AMENDED AND RESTATED OPERATING AGREEMENT OF TEKOIL AND GAS GULF COAST, LLC formerly known as MASTERS ACQUISITION CO., LLC May 11, 2007
Exhibit
10.38
AMENDED
AND RESTATED OPERATING AGREEMENT
OF
TEKOIL
AND GAS GULF COAST, LLC
formerly
known as MASTERS ACQUISITION CO., LLC
May
11,
2007
THE
MEMBERSHIP INTERESTS CREATED BY THIS OPERATING AGREEMENT ARE NOT INTENDED TO
CONSTITUTE SECURITIES. TO THE EXTENT THESE MEMBERSHIP INTERESTS ARE CONSTRUED
TO
BE SECURITIES, THEN SUCH SECURITIES REPRESENTED BY THIS OPERATING AGREEMENT
HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED
NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR
HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL
SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER
OF
ANY SECURITIES REPRESENTED BY THIS OPERATING AGREEMENT IS FURTHER SUBJECT TO
OTHER RESTRICTIONS, TERMS AND CONDITIONS.
AMENDED
AND RESTATED OPERATING AGREEMENT
OF
TEKOIL
AND GAS GULF COAST, LLC
formerly
known as MASTERS ACQUISITION CO., LLC
In
accordance with the Delaware Limited Liability Company Act and subject to the
Certificate of Formation, which was filed on January 17, 2007 with the Delaware
Secretary of State, the members listed on Exhibit
A,
and
such other persons or entities who from time to time are signatories hereto
(the
"Members"),
adopt
the following Amended and Restated Operating Agreement (this "Agreement")
regarding the conduct of the business and affairs of Tekoil and Gas Gulf Coast,
LLC, a Delaware limited liability company formerly known as Masters Acquisition
Co., LLC (the "Company").
WITNESSETH:
WHEREAS,
Tekoil & Gas Corporation, a Delaware corporation ("Tekoil"),
as
the sole member of the Company, formed the Company as a limited liability
company named "Masters Acquisition Co., LLC" under the Delaware Limited
Liability Company Act;
WHEREAS,
Tekoil, as the sole member of the Company, adopted an Operating Agreement on
January 17, 2007 (the "Original
Agreement"),
in
order to set forth the regulations, terms and conditions under which the Company
would be operated;
WHEREAS,
on January 26, 2007, the Company effected a name change, changing the name
of
the Company to "Tekoil and Gas Gulf Coast, LLC";
WHEREAS,
effective as of the date hereof, in connection with that certain Credit Facility
(as defined below), the Company is issuing to Xxxxxxx, Xxxxx & Co.
("Goldman")
a
Membership Interest (as defined below) having the Membership Percentage (as
defined below) set forth next to Xxxxxxx'x name on Exhibit A hereto and is
admitting Goldman as a member of the Company; and
WHEREAS,
the Members now desire to amend and restate the Original Agreement in its
entirety and set forth herein the regulations, terms, and conditions under
which
the Company will be operated by adopting this Agreement.
NOW,
THEREFORE, set forth below are the regulations, terms and conditions of the
operation of the Company.
ARTICLE
I -
DEFINED TERMS; EXHIBITS, ETC.
1.1 Definitions.
As
used
in this Agreement, the following terms shall have the respective meanings
indicated below:
"Act"
means
the Delaware Limited Liability Company Act, as the same may be amended from
time
to time.
1
"Adjusted
Capital Account Deficit"
means,
with respect to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the relevant Fiscal Year, after giving effect
to the following adjustments:
(a) Decrease
such deficit by any amounts which such Member is obligated or deemed obligated
to restore pursuant to this Agreement or the penultimate sentence of each of
Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5). For these purposes, a
Member is obligated to restore an amount to the Company to the extent (i) the
Member is unconditionally obligated to restore part or all of its negative
Capital Account balance in the manner described in Regulation Section
1.704-1(b)(2)(ii)(b)(3), or (ii) the Member is unconditionally obligated to
contribute capital to the Company; and
(b) Increase
such deficit by the items described in Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The
foregoing definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Affiliate"
means
any Person who or which, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with
an
entity (the term "control"
for
purposes of this definition meaning the ability, whether by ownership of shares
or other equity interests, by contract or otherwise, to elect a majority of
the
directors of a corporation, to select the managing or general partner of a
partnership, or otherwise to select, or have the power to remove and then
select, a majority of those Persons exercising governing authority over an
entity).
"Agreement"
means
this Amended and Restated Operating Agreement, as originally executed and as
amended, modified, supplemented or restated from time to time, as the context
requires.
"Bankrupt
Member" means
any
Member (a) that (i) makes a general assignment for the benefit of creditors;
(ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an
order for relief or is declared insolvent in any federal or state bankruptcy
or
insolvency proceedings; (iv) files a petition or answer seeking for the Member
a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law; (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against the Member in a proceeding of the type described in subclauses
(i)
through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces
in the appointment of a trustee, receiver, or liquidator of the Member's or
of
all or any substantial part of the Member's properties; or (b) against
which, a proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any law has
been
commenced and sixty (60) days have expired without dismissal thereof or with
respect to which, without the Member's consent or acquiescence, a trustee,
receiver, or liquidator of the Member or of all or any substantial part of
the
Member's properties has been appointed and sixty (60) days have expired without
the appointments having been vacated or stayed, or sixty (60) days have expired
after the date of expiration of a stay, if the appointment has not previously
been vacated.
2
"Business
Day"
means
any day on which banks are open for business in New York, New York.
"Capital
Account"
means,
with respect to any Member, the separate "book" account which the Company shall
establish and maintain for each Member in accordance with Section 704(b) of
the
Code and Regulation Section 1.704-1(b)(2)(iv) and such other provisions of
Regulation Section 1.704-1(b) that must be complied with in order for the
Capital Accounts to be determined in accordance with the provisions of the
Regulations. In furtherance of the foregoing, the Capital Accounts shall be
maintained in compliance with Regulation Section 1.704-1(b)(2)(iv), and the
provisions hereof shall be interpreted and applied in a manner consistent
therewith. For purposes of computing the Members' Capital Accounts, Simulated
Depletion Deductions, Simulated Gains and Simulated Losses shall be allocated
among the Members in the same proportions as they (or their predecessors in
interest) were allocated the basis of Company oil and gas properties pursuant
to
Code Section 613A(c)(7)(D), the Regulations thereunder and Regulations Section
1.704-1(b)(4)(v). In accordance with Code Section 613A(c)(7)(D), the Regulations
thereunder and Regulations Section 1.704-1(b)(4)(v), the adjusted basis of
all
oil and gas properties shall be allocated among the Members in accordance with
their respective Membership Percentages.
"Capital
Contribution"
means,
with respect to each Member, the amount of money and the initial Gross Asset
Value of any property (other than money) contributed to the Company by such
Member from time to time.
"Certificate"
means
the
Certificate of Formation of the Company filed with the Secretary of State of
the
State of Delaware, as amended from time to time.
"Code"
means
the Internal Revenue Code of 1986, as amended, or any replacement or successor
law thereto.
"Company
Minimum Gain"
has the
meaning ascribed to partnership minimum gain in Regulation Sections
1.704-2(b)(2) and 1.704-2(d), and any Member's share of Company Minimum Gain
shall be determined in accordance with Regulations Section
1.704-2(g)(1).
"Credit
Agreement"
means
that certain Credit Agreement dated as of May 11, 2007 among the Company,
Tekoil,
the
other Guarantors (as defined in the Credit Agreement), the Lenders (as defined
in the Credit Agreement), X. Xxxx & Company as Lead Arranger and Syndication
Agent, and X. Xxxx & Company as Administrative Agent, pursuant to which
Lenders have agreed to extend the Credit Facility to the Company.
"Credit
Facility"
means
a
senior secured credit facility, governed by the Credit Agreement consisting
of a
fifty million dollar ($50,000,000.00) term loan.
"Depreciation"
means,
for each Fiscal Year or other period, an amount equal to the depreciation,
amortization or other cost recovery deduction allowable for federal income
tax
purposes with respect to an asset for such year or other period in accordance
with the depreciation method elected by the Company with respect to such asset,
except that if the Gross Asset Value of an asset differs from its adjusted
basis
for federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization or other
cost recovery deduction allowable for such year or other period bears to such
beginning adjusted tax basis or as otherwise required under Section
1.704-1(b)(2)(iv)(g)(3) of the Regulations, or, in the reasonable discretion
of
the Managing Member, as otherwise permitted thereunder.
3
"Distributable
Cash"
means,
with respect to any Fiscal Year or other applicable period, the excess, if
any,
as determined by the Managing Member, of (a) all cash of the Company from
all sources for such period, including, without limitation, receipts from
operations, contributions of capital by the Members, proceeds of borrowing
or
from the issuance of securities by the Company, deposits and all other Company
cash sources and all Company cash reserves on hand at the beginning of such
period over (b) all cash expenses and capital expenditures of the Company
for such period, all payments of principal and interest on account of Company
indebtedness (including any loans by any Member) and such cash reserves as
the
Managing Member determines in its discretion (or those mandated by law, contract
or the Company's debt instruments).
"Entity"
means
any corporation, partnership (general, limited or other), limited liability
company, company, trust, business trust, cooperative or
association.
"Event
of Bankruptcy" means
any
event that causes a Member to be deemed a Bankrupt Member.
