLE TIME FOR WINDING UP. A reasonable time shall be allowed
for the orderly winding up of the business and affairs of the Company and the
liquidation of its assets pursuant to Section 10.2 in order to minimize any
losses otherwise attendant upon such a winding up, provided that the liquidation
is carried out in conformity with the timing requirements of
Section 1.704-1(b)(2)(ii)(b) and (g) of the Treasury Regulations.
10.4 PURCHASE OF ASSETS BY MEMBER. Any Member shall have the right to
bid for and purchase Company Property to be sold by the Liquidating Trustees
pursuant to Section 10.2.
10.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as
provided by law, upon dissolution, each Member shall look solely to the assets
of the Company for the return of its Capital Contribution and/or Distributions.
If the assets of the Company remaining after the payment or discharge of the
debts and liabilities of the Company are insufficient to return the cash
contribution of one or more Members or to make Distributions under this
Agreement, such Member or Members shall have no recourse against any other
Member.
10.6 ARTICLES OF DISSOLUTION. When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been made
therefor and all of the remaining assets of the Company have been distributed to
the Members, articles of dissolution shall be executed and filed in accordance
with the Act.
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10.7 TERMINATION OF COMPANY. The Company shall terminate when (i) all
of the Property of the Company shall have been converted into cash; (ii) the net
proceeds therefrom, as well as any other assets of the Company, after payment of
or due provision for all debts, liabilities and obligations of the Company,
shall have been distributed to the Members as provided in Section 10.2; and
(iii) the articles of dissolution shall have been executed and filed in
accordance with the Act.
10.8 WAIVER OF RIGHT TO COURT DECREE OF DISSOLUTION. Each Member agrees
that irreparable damage would be done to the good will and business affairs of
the Company if any Member should bring an action in court to dissolve the
Company. Accordingly, each Member hereby waives and renounces its right to a
court decree of dissolution or to seek the appointment by a court of a receiver
and/or liquidator for the Company under the Act or any other applicable law,
except as may be sought by the Company itself.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
deemed to have been sufficiently given or served for all purposes if delivered
personally to the party to whom the same is directed or, if sent by registered
or certified mail, postage and charges prepaid, addressed to the address
contained in the records of the Company. Any such notice shall be deemed to be
given three Business Days after the date on which the same was deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and sent as aforesaid.
11.2 BOOKS OF ACCOUNT AND RECORDS. Proper and complete records and
books of account shall be kept in which all information required under the Act
and such other information relating to the Company's business shall be entered
fully and accurately in such detail and completeness as is customary and usual
for businesses of the type engaged in by the Company. The books and records
shall at all times be maintained at the registered office of the Company and
shall be subject to inspection and copying at the reasonable request, and at the
expense, of any Member during ordinary business hours. For so long as NEG is a
member of the Company, the financial statements of the Company and that of NEG
Operating LLC, including any subsidiary entities thereof, shall be audited by
the same firm of independent public accountants which act as independent
accountants for NEG, provided, however, that should at any time such firm be
unacceptable to the Managing Member, the Managing Member shall give written
notice to NEG of such unacceptability and NEG shall choose another firm of
independent public accountants who shall become the auditor, subject to the
approval of the Managing Member, whose approval shall not be unreasonably
withheld.
11.3 APPLICATION OF DELAWARE LAW. This Agreement, and the application
of interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Delaware, and specifically, the Act.
19
11.4 WAIVER OF ACTION FOR PARTITION. FOR so long as the Company is in
existence, each Member irrevocably waives during the term of the Company any
right that it may have to maintain any action for partition with respect to the
assets of the Company.
11.5 ENTIRE AGREEMENT AND AMENDMENTS.
(a) This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof. This Agreement may
only be modified or amended by the unanimous written consent of all Members,
provided, however, that no amendments under this Section 11.5 shall (i) impose
any additional financial obligations or liabilities upon any Member without the
prior written consent of that Member, or (ii) materially and adversely affect
the amount of Distributions which any Member is entitled to receive, without the
prior written consent of the affected Member.
(b) Notwithstanding Section 11.5(a), this Agreement may be
amended by the Managing Member without the consent or approval of the Members:
(i) To reflect changes in Capital Accounts and
Interests caused by additional Capital Contributions, defaults, and
withdrawals;
(ii) To preserve the legal status of the Company as a
limited liability company and classification as a partnership under
applicable Delaware and federal laws, if such amendment does not change
the substance of this Agreement;
(iii) To satisfy the requirements of the Code and
regulations thereunder with respect to investment partnerships or of
any federal or state securities laws or regulations, if such amendment
does not adversely affect the interests of the Members and is necessary
or appropriate as reasonably determined by the Managing Member. Any
amendment under this subsection (iii) shall be effective as of the date
of this Agreement; or
(iv) Upon advice of the accountants or counsel for
the Company, to amend Article VI and restate the Capital Accounts of
the Members to comply with the income tax regulations promulgated by
the IRS for Section 704 of the Code relating to the allocations of
profits and losses among partners and the administrative and judicial
interpretations thereof; provided, however, that no amendment shall be
made pursuant to this subsection which would cause a material adverse
change in the economic benefits to the Members without the consent of
the Members.
(c) Nothing in this Section 11.5 shall prevent the Managing
Member from amending or supplementing this Agreement in order to (i) cure any
ambiguity or (ii) correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, provided that any
such amendment or supplement is not adverse to any Member.
20
11.6 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any law, rule or regulation.
11.7 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.
11.8 HEADINGS. The headings in this Agreement are inserted 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 provision hereof.
11.9 WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
11.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
11.11 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, successors and assigns.
11.12 CREDITORS. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Company.
11.13 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
11.14 NO THIRD PARTY BENEFICIARIES. Except as may be expressly provided
for herein, no Person not a party hereto shall have any rights or obligations
hereunder.
11.15 NO PARTNERSHIP INTENDED FOR NON-TAX PURPOSES. The Members have
formed the Company under the Act and expressly do not intend hereby to form a
partnership under Delaware law. The Members do not intend to be partners one to
another, or to any third party.
21
This Operating Agreement is executed as of the date first above
mentioned.
NATIONAL ENERGY GROUP, INC.
/s/ XXX X. XXXXXXXXX
----------------------------------------
By: Xxx X. Xxxxxxxxx
Title: CEO
XXXXXX PARTNERS
By: Astral Gas Corp, Partner
/s/ XXXXXX X. XXXXXXX
----------------------------------------
By: Xxxxxx X. Xxxxxxx
Title: President
[Signature Page to the NEG Holding LLC Operating Agreement]
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EXHIBIT 5.1
CAPITAL CONTRIBUTIONS
NATIONAL ENERGY GROUP, INC.
1. All of National Energy Group, Inc.'s undivided right, title and
interest in and to 100% of its oil and natural gas properties, and all
associated oil, gas and/or mineral leases and any ratifications and/or
amendments to such leases.
XXXXXX PARTNERS
1. All of Xxxxxx Partners' right, title and interest in the sole
membership interest in Xxxxx National LLC, a Delaware limited liability
company; and
2. That certain Revolving Note in the amount of $10,939,750 by National
Energy Group, Inc. dated August 1, 2001; and
3. Cash in the amount of Seventy-Five Million One Hundred Sixty Thousand
Two Hundred and Fifty Dollars ($75,160,250).