"Fiscal
Year"
means
the twelve-month period ending on December 31 of each year.
"Gross
Asset Value"
means,
with respect to any asset of the Company, the adjusted basis of such asset
for
federal income tax purposes, except as follows:
(a) The
Gross
Asset Value of any asset contributed by a Member to the Company shall, as of
the
date of such contribution and subject to further adjustment as herein provided,
be the gross fair market value of such asset, as agreed upon by the contributing
Member and all other Members.
(b) The
Gross
Asset Values of all Company assets (including assets contributed to the Company)
shall be adjusted to equal their respective gross fair market values, as
reasonably determined by the Managing Member, as of each of the following times:
(i) the acquisition of an additional Membership Interest by any new or existing
Member in exchange for more than a de
minimis
Capital
Contribution; (ii) the distribution by the Company to a Member of more than
a
de
minimis
amount
of Company property or cash in consideration of the redemption, or partial
redemption, of the Membership Interest of the Member or Members to whom such
distribution shall be made if, in connection therewith, the Managing Member
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 Regulation Section
1.704-1(b)(2)(ii)(g).
4
(c) The
Gross
Asset Value of any Company asset distributed to any Member shall be the gross
fair market value of such asset on the date of distribution as determined by
all
Members.
(d) The
Gross
Asset Value of any 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 to the extent the Managing Member determines that an adjustment
pursuant to subparagraph (b) above is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to
this
subparagraph (d).
If
the
Gross Asset Value of an asset has been determined or adjusted pursuant to any
of
the foregoing, such Gross Asset Value shall thereafter be adjusted by the
Depreciation or Simulated Depletion Deductions taken into account with respect
to such asset for purposes of computing Net Income and Net Losses.
"Incapacitated"
shall
mean the inability, by reason of a reasonably verifiable physical or mental
disability, of a person to perform such person's assigned duties to the Company,
on a full-time basis, for a continuous period of 120 days or for an aggregate
of
180 days in any 365 day period.
"Investment"
shall
mean (i) with respect to Tekoil, the sum of (A) $27,182,542 plus (B) the
aggregate amount of all Excess Capital Contributions made by Tekoil pursuant
to
Section 3.3(c) and (ii) with respect to Goldman, the sum of (C) $9,060,847
plus
(D) the aggregate amount of all Excess Capital Contributions made by Goldman
pursuant to Section 3.3(c).
"Liquidating
Trustee"
means
such Person as is selected at the time of dissolution by the Managing Member,
which Person may include an Affiliate of the Managing Member or any Member.
The
Liquidating Trustee shall be empowered to give and receive notices, reports
and
payments in connection with the dissolution, liquidation and/or winding-up
of
the Company and shall hold and exercise such other rights and powers as are
necessary or required to permit all parties to deal with the Liquidating Trustee
in connection with the dissolution, liquidation, and/or winding-up of the
Company.
"Managing
Member"
means
the managing member of the Company as appointed in Section 7.1 of this
Agreement.
"Member
Nonrecourse Debt"
has the
meaning ascribed to partner nonrecourse debt in Regulation Section
1.704-2(b)(4).
"Member
Nonrecourse Debt Minimum Gain"
means an
amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt was treated
as a
Nonrecourse Liability, determined in accordance with Regulation Sections
1.704-2(i)(2) and (3).
5
"Member
Nonrecourse Deductions"
has the
meaning ascribed to partner nonrecourse deductions in Regulation Sections
1.704-2(i)(1) and 1.704-2(i)(2).
"Members"
means
the Persons listed on Exhibit
A
attached
hereto and incorporated herein by reference, as the same shall be amended from
time to time, who have been admitted to the Company in accordance with this
Agreement and other Persons who become signatories hereto from time to
time.
"Membership
Interest"
means a
Member's entire interest in the Company, which shall entitle the Member to
(a)
an interest in the Net Income, Net Loss, Distributable Cash, and net proceeds
of
liquidation of the Company, as set forth herein, (b) any right to vote as set
forth herein or as required under the Act, and (c) any right to participate
in
the management of the Company as set forth herein or as required under the
Act.
A Membership Interest is personal property and a Member shall have no interest
in the specific assets or property of the Company.
"Membership
Percentage"
means,
with respect to each Member, such Member's percentage ownership interest in
the
Company set forth on Exhibit
A
attached
hereto, as may be amended or adjusted from time to time in accordance with
Section 3.3(c).
"Net
Income"
or
"Net
Loss"
shall
mean the income or loss for federal income tax purposes determined as of the
close of the Company's Fiscal Year or as of such other time as may be required
by this Agreement or the Code, as well as, where the context requires, related
federal tax items such as tax preferences and credits, appropriately adjusted
with respect to final determination of any of the foregoing for federal income
tax purposes, and also adjusted as follows:
(a) Any
income that is exempt from federal income tax and not otherwise taken into
account in computing Net Income or Net Loss shall be added to such taxable
income or loss.
(b) Any
expenditures described in Section 705(a)(2)(B) of the Code, or treated as
Section 705(a)(2)(B) expenditures pursuant to Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net
Income or Net Loss shall be subtracted from such taxable income or loss.
(c) In
lieu
of depreciation, amortization or other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be taken into
account Depreciation for such Fiscal Year or other period.
(d) Gain
or
loss during any Fiscal Year on account of the sale, exchange, condemnation
or
other disposition of any assets, as determined in accordance with Section 1001
of the Code (or, where applicable, Section 453 of the Code), appropriately
adjusted, however, with respect to final determination of the foregoing for
federal income tax purposes, and also adjusted as follows:
(i) In
the
event the Gross Asset Value of any asset is adjusted pursuant to subparagraphs
(b) or (c) of the definition of Gross Asset Value, the amount of such adjustment
shall be taken into account as though the same constituted gain or loss from
the
disposition of such asset for purposes of computing Net Income or Net Loss
under
the provisions of this Agreement.
6
(ii) Gain
or
loss, if any, resulting from any disposition of Company assets 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.
(e) Notwithstanding
any other provision of this definition, any items that are specially allocated
pursuant to Section 4.3 hereof shall not be taken into account in computing
Net
Income or Net Loss.
"Nonrecourse
Deductions"
has the
meaning set forth in Regulation Section 1.704-2(b)(1).
"Nonrecourse
Liability"
has the
meaning set forth in Regulation Section 1.704-2(b)(3).
"Person"
means
any natural person or Entity.
"Prime
Rate"
shall
mean the fluctuating rate as reported in the Wall
Street Journal or,
in
the event publication of the Wall
Street Journal is
terminated, in such successor national financial publication as determined
by
the Managing Member.
"Properties"
means
the
oil and gas properties described on Exhibit
B
attached
hereto and incorporated herein by reference.
"Regulation"
or "Regulations"
means
the proposed, temporary and final regulations promulgated by the Treasury
Department pursuant to the Code, as amended from time to time.
"Simulated
Depletion Deductions"
means
the simulated depletion allowance computed by the Company with respect to its
oil and gas properties pursuant to Regulations Section
1.704-1(b)(2)(iv)(k)(2).
"Simulated
Gains"
or "Simulated
Losses"
means,
respectively, the simulated gains or simulated losses computed by the Company
with respect to its oil and gas properties pursuant to Regulations Section
1.704-1(b)(2)(iv)(k)(2).
"Total
Investments"
shall
mean the sum of Tekoil's Investment and Xxxxxxx'x Investment.
1.2 Other
Defined Terms. Capitalized
terms not defined in Section 1.1 shall have the meanings set forth in the other
sections of this Agreement.
1.3 References.
References
to an "Exhibit"
are,
unless otherwise specified, to one of the exhibits attached to this Agreement,
and references to an "Article"
or a
"Section"
are,
unless otherwise specified, to one of the articles or sections of this
Agreement. Each Exhibit attached hereto and referred to herein is hereby
incorporated herein by such reference.
7
ARTICLE
II -
ORGANIZATION
2.1 Organization
of Company. Effective
as of January 17, 2007, the date of the filing of the Certificate with the
Secretary of State of the State of Delaware, the initial Member of the Company
formed the Company as a limited liability company governed by the terms hereof.
Except as provided herein or in the Certificate, the rights and obligations
of
the Members are as provided under the Act.
2.2 Name.
The
name
of the Company is "TEKOIL AND GAS GULF COAST, LLC". Subject to all applicable
laws, the business of the Company shall be conducted in the name of the Company
unless, under the law of some jurisdiction in which the Company does business,
such business must be conducted under another name or unless the Managing Member
determines that it is advisable to conduct Company business under another name.
The Managing Member shall cause to be filed on behalf of the Company such
limited liability company or assumed or fictitious name certificate or
certificates or similar instruments as may from time to time be required by
law.
2.3 Purpose
and Powers. The
purpose and business of the Company is to acquire, explore, and develop the
Properties, and to engage in any and all activities or businesses related or
incidental thereto as permitted by the Act. The Company shall not engage in
any
other activity not incidental to the foregoing.
2.4 Principal
Office. The
location of the Company's principal office 00000 X-00 Xxxxx, Xxxxx 000, Xxx
Xxxxxxxxx, Xxxxx 00000,
or
such
other place as from time to time may be selected by the Managing Member. The
Managing Member shall promptly notify each of the other Members of any change
of
the Company's principal office.
2.5 Registered
Agent and Registered Office.
The
statutory agent for service of process and the registered office of the Company
in the State of Delaware shall be Corporation Service Company at 0000
Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, or such other statutory
agent and registered office as the Managing Member may determine from time
to
time.
2.6 Registered
Members. The
Company shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of Membership Interests to receive
distributions, and to vote or take other action as such owner, and to hold
liable for calls and assessments (to the extent permitted hereby) a person
registered on its books as the owner of Membership Interests, and shall not
be
bound to recognize any equitable or other claim to or interest in such
Membership Interests on the part of any other Person.
2.7 Members.
The
Members listed on Exhibit
A,
as the
same may be amended from time to time in accordance herewith, have been admitted
to the Company as Members. The names and mailing addresses of the Members are
set forth in Exhibit
A
attached
hereto and incorporated herein by reference.
2.8 No
State Law Partnership; Liability to Third Parties. The
Members intend that the Company not be a partnership (including, without
limitation, a limited partnership) or joint venture under any state law, and
that no Member or Managing Member be a partner or joint venturer of any other
Member, for any purposes other than federal and state tax purposes (for which
the Members do intend to be taxed as a "partnership"),
and
that this Agreement not be construed to suggest otherwise. Except as otherwise
specifically provided in the Act, no Member shall be liable for the debts,
obligations or liabilities of the Company, including under a judgment decree
or
order of a court and shall not be obligated to make any contributions to the
Company to restore any negative balances in any Capital Accounts.
8
2.9 Scope
of Members' Authority.
Unless
otherwise expressly provided in this Agreement, no Member shall have any
authority to act for, or assume any obligations or responsibility on behalf
of
the Company or any other Member. Nothing contained herein shall constitute
the
Members as partners with one another in any matter (other than for federal
income tax purposes) or render any of them liable for the debts or obligations
of any other Member.
ARTICLE
III -
CAPITAL CONTRIBUTIONS
3.1 Initial
Capital Contributions. The
initial Capital Contributions of the Members named in the preamble to this
Agreement have been or shall be made on the date of this Agreement in the form
and amount as set forth on Exhibit A attached hereto. As of the date of this
Agreement, the initial Capital Account balance of Tekoil shall be equal to
$15,932,542. Tekoil's initial Capital Account balance shall be increased by
$7,500,000 upon Tekoil's additional Capital Contribution of $7,500,000 as
required by the Credit Agreement. As of the date of this Agreement, the initial
Capital Account balance of Goldman shall be equal to $7,810,847. If the Company
is liquidated pursuant to Article X prior to the date of Tekoil's additional
Capital Contribution of $7,500,000 as required by the Credit Agreement, the
initial Capital Account balance of Goldman shall be equal to
$5,310,847.
3.2 Withdrawal;
Return of Capital; Interest. Except
as
specifically provided herein, no Member shall be entitled to any distributions
from the Company or to withdraw any part of such Member's Capital Contribution
prior to the Company's dissolution and liquidation, or when such withdrawal
of
capital is permitted, to demand distribution of property other than money.
No
Member shall be entitled to interest on its Capital Contribution. No Member
shall be obligated to restore any deficit balance in its Capital Account or
bring its Capital Account into any particular relationship with the
Capital
Account
of any other Member.
3.3 No
Obligation to Make Additional Capital Contributions; Treatment of Additional
Capital Contributions by Tekoil.
(a) Subject
to Section 7.3 and except as provided in the Credit Agreement, no Member shall
be required to make any additional Capital Contributions.
(b) In
the
event that Tekoil or any of its Affiliates makes additional Capital
Contributions to the Company (other than the $7,500,000 additional Capital
Contribution by Tekoil referenced in Section 3.1), twenty five percent (25%)
of
any such additional Capital Contributions made by Tekoil or any of its
Affiliates, up to an aggregate of $5,000,000 of additional Capital Contributions
made by Tekoil or any of its Affiliates, shall be reallocated from the Capital
Account of Tekoil to the Capital Account of Goldman as of the date such
additional Capital Contributions are made.
9
(c) In
the
event that Tekoil proposes to make additional Capital Contributions to the
Company after the date hereof in excess of $12,500,000 (such amount being the
aggregate of the $7,500,000 additional Capital Contribution by Tekoil referenced
in Section 3.1 and the $5,000,000 of additional of Capital Contributions of
Tekoil referenced in paragraph (b) above) (any such additional Capital
Contribution being referred to as an "Excess
Capital Contribution"),
Goldman shall have the right, in its sole discretion, to make its proportionate
share of any such Excess Capital Contribution based on its Membership Percentage
in effect immediately prior to such Excess Capital Contribution. In the event
that Goldman elects not to make its proportionate share of such Excess Capital
Contribution, then upon the making of such Excess Capital Contribution by
Tekoil, the Membership Percentages of Tekoil and Goldman shall be adjusted
such
that (i) Tekoil's Membership Percentage shall be an amount, expressed as a
percentage, equal to (A) Tekoil's Investment divided by (B) Total Investments
and (ii) Xxxxxxx'x Membership Percentage shall be an amount, expressed as a
percentage, equal to (C) Xxxxxxx'x Investment divided by (D) Total
Investments.
ARTICLE
IV -
ALLOCATION
OF NET INCOME AND NET LOSS; ETC.
4.1 Net
Income and Net Loss.
After
giving effect to the special allocations set forth in Section 4.3, Net Income
and Net Loss for any Fiscal Year or other applicable period shall be allocated
among the Members in accordance with and in proportion to the Members'
respective Membership Percentages.
4.2 Limitations
on Net Loss Allocation.
Notwithstanding Section 4.1, Net Losses allocated to a Member pursuant to
Section 4.1 shall not exceed the maximum amount of Net Losses that can be
allocated without causing a Member to have an Adjusted Capital Account Deficit
at the end of any Fiscal Year. If any Member would have an Adjusted Capital
Account Deficit as a consequence of an allocation of Net Losses pursuant to
Section 4.1, the amount of Net Losses that would be allocated to such Member
but
for the application of this Section 4.2 shall be allocated to the other Members
to the extent that such allocations would not cause such other Members to have
an Adjusted Capital Account Deficit and allocated among such other Members
in
proportion to their positive adjusted Capital Account balances. If none of
the
Members can be allocated Net Losses without such allocation causing such Members
to have an Adjusted Capital Account Deficit, such Net Losses shall be allocated
as if this Section 4.2 were not in effect. Any allocation of items of income,
gain, loss, deduction or credit pursuant to this Section 4.2 shall be taken
into
account in making subsequent allocations pursuant to Section 4.1, and prior
to
any allocation of items in Section 4.1 so that the net amount of any items
allocated to each Member pursuant to Section 4.1 and this Section 4.2 shall,
to
the maximum extent practicable, be equal to the net amount that would have
been
allocated to each Member pursuant to the provisions of Section 4.1 if such
allocations under this Section 4.2 had not occurred.
4.3 Special
Allocations.
(a) Company
Minimum Gain Chargeback.
Notwithstanding any other provision of this Article IV, if there is a net
decrease in Company Minimum Gain during any Fiscal Year or other period for
which allocations are made, prior to any other allocation under this Agreement,
each Member will be specially allocated items of income and gain relating to
that period (and, if necessary, subsequent periods) in proportion to, and to
the
extent of, an amount equal to such Member's share of the net decrease in Company
Minimum Gain during such year as determined in accordance with Regulation
Section 1.704-2(g)(2). The items to be allocated will be determined in
accordance with Regulation Section 1.704-2(f).
10
(b) Member
Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any other provision of this Article IV, if there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulation Section 1.704-2(i)(5), shall be specially allocated
items of income and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Member's share of the net decrease
in
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulation Section
1.704-2(i)(4).
(c) Qualified
Income Offset.
A
Member who unexpectedly receives any adjustment, allocation or distribution
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be
specially allocated items of income and gain in an amount and manner sufficient
to eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of the Member as quickly as possible.
(d) Gross
Income Allocations.
Each
Member who has an Adjusted Capital Account Deficit at the end of any Fiscal
Year
will be specially allocated, as quickly as possible, items of gross income
and
gain in the amount of such deficit.
(e) Nonrecourse
Deductions.
Nonrecourse Deductions for any Fiscal Year or other period for which allocations
are made will be allocated to the Members among the Members in proportion to
their respective Membership Percentages.
(f) Member
Nonrecourse Deductions.
Notwithstanding anything to the contrary in this Agreement, any Member
Nonrecourse Deductions for any Fiscal Year or other period for which allocations
are made will be allocated to the Member who bears the economic risk of loss
with respect to the Member Nonrecourse Debt to which the Member Nonrecourse
Deductions are attributable in accordance with Regulation Section
1.704-2(i).
(g) Code
Section 754 Adjustments.
To the
extent an adjustment to the adjusted tax basis of any Company asset under Code
Sections 734(b) or 743(b) is required to be taken into account in determining
Capital Accounts under Regulation Section 1.704-1(b)(2)(iv)(m), the amount
of
the adjustment to the Capital Accounts will be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis), and the gain or loss will be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted under Regulation Section
1.704-1(b)(2)(iv)(m).
(h) Curative
Allocations.
The
allocations set forth in Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e),
4.3(f), 4.3(g) and 4.2 (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items
of
Company income, gain, loss or deduction pursuant to this Section 4.3(h).
Therefore, notwithstanding any other provision of this Article IV (other than
the Regulatory Allocations), the Managing Member shall make such offsetting
special allocations of Company income, gain, loss or deduction in whatever
manner it determines reasonably appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if
the
Regulatory Allocations were not part of this Agreement and all Company items
were allocated pursuant to Section 4.1.
11
4.4 Tax
Allocations. Except
as
otherwise provided in this Section 4.4, each item of income, gain, loss and
deduction of the Company for federal income tax purposes shall be allocated
among the Members in the same manner as such items are allocated for book
purposes under this Article IV. 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 Asset Value in accordance with the one of
the
methods under Regulation Section 1.704-3 as determined by the Members. Any
recapture of depreciation pursuant to Sections 1245 or 1250 of the Code shall
be
allocated to the Members which realized the benefit of the deductions
attributable to such recapture.
4.5 Effect
on Allocations of New Members or Assignees. In
the
event that new Members are admitted to the Company or persons become assignees
on other than the first day of any Fiscal Year, Net Income and Net Loss for
such
Fiscal Year shall be allocated among the Members and assignees in accordance
with Code Section 706, using any convention permitted by law and selected
by the Members.
ARTICLE
V -
DISTRIBUTIONS
5.1 Distributions.
Except
as otherwise provided in Article
X,
Distributable Cash, if any, shall be distributed only in the following order
of
priority:
(a) Tax
Distributions.
Except
as and to the extent prohibited by applicable law or by the Credit Agreement
or
other contractual restriction binding upon the Company, within sixty (60) days
after the close of each Fiscal Year, the Managing Member shall cause the Company
to distribute cash to the Members, such that each Member has received cumulative
cash distributions from the Company (taking into account all current and prior
distributions pursuant to Sections 5.1(a) and 5.1(b)) equal to such Member's
share of the cumulative Net Income (net of prior allocations of Net Losses)
allocated to such Member pursuant to Section 4.1 (through the end of the prior
Fiscal Year) multiplied by forty percent (40%). Any distributions received
by a
Member pursuant to this Section 5.1(a) shall be taken into account for purposes
of determining subsequent distributions pursuant to Section 5.1(b) such that
each Member shall have received an amount of distributions pursuant to this
Agreement equal to that which such Member would have received since the date
of
this Agreement assuming distributions had been made solely pursuant to Section
5.1(b).
12
(b)
Remaining
Distributable Cash. After
the
Managing Member shall have made the distributions set forth in Section 5.1(a),
the Managing Member shall, at such times and from time to time as the Managing
Member determines and except as and to the extent prohibited by applicable
law
or by the Credit Agreement or other contractual restriction binding upon the
Company, distribute any remaining Distributable Cash to the Members in
accordance with their respective Membership Percentages.
5.2 Withholding.
Any
amount that the Company is required to withhold and deposit with any
governmental authority with respect to any federal, state, local or foreign
tax
liability of a Member, including any withholding pursuant to Sections 1441,
1442, 1445 or 1446 or any other applicable sections of the Code, shall be
treated as an amount distributed to such Member and shall reduce, dollar for
dollar, any distribution that would otherwise be made to such Member pursuant
to
this Agreement for that or any subsequent period. To the extent any amount
so
withheld exceeds the cash otherwise distributable to such Member, such expense
shall be deemed a loan to the Member bearing interest at the Prime Rate, payable
out of any future distributions, and if not earlier repaid upon termination
of
the Company or the sale or other disposition of any of such Member's Membership
Interest.
ARTICLE
VI -
ACCOUNTING AND ADMINISTRATIVE MATTERS
6.1 Books
and Records. The
Company will maintain true, complete and correct books of account of the
Company, in accordance with such methodology, consistently applied, as
determined by the Managing Member. The books of account shall contain
particulars of all monies, goods, assets (including, but not limited to, real,
personal, and intangible) or effects belonging to or owing to or by the Company,
or paid, received, sold or purchased in the course of the Company's business,
and all of such other transactions, matters and things relating to the business
of the Company as are usually entered in books of accounts kept by persons
engaged in a business of a like kind and character. In addition, the Company
shall keep all records required to be kept pursuant to the Act. A Member shall,
upon prior written notice and during normal business hours, have access to
the
information described in Section 18-305 of the Act, for the purpose of
inspecting or, at the expense of such Member, copying the same. Any Member
reviewing the books and records of the Company pursuant to the preceding
sentence shall do so in a manner which does not unduly interfere with the
conduct of the business of the Company.
6.2 Reports. The
Company will furnish the following statements and reports to each of the Members
at the Company's expense:
(a) Within
ninety (90) days after the close of each Fiscal Year, a Schedule K-1 or such
other form as shall be necessary to advise all Members relative to their
investment in the Company for federal, state, local, provincial, territorial
and
foreign income tax reporting purposes, prepared by an independent certified
public accounting firm appointed by the Company and approved by Xxxxxxx (such
approval not to be unreasonably withheld). Such Schedule K-1 or other form
shall
be furnished to each Person who was a Member during such Fiscal
Year.
13
(b) As
soon
as available, and in any event within ninety (90) days after the end of each
Fiscal Year (commencing with the fiscal year ending December 31, 2007), complete
consolidated financial statements of the company together with all notes
thereto, prepared in reasonable detail in accordance with generally accepted
accounting principles, together with an unqualified opinion, based on an audit
using generally accepted auditing standards, by independent certified public
accountants selected by the Company and acceptable to Xxxxxxx, stating that
such
consolidated financial statements have been so prepared. These financial
statements shall contain a consolidated balance sheet as of the end of such
Fiscal Year and consolidated statements of earnings, of cash flows, and of
changes in owners' equity for such Fiscal Year, each setting forth in
comparative form the corresponding figures for the preceding Fiscal
Year.
(c) As
soon
as available, and in any event within thirty (30) days after the end of
each fiscal quarter of the Company, the Company's consolidated balance sheet
as
of the end of such fiscal quarter and consolidated statements of earnings and
cash flows for the period from the beginning of the then current Fiscal Year
to
the end of such fiscal quarter, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, subject to changes
resulting from normal year-end adjustments.
(d) Promptly
upon their becoming available, copies of all financial statements, reports,
notices and proxy statements sent by Tekoil to its stockholders and all
registration statements, periodic reports and other statements and schedules
filed by Tekoil with any securities exchange, the Securities and Exchange
Commission or any similar governmental authority.
(e) If,
as a
result of any change in accounting principles and policies from those used
in
the preparation of the Company's audited consolidated financial statements
as of
the immediately preceding fiscal year, the consolidated financial statements
of
the Company and its subsidiaries delivered pursuant to Section 6.2(b) or
6.2(c) will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subsections had
no
such change in accounting principles and policies been made, then, together
with
the first delivery of such financial statements after such change, one or more
statements of reconciliation for such changes in form and substance satisfactory
to Xxxxxxx.
(f) By
March
1 and September 1 of each year, beginning September 1, 2007, an
Engineering Report (as defined in the Credit Agreement) prepared as of the
preceding January 1 or July 1, respectively, concerning the
Properties. Each Engineering Report prepared as of any January 1 must be
prepared or audited by the Independent Engineer (as defined in the Credit
Agreement or another independent petroleum engineer selected by the Company
and
approved by Xxxxxxx in its sole discretion); each Engineering Report prepared
as
of any July 1 may, at the Company's option, be prepared by the Company's
in-house engineering staff or prepared or audited by the Independent Engineer.
In addition, Xxxxxxx may (at its expense) request additional Engineering Reports
from time to time prepared by the Independent Engineer.
(g) Within
thirty (30) days after the end of each calendar month, a report in detail
acceptable to Xxxxxxx with respect to the Properties during such
month:
(i) describing
by well and field the net quantities of oil, gas, natural gas liquids, and
water
produced (and the quantities of water injected) during such month;
14
(ii) describing
by well and field the quantities of oil, gas and natural gas liquids sold during
such month out of production from the Properties and calculating the average
sales prices of such oil, natural gas, and natural gas liquids;
(iii) specifying
any leasehold operating expenses, overhead charges, gathering costs,
transportation costs, and other costs with respect to the Properties of the
kind
chargeable as direct charges or overhead under an Onshore XXXXX Accounting
Procedure for Joint Operations (1984 form published by the Council of Petroleum
Accountants Societies);
(iv) setting
forth the amount of Direct Taxes (as defined in the Credti Agreement) on the
Properties during such month and the amount of royalties paid with respect
to
the Properties during such month;
(v) describing
all activities carried out during such month in furtherance of the Company's
development plan, all other capital expenditures during such month, and all
projections of capital expenditures projected to be made on any of the
Properties; and
(vi) describing
all workover work and drilling during such month including the cost and status
of each well drilled or worked over during such month, test reports for each
well tested during such month, reports on prices and volumes received for such
month, reports for each well completed during such month, and accompanying
authorizations for expenditures.
(h) As
soon
as available, and in any event within thirty (30) days after the end of each
fiscal quarter of the Company, a report describing aggregate volume of
production and sales attributable to production during such fiscal quarter
from
the Properties and describing the related severance taxes, leasehold operating
expenses and capital costs attributable thereto and incurred during such fiscal
quarter.
(i) As
soon
as practicable and in any event by the last day of each fiscal year, a report
in
form and substance satisfactory to Xxxxxxx outlining all material insurance
coverage maintained as of the date of such report by the Company and its
subsidiaries and all material insurance coverage planned to be maintained by
the
Company and its subsidiaries in the immediately succeeding Fiscal
Year.
(j) Promptly,
and in any event within ten (10) Business Days (i) after any Material Contract
(as defined in the Credit Agreement) of the Company or any of its subsidiaries
is terminated or amended in a manner that is materially adverse to the Company
or such subsidiary, as the case may be, or (ii) any new Material Contract is
entered into, a written statement describing such event, with copies of such
material amendments or new contracts, delivered to Xxxxxxx (to the extent such
delivery is permitted by the terms of any such Material Contract, provided,
no
such prohibition on delivery shall be effective if it were bargained for by
the
Company or its applicable subsidiary with the intent of avoiding compliance
with
this Section (j)), and an explanation of any actions being taken with
respect thereto.
15
6.3 Tax
Matters Partner. The
Managing Member shall be the "Tax Matters Partner," as such term is defined
in
Section 6231(a)(7) of the Code. The Tax Matters Partner shall take such action
as may be reasonably necessary to cause each other Member to become a notice
partner within the meaning of Code Section 6231(a)(8). The Tax Matters Partner
shall inform each other Member of all significant matters that may come to
its
attention in its capacity as Tax Matters Partner by giving notice thereof on
or
before the fifth day after becoming aware thereof and, within that time, shall
forward to each other Member copies of all significant written communications
it
may receive in that capacity. The Tax Matters Partner shall not enter into
any
extension of the period of limitations for making assessments on behalf of
the
Members without first obtaining the consent of all Members. The Tax Matters
Partner shall not bind any Member to a settlement agreement without obtaining
the consent of such Member. Any Member that enters into a settlement agreement
with respect to any Company item (within the meaning of Code Section 6231(a)(3))
shall notify the other Members of such settlement agreement and its terms within
30 days from the date of the settlement.
6.4 Tax
Elections. The
Managing Member shall make the following elections on the appropriate tax
returns of the Company:
(a) To
adopt
the calendar year as the Company's tax year;
(b) To
adopt
the accrual method of accounting;
(c) Upon
request of any Member, an election under Code Section 754;
(d) To
deduct
expenses incurred in organizing the Company ratably over a sixty month period
as
provided in Code Section 709;
(e) To
expense intangible drilling and development costs; and
(f) Any
other
election that the Managing Member deems appropriate and in the best interests
of
the Members after obtaining approval of the Members.
Neither
the Company nor any Member may make an election for the Company to be excluded
from the application of the provisions of subchapter K of Chapter 1 of subtitle
A of the Code or any similar provision of applicable law.
ARTICLE
VII -
MANAGEMENT
OF COMPANY
AND VOTING BY MEMBERS
7.1 The
Managing
Member
(a) Managing
Member.
Except
as specifically provided in this Agreement, the management and control of the
Company shall be vested exclusively in Tekoil, as the Managing Member. The
Managing Member shall be responsible for the establishment of operating
procedures respecting the business affairs of the Company and overseeing or
delegating the day-to-day operation of the Company's business. Except as
specifically provided in this Agreement, the Managing Member shall have the
power and authority to take any actions not prohibited under the Act or which
are otherwise conferred or permitted by law, which the Managing Member
determines, in its reasonable discretion, are necessary, proper, advisable
or
convenient to the discharge of its duties under this Agreement or applicable
law
to conduct the business and affairs of the Company, including, but not limited
to, any decision to sell, mortgage, lease or otherwise transfer any assets
of
the Company, which shall be binding on the Company without the necessity of
any
further action. Except as specifically provided in this Agreement, the Managing
Member shall have the right, power and authority to perform any and all other
acts or activities customary or incident to the management of the Company's
business on behalf of the Company.
16
(b) Delegation
of Powers.
The
Managing Member may delegate its powers, but not its responsibilities, to any
Member or to any other Person.
7.2 Resignation/Removal
of Managing Member. The
Managing Member may resign at any time by giving written notice to the Members
(the "Resignation Notice"). The resignation of the Managing Member shall take
effect thirty (30) days after the Resignation Notice is given or at such earlier
time as accepted by the Members; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
The
Managing Member may be removed, with or without cause, upon the affirmative
vote
of all of the Members. If no one
is
serving as Managing Member for any reason, then a new Managing Member shall
be
elected
by the affirmative vote of all of the Members. The resignation of the Managing
Member shall not affect the Managing Member's rights as a Member, if any, and
shall not constitute the Managing
Member's withdrawal as a Member.
7.3 Actions
Requiring Member Approval. Notwithstanding
anything in this Agreement to the contrary, no action shall be taken, sum
expended, decision made or obligation incurred with respect to a matter within
the scope of any of the major decisions enumerated below (the "Major
Decisions"),
unless such a Major Decision has been approved by unanimous consent of the
Members of the Company. The Major Decisions are:
(a) Amending,
modifying, waiving or repealing any provisions of this Agreement or the
Certificate, except as otherwise contemplated in this Agreement;
(b) Engaging,
directly or indirectly through subsidiaries, in any business or activity other
than as specified in Section 2.3;
(c) Requiring
additional Capital Contributions of the Members, except as expressly provided
in
the Credit Agreement with respect to Tekoil (provided that this clause (c)
shall
not be interpreted to prohibit additional Capital Contributions by Tekoil and
Xxxxxxx in accordance with Sections 3.3(b) and 3.3(c));
(d) Reorganizing
the Company or causing the Company to merge or consolidate with or into another
Entity or acquiring, directly or indirectly through subsidiaries, another Entity
or all or substantially all the assets of another Entity, or selling all or
substantially all of the assets of the Company or its subsidiaries;
(e) Selling,
transferring, leasing, disposing of or abandoning any of the properties and
assets of the Company or its subsidiaries (exclusive of properties, materials,
supplies, equipment or other items of personal property disposed of in the
ordinary course of business, which do not have a value of more than $2,000,000
individually or in the aggregate and are not otherwise material to the business
of the Company) or farmout any assets or properties which are material to the
business of the Company and its subsidiaries;
17
(f) Compromising
or settling any lawsuit, administrative matter or other dispute where the amount
the Company or any of its subsidiaries may recover or might be obligated to
pay,
as applicable, is in excess of $2,000,000 or to repairing or replacing property
or assets damaged or destroyed as a result of an accident or other occurrence
when the Company's or its subsidiaries' share of the costs of repair or
replacement (either individually or in the aggregate) is in excess of
$2,000,000;
(g) Causing
the Company or any of its subsidiaries to enter into any material contract
or
agreement, which for the purpose of this Agreement shall mean any contract,
agreement, or series of contracts or agreements that would obligate the Company
or any of its subsidiaries to expend (or transfer assets with a value of)
$2,000,000 or more, or which cannot be terminated by the Company or its
subsidiaries without penalty upon notice of 60 days or less;
(h) Admitting
a Person as a Member of the Company, except as a substituted Member in
accordance with Section 9.1 hereof;
(i) Dissolving
or liquidating the Company or commencing a voluntary bankruptcy by the Company,
or consenting to the appointment of a receiver, liquidator, assignee, custodian,
or trustee for the purposes of winding up the affairs of the
Company;
(j) Engaging,
directly or indirectly through subsidiaries, in any transaction or arrangement
with any Member or any Affiliate of any Member except as expressly contemplated
hereby or by the Credit Agreement;
(k) Directly
or indirectly through subsidiaries, borrowing money, incurring any indebtedness
or assuming or guaranteeing any indebtedness of any other Person, other than
normal trade accounts payable and lease obligations in the normal course of
business, or granting consensual liens on the Properties; provided, however,
that the Managing Member is hereby authorized to secure financing for the
Company pursuant to the terms of the Credit Agreement and other indebtedness
expressly permitted in the Credit Agreement and any other documents related
to
the Credit Facility, and to grant a mortgage, lien or liens on the Company's
property to secure the Credit Facility; and
(l) Materially
modifying, changing or amending any agreement or arrangement which is the
subject of the matters referred to in this Section 7.3.
7.4 Member
Meetings. An
annual
meeting of the Members shall be held, with notice, in April of each year or
with
notice on such other date selected by the Managing Member, for the purposes
of
discussing any business that may come before the annual meeting. The Managing
Member may call special meetings of the Members for any reason the Managing
Member may deem necessary. Member meetings shall be chaired by the Managing
Member.
7.5 Quorum
and Voting.
Members
owning all of the Membership Percentages of the Company shall constitute a
quorum if present in person or by proxy. Except as provided elsewhere in this
Agreement (including in Section 7.3), for any act for which the vote of the
membership is taken, the vote of Members holding at least fifty percent (51%)
of
the Membership Percentages shall be the act of the Company. For actions on
which
the Members will vote, no action may be taken at a meeting of the Members unless
a quorum is present.
18
7.6 Proxies.
At
any
meeting of the Members, a Member may vote by proxy executed in writing by the
Member or by his, her or its duly authorized attorney in fact. Such proxy shall
be filed with the Company before or at the time of the meeting. Unless otherwise
provided therein, a proxy shall not be valid more than three (3) years after
the
date of its execution, unless the proxy provides for a longer
period.
7.7 Waiver
of Notice. Whenever
written notice is required to be given to the Member, a written waiver thereof
signed by the Member entitled to such notice (whether, in the case of notice
of
a meeting, the written waiver thereof is signed before or after the meeting)
shall be in all respects tantamount to notice. Attendance of a Member at a
meeting of the Member shall constitute a waiver of notice of such meeting,
except where a Member attends a meeting for the express purpose of objection
to
the transaction of any business on the grounds that the meeting is not lawfully
called or convened.
7.8 Telephonic
Meetings. Any
meetings of the Members may be held, or any Member may participate in any
meeting of the Members, by use of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and communicate with each other.
7.9 Compensation;
Reimbursement of Expenses. Except
as
determined by the Managing Member, neither the Managing Member nor any Member
shall receive compensation for their services to the Company in such capacity.
The Company shall reimburse the Managing Member for all reasonable costs and
expenses incurred by it in or related to the performance of its duties to the
Company.
7.10 No
Authority of Individual Member. Except
as
set forth in this Article VII, or otherwise in this Agreement, no Member,
acting individually, nor any of their respective Affiliates, has the power
or
authority to bind the Company, or any other Member or to authorize any action
to
be taken by the Company, or to act as agent for the Company or any other Member,
unless that power or authority has been specifically delegated or authorized
by
action of the Members.
7.11 Presumption
of Assent. A
Member
who is present at a meeting of the Members shall be conclusively presumed to
have assented to any action taken unless his, her or its dissent shall be
expressed at such meeting and entered in the minutes of the
meeting.
7.12 Decision
of Members by Written Consent. Any
action to be made by the Members may be taken without a meeting if a consent
in
writing, setting forth the action so taken, is signed by the Members owning
the
Membership Percentages otherwise required for taking such action.
7.13 Related
Party Transactions. Subject
to Section 7.3, the Members acknowledge that the Company may engage in
transactions with Members or their Affiliates. With
respect to contracts which the Company enters into with an Affiliate of a
Member, in the event the non-affiliated Member reasonably determines that the
Affiliate has defaulted
under the terms of the contract at issue, such non-affiliated Member shall
have
the right, on behalf of the Company, to declare a default under such contract
and to pursue any and all remedies which the Company may have at law or in
equity, including all remedies available under the contract, without the consent
or approval of the other Member. The acts of the non-affiliated Member with
respect to any of the foregoing shall be deemed to be the acts of the Company.
19
ARTICLE
VIII -
LIMITATION ON LIABILITY AND INDEMNIFICATION
8.1 Exculpation
of Liability. No
Managing Member or Member (each, an "Exculpated
Party"),
shall
be liable, in damages or otherwise, to the Company or to any of the Members
for
any act or omission by any such Exculpated Party pursuant to the authority
granted by this Agreement, unless such act or omission results from fraud,
gross
negligence, or willful misconduct. The Company may indemnify, defend and hold
harmless each Exculpated Party from and against any and all claims or
liabilities of any nature whatsoever, including reasonable attorneys' fees,
arising out of or in connection with any action taken or omitted by an
Exculpated Party pursuant to the authority granted by this Agreement or
otherwise, except where attributable to the fraud, gross negligence, or willful
misconduct of such Exculpated Party. Each Exculpated Party shall be entitled
to
rely on the advice of counsel, public accountants or other independent experts
experienced in the manner at issue, and any act or omission of such Exculpated
Party pursuant to such advice shall in no event subject such Exculpated Party
to
liability to the Company or any Member.
8.2 Liability
of Exculpated Parties and Members.
(a) In
carrying out their respective powers and duties hereunder, each Exculpated
Party
(as defined in Section 8.1 above) shall exercise its best efforts and shall
not
be liable to the Company or to any Member for any actions taken or omitted
to be
taken in good faith and reasonably believed to be in the best interest of the
Company or for errors of judgment made in good faith.
(b) In
no
event shall a Member who ceases to be a Member be liable for or on account
of
obligations or liabilities of the Company incurred subsequent to its ceasing
to
be a Member.
8.3 Indemnification
of Managing Member. In
any
pending or completed action, suit, or proceeding to which the Managing Member
or
any Member is or was a party by reason of the fact that such Managing Member
or
Member is or was the Managing Member or Member, the Company shall hold harmless
and indemnify such Managing Member or Member from and against any and all
losses, harm, liabilities, damages, costs, and expenses (including, but not
limited to, attorneys' fees, judgments, and amounts paid in settlement) incurred
by such Managing Member or Member in connection with such action, suit, or
proceeding if such Managing Member or Member determined in good faith, that
the
course of conduct which caused the loss or liability was in the best interests
of the Company, and provided that such Managing Member's or Member's conduct
does not constitute gross negligence, willful misconduct, or breach of fiduciary
duty to the Company or the Members.
20
8.4 Advancement
of Legal Costs and Expenses.
The
Company shall advance Company funds to the Managing Member or Member for legal
expenses and other costs incurred as a result of any legal action if the
following conditions are satisfied: (a) the legal action relates to acts or
omissions with respect to the performance of duties or services on behalf of
the
Company; (b) the legal action is initiated by a third party who is not a Member,
or the legal action is initiated by a Member and a court of competent
jurisdiction specifically approves such advancement; and (c) the Managing Member
or Member undertakes to repay the advanced funds, together with interest at
the
Prime Rate plus one percent (1%), to the Company in cases in which the Members
determine that the Managing Member or Member should not be indemnified under
this Article VIII.
8.5 Provisions
Not Exclusive. The
exculpation of liability and indemnification provided by this Article VIII
shall
not be deemed exclusive of any other limitation on liability or rights to which
those seeking indemnification may be entitled under any statute, agreement,
vote
of Members or otherwise.
8.6 Insurance. The
Company may purchase insurance to insure against the liabilities contemplated
by
this Article VIII.
8.7 Reliance
by Managing Member.
In
discharging its duties, the Managing Member, when acting in good faith, may
rely
upon information, opinions, reports, or statements, including financial
statements and other financial data, in each case presented or prepared by
(a)
one or more officers of the Company whom the Managing Member reasonably believes
to be reliable and competent in the matters presented, (b) counsel, public
accountants, or other persons as to matters that the Managing Member believes
to
be within that person's professional or expert competence, or (c) a committee
of
Members upon which the Managing Member does not serve, duly designated according
to law, as to matters within its designated authority, if the Managing Member
reasonably believes that the committee is competent.
ARTICLE
IX -
RESTRICTION
ON TRANSFERS; RIGHT OF FIRST REFUSAL
9.1 Transfer
of
Membership Interests.
(a) Except
as
otherwise set forth in this Article IX, Tekoil may not assign, sell, transfer,
pledge or encumber ("Transfer") its Membership Interest or any portion thereof
except (i) with the written approval of all of the other Members or (ii) in
a
bona fide sale of its entire Membership Interest to a Person or Persons who
are
not Affiliates of Tekoil and that complies with Section 9.2. Except as otherwise
set forth in this IX, the Membership Interest of each Member other than Tekoil
shall be freely Transferable without the approval of any Member.
(b) Unless
an
assignee becomes a substituted Member in accordance with the provisions set
forth below, such assignee shall not be entitled to any of the rights granted
to
a Member hereunder, other than the right to receive allocations of income,
gain,
loss, deduction, credit and similar items and distributions to which the
assignor would otherwise be entitled, to the extent such items are
assigned.
21
(c) An
assignee of the Membership Interest of a Member, or any portion thereof, shall
become a substituted Member entitled to all of the rights of a Member with
respect to such Membership Interest if, and only if, (i) the assignor gives
the assignee such right, (ii) in the case of a Transfer by Tekoil, such
Transfer is made in accordance with the first sentence of Section 9.1(a), and
(iii) the assignee executes and delivers such instruments, in form and
substance satisfactory to the Managing Member, as the Managing Member may deem
necessary or desirable in its sole and absolute discretion to effect such
substitution and to confirm the agreement of the assignee to be bound by all
of
the terms and provisions of this Agreement. Upon the satisfaction of such
requirements, such assignee shall be concurrently (or as of such later date
as
shall be provided for in any applicable written instruments furnished to the
Managing Member) admitted as a substituted Member of the Company.
(d) The
Company shall be entitled to treat the record owner of any Membership Interest
as the absolute owner thereof in all respects and shall incur no liability
for
distributions of cash or other property made to such owner until such time
as a
written assignment of such interest that complies with the terms of this
Agreement has been received by the Managing Member.
(e) In
the
event that any Member other than Tekoil desires to Transfer all or any part
of
its Membership Interest, other than in a Transfer pursuant to Section 9.2,
such
Member shall provide written notice to Tekoil that it intends to Transfer such
Membership Interest. Until the expiration of 30 days after the giving of such
notice, such transferring Member shall not Transfer its Membership Interest
to
any Person other than Tekoil and shall not solicit offers from or engage in
negotiations with any Person other than Tekoil with respect to the Transfer
of
its Membership Interest. Tekoil shall have the right during such 30-day period
to make a written proposal to the transferring Member with respect to the
purchase by Tekoil of the Membership Interest to be Transferred. If Tekoil
makes
any such proposal, the transferring Member shall notify Tekoil in writing
whether it accepts or declines such proposal, which the transferring Member
may
do in its sole discretion. If the transferring Member accepts such proposal,
then Tekoil and the transferring Member shall cooperate in good faith to
complete the purchase of the Membership Interest by Tekoil as soon as
practicable and in any event within 30 days after the acceptance of such
proposal by the transferring Member. If the transferring Member declines such
proposal or if it accepts the proposal and such purchase is not completed within
30 days after such acceptance notwithstanding the good faith cooperation of
the
transferring Member, then the transferring Member shall have 90 days from the
date it declines such offer or the date on which such 30-day period expires,
as
applicable, to complete the Transfer of its Membership Interest to any Person,
subject to the other provisions of this Section 9.1. In the event the
transferring Member has not completed the Transfer within such 90-day period,
any proposed Transfer of such Member's Membership Interest shall again be
subject to this paragraph (e).
(f) No
Transfer of any Membership Interest shall be made if counsel for the Company
shall be of the opinion that (i) such Transfer would be in violation of any
federal, state or foreign law, or would cause the original issuance of the
Membership Interests by the Company to be in violation of such laws or (ii)
such
Transfer would result in the Company being treated as a corporation for tax
purposes.
22
(g) Any
assignment, sale, exchange or other transfer in contravention of any of the
provisions of this Section 9.1
shall be
void and of no force or effect, and shall not bind or be recognized by the
Company.
9.2 Tag-Along
Right.
(a) In
the
event that Tekoil proposes to sell all of its Membership Interest (such proposed
transfer, a "Tag-Along
Sale"),
(i)
Tekoil shall provide each other Member notice of the terms and conditions of
such proposed sale (the "Tag-Along
Notice")
and
offer each other Member the opportunity to participate in such sale in
accordance with this Section
9.2
and
(ii) each other Member may elect, at its option, to participate in the
proposed sale in accordance with this Section 9.2
(each
such electing Member, a "Tagging
Member").
(b) The
Tag-Along Notice shall identify the consideration for which the transfer is
proposed to be made, and all other material terms and conditions of the
Tag-Along Sale, including the form of the proposed agreement, if
any.
(c) From
the
date of its receipt of the Tag-Along Notice, each Tagging Member shall have
the
right (a "Tag-Along
Right"),
exercisable by notice (the "Tag-Along
Response Notice")
given
to Tekoil within ten Business Days after its receipt of the Tag-Along Notice
(the "Tag-Along
Notice Period"),
to
request that Tekoil include in the proposed transfer the Membership Interest
held by such Tagging Member.
(d) Each
Tag-Along Response Notice shall include wire transfer instructions for payment
of the purchase price for the Membership Interest to be sold in such Tag-Along
Sale. Each Tagging Member that exercises its Tag-Along Rights hereunder shall
deliver to Tekoil, with its Tag-Along Response Notice, a limited
power-of-attorney authorizing Tekoil to transfer its Membership Interests on
the
terms set forth in the Tag-Along Notice and all other documents required to
be
executed in connection with such Tag-Along Sale. Delivery of the Tag-Along
Response Notice with such limited power-of-attorney shall constitute an
irrevocable acceptance of the terms of the Tag-Along Sale by such Tagging
Member.
(e) If,
at
the end of a 90-day period after delivery of the Tag-Along Response Notice
(which 90-day period shall be extended if any of the transactions contemplated
by the Tag-Along Sale are subject to regulatory approval until the expiration
of
five Business Days after all such approvals have been received, but in no event
later than 120 days following receipt by Tekoil of the Tag-Along Response
Notice), Tekoil has not completed the transfer of its Membership Interest on
substantially the same terms and conditions set forth in the Tag-Along Notice,
Tekoil shall (i) return to each Tagging Member the limited power-of-attorney
(and all copies thereof) that such Tagging Member executed and any other
documents in the possession of Tekoil executed by the Tagging Members in
connection with the proposed Tag-Along Sale, and (ii) not conduct any transfer
of its Membership Interest without again complying with this Section
9.2.
(f) Concurrently
with the consummation of the Tag-Along Sale, Tekoil shall (i) notify the Tagging
Members thereof, (ii) remit to the Tagging Members the total consideration
for
the Membership Interests of the Tagging Members transferred pursuant thereto,
and (iii) promptly after the consummation of the Tag-Along Sale, furnish such
other evidence of the completion and the date of completion of such transfer
and
the terms thereof as may be reasonably requested by the Tagging
Members.
23
(g) If
at the
termination of the Tag-Along Notice Period any other Member shall not have
elected to participate in the Tag-Along Sale, such Member shall be deemed to
have waived its rights under this Section
9.2
with
respect to the transfer of its Membership Interest pursuant to such Tag-Along
Sale.
(h) Notwithstanding
anything contained in this Section
9.2,
there
shall be no liability on the part of Tekoil to the Tagging Members if the
transfer of the Membership Interests pursuant to this Section
9.2
is not
consummated for whatever reason. Whether to effect a transfer of Membership
Interests by Tekoil is in the sole and absolute discretion of
Tekoil.
(i) Notwithstanding
anything contained in this Section
9.2,
the
rights and obligations of the other Members to participate in a Tag-Along Sale
are subject to the following conditions:
(i) subject
to the allocation provisions set forth in Section
10.4,
upon
the consummation of such Tag-Along Sale, all of the Members participating
therein will receive the same form of consideration and shall be subject to
all
of the same other terms and conditions of such sale (and no such terms and
conditions shall be less favorable to the Tagging Members than to Tekoil) in
a
manner proportionate to their relative Membership Interests being sold;
and
(ii) no
Member
participating therein shall be obligated to pay any expenses incurred in
connection with any unconsummated Tag-Along Sale, and each such Member shall
be
obligated to pay only its pro rata share (based on the relative Membership
Percentage transferred) of expenses incurred in connection with a consummated
Tag-Along Sale to the extent such expenses are incurred for the benefit of
all
such Members and are not otherwise paid by the Company or another person.
9.3 Death,
Incapacity, Bankruptcy or Insolvency
of a Member; Purchase Option.
(a) If
a
Member dies or becomes Incapacitated, or becomes a Bankrupt Member, the
remaining Member or Members (the "Remaining
Members")
shall
forthwith become vested with the exclusive right and option, to be exercised
in
writing to such Bankrupt, deceased or Incapacitated Member, for a period of
ninety (90) days after the Remaining Members have received (i) written notice
from the Bankrupt Member of the occurrence of any Event of Bankruptcy (which
notice shall be delivered within three (3) Business Days after such occurrence),
or (ii) notice of the death or incapacity of a Member, to elect to purchase
the
Membership Interest of the Bankrupt, deceased or Incapacitated Member at a
purchase price determined in accordance with subsection (c) of this Section
9.3.
In the event that more than one Remaining Member desires to exercise the option
to purchase the Membership Interest of the Bankrupt, deceased or Incapacitated
Member, such option shall be exercised by all such Remaining Members in
proportion to their relative Membership Percentages.
(b) A
Bankrupt, deceased or Incapacitated Member (or its legal representative) whose
entire Membership Interest is to be purchased and succeeded to by the Remaining
Members pursuant to this Section 9.3 shall, within ten (10) days after receipt
of notice from the Remaining Members of their intent to purchase the entire
Membership Interest of the Bankrupt, deceased or Incapacitated Member, execute
and deliver such deeds, bills of sale and other instruments as shall reasonably
be requested by such Remaining Members to effect the conveyance and transfer
of
the entire right, title and interest of such Bankrupt, deceased or Incapacitated
Member in the Company, and shall, to the extent requested by the Remaining
Members, cooperate to effect a smooth and efficient continuation of the Company
affairs. If the Bankrupt Member (or its legal representative) or the legal
representative of the deceased or Incapacitated Member disputes the right of
the
Remaining Members to purchase and succeed to the Bankrupt, deceased or
Incapacitated Member's entire Membership Interest in the Company, such Bankrupt
Member (and its legal representative) or the legal representative of the
deceased or Incapacitated Member, as the case may be, shall nevertheless execute
instruments and cooperate with the Remaining Members pursuant to the immediately
preceding sentence, without, however, being deemed to have waived his, her
or
its rights to damages if the Remaining Members shall have purchased and
succeeded to the Membership Interest of the Bankrupt, deceased or Incapacitated
Member under this Section 9.3 without having the right to do so.
24
(c) Upon
compliance by the Bankrupt Member or the legal representative of a deceased
or
Incapacitated Member with the provisions of the immediately preceding subsection
(b) of this Section 9.3, the Remaining Members succeeding to the entire
Membership Interest of the Bankrupt, deceased or Incapacitated Member, as the
case may be, in the Company shall pay to such Member or his/her legal
representative the "Fair
Value"
thereof
(such value to be determined as of the date the Remaining Members serve notice
on the Bankrupt Member or the legal representative of the deceased or
Incapacitated Member of their intent to purchase such Member's interest) within
ninety (90) days thereafter. The Fair Value of the Company and of the Membership
Interest of the Bankrupt, deceased or incapacitated Member therein shall be
determined pursuant to paragraph (d) below.
(d) In
the
event the Fair Value of the Company, and of the Bankrupt, deceased or
Incapacitated Member's Membership Interest therein, is to be determined pursuant
to this Section 9.3 or any other provision of this Agreement or the Act,
"Fair
Value"
shall
be determined by agreement of the Bankrupt Member (or its legal representative)
or the legal representative of the deceased or Incapacitated Member, as the
case
may be, and the Remaining Members, or, if agreement cannot be reached, by the
median appraisal of three (3) independent appraisers, one to be chosen by the
Bankrupt Member (or its legal representative) or by the legal representative
of
the deceased or Incapacitated Member, as the case may be, one to be chosen
by
the Remaining Members, and one to be chosen by agreement of the other two
independent appraisers (or by an arbitrator if the appraisers cannot agree)
in
advance of any appraisal.
ARTICLE
X -
DISSOLUTION AND TERMINATION
10.1 Dissolution.
The
Company shall continue in effect until dissolved upon the first to occur of
the
following:
(a) The
unanimous vote of Members;
25
(b) The
entry
of a decree of judicial dissolution of the Company under Section 18-802 of
the
Act or such other event requiring dissolution under the Act; or
(c) The
sale
or other disposition of all or substantially all of the Company's assets and
the
collection of all amounts derived from any such disposition, including all
amounts payable to the Company under any promissory notes or other evidence
of
indebtedness derived by the Company from any such disposition unless the Members
agree, in writing, within ninety (90) days of such sale or disposition, to
continue the Company.
10.2 Accounting.
Upon
the
dissolution of the Company, a proper accounting shall be made of the assets
and
liabilities of the Company and the Capital Account of each Member as of the
date
of dissolution and of the items of Net Income and Net Loss from the date of
the
last previous accounting to the date of dissolution. The Liquidating Trustee
shall cause
financial statements (consisting of a balance sheet, statement of operations,
statement of Members' equity and statement of cash flows) of the Company to
be
prepared in accordance with such methodology consistent with the books and
records of the Company,
presenting such accounting to be prepared and certified.
10.3 Liquidating
Trustee.
(a) Upon
the
dissolution of the Company, the affairs of the Company shall be wound up and
terminated and the Members shall continue to share Net Income, Net Loss,
Distributable Cash and other items of the Company during the winding-up period
in accordance with the provisions of Articles IV and V hereof. The winding-up
of
the affairs of the Company and the distribution of its assets shall be conducted
exclusively by the Liquidating Trustee, who is hereby authorized to do all
acts
authorized by law for these purposes. The Liquidating Trustee, in carrying
out
such winding up and distribution, shall have full power and authority to sell,
assign, transfer and encumber all or any of the Company assets.
(b) Upon
the
completion of the winding up of the Company and the distribution of all Company
assets, the Company shall terminate and the Liquidating Trustee shall have
the
authority to execute and record any and all other documents required to
effectuate the termination of the Company.
(c) The
Liquidating Trustee shall be indemnified and held harmless by the Company from
and against any and all claims, liabilities, costs, damages and causes of action
of any nature whatsoever arising out of or incidental to the Liquidating
Trustee's taking of or failure to take any action authorized under, or within
the scope of, this Agreement; provided,
however,
that
the Liquidating Trustee shall not be entitled to indemnification
for:
(i) Matters
entirely unrelated to the Liquidating Trustee's actions under the provisions
of
this Agreement; or
(ii) Fraud,
willful misconduct, self-dealing or criminal activity.
26
10.4 Liquidating
Distribution. In
the
event of the dissolution of the Company for any reason, the assets of the
Company shall be liquidated for distribution in the following rank and
order:
(a) First,
to
the payment and discharge of all the debts and liabilities in the order of
priority as provided by the Act;
(b) Second,
to the establishment of any necessary reserves to provide for contingent
liabilities, if any;
(c) Third,
to
the payment of loans to the Company by the Members, if any, in the order of
priority provided under this Agreement or by law; and
(d) Fourth,
to the Members in proportion to their positive Capital Account balances after
giving effect to the allocations set forth in Article IV hereof, treating any
distribution of property as a sale thereof at fair market value.
Such
distributions shall be made on or before a date (the "Final
Liquidation Date")
no
later than the later to occur of (i) the last day of the taxable year of the
Company in which the liquidation of the Company occurs and (ii) ninety (90)
days
after such liquidation. If the Liquidating Trustee, in its discretion,
determines that the distributions will not be timely made, it may distribute
all
of the assets and liabilities of the Company in trust with the Liquidating
Trustee, or such other Person as may be selected by the Liquidating Trustee
acting as trustee; the purpose of the trust is to allow the Company to comply
with the timing requirements under Regulation Section 1.704-1(b). The trustees
of said trust shall distribute the former Company assets (however constituted,
enhanced or otherwise) as promptly as such trustee deems proper and in the
same
manner as directed in this Section (without regard to this sentence or the
preceding two sentences) and otherwise as required hereunder. The trust shall
be
terminated as soon as possible after the trust property is distributed to the
beneficiaries thereof.
10.5 Distributions
in Kind. Company
property distributed in kind shall be transferred and conveyed to the
distributees as tenants in common subject to any liabilities attached thereto
so
as to vest in them undivided interests in the whole of such property in
proportion to their respective rights to share in the proceeds of the sale
of
such property in accordance
with this Article.
ARTICLE
XI -
MISCELLANEOUS
11.1 Authority
to Amend. Except
as
provided herein, this Agreement may be amended only by a writing approved by
all
of
the Members. The Managing Member shall notify all Members in writing of the
substance of any such amendment, furnish a copy of the amendment and state
the
effective date of the amendment.
11.2 Further
Assurances. Each
Member agrees to execute, acknowledge, deliver, file, record and publish such
further certificates, amendments to certificates, instruments and documents,
and
do such other acts and things as may be required by law, or as may be required
to carry out the intent and purposes of this Agreement.
27
11.3 Notices.
All
notices, demands, consents, approvals, requests, offers or other communications
which any of the parties to this Agreement may desire or shall be required
to be
given hereunder shall be in writing and shall be given (a) by registered or
certified mail, return receipt requested, or (b) delivery, signed receipt
required, via nationally recognized overnight delivery service, the cost and
expense of such delivery to be borne by the sending party. All notices shall
be
addressed to the recipient at the address set forth on Exhibit
A
hereto
unless such address is subsequently changed by giving to the other parties
at
least ten (10) days written notice thereof. Any notice sent in compliance with
the above provisions shall be deemed delivered and received, except for
electronic communications, on the third (3rd)
Business Day next succeeding the day on which it was sent, or, if sooner, on
the
actual date received, and, in the case of electronic communications, only on
the
date the sending party receives acknowledgment of receipt of such
notice.
11.4 Governing
Law. This
Agreement shall be construed according to and governed by the laws of the State
of Delaware, but without regard to Delaware choice of law rules.
11.5 Captions.
All
articles and section headings or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
11.6 Pronouns.
As
used
herein, all pronouns shall include the masculine, feminine, neuter, singular
and
plural thereof wherever the context and facts require such
construction.
11.7 Successors
and Assigns. This
Agreement shall be binding upon the parties hereto and their respective
executors, administrators, legal representatives, heirs, successors and assigns,
and shall inure to the benefit of the parties hereto, and, except as otherwise
herein expressly provided, their respective executors, administrators, legal
representatives, successors and assigns.
11.8 Extension
not a Waiver. No
delay
or omission in the exercise of any power, remedy or right herein provided or
otherwise available to a party or to the Company shall impair or affect the
right of such Member or the Company thereafter to exercise the same. Any
extension of time or other indulgences granted to a Member hereunder shall
not
otherwise alter or affect any power, remedy or right of any other Member or
of
the Company or of the obligations of the Member to whom such extension or
indulgence is granted.
11.9 Severability.
If
any
provision of this Agreement or application to any party or circumstances shall
be determined by any court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such Person or circumstances, other than as to which it
is
so determined invalid or unenforceable, shall not be affected thereby, and
each
provision shall be valid and shall be enforced to the fullest extent permitted
by law.
11.10 Entire
Agreement. This
Agreement, and the exhibits hereto, contain the entire understanding and
agreement of the parties hereto relating to the subject matter hereof and all
prior agreements relative hereto which are not contained herein.
28
11.11 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, and all of which, when taken together, shall be deemed
one
agreement, but no counterpart shall be binding unless an identical counterpart
shall have been executed and delivered by each of the other parties
hereto.
11.12 No
Third Party Beneficiary. The
provisions of this Agreement shall be solely for the benefit of the parties
hereto and their respective successors and assigns.
[SIGNATURE
PAGE FOLLOWS]
29
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed as of the 11th
day
of May, 2007.
| MEMBERS: | ||
|
TEKOIL
& GAS CORPORATION
|
||
| |
|
|
| By: | /s/ Xxxx Xxxxxxx | |
|
Xxxx
Xxxxxxx, CEO and
Chairman
of the
Board of Directors
|
||
Signature
Page to Amended and Restated Operating Agreement
30
| XXXXXXX, SACHS & CO. | ||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxxxx | |
|
Name:
Xxxxxx X. Xxxxxxx III
Title:
Authorized Signatory
|
||
Signature
Page to Amended and Restated Operating Agreement
31
EXHIBIT
A
TO
AMENDED
AND RESTATED OPERATING AGREEMENT
OF
TEKOIL
AND GAS GULF COAST, LLC
|
Name
and Address of Member
|
Initial
Capital Contribution
|
Membership
Percentage
|
|||||
|
Tekoil
& Gas Corporation
00000
X-00 Xxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, Xxxxx 00000
|
$
|
15,932,542
|
75
|
%
|
|||
|
Xxxxxxx,
Xxxxx & Co.
c/o
Goldman, Sachs E & P Capital
0000
Xxxxxxxxx Xx., Xxxxx 000
Xxxxxxx,
Xxxxx 00000
|
$
|
7,810,847
|
25
|
%
|
|||
32
EXHIBIT
B
TO
AMENDED
AND RESTATED OPERATING AGREEMENT OF
TEKOIL
AND GAS GULF COAST, LLC
Description
of Property
33
